ANTIBE THERAPEUTICS INC.
Consolidated Financial Statements
March 31, 2018 and 2017
(Expressed in Canadian Dollars)
INDEPENDENT AUDITORS’ REPORT
To the Shareholders of Antibe Therapeutics Inc.
We have audited the accompanying consolidated financial statements of Antibe Therapeutics Inc. (the “Company”),
which comprise the consolidated statements of financial position as at March 31, 2018 and 2017, and the consolidated
statements of loss and comprehensive loss, changes in shareholders’ equity and cash flows for the years then ended,
and a summary of significant accounting policies and other explanatory information.
Management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in
accordance with International Financial Reporting Standards, and for such internal control as management determines
is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to
fraud or error.
Auditors’ responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that
we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment
of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making
those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation
of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates
made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of
Antibe Therapeutics Inc. as at March 31, 2018 and 2017, and its financial performance and its cash flows for the
years then ended in accordance with International Financial Reporting Standards.
Emphasis of matter
Without qualifying our opinion, we draw attention to Note 2(c) in the consolidated financial statements, which
indicates that the Company incurred a net loss of $7,429,832 during the year ended March 31, 2018 and, as of that
date, the Company had an accumulated deficit of $27,515,517. These conditions, along with other matters as set forth
in Note 2(c), indicate the existence of a material uncertainty that may cast significant doubt about the Company’s
ability to continue as a going concern.
Toronto, Canada
June 26, 2018
ANTIBE THERAPEUTICS INC.
Consolidated Statements of Financial Position
As at March 31, 2018 and 2017
(Expressed in Canadian Dollars)
ASSETS
Current
Cash
Restricted cash [note 8]
Term deposits [note 6]
Accounts receivable, net [note 4]
Inventory
Income taxes recoverable
Prepaid expenses
Due from Antibe Holdings Inc. [note 7]
Total current assets
Non-current
Property and equipment, net
Deposits
Intangible assets, net [note 5]
Goodwill
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current
Bank indebtedness [note 6]
Accounts payable and accrued liabilities [note 12]
Convertible debentures [notes 8 and 9]
Total current liabilities
Non-current liabilities
Deferred revenue [note 13]
Convertible debentures [notes 8 and 9]
Deferred income taxes [note 20]
Total non-current liabilities
2018
$
3,725,824
-
25,000
1,106,987
3,106,316
2,504
169,600
174,398
8,310,629
94,408
22,965
2,779,707
1,283,221
4,180,301
2017
$
1,501,959
545,000
25,000
1,045,003
2,752,996
18,862
197,027
137,557
6,223,404
75,294
18,453
3,125,325
1,283,221
4,502,293
12,490,930
10,725,697
1,291,259
1,894,874
246,117
3,432,250
1,083,540
-
-
1,083,540
1,152,264
1,994,792
-
3,147,056
1,083,540
2,631,818
309,854
4,025,212
TOTAL LIABILITIES
4,515,790
7,172,268
SHAREHOLDERS’ EQUITY
Share capital [note 9]
Common share purchase warrants [note 9]
Contributed surplus [note 9]
Accumulated other comprehensive income
Deficit
TOTAL SHAREHOLDERS’ EQUITY
29,507,301
503,004
5,477,961
2,391
(27,515,517)
7,975,140
15,517,895
3,728,024
4,364,112
29,083
(20,085,685)
3,553,429
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
12,490,930
10,725,697
Commitments and contingencies [note 24]
(Signed) Daniel Legault Daniel Legault, Director
(Signed) John Wallace
John Wallace, Director
See accompanying notes to the consolidated financial statements
2
ANTIBE THERAPEUTICS INC.
Consolidated Statements of Loss and Comprehensive Loss
For the Years Ended March 31, 2018 and 2017
(Expressed in Canadian Dollars)
REVENUE
Product sales
COST OF SALES
GROSS PROFIT
General and administrative [note 14]
Selling and marketing [note 15]
Research and development [note 16]
Stock-based compensation [note 17]
Amortization and depreciation [note 5]
Total expenses
LOSS FROM OPERATIONS
Finance and related costs [note 18]
Finance income
LOSS BEFORE INCOME TAXES
PROVISION FOR (RECOVERY OF) INCOME TAXES [note 19]
Current
Deferred
Total recovery of income taxes
NET LOSS
OTHER COMPREHENSIVE INCOME (LOSS)
Exchange differences on translation of foreign operations subject to
future reclassification
COMPREHENSIVE LOSS
2018
$
2017
$
8,510,149
9,054,404
5,134,909
5,120,594
3,375,240
3,933,810
2,845,484
3,381,279
2,742,476
692,996
377,139
10,039,374
3,968,705
2,964,662
700,796
1,155,753
352,614
9,142,530
(6,664,134)
(5,208,720)
1,057,806
(17,347)
(7,704,593)
905,742
(3,638)
(6,110,824)
25,469
(300,230)
(274,761)
(63,564)
(301,439)
(365,003)
(7,429,832)
(5,745,821)
(26,692)
6,911
(7,456,524)
(5,738,910)
Basic and diluted loss per share [note 10]
(0.05)
(0.06)
Basic and diluted weighted average number of shares
outstanding [note 10]
151,621,931
95,744,799
See accompanying notes to the consolidated financial statements
3
ANTIBE THERAPEUTICS INC.
Consolidated Statements of Changes in Shareholders’ Equity
For the Years Ended March 31, 2018 and 2017
(Expressed in Canadian Dollars)
Number of
common
shares
Share
capital
$
Common
share
purchase
warrants
$
Contributed
surplus
$
Accumulated
other
comprehensive
income
$
Deficit
Total shareholders’ equity
$
$
Balance, March 31,
2016
78,640,115
13,112,542
2,082,995
3,096,208
22,172
(14,339,864)
3,974,053
Shares issued
32,953,299
2,521,735
1,716,619
-
Share issuance costs
-
(454,890)
-
189,254
1,424,900
338,508
(71,590)
(77,103)
-
-
-
-
-
-
-
-
-
1,155,753
-
-
-
-
-
-
-
-
-
-
-
4,238,354
(265,636)
189,815
1,155,753
(5,745,821)
(5,745,821)
6,911
-
6,911
Shares issued for
exercised warrants
Stock-based
compensation
Net loss for the year
Exchange
differences on
translation of foreign
operations
Balance, March 31,
2017
Balance, March 31,
2017
Shares issued for
exercised warrants
Shares issued on
debenture
conversion
Reallocation of
exercised warrants
Stock-based
compensation
Forfeiture of stock
options
Net loss for the year
Exchange
differences on
translation of foreign
operations
Balance, March 31,
2018
Shares issued
49,828,999
3,066,824
1,916,076
-
Share issuance costs
-
(678,805)
(421,804)
309,030
113,018,314
15,517,895
3,728,024
4,364,112
29,083
(20,085,685)
3,553,429
113,018,314
15,517,895
3,728,024
4,364,112
29,083
(20,085,685)
3,553,429
21,699,781
8,520,802
(4,607,468)
14,002,659
3,080,585
-
-
-
-
-
-
-
-
-
(111,824)
111,824
-
-
-
-
- 762,453
- (69,458)
-
-
-
-
-
-
-
-
-
-
-
-
- 4,982,900
- (791,579)
-
-
-
3,913,334
3,080,585
-
-
762,453
- (69,458)
(7,429,832)
(7,429,832)
(26,692)
- (26,692)
198,549,753
29,507,301
503,004
5,477,961
2,391
(27,515,517)
7,975,140
See accompanying notes to the consolidated financial statements
4
ANTIBE THERAPEUTICS INC.
Consolidated Statements of Cash Flows
For the Years Ended March 31, 2018 and 2017
(Expressed in Canadian Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
Items not affecting cash:
Deferred income taxes
Stock-based compensation [note 17]
Accretion interest [notes 8 and 18]
Amortization of transaction costs [note 8]
Depreciation of property and equipment
Amortization of intangible assets [note 5]
Amortization of deferred finance charges
Interest paid-in-kind [note 8]
Shares and warrants paid-in-kind
Changes in non-cash working capital:
Accounts receivable [note 4]
Inventory
Prepaid expenses
Income taxes recoverable
Deposits
Accounts payable and accrued liabilities
2018
$
2017
$
(7,429,832)
(5,745,821)
(309,854)
692,996
611,471
83,413
31,521
345,618
-
-
-
(5,974,667)
(61,984)
(353,320)
27,427
16,358
(4,512)
(99,918)
(475,949)
(298,242)
1,155,753
305,138
59,876
18,699
333,915
7,471
239,509
58,860
(3,864,842)
202,418
(379,309)
(18,862)
(11,970)
-
632,774
425,051
Cash flows used in operating activities
(6,450,616)
(3,439,791)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of customer lists
Purchase of license
Purchase of equipment
Cash flows used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from (to) Antibe Holdings Inc. [notes 7 and 24]
Repayment of long-term liabilities
Increase in deferred revenue
Net increase (decrease) in bank indebtedness [note 6]
Net change to restricted cash and term deposits [note 8]
Issuances:
Gross proceeds from shares and warrant issuance [note 9]
Proceeds from warrants [note 9]
Issuance costs [note 9]
Deferred expenses
Cash flows provided by financing activities
Net increase in cash during the year
Exchange gain (loss) on translation of foreign subsidiary
Cash, beginning of the year
Cash, end of the year
-
-
(50,636)
(50,636)
(36,841)
-
-
138,995
545,000
4,982,900
3,913,334
(791,579)
-
8,751,809
2,250,557
(26,692)
1,501,959
3,725,824
(177,080)
(66,810)
(13,543)
(257,433)
110,733
(106,040)
1,083,540
(392,373)
-
4,179,495
189,815
(265,636)
6,673
4,806,207
1,108,983
6,911
386,065
1,501,959
See accompanying notes to the consolidated financial statements
5
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
1. DESCRIPTION OF BUSINESS
Antibe Therapeutics Inc. (the “Company” or “Antibe”) was incorporated under the Business Corporations Act
(Ontario) on May 5, 2009. The Company was originally established under the legal name 2205405 Ontario Inc.
On December 16, 2009, the Company changed its name to Antibe Therapeutics Inc. On June 18, 2013, the
Company completed its initial public offering and was listed on the TSX Venture Exchange. On September 15,
2014, the Company began trading in the United States on the OTCQX Exchange. On October 1, 2017, the
Company changed trading platforms to the OTCQB Exchange.
The Company originates, develops and out-licenses patent-protected new pharmaceuticals. Antibe’s lead
compound, ATB-346, combines hydrogen sulfide with naproxen, an approved, marketed and off-patent non-
steroidal anti-inflammatory drug (“NSAID”). The Company’s main objective is to develop ATB-346 to the end
of Phase II by satisfying the requirements of the relevant drug regulatory authorities while also satisfying the
commercial licensing objectives of prospective global partners. The Company has also established a
development plan for its lead compound through to the end of Phase III human clinical studies for regulatory
discussion purposes. Additionally, the Company continues to investigate other research projects as well as
additional development opportunities that it has access to while not losing sight of its main objective.
The Company is also, through its wholly owned subsidiary, Citagenix Inc. (“Citagenix”), a seller of tissue
regenerative products servicing the orthopaedic and dental marketplaces. Citagenix has grown a comprehensive
portfolio of branded biologics and medical devices that promote bone regeneration. Citagenix operates in Canada
through its direct sales force and in the US, Germany and internationally via a network of distributors.
The address of the Company's registered head office and principal place of business is 15 Prince Arthur Avenue,
Toronto, Ontario, Canada, M5R 1B2.
Approximately 7.6 % of the Company’s common shares are held by Antibe Holdings Inc. (“AHI”) as at
March 31, 2018.
These consolidated financial statements were authorized for issuance by the Board of Directors on June 26, 2018.
2. BASIS OF PRESENTATION
(a) Statement of compliance -
These consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”). These consolidated
financial statements have been prepared using the accounting policies in note 3.
(b) Consolidation -
These consolidated financial statements include the accounts of the Company and its subsidiaries, as follows:
Antibe Terapiya Rus LLP (“Tera”)
Citagenix
BMT Medizintechnik GmbH (“BMT”)
Percentage ownership
100%
100%
100%
Citagenix, the parent company of BMT, was acquired on October 15, 2015. Citagenix was incorporated under
the Business Corporations Act (Quebec) on December 8, 1997 and operates in Canada. BMT was incorporated
and operates in Germany.
All intercompany balances and transactions have been eliminated on consolidation.
6
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
2. BASIS OF PRESENTATION (continued)
(c) Going concern -
The consolidated financial statements have been prepared assuming that the Company will continue as a going
concern. As at March 31, 2018, the Company had working capital of $4,878,379 (March 31, 2017 - $3,076,348),
incurred a net loss for the year then ended of $7,429,832 (2017 - $5,745,821), and had negative cash flows from
operations of $6,450,616 (2017 - $3,439,791).
All of the factors above may cast significant doubt about the Company’s ability to continue as a going concern.
Management’s plans to address these issues involve actively seeking capital investment and generating revenue
and profit from the commercialization of its products. The Company’s ability to continue as a going concern is
subject to management’s ability to successfully implement this plan. Failure to implement this plan could have a
material adverse effect on the Company’s financial condition and financial performance.
Until such time as the Company’s pharmaceutical products are patented and approved for sale, the Company’s
liquidity requirements are dependent on its ability to raise additional capital by selling additional equity, from
proceeds from the exercise of stock options and common share warrants or by obtaining credit facilities. The
Company’s future capital requirements will depend on many factors, including, but not limited to, the market
acceptance of its products and services. No assurance can be given that any such additional funding will be
available or that, if available, it can be obtained on terms favourable to the Company. See notes 6 and 22.
If the going concern assumption were not appropriate for these consolidated financial statements, then
adjustments would be necessary to the carrying value of assets and liabilities, the reported revenue and expenses,
and the classifications used in the consolidated statements of financial position. The consolidated financial
statements do not include adjustments that would be necessary if the going concern assumption was not
appropriate.
(d) Use of estimates -
The preparation of consolidated financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the
date of the consolidated financial statements, and the reported amount of expenses during the year. Actual results
may vary from the current estimates. These estimates are reviewed periodically and, as adjustments become
necessary, they are reported in earnings in the year in which such adjustments become known. Significant estimates
in these consolidated financial statements include determination of eligible expenditures for investment tax credit
(“ITC”) purposes, inventory, intangible assets, impairment of goodwill, intangible assets not yet subject to
amortization, and inputs related to the calculation of fair value of stock-based compensation and warrants.
(e) Comparative figures -
Certain reclassifications of amounts in fiscal 2017 have been made to facilitate comparison with the current year.
Exercised warrants have been reallocated from contributed surplus to common share purchase warrants. Certain
expense amounts have been reclassified from general and administrative to sales and marketing.
7
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Significant accounting policies
Cash -
Cash includes cash and liquid investments with a term to maturity of 90 days or less when acquired.
Inventory -
Inventory consists of ready for sale goods. Inventory is valued at the lower of cost and net realizable value. Cost
is determined based on the average cost. Net realizable value is the estimated selling price less the estimated
costs necessary to make the sale.
Property and equipment -
Property and equipment are stated at cost or deemed cost less accumulated depreciation and accumulated
impairment losses. Property and equipment are amortized over their estimated useful life at the following rates
and methods:
Furniture and fixtures
Computer equipment
Leasehold improvements
Vehicles
20% per annum
3 years
10 years
5 years
declining balance method
straight-line method
straight-line method
straight-line method
The Company prorates depreciation for acquisitions made during the year.
The depreciation method, useful life and residual values are assessed annually.
When an item of property and equipment comprises significant components with different useful lives, the
components are accounted for as separate items of property or equipment. Expenditures incurred to replace a
component of an item of property or equipment that is accounted for separately are capitalized.
Gains and losses on disposal of property and equipment are determined by comparing the proceeds from disposal
with the carrying amount of property and equipment, and are recognized within other income in the consolidated
statements of loss and comprehensive loss.
Intangible assets -
Intangible assets with finite lives are stated at cost less accumulated amortization. Amortization is based on the
estimated useful life of the asset and is calculated as follows:
Trademarks and brands
License and customer lists
Patents
10 years
10 years
17 years
straight-line method
straight-line method
straight-line method
8
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Impairment of non-financial assets -
The Company’s property, equipment and intangible assets with finite lives are reviewed for indications of
impairment whenever events or changes in circumstances indicate that their carrying amounts may not be
recoverable. If indication of impairment exists, the asset’s recoverable amount is estimated.
An impairment loss is recognized when the carrying amount of an asset, or its cash-generating unit (“CGU”),
exceeds its recoverable amount. A CGU is the smallest identifiable group of assets that generates cash inflows
that are largely independent of the cash inflows from other assets or groups of assets. Impairment losses are
recognized in profit and loss for the year. Impairment losses recognized in respect of CGUs are allocated first to
reduce the carrying amount of any goodwill allocated to the CGUs and then to reduce the carrying amount of the
other assets in the unit on a pro-rata basis.
The recoverable amount is the greater of the CGU’s fair value less costs of disposal and value in use. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset
that does not generate largely independent cash inflows, the recoverable amount is determined for the CGU to
which the asset belongs. The Company has two CGUs: Antibe, the pharmaceutical development and out-licensing
business, and Citagenix, the tissue regenerative products business.
An impairment loss is reversed if there is an indication that there has been a change in the estimates used to
determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying
amount does not exceed the carrying amount that would have been determined, net of depreciation or
amortization, if no impairment loss had been recognized.
Intangible assets that are not yet available for use are not amortized, but are tested for impairment at least annually
or sooner if there is an indication of impairment.
Goodwill -
Goodwill represents the excess of the purchase price of business acquisitions over the fair value of identifiable
net assets acquired in such acquisitions. Goodwill is determined at the date of the business combination. Goodwill
is not amortized, but is tested for impairment annually, or more frequently if events or changes in circumstances
indicate the asset might be impaired.
For the purpose of impairment testing, goodwill is allocated to each of the Company’s CGUs that is expected to
benefit from the synergies of the combination. If the recoverable amount of the CGU is less than its carrying
amount, excluding any goodwill, the impairment loss is allocated first to reduce the carrying amount of goodwill
allocated to the CGU and then reduces the carrying amount of the other assets of the CGU on a pro rata basis. An
impairment loss for goodwill is recognized directly in profit or loss. An impairment loss recognized for goodwill
is not reversed in subsequent periods.
All of the Company’s goodwill on the Consolidated statements of financial position has been allocated to the
Citagenix CGU. As at March 31, 2018, there is no impairment of goodwill. The Company tests goodwill for
impairment annually in the fourth quarter. The impairment test on Citagenix is carried out by comparing the
carrying amount of Citagenix and its recoverable amount. The recoverable amount of Citagenix is the higher of
its fair value, less costs to sell, and its value in use. The recoverable amount has been determined by
management using the value in use model. This complex valuation process entails the use of methods such as
the discounted cash flow method, which requires numerous assumptions to estimate future cash flows. The
recoverable amount is impacted significantly by the discount rate used in the discounted cash flow model, as
well as the quantum and timing of expected future cash flows and the growth rate used in the projections. A
reasonable possible change in the assumptions used could result in an impairment. However, management
concluded that the assumptions used in the value-in-use analysis were the best estimate of the recoverable
amount as at March 31, 2018.
9
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The estimated future cash flows were based on the budget and strategic plan for the next five years, and a growth
rate of 3.0% was applied to derive a terminal value beyond the initial five-year period. The post-tax discount rate
used to calculate the recoverable amount in fiscal year 2017 was 20%.
Related party transactions -
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or
exercise significant influence over the other party in making financial and operating decisions. Parties are also
considered to be related if they are subject to common control or common significant influence. Related parties
may be individuals or corporate entities. A transaction is considered to be a related party transaction when there
is a transfer of resources or obligations between related parties.
Income taxes -
Income taxes are accounted for using the liability method. Deferred tax assets and liabilities are recognized based
on the temporary differences between the assets and liabilities for accounting purposes and the amounts used for
tax purposes and the benefit of unutilized tax losses for which it is probable they will be realized and carried
forward to future years to reduce income taxes. Deferred tax assets and liabilities are not recognized if the
temporary differences arise from goodwill or from initial recognition of other assets and liabilities in a transaction
that affects neither the taxable profit nor the accounting profit. Deferred tax assets and liabilities are measured
using tax rates enacted by tax laws or substantively enacted for the years in which deferred income tax assets are
likely to be realized or deferred income tax liabilities settled. The effect of a change in tax rates on deferred
income tax assets and liabilities is included in loss and comprehensive loss in the period when the change is
substantially enacted.
Deferred share issuance costs -
These are costs related directly to the proposed issuance of shares by the Company pursuant to private placements
and public share offerings. Upon completion of the share issuance, these costs are charged against share capital.
Such costs are recognized as an expense in the event that it is determined that such transaction will not be
completed.
Government grants and investment tax credits -
Amounts received or receivable resulting from government assistance programs are recognized when there is
reasonable assurance that the amount of government assistance will be received and all attached conditions will
be complied with. When the amount relates to an expense item, it is recognized into income as reduction to the
costs that it is intended to compensate. When the amount relates to an asset, it reduces the carrying amount of the
asset and is then recognized as income over the useful life of the depreciable asset by way of a reduced
depreciation charge.
ITCs receivable are amounts refundable from the Canadian federal and provincial governments under the
Scientific Research & Experimental Development incentive program. The amounts claimed under the program
represent the amounts submitted by management based on research and development costs paid during the period
and included a number of estimates and assumptions made by management in determining the eligible
expenditures. ITCs are recorded when there is reasonable assurance that the Company will realize the ITCs.
Recorded ITCs are subject to review and approval by tax authorities and, therefore, could be different from the
amounts recorded.
10
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Convertible debt instruments -
The Company’s convertible debt instruments are segregated into their debt and equity elements at the date of
issue, based on the relative fair market values of these elements. The debt element of the instruments is classified
as a liability and recorded as the present value of the Company’s obligation to make future interest payments in
cash and settle the redemption value of the instrument in cash. The carrying value of the debt element is accreted
to the original face value of the instruments, over their life, using the effective interest method.
Research and development expense -
Research costs are expensed as incurred. Development costs are expensed in the year incurred unless they meet
certain criteria for capitalization. No development costs have been capitalized to date.
Revenue recognition -
Revenue from license fees is recognized based on the terms of the license agreement, when there is persuasive
evidence of an arrangement, delivery or performance has occurred, the fee is fixed or determinable, and when
collection is reasonably assured. The licensing arrangements are reviewed in order to determine whether the
elements can be divided into separate units of accounting, if certain criteria are met. If separable, the consideration
received is allocated among the separate units of accounting based on their respective fair values and the
applicable revenue recognition criteria are applied to each of the separate units. If not separable, the applicable
revenue recognition criteria are applied to combined elements as a single unit of accounting.
The Company recognizes revenue from sales of medical equipment when persuasive evidence of an arrangement
exists, delivery has occurred, fees are fixed or determinable and collection is reasonably assured.
Interest income is recognized using the effective interest method as earned.
Deferred revenue -
Revenue from up-front payments is deferred and amortized to the consolidated statements of loss and
comprehensive loss at the point in time when the risks and rewards have been transferred to the licensee.
Stock-based compensation -
The Company accounts for options and warrants using the fair value-based method of accounting for stock-based
compensation. Fair values are determined using the Black-Scholes-Merton option-pricing model (“BSM”).
Management exercises judgment in determining the underlying share price volatility, expected life of the option,
expected forfeitures and other parameters of the calculations. Compensation costs are recognized over the vesting
period as an increase to stock-based compensation expense and contributed surplus. If, and when, stock options
and warrants are ultimately exercised, the applicable amounts of contributed surplus and common share purchase
warrants are transferred to share capital.
Broker warrants -
Warrants issued in a public or private placement to brokers are accounted for under IFRS 2 and are classified as
equity. Warrants issued to brokers are valued at the fair value of the services received.
11
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Foreign currency translation -
The Company's presentation currency is the Canadian dollar. The functional currency of the Company and its
subsidiary, Citagenix, is the Canadian dollar, while the functional currency of BMT and Tera is the euro.
In preparing the financial statements of the individual entities, transactions in currencies other than the
Company’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the date
of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are
retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in
foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Foreign
currency translation gains and losses are presented in the consolidated statements of loss and comprehensive loss
in the period in which they occur.
For its subsidiaries with a non-Canadian dollar functional currency, results of operations and cash flows are
translated at average exchange rates during the period, assets and liabilities are translated at the unified exchange
rate at the end of the period, and equity is translated at historical exchange rates. Translation adjustments resulting
from the process of translating the local currency financial statements into Canadian dollars are included in other
comprehensive income (loss).
Loss per share -
Basic loss per share is calculated on the basis of loss attributable to the holders of common shares divided by the
weighted average number of common shares outstanding during the period. Diluted per share amounts are
calculated giving effect to the potential dilution that would occur if securities or other contracts to issue common
shares were exercised or converted to common shares. The treasury stock method assumes that proceeds received
from the exercise of in-the-money stock options and common share purchase warrants are used to repurchase
common shares at the prevailing market rate. Diluted loss per share is equal to basic loss per share when the
effect of otherwise dilutive securities is anti-dilutive.
Provisions -
The Company recognizes a provision when it has a present obligation (legal or constructive) as a result of a past
event, it is probable it will be required to settle the obligation, and it can make a reliable estimate of its amount.
The amount it recognizes as a provision is its best estimate of the consideration required to settle the present
obligation at the end of the reporting period, taking into account the surrounding risks and uncertainties. Where
it measures a provision using the cash flows estimated to settle the present obligation, the carrying amount is the
present value of those cash flows, calculated using a pre-tax discount rate reflecting the risks specific to the
liability. The Company adjusts the liability at the end of each reporting period for the unwinding of the discount
rate and for changes to the discount rate or to the amount or timing of the estimated cash flows underlying the
obligation.
Leases -
As at March 31, 2018, all leases are classified as operating leases.
Operating lease payments are expensed on a straight-line basis over the term of the relevant lease.
12
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Measurement of financial instruments -
Financial instruments are classified into one of five categories: fair value through profit or loss (“FVTPL”); held
to maturity (“HTM”); loans and receivables; available for sale (“AFS”); or other financial liabilities.
The classification is determined at initial recognition and depends on the nature and purpose of the financial
instruments.
(i) FVTPL financial instruments -
Financial assets and financial liabilities are classified as FVTPL when the financial asset or financial liability is
held for trading or it is designated as FVTPL. A financial asset or financial liability is classified as held for trading
if it has been acquired principally for the purpose of selling in the near future; it is part of an identified portfolio
of financial instruments that the Company manages and has an actual pattern of short-term profit making; or it is
a derivative that is not designated and effective as a hedging instrument. Financial assets classified or designated
as FVTPL are initially measured at fair value with any subsequent gain or loss recognized in other income (loss).
The net gain or loss recognized incorporates any dividend or interest earned on the financial asset. Financial
liabilities classified or designated as FVTPL are initially measured at fair value and with any subsequent gain or
loss recognized in net income (loss). Interest and dividends paid on financial liabilities are recognized in other
income (loss). The Company classifies cash, term deposits, restricted cash and bank indebtedness as FVTPL.
(ii) HTM financial instruments -
HTM financial instruments having a fixed maturity date and fixed or determinable payments, where the Company
intends and has the ability to hold the financial instrument to maturity, are classified as HTM and measured at
amortized cost using the effective interest rate method. Any gains or losses arising from the sale of HTM financial
instruments are included in other income. Currently, the Company has no HTM financial instruments.
(iii) Loans and receivables -
Items classified as loans and receivables are measured at amortized cost using the effective interest method. Any
gains or losses on the realization of loans and receivables are included in other income. The Company classifies
due from AHI as loans and receivables.
(iv) Available-for-sale -
Available-for-sale financial assets are those non-derivative financial assets that are designated as available-for-
sale, or that are not classified as FVTPL, HTM, or loans and receivables. Available-for-sale financial assets are
carried at fair value with unrealized gains and losses included in accumulated other comprehensive income until
realized when the cumulative gain or loss is transferred to other income. Currently, the Company has no AFS
financial instruments.
(v) Other financial liabilities -
Other financial liabilities are initially measured at fair value, net of transaction costs, and are subsequently
measured at amortized cost using the effective interest method, with interest expense recognized on an effective
yield basis. The Company has classified accounts payable and accrued liabilities, long-term debt and convertible
debentures as other financial liabilities.
13
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(b) Future changes in significant accounting policies -
At the date of approval of these consolidated financial statements, the following standards and interpretations,
which may be applicable to the Company, but have not yet been applied in these consolidated financial
statements, were in issue but not yet effective:
(i) Financial Instruments -
IFRS 9, Financial Instruments (“IFRS 9”), was issued in 2010 and is to replace International Accounting Standard
39, Financial Instruments: Recognition and Measurement (“IAS 39”).
IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value,
replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial
instruments in the context of its business model and the contractual cash flow characteristics of the financial
assets. In addition, under IFRS 9, the same impairment model is applied to all financial instruments that are
subject to impairment accounting. The current impairment model is replaced with an expected credit loss model,
which means that a loss event will no longer need to occur before an impairment allowance is recognized.
IFRS 9 is effective for annual periods beginning on or after January 1, 2018. For the Company, the standard was
effective as of April 1, 2018.
Management is currently evaluating the impact of IFRS 9 on its consolidated financial statements.
(ii) Revenue -
IFRS 15, Revenue from Contracts with Customers (“IFRS 15”), was issued in May 2014 and establishes a five-
step model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognized
at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring
goods or services to a customer. The new revenue standard will supersede all current revenue recognition
requirements under IFRS. Either a full retrospective application or a modified retrospective application is
required for annual periods. IFRS 15 is effective for annual periods beginning on or after January 1, 2018. For
the Company, the standard was effective as of April 1, 2018.
Management is in the process of assessing a sample of contracts to evaluate any potential impacts of IFRS 15.
(iii) Leases -
In January 2016, the IASB issued IFRS 16, Leases (“IFRS 16”), its new leases standard that requires lessees to
recognize assets and liabilities for most leases on their balance sheets. Lessees applying IFRS 16 will have a
single accounting model for all leases, with certain exemptions. The new standard will be effective for annual
periods beginning on or after January 1, 2019, with limited early application permitted.
Management is currently evaluating the impact of IFRS 16 on its consolidated financial statements.
14
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
4. ACCOUNTS RECEIVABLE
Trade receivables
Value-added taxes receivable
Harmonized Sales Taxes receivable
Allowance for doubtful accounts
2018
$
897,593
4,696
188,932
(793)
1,090,428
2017
$
983,256
2,329
39,287
(569)
1,024,303
Employee advances [note 7]
16,559
20,700
1,106,987
1,045,003
5.
INTANGIBLE ASSETS
Intangible assets consist of the following:
Cost
As at March 31, 2016
Additions
As at March 31, 2017
As at April 1, 2017
Additions
As at March 31, 2018
Amortization
As at March 31, 2016
Charge for the year
As at March 31, 2017
As at April 1, 2017
Charge for the year
As at March 31, 2018
Carrying amount
As at March 31, 2017
As at March 31, 2018
Trademarks
and brands
$
License
$
Customer list
$
Patents
$
Total
$
3,094,018
-
3,094,018
3,094,018
-
3,094,018
250,000
66,810
316,810
316,810
-
316,810
-
177,080
177,080
177,080
-
177,080
18,872
-
18,872
18,872
-
18,872
3,362,890
243,890
3,606,780
3,606,780
-
3,606,780
142,410
309,402
451,812
451,812
309,402
761,214
-
-
-
-
-
-
-
17,708
17,708
17,708
5,130
6,805
11,935
11,935
147,540
333,915
481,455
481,455
35,416
800
345,618
53,124
12,735
827,073
2,642,206
2,332,804
316,810
316,810
159,372
123,956
6,937
6,137
3,125,325
2,779,707
The term of the license agreement is 10 years from the date of the first commercial sale of the licensed product.
As at March 31, 2018, there were no commercial sales of the licensed products. As such, no amortization is
recognized in the current year related to this license. There were no indicators of impairment on this license.
15
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
6. BANK INDEBTEDNESS
The Company has an operating line of credit with a Canadian Chartered Bank (the “Bank”) to a maximum of
$2,000,000. The outstanding line of credit balance is due on demand and bears interest at the Bank’s prime
lending rate plus 0.50% per annum. The following have been provided as security:
1.
A moveable hypothec in the amount of $10,000,000 covering the Company's present and future
claims and universality of the Company's present and future property and assets with all risk of
insurance and with losses payable to the Bank; and
2.
Assignment of inventory, in virtue of Section 427 of the Bank Act (Canada).
The line of credit is subject to certain financial tests and covenants measured based on the Company's non-
consolidated year-end financial statements of Citagenix. As at March 31, 2018, the Company was in compliance
with these respective covenants. The line of credit matures on June 30, 2018.
As at March 31, 2018, $1,283,241 was outstanding on the operating line of credit.
The Company holds a corporate credit card facility with a $25,000 limit and the Bank holds $25,000 of term
deposits in trust as collateral. This amount is presented as term deposits on the consolidated statements of
financial position. The Company will continue its practice of paying all outstanding balances on the corporate
credit card in full monthly.
7. RELATED PARTY TRANSACTIONS
On June 29, 2016, with the enrolment of the first patient in a Phase II clinical trial, the Company triggered a
milestone payment of $150,000 to AHI as detailed in a licensing agreement between the two companies dated
December 22, 2009. See note 24 for details of the license agreement and potential future commitments.
As part of the prospectus offering during the year ended March 31, 2018, one director of the Company purchased
1,000,000 Units, such investment being a “related party transaction” for purposes of Multilateral Instrument 61-
101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”). The Company has relied
on the exemptions contained in sections 5.5(a) and 5.7(1)(a) of MI 61-101 from the valuation and minority
shareholder approval requirements in MI 61-101 in respect of the director’s participation in the Offering, since
neither the fair market value of the subject matter of, nor the fair market value of the consideration for, the
director’s investment exceeds 25% of the Company’s market capitalization.
During the year, the Company advanced $36,841 (2017 - $39,268) to AHI. As at March 31, 2018, $174,398
(2017 - $137,557) was receivable. This balance bears no interest, is payable on demand and is unsecured.
Employee advances consist of cash advances, payments to the Company cell phone plan on behalf of employees,
and petty cash in foreign currencies. Currently, the Company has one employee receiving cash advances.
16
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
8. CONVERTIBLE DEBENTURES
The following is a summary of the private placements of senior secured convertible debentures as at March 31, 2017:
Date
Private
placement
October 15, 2015
CDC1a
Gross
proceeds
$
1,800,000
November 13, 2015
CDC1b
800,000
December 23, 2015
CDC2a
450,000
Interest
rate
per
annum
10%
10%
10%
Debenture
conversion
price per
share
$
0.22
0.22
0.22
Debenture
maturity date Warrants
October 15, 2018
3,600,000
October 15, 2018
1,600,000
October 15, 2018
900,000
Warrant
exercise
price
$
0.31
0.31
0.31
Warrant
expiry date
October 15, 2018
October 15, 2018
October 15, 2018
CDC1a, CDC1b and CDC2a debentures were all secured by a first priority security interest over all assets of
Antibe other than the shares of Citagenix.
CDC1a, CDC1b and CDC2a warrants are exercisable for one common share of the Company.
The debentures bore an interest rate of 10% per year, were secured by the assets of Antibe, and, upon maturity,
were convertible at the option of the holder into common shares of Antibe at a price of $0.22 per share.
In connection with CDC2a, a brokered private placement, the Company issued the following broker warrants to
agents:
Date
Private
placement
Broker
warrants
Broker warrant
exercise price
$
Broker warrant
expiry date
December 23, 2015
CDC2a
143,182
0.22
December 23, 2017
The Debenture agreements provided that the Company may, at its sole option, elect to pay, in kind, certain interest
payments. The following is a summary of all payment in-kind elections:
Date interest due
Aggregate interest payment
added to principal amount
Debenture conversion
price per share
Additional shares
issuable upon conversion
January 15, 2016
April 15, 2016
July 15, 2016
October 15, 2016
$
62,014
77,587
79,522
82,400
$
0.22
0.22
0.22
0.22
281,882
352,669
361,462
374,545
17
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
8. CONVERTIBLE DEBENTURES (continued)
The following is a continuity of the convertible debentures:
Balance, beginning of the year
Interest paid-in-kind
Accretion
Amortization of issue costs
Debentures converted to shares
Balance, end of the year
2018
$
2,631,818
-
611,471
83,413
(3,080,585)
2017
$
2,027,295
239,509
305,138
59,876
-
246,117
2,631,818
As at March 31, 2018, six of the senior secured convertible debentures, including all interest paid-in-kind,
were converted to common shares of the Company. In total, 14,002,659 common shares were issued at $0.22
per share for a total conversion of $3,080,585.
As at March 31, 2017, of the total amount of the cash proceeds received on the issuance of convertible debentures,
$545,000 was designated as restricted cash and held as additional security for one of the convertible debenture holders
pending the achievement of certain milestones. As at March 31, 2018, the debenture holder converted to shares the
entirety of the debenture including interest paid-in-kind, thereby releasing the restricted cash.
9. SHARE CAPITAL
(a) Authorized
The Company has an unlimited number of authorized common shares without par value.
(b) Common shares
Balance, beginning of the year
Private placement (“PP4a”)
Private placement (“PP4b”)
Private placement (“PP5a”)
Private placement (“PP5b”)
Prospectus (“P2017a”)
Prospectus (“P2017b”)
Return of territory rights
Warrants exercised
Debentures converted
Share issuance costs (PP4a, PP4b)
Share issuance costs (PP5a, PP5b)
Share issuance costs (P2017a, P2017b)
Balance, end of the year
2018
2017
Shares
113,018,314
-
-
-
-
40,498,999
9,330,000
-
21,699,781
14,002,659
-
-
-
198,549,753
Amount
$
15,517,895
-
-
-
-
2,481,234
585,590
-
8,520,802
3,080,585
-
-
(678,805)
29,507,301
Shares
78,640,115
9,685,000
4,865,000
16,178,299
1,985,000
-
-
240,000
1,424,900
-
-
-
-
113,018,314
Amount
$
13,112,541
651,628
330,429
1,322,444
171,635
-
-
45,600
338,508
-
(145,113)
(309,777)
-
15,517,895
18
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
9. SHARE CAPITAL (continued)
The following provides additional information on the private placements and prospectus raise completed during
the years ended March 31, 2018 and 2017:
Private
placement
/
prospectus
Number of
units1 /
shares issued
Number of warrants
issued
Price
per
unit
$
Gross
proceeds2
$
9,685,000
4,865,000
16,178,299
1,985,000
4,842,500
0.10
968,500
2,432,500
0.10
486,500
8,089,154
0.15
2,426,745
992,500
0.15
297,750
Warrant
exercise
price
Warrant
expiry date
$
0.15
0.15
0.22
0.22
Jun 10, 2018
Jun 20, 2018
Dec 15, 2018
Dec 21, 2018
Closing date
Jun 10, 2016
Jun 20, 2016
Dec 15, 2016
Dec 21, 2016
Mar 27, 2017
PP4a
PP4b
PP5a
PP5b
Return of
territory
rights3
240,000
120,000
-
-
0.22 Mar 27, 2019
Jun 21, 2017
P2017a
40,498,999
20,249,499
0.10
4,049,900
Aug 18, 2017
P2017b
9,330,000
4,665,000
0.10
933,000
0.15
0.15
Jun 21, 2020
Jun 21, 2020
1Each unit was composed of one common share and one-half of one common share purchase warrant. Each whole
warrant entitles the holder to purchase one common share.
2Gross proceeds have been allocated to share capital and warrants based on the residual method. Warrants were
valued using the BSM.
3In connection with Antibe’s regional licensing deal with Laboratoires Acbel SA, Antibe issued common shares
and common share purchase warrants to Knight Therapeutics Inc. (“Knight”) in exchange for the return of the
ATB-346 territory rights to Romania (previously granted to Knight in November 2015). Each whole warrant
entitles Knight to purchase one common share.
With respect to the private placements and prospectus raise completed during the years ended March 31, 2018
and 2017, the Company issued the following warrants to brokers and finders:
Private
placement
/
prospectus
Closing
date
Jun 10, 2016
PP4a
Jun 20, 2016
PP4b
Number
of broker
/ finder
warrants
issued
318,000
378,880
Dec 15, 2016
PP5a
1,145,088
Dec 21, 2016
PP5b
165,150
Jun 21, 2017
P2017a
2,834,930
Aug 18, 2017
P2017b
653,101
Non-cash cost from
issuance of warrants
to brokers / finders
Broker
/ finder
warrant
exercise
price
Broker /
finder
warrant
expiry date
Total issuance costs
$
-
145,113
-
309,777
522,725
156,080
$
-
68,150
-
121,104
255,200
53,830
$
0.15
0.15
0.15
0.15
0.10
0.10
Jun 10, 2018
Jun 20, 2018
Jun 15, 2018
Jun 21, 2018
Jun 21, 2019
Jun 21, 2019
19
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
9. SHARE CAPITAL (continued)
All issuance costs were offset against share capital and common share purchase warrants in proportion to the
allocation of proceeds.
The following is a summary of all warrants exercised during the years ended March 31, 2018 and 2017:
Exercise price
Number of
warrants
exercised
2018
2017
Number of
warrants
exercised
Gross
proceeds
$
Gross
proceeds
$
2,211,854
14,108,509
1,019,419
4,360,000
221,185
2,116,276
224,273
1,351,600
478,400
946,500
47,840
141,975
-
-
-
-
$
0.10
0.15
0.22
0.31
Each of the warrants entitled the bearer to purchase one common share of the Company.
(c) Stock options
The Company has established a stock option plan that provides a limited issuance of options, capped at
22,337,983 common shares. The plan is to encourage ownership of common shares by directors, senior officers
and consultants of the Company. The fair value of the options is measured as of the grant date, using the BSM,
and is recognized over the vesting period. The fair value is recognized as an expense over the vesting period in
the consolidated statements of loss and comprehensive loss. The amount recognized as an expense is adjusted to
reflect the number of share options expected to vest.
Included in the options granted for the year ended March 31, 2017 are 3,500,000 performance options granted to
key senior executives of Antibe and Citagenix. Vesting of these performance options is subject to the successful
achievement of certain goals related to advancements in the clinical development of the Company’s lead drug,
capital efficiency, and corporate profitability. The determination that the goals have been met is the responsibility
of the Board of Directors.
Option pricing models require the input of highly subjective assumptions, particularly as to the expected price
volatility of the stock and the expected life of the option. Changes in the subjective input assumptions can
materially affect the fair value estimate. There is no cash cost to the Company related to these options.
The following is a summary of all options to purchase common shares that are outstanding as at March 31, 2018
and 2017, as well as details on exercise prices and expiry dates:
Balance, beginning of the year
Granted during the year
Forfeited during the year
Expired during the year
Balance, end of the year
2018
2017
Weighted
average
exercise price
$
0.25
0.19
0.19
0.52
0.25
Options
21,134,000
73,500
(343,132)
(24,000)
20,840,368
Weighted
average
exercise price
$
0.29
0.20
0.34
-
0.25
Options
11,449,000
9,712,000
(27,000)
-
21,134,000
20
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
9. SHARE CAPITAL (continued)
Number of options
300,000
12,000
12,000
12,000
12,000
24,000
2,700,000
18,000
150,000
805,000
75,000
604,799
6,651,357
150,000
9,240,712
37,500
36,000
20,840,368
Exercise
price
$
0.24
0.17
0.15
0.13
0.23
0.19
0.33
0.20
0.55
0.66
0.54
0.14
0.15
0.19
0.20
0.085
0.29
Expiry date
May 5, 2018
November 17, 2018
March 9, 2019
June 10, 2019
September 6, 2019
January 18, 2020
January 25, 2020
March 31, 2020
October 21, 2023
March 4, 2024
May 9, 2024
July 13, 2025
March 9, 2026
January 18, 2027
March 31, 2027
October 20, 2020
February 27, 2021
The number of options exercisable as at March 31, 2018 is 14,045,507, and the weighted average exercise price
of these options is $0.23.
The following assumptions were used in the BSM to determine the fair value of the share-based compensation
expense relating to stock options in the year:
Risk-free interest rate
Expected volatility
Expected dividend yield
Expected life of options
Weighted average share price
Exercise price
2018
2017
1.53% - 1.89%
121% - 173%
0.00%
3 years
$0.19
$0.085 - $0.29
0.53% - 1.70%
157% - 172%
0.00%
3 - 10 years
$0.20
$0.13 - $0.23
21
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
9. SHARE CAPITAL (continued)
(d) Common share purchase warrants
In conjunction with the private placement or prospectus capital raises, the following broker and finder warrants
were granted during the years ended March 31, 2018 and 2017:
Closing date
June 10, 2016
June 20, 2016
December 15, 2016
December 21, 2016
June 21, 2017
August 18, 2017
March 31, 2018*
Private
placement /
prospectus
Number of
broker / finder
warrants
issued
Non-cash cost
from issuance
of warrants to
brokers / finders
Broker / finder
warrant
exercise price
Broker / finder
warrant expiry
date
PP4a
PP4b
PP5a
PP5b
P2017a
P2017b
P2017a and
P2017b
318,000
378,880
1,145,088
165,150
2,834,930
653,101
1,045,928
$
31,094
37,056
106,891
14,212
255,200
53,830
$
0.15
0.15
0.15
0.15
0.10
0.10
June 10, 2018
June 20, 2018
June 15, 2018
June 21, 2018
June 21, 2019
June 21, 2019
0.15
June 21, 2020
*The broker warrants issued under the June 21, 2017 and August 18, 2017 prospectus capital raise entitle the
holder, upon exercise, to receive one common share of the Company and one-half broker warrant warrant. Each
whole broker warrant warrant entitles the holder to purchase one common share of the company at an exercise
price of $0.15 and expires June 21, 2020. As at March 31, 2018, 2,091,854 P2017a and P2017b broker warrants
were exercised resulting in the issuance of 1,045,928 broker warrants.
The estimated fair value of the broker/finder warrants was calculated using the BSM and was offset against share
capital and common share purchase warrants as share issuance costs. The assumptions used for the BSM are
summarized at the end of this note.
The following is a summary of all warrants to purchase common shares that are outstanding as at March 31, 2018
and 2017, as well as details on exercise prices and expiry dates:
2018
2017
Warrants
31,948,454
29,448,458
(21,699,781)
(930,683)
38,766,448
Weighted
average
exercise price
$
0.23
0.14
0.18
0.60
0.18
Warrants
16,213,362
18,483,772
(1,424,900)
(1,323,780)
31,948,454
Weighted
average
exercise price
$
0.31
0.18
0.13
0.77
0.23
Balance, beginning of the year
Granted during the year
Exercised during the year
Expired during the year
Balance, end of the year
22
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
9. SHARE CAPITAL (continued)
Number of warrants
162,500
125,000
2,067,500
633,297
2,418,000
46,150
1,740,000
168,000
7,094,735
967,500
120,000
907,500
1,396,177
20,920,089
38,766,448
Exercise
price
$
0.15
0.15
0.15
0.15
0.15
0.15
0.31
0.83
0.22
0.22
0.22
0.83
0.10
0.15
Expiry date
April 1, 2018
April 9, 2018
June 10, 2018
June 15, 2018
June 20, 2018
June 21, 2018
October 15, 2018
December 1, 2018
December 15, 2018
December 21, 2018
March 27, 2019
June 1, 2019
June 21, 2019
June 21, 2020
The following assumptions were used in the BSM to determine the fair value of warrants in the year:
2018
2017
Risk-free interest rate
Expected volatility
Expected dividend yield
Expected life of warrants and options
Weighted average share price
Exercise price
0.91% - 1.59%
104% - 176%
0.00%
2 - 3 years
$0.14
$0.10 - $0.15
0.49% - 1.70%
121% - 203%
0.00%
1.5 - 10 years
$0.18
$0.10 - $0.23
10. LOSS PER SHARE
Basic loss per share is calculated by dividing the net loss attributable to common shareholders by the weighted
average number of common shares outstanding during the year. All unexercised share options and warrants were
excluded from calculating diluted loss per share.
23
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
11. SEGMENTED RESULTS
The Company has two primary business segments: Antibe Therapeutics, a pharmaceutical development
company, and Citagenix, a marketer and distributor of regenerative medicines serving the dental and
orthopaedic market places. Prior to the acquisition of Citagenix on October 15, 2015, the Company had only
one business segment.
The segmented performance of these two businesses as at March 31, 2018 and 2017 is as follows:
Antibe
$
-
-
-
5,809,100
2018
Citagenix
$
8,510,149
5,134,909
3,375,240
5,270,733
Consolidated
$
8,510,149
5,134,909
3,375,240
11,079,833
Antibe
$
-
-
-
4,634,166
2017
Citagenix
$
9,054,404
5,120,594
3,933,810
5,410,468
Consolidated
$
9,054,404
5,120,594
3,933,810
10,044,634
(5,809,100)
(1,895,493)
(7,704,593)
(4,634,166)
(1,476,658)
(6,110,824)
Revenue
Cost of goods sold
Gross profit
Expenses
Loss before
income taxes
There is no single customer who comprises more than 10% of revenue.
The Company’s assets and liabilities by each business as at March 31, 2018 and 2017 are as follows:
2018
2017
Antibe
Citagenix Consolidated
Antibe
Citagenix Consolidated
$
$
$
$
$
$
Assets:
Current
Non-current
4,158,760
1,600,031
4,151,869
2,580,270
8,310,629
4,180,301
2,267,186
1,600,081
3,956,218
2,902,212
6,223,404
4,502,293
Total assets
5,758,791
6,732,139
12,490,930
3,867,267
6,858,430
10,725,697
Liabilities:
Current
Non-current
526,507
1,083,540
2,905,743
-
3,432,250
1,083,540
420,139
4,025,212
2,726,917
-
3,147,056
4,025,212
Total liabilities
1,610,047
2,905,743
4,515,790
4,445,351
2,726,917
7,172,268
24
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
12. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
The following table summarizes accounts payable and accrued liabilities as at March 31, 2018 and 2017:
Accounts payable
Antibe
Citagenix
BMT
Accrued liabilities
Antibe
Citagenix
BMT
2018
$
114,692
1,257,619
99,800
1,472,111
165,696
158,446
98,621
422,763
2017
$
61,212
968,525
79,731
1,109,468
358,927
430,822
95,575
885,324
Total accounts payable and accrued liabilities
1,894,874
1,994,792
13. DEFERRED REVENUE
On February 24, 2017, Antibe entered into an exclusive long-term license and distribution agreement (the
“License Agreement”) with Acbel for ATB-346 in Albania, Algeria, Bulgaria, Greece, Jordan, Romania and
Serbia (the “Territory”). Acbel is an affiliated holding company of Galenica SA and one of the largest
pharmaceutical companies in Greece. Under the terms of the license agreement, Antibe was issued an upfront
payment of €800,000 and is entitled to receive a 5% royalty on net sales of ATB-346 in the Territory. The upfront
revenue is reflected in deferred revenue until the point that Acbel can benefit from the license.
The amount of the license upfront payment is included on the consolidated statements of financial position as
deferred revenue.
14. GENERAL AND ADMINISTRATIVE EXPENSES
The nature of the general and administrative expenses for the years ended March 31, 2018 and 2017 is
summarized as follows:
Salaries and wages
Professional and consulting fees
Licensing fees
Office expenses
Other expenses
Total general and administrative
2018
$
1,284,160
904,244
-
524,471
132,609
2,845,484
2017
$
1,792,305
1,110,286
150,000
551,247
364,867
3,968,705
25
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
15. SELLING AND MARKETING
The nature of the selling and marketing expenses for the years ended March 31, 2018 and 2017 is
summarized as follows:
Salaries and wages
Commissions
Advertising and promotions
Travel and entertainment
Total selling and marketing
2018
$
1,866,562
544,835
508,081
461,801
3,381,279
2017
$
1,667,910
532,052
318,313
446,387
2,964,662
16. RESEARCH AND DEVELOPMENT
The nature of the research and development expenses for the years ended March 31, 2018 and 2017 is
summarized as follows:
Salaries and wages
Professional and consulting fees
Development costs
Scientific Research and Experimental
Development payment (rebate)
Total research and development
2018
$
478,395
114,497
2,208,752
(59,168)
2,742,476
2017
$
71,985
329,139
117,155
182,517
700,796
17. STOCK-BASED COMPENSATION
The function of the stock-based compensation expense for the years ended March 31, 2018 and 2017 is
summarized as follows:
General and administrative
Research and development
Total stock-based compensation
2018
$
469,202
223,794
692,996
2017
$
719,928
435,825
1,155,753
26
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
18. FINANCE AND RELATED COSTS
The components of the finance and related costs as at March 31, 2018 and 2017 are as follows:
Interest on convertible debenture
Accretion interest
Interest and bank charges
Unrealized foreign currency translation
Total finance and related costs
2018
$
412,452
611,471
154,029
(120,146)
1,057,806
2017
$
384,805
305,138
145,222
70,577
905,742
19. INCOME TAXES
The income tax provision recorded differs from the income tax obtained by applying the statutory income
tax rate of 26.50% (2017 – 26.50%) to the loss before income taxes for the year, and is reconciled as
follows:
Loss before income taxes
Expected income tax recovery at the combined basic
f d
l
and provincial tax rate:
Decrease (increase) resulting from:
Non-deductible expenses
Share issuance costs
Others
Amount related to unrecognized deferred tax assets
Recovery of income taxes
2018
$
(7,704,593)
2017
$
(6,110,824)
(2,041,717)
(1,619,368)
320,956
(309,362)
28,917
1,726,445
(274,761)
412,720
(70,394)
38,997
873,042
(365,003)
The Company has incurred losses of $19,375,590 for tax purposes, which are available to reduce future
taxable income. Such benefits will be recorded as an adjustment to the tax provision in the year realized.
The losses expire as follows:
In the year ending March 31
2030
2031
2032
2033
2034
2035
2036
2037
2038
Indefinitely
$
258,166
607,722
735,014
875,160
1,426,628
2,006,240
2,858,123
3,002,487
6,718,598
887,452
19,375,590
27
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
19. INCOME TAXES (continued)
The cumulative carry-forward pool of SR&ED expenditures as at March 31, 2018 applicable to future
years, with no expiry date, is $4,716,807.
20. DEFERRED INCOME TAXES
The recognized temporary differences and tax losses are attributable to the following:
Amount related to tax loss
Amount related to intangible assets on business combination
Amount related to foreign exchange translation gains
Amount related to transaction costs
Amount related capital property
Amount related to eligible capital property
Net deferred income tax liabilities
2018
$
578,774
(625,192)
(20,337)
630
13,723
52,402
-
2017
$
471,236
(710,754)
(10,644)
867
1,236
(61,795)
(309,854)
Deferred tax expense of $9,733 (2017 – $10,644) related to the foreign exchange translation gains, was
recognized in other comprehensive income for the year.
Deferred tax assets have not been recognized in respect of the following temporary differences:
Amount related to tax loss carryforwards
Amount related to eligible capital property
Amount related to SR&ED expenditures
Amount related to donations
Amount related to ITC, net of tax
Amount related to ORDTC, net of tax
Amount related to share issuance costs
2018
$
4,541,168
67,099
1,249,954
14,178
461,975
39,248
351,138
6,724,760
2017
$
3,109,404
58,141
1,100,595
13,250
380,611
-
194,879
4,856,880
Deferred tax assets have not been recognized in respect of these items because it is not probable that future
taxable profit will be available against which the Company will be able to use these benefits.
28
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
21. FINANCIAL INSTRUMENTS
The carrying values of cash, term deposits, restricted cash, accounts receivable, due from AHI, bank
indebtedness, accounts payable and accrued liabilities approximate fair values due to the relatively short-term
maturities of these instruments.
The fair value of convertible debentures approximates their carrying value as the instruments are discounted at
market rates.
Financial instruments that are measured subsequent to initial recognition at fair value are grouped into a hierarchy
based on the degree to which the fair value is observable. Level 1 fair value measurements are derived from
unadjusted, quoted prices in active markets for identical assets or liabilities. Level 2 fair value measurements are
derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability
directly or indirectly. Level 3 fair value measurements are derived from valuation techniques that include inputs
for the assets or liabilities that are not based on observable market data.
Financial instruments classified as Level 1 include cash, term deposits, restricted cash and bank indebtedness. At
the current time, the Company does not have financial instruments classified in Level 2 or Level 3, other than the
convertible debentures (note 8).
22. CAPITAL RISK MANAGEMENT
The Company’s primary objective with respect to its capital management is to ensure that it has sufficient
cash resources to fund the research, development and patent of drugs and the growth objectives of
Citagenix. To secure the additional capital necessary to pursue these plans, the Company may attempt to
raise additional funds through the issuance of equity.
The Company includes the following in its definition of capital: common shares, common share purchase
warrants, contributed surplus, accumulated other comprehensive income and deficit, which total
$7,975,140 (2017 – 3,553,429). The Company is not subject to externally imposed capital requirements.
23. FINANCIAL RISK MANAGEMENT
The Company is exposed to a variety of financial risks by virtue of its activities: market risk (including interest
rate risk), credit risk, liquidity risk and foreign currency risk. The overall risk management program focuses on
the unpredictability of financial markets and seeks to minimize potential adverse effects on financial
performance.
Risk management is carried out by the officers of the Company as discussed with the Board. The officers of the
Company are charged with the responsibility of establishing controls and procedures to ensure that financial risks
are mitigated in accordance with the expectation of the Board as follows:
Credit risk
The Company's credit risk is primarily attributable to accounts receivable, amount due from AHI and the excess
of cash held in one financial institution over the deposit insurance by Canadian Deposit Insurance Corporation.
The Company, in the normal course of operation, monitors the financial condition of its customers. The Company
establishes an allowance for doubtful accounts that corresponds to the specific credit risk of its customers,
historical trends and economic conditions.
29
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
23. FINANCIAL RISK MANAGEMENT (continued)
Liquidity risk
Liquidity risk is the risk that the Company is not able to meet its financial obligations as they become due or can
do so only at excessive cost. The Company manages its liquidity risk by forecasting cash flows and anticipated
investing and financing activities. Officers of the Company are actively involved in the review and approval of
planned expenditures, including actively seeking capital investment and generating revenue and profit from the
commercialization of its products.
As at March 31, 2018, the Company’s financial obligations, including applicable interest, are due as follows:
Less than
one year
$
1 – 2 years
$
After 2 years
$
Total
$
Accounts payable and accrued liabilities
1,894,874
Bank indebtedness
Convertible debentures
Interest on the above financial
obligations
Foreign currency risk
1,291,259
246,117
113,351
3,545,601
-
-
-
-
-
-
-
-
-
-
1,894,874
1,291,259
246,117
113,351
3,545,601
The functional and reporting currency of the Company is the Canadian dollar. The Company undertakes
transactions denominated in foreign currencies, including US dollars and euros, and, as such, is exposed to
currency risk due to fluctuations in foreign exchange rates against the Canadian dollar. The Company does not
use derivative instruments to reduce exposure to foreign exchange risk.
Interest rate risk
Interest risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in market interest rates. Financial assets and financial liabilities with variable interest rates expose the
Company to cash flow interest rate risk. The Company is currently exposed to interest rate risk on its credit
facility and long-term debt.
30
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
24. COMMITMENTS AND CONTINGENCIES
(a) Royalty and milestone commitment
On December 22, 2009, the Company entered into a License Agreement with AHI that provided for the exclusive
right and license to research, develop, and commercialize various patents. Pursuant to the agreement, the
Company paid an upfront non-refundable license fee of $150,000 to obtain exclusive right to the patents. The
agreement requires the Company to pay royalties of 4% of all net sales upon the first commercial sale or, if the
Company sublicenses the patents, the Company will pay a 15% royalty on royalty revenue earned. Additionally,
the Company is required to make milestone payments to AHI at various stages of development, namely:
•
•
•
•
•
the greater of a $150,000 payment upon enrolment of the first patient in a Phase I clinical trial or 10%
of any milestone payment received from a sublicense relation thereto;
the greater of a $150,000 payment upon enrolment of the first patient in the first Phase II clinical trial
or 10% of any milestone payment received from a sublicense relation thereto;
the greater of a $150,000 payment upon enrolment of the first patient in the first Phase III clinical trial
or 10% of any milestone payment received from a sublicense relation thereto;
the greater of a $250,000 payment upon the first filing of a new drug application or 10% of any milestone
payment received from a sublicense relation thereto; and
the greater of a $750,000 payment upon receipt of the first regulatory approval from any relevant
registration authority or 10% of any milestone payment received from a sublicense relation thereto.
On June 29, 2016, the Company made a milestone payment of $150,000 to AHI as a result of the enrolment of
the first patient in ATB-346’s Phase II clinical trial.
(b) Royalty agreement
On November 16, 2015, the Company announced the signing of an exclusive long-term license and distribution
agreement with Knight, a leading Canadian specialty pharmaceutical company, for the Company’s anti-
inflammatory and pain drugs, ATB-346, ATB-352 and ATB-340, as well as the rights to other, future prescription
drugs. Under the terms of the license agreement, the Company has granted Knight the exclusive commercial
rights for the Company’s drug candidates and other future prescription drugs in Canada, Israel, Russia and sub-
Saharan Africa. The Company is entitled to royalties on annual sales, along with the potential for $10 million
in payments for sales-based milestones.
(c) Licensing and distribution agreement
On January 12, 2016, the Company announced the signing of an exclusive Licensing and Distribution Agreement
with Induce Biologics Inc. (“Induce”) for the Canadian rights for Induce’s URIST (“Licensed Product”)
biological product for dental and craniofacial applications. URIST is a bone graft substitute that contains bone
morphogenetic protein-2 (BMP), and is being developed as a means of promoting the regeneration of bone
following dental and oral maxillofacial surgery. The Company is committed to royalty fees paid quarterly based
on net sales of the Licensed Product starting at the end of the quarter following the date of the first commercial
sale of the URIST to Canadian market. As at March 31, 2018, the first commercial sale of URIST had not yet
occurred. There were no indicators of impairment on this license.
(d) Office lease commitments
The Company has entered into long-term leases for its premises. The future minimum payments under the lease
agreements are as follows:
No later than 1 year
Later than 1 year but no later than 5 years
Total
$
244,875
979,501
1,224,376
31
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2018 and 2017
24. COMMITMENTS AND CONTINGENCIES (continued)
(e) Retention Bonus
Certain Company executives are eligible to receive retention bonuses based on achieving certain profitability
targets. To date, no accrual has been made for such bonuses as the probability of payout is uncertain.
25. SUBSEQUENT EVENTS
(a) The following is a summary of all options exercised in the period from April 1, 2018 to the date of issuance
of these consolidated financial statements:
Exercise price
Number of
options exercised
$
0.140
0.145
0.200
0.235
44,799
2,419,570
95,837
300,000
2,860,206
Proceeds
$
6,272
350,838
19,167
70,500
446,777
Each of the options entitled the bearer to purchase one common share of the Company.
(b) The following is a summary of all warrants exercised in the period from April 1, 2018 to the date of issuance
of these consolidated financial statements:
Exercise price
Number of
warrants exercised
$
0.100
0.150
0.220
0.310
50,000
6,153,107
360,000
1,600,000
8,163,107
Proceeds
$
5,000
922,966
79,200
496,000
1,503,166
Each of the warrants entitled the bearer to purchase one common share of the Company.
(c) On April 10, 2018 and April 13, 2018, the remaining senior secured convertible debentures, including
all interest paid-in-kind, were converted to common shares of the Company. In total, 1,231,533 common
shares were issued at $0.22 per share for a total conversion of $270,937 subsequent to March 31, 2018.
32