ANTIBE THERAPEUTICS INC.
Consolidated Financial Statements
March 31, 2019 and 2018
(Expressed in Canadian Dollars)
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Antibe Therapeutics Inc.
Opinion
We have audited the consolidated financial statements of Antibe Therapeutics Inc. and its subsidiaries (the “Group”),
which comprise the consolidated statements of financial position as at March 31, 2019 and 2018 and the consolidated
statements of loss and comprehensive loss, consolidated statements of changes in shareholders’ equity and
consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements,
including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects the
consolidated financial position of the Group as at March 31, 2019 and 2018, and its consolidated financial
performance and its consolidated cash flows for the years then ended in accordance with International Financial
Reporting Standards (IFRS), as issued by the International Accounting Standards Board.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated
Financial Statements section of our report. We are independent of the Group in accordance with the ethical
requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled
our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to note 2(c) in the consolidated financial statements, which indicates that the Group incurred a net
loss of $12,816,071 during the year ended March 31, 2019 and, as of that date, the Group had an accumulated deficit
of $40,331,588. As stated in note 2(c), these events or conditions, along with other matters as set forth in Note 2(c),
indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a
going concern. Our opinion is not modified in respect of this matter.
Other information
Management is responsible for the other information. The other information comprises the information included in
the Management’s Discussion and Analysis.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information, and in doing so, consider whether the other information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on the work
we have performed, we conclude that there is a material misstatement of this other information, we are required to
report that fact in this auditor’s report. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial
Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in
accordance with IFRS, and for such internal control as management determines is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or
error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no
realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit 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
Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or
conditions may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure, and content of the consolidated financial statements, including the
disclosures, and whether the consolidated financial statements represent the underlying transactions and events
in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the consolidated financial statements. We are responsible
for the direction supervision and performance of the group audit. We remain solely responsible for our audit
opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
The engagement partner on the audit resulting in this independent auditor’s report is Paula J. Smith.
Toronto, Canada
July 16, 2019
ANTIBE THERAPEUTICS INC.
Consolidated Statements of Financial Position
As at March 31, 2019 and 2018
(Expressed in Canadian Dollars)
ASSETS
Current
Cash
Term deposits
Trade and other receivables [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
Deferred contract costs [note 13]
Investment in Red Rock Regeneration Inc. [note 24]
Intangible assets, net [note 5]
Goodwill
Total non-current assets
2019
$
2018
$
5,992,832
25,000
1,292,747
2,803,167
2,504
154,560
293,128
10,563,938
181,206
20,789
235,866
100,000
2,434,089
1,283,221
4,255,171
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
TOTAL ASSETS
14,819,109
12,490,930
LIABILITIES
Current
Bank indebtedness [note 6]
Accounts payable and accrued liabilities [note 12]
Convertible debentures [note 8]
Total current liabilities
Non-current liabilities
Loan payable [note 6]
Deferred revenue [note 13]
Total non-current liabilities
TOTAL LIABILITIES
SHAREHOLDERS’ EQUITY
Share capital [note 9]
Common share purchase warrants [note 9]
Contributed surplus [note 9]
Accumulated other comprehensive income (loss)
Deficit
TOTAL SHAREHOLDERS’ EQUITY
-
2,906,807
-
2,906,807
1,291,259
1,894,874
246,117
3,432,250
2,072,245
2,399,295
4,471,540
-
1,083,540
1,083,540
7,378,347
4,515,790
36,985,901
2,756,746
8,034,382
(4,679)
(40,331,588)
7,440,762
29,507,301
503,004
5,477,961
2,391
(27,515,517)
7,975,140
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
14,819,109
12,490,930
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, 2019 and 2018
(Expressed in Canadian Dollars)
REVENUE
Product sales
COST OF SALES
GROSS PROFIT
EXPENSES
General and administrative [note 14]
Selling and marketing [note 15]
Research and development [note 16]
Stock-based compensation [note 17]
Amortization and depreciation
Total expenses
LOSS FROM OPERATIONS
Finance and related costs [note 18]
Finance income
LOSS BEFORE INCOME TAXES
2019
$
2018
$
9,538,942
8,510,149
5,989,387
5,134,909
3,549,555
3,375,240
4,871,074
3,520,949
3,943,063
2,986,257
416,219
15,737,562
2,845,484
3,381,279
2,742,476
692,996
377,139
10,039,374
(12,188,007)
(6,664,134)
525,350
(31,411)
(12,681,946)
1,057,806
(17,347)
(7,704,593)
PROVISION FOR (RECOVERY OF) INCOME TAXES [note 19]
Current
Deferred
Total provision for (recovery of) income taxes
131,576
2,549
134,125
25,469
(300,230)
(274,761)
NET LOSS FOR THE YEAR
(12,816,071)
(7,429,832)
OTHER COMPREHENSIVE LOSS
Exchange differences on translation of foreign operations subject to
future reclassification
(7,070)
(26,692)
COMPREHENSIVE LOSS
(12,823,141)
(7,456,524)
Basic and diluted loss per share [note 10]
(0.06)
(0.05)
Basic and diluted weighted average number of shares
outstanding [note 10]
214,867,861
151,621,931
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, 2019 and 2018
(Expressed in Canadian Dollars)
Number of
common
shares
Share
capital
Common
share
purchase
warrants
Contributed
surplus
Accumulated
other
comprehensive
income (loss)
Deficit
Total shareholders’
equity
$
$
$
$
$
$
Balance, March 31, 2017
113,018,314
15,517,895
3,728,024
4,364,112
29,083
(20,085,685)
3,553,429
Shares issued
49,828,999
3,066,824
1,916,076
-
Share issuance costs
-
(678,805)
(421,804)
309,030
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)
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
198,549,753
29,507,301
503,004
5,477,961
2,391
(27,515,517)
7,975,140
Balance, March 31, 2018
198,549,753
29,507,301
503,004
5,477,961
2,391
(27,515,517)
7,975,140
Shares issued
23,000,000
3,971,103
1,778,897
-
Share issuance costs
-
(659,401)
(295,386)
228,086
Revision of exercised
warrants and options
[note 2(f)]
Shares issued for exercised
warrants
Shares issued for exercised
options
Shares issued for vested
restricted share units
Shares issued on debenture
conversion
-
(2,586,642)
2,586,642
16,660,918
5,140,602
(1,816,411)
-
-
3,155,031
996,143
-
(491,421)
216,668
166,501
-
1,798,382
1,231,534
270,937
-
-
Stock-based compensation
-
-
-
1,021,374
578,572
179,357
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,750,000
(726,701)
-
3,324,191
504,722
1,964,883
270,937
1,021,374
179,357
(12,816,071)
(12,816,071)
(7,070)
-
(7,070)
Shares issued for Citagenix
loan facility
Net loss for the year
Exchange differences on
translation of foreign
operations
Balance,
March 31, 2019
243,392,476
36,985,901
2,756,746
8,034,382
(4,679)
(40,331,588)
7,440,762
See accompanying notes to the consolidated financial statements
4
ANTIBE THERAPEUTICS INC.
Consolidated Statements of Cash Flows
For the Years Ended March 31, 2019 and 2018
(Expressed in Canadian Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the year
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]
Increase in deferred revenue [note 13]
Changes in non-cash working capital:
Accounts receivable [note 4]
Inventory
Prepaid expenses
Income taxes recoverable
Deposits
Deferred contract costs
Accounts payable and accrued liabilities
2019
$
2018
$
(12,816,071)
(7,429,832)
-
2,986,257
122,529
8,944
70,601
345,618
1,315,755
(7,966,367)
(185,760)
303,149
15,040
-
2,176
(235,866)
1,011,933
(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)
Net change in non-cash working capital balances
910,672
(475,949)
Cash flows used in operating activities
(7,055,695)
(6,450,616)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Red Rock Regeneration Inc convertible debenture
Purchase of equipment
Cash flows used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Advances to Antibe Holdings Inc. [notes 7 and 24]
Net proceeds from loan payable [note 6]
Advances in (repayments of) 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 exercised warrants [note 9]
Proceeds from exercised options [note 9]
Share issuance costs [note 9]
Cash flows provided by financing activities
Net increase in cash during the year
Foreign exchange loss on translation
Cash, beginning of the year
Cash, end of the year
(100,000)
(157,400)
(257,400)
(118,730)
1,965,593
(1,291,259)
-
5,929,357
3,324,191
504,722
(726,701)
9,587,173
2,274,078
(7,070)
3,725,824
5,992,832
-
(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
See accompanying notes to the consolidated financial statements
5
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2019 and 2018
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. The Company’s main objectives are to develop ATB-346 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.
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’s portfolio consists of
branded biologics and medical devices that promote bone regeneration. Citagenix operates in Canada through its
direct sales force and in the United States, 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 6.2% of the Company’s common shares are held by Antibe Holdings Inc. (“AHI”) as at
March 31, 2019.
These consolidated financial statements were authorized for issuance by the Board of Directors on July 16, 2019.
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:
Citagenix
BMT Medizintechnik GmbH (“BMT”)
Percentage ownership
100%
100%
Antibe Terapiya Rus LLP is no longer a subsidiary of the Company and has been expulsed from the Russian
Trade Register.
6
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2019 and 2018
2. BASIS OF PRESENTATION (continued)
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.
(c) Going concern –
The consolidated financial statements have been prepared assuming that the Company will continue as a going
concern. As at March 31, 2019, the Company had working capital of $7,657,131 (March 31, 2018 – $4,878,379),
incurred a net loss for the year then ended of $12,816,071 (2018 – $7,429,832), had negative cash flows from
operations of $7,055,695 (2018 – $6,450,616) and an accumulated deficit of $40,331,588 (March 31, 2018 -
$27,515,517).
All of the factors above indicate there is a material uncertainty that may cast significant doubt about the
Company’s ability to continue as a going concern, which assumes the Company will continue its operations for
the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the
ordinary course of business. 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, 22 and 23.
If the going concern assumption was 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 were 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 reporting period.
Actual results may vary from the current estimates. These estimates are reviewed periodically and, as adjustments
become necessary, they are reported in income 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 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.
7
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2019 and 2018
2. BASIS OF PRESENTATION (continued)
(e) 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 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 subsidiary 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 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 loss.
(f) Revised allocation of previously exercised warrants –
During the year, the Company revised the presentation of warrants exercised prior to April 1, 2018. IFRS 2,
Share-based Payments does not preclude an entity from recognizing a transfer from one component of equity to
another. The result of the revised allocation of previously exercised warrants is a decrease in share capital of
$2,586,642 and a corresponding increase to the common share purchase warrant reserve. As a result of this
revision, there is no net impact to equity, no impact to the consolidated statements of loss and comprehensive
loss, and no impact to the cash flows of the Company.
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES, JUDGEMENTS, and
ASSUMPTIONS
(a) Significant accounting policies, estimates, judgements, and assumptions –
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. The Company monitors inventory to determine when inventory values are not
recoverable, and when a write-down is necessary.
8
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2019 and 2018
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES, JUDGEMENTS, and
ASSUMPTIONS (continued)
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
Impairment of non-financial assets –
The Company’s property and 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.
9
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2019 and 2018
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES, JUDGEMENTS, and
ASSUMPTIONS (continued)
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, 2019, 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, 2019.
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 2018 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.
10
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2019 and 2018
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES, JUDGEMENTS, and
ASSUMPTIONS (continued)
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.
Investment tax credits (“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 year 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.
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.
11
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2019 and 2018
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES, JUDGEMENTS, and
ASSUMPTIONS (continued)
Revenue recognition –
The Company has adopted IFRS 15, Revenue from Contracts with Customers (“IFRS 15”), with a date of initial
application of April 1, 2018 using the modified retrospective method. As a result, the Company has changed its
accounting policy for revenue recognition:
Product sales
Revenue from product sales is recognized upon shipment of the product to the customer, provided transfer of title
to the customer occurs upon shipment and provided the Company has not retained any significant risks of
ownership or future obligations with respect to the product shipped, the price is fixed and determinable and
collection is reasonably assured. In certain circumstances, returns or exchange of products are allowed under the
Company’s policy or the Company may provide discounts or allowances, which gives rise to variable
consideration. The variable consideration is estimated using the expected value method as this best predicts the
amount of variable consideration to which the company is entitled.
License revenue
The Company may enter into license agreements for the development and/or commercialization of products in
certain territories. IFRS 15 includes specific guidance for accounting for license of intellectual property (“IP”),
which requires revenue to be recorded either over time or at a point in time, depending on whether the customer
has the “right to access” or the “right to use” the IP. For licenses that provide the customer with the right to access
the IP, revenue is recognized throughout the license period. For licenses that provide the customer with the right
to use the IP, revenue is deferred and amortized to the consolidated statements of loss and comprehensive loss at
a point in time where the customer can first use and benefit from the license.
Costs to obtain a contract – Incremental costs incurred to obtain a contract are capitalized as a contract asset on
the consolidated statements of financial position. These costs are deferred and amortized to the consolidated
statements of loss and comprehensive loss at a point in time where the customer can first use and benefit from
the license. The contract assets are tested for impairment annually, or if there are indicators of impairment.
Financing component – Agreements entered into with licensing partners often include an upfront fee upon
execution of the agreement. If considered significant in the context of the arrangement, these upfront fees are
accounted for as a financing component.
The following were the revenue recognition policies prior to April 1, 2018, under IAS 18:
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.
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.
Revenue from upfront 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.
Interest income is recognized using the effective interest method as earned.
12
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2019 and 2018
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES, JUDGEMENTS, and
ASSUMPTIONS (continued)
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.
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 year. 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, 2019, all leases are classified as operating leases.
Operating lease payments are expensed on a straight-line basis over the term of the relevant lease.
13
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2019 and 2018
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES, JUDGEMENTS, and
ASSUMPTIONS (continued)
Measurement of financial instruments –
The Company has adopted IFRS 9, Financial Instruments (“IFRS 9”) with a date of initial application of April
1, 2018 using the modified retrospective method. As a result, the Company has changed its accounting policy for
financial instruments:
Classification and measurement
Except for certain trade receivables, under IFRS 9, the Company initially measures a financial asset at its fair
value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Under
IFRS 9, financial liabilities are subsequently measured at fair value through profit or loss (“FVPL”), amortized
cost, or fair value through other comprehensive income.
The classification is based on two criteria: the Company’s business model for managing the assets; and whether
the instruments’ contractual cash flows represent “solely payments of principal and interest” on the principal
amount outstanding.
On the date of initial application, April 1, 2018, the financial instruments of the Company were as follows:
Financial assets
Cash
Term deposits
Accounts receivable
Due from AHI
Deposits
Investment in Red Rock
Financial liabilities
Bank indebtedness
Accounts payable and accrued liabilities
Convertible debentures
Loan payable
IAS 39
IFRS 9
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
FVPL
FVPL
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
FVPL
Amortized cost
Amortized cost
Amortized cost
Amortized cost
The Company assessed the classification and measurement of the financial instruments it held at the date of initial
application of IFRS 9 and has classified its financial instruments into the appropriate IFRS 9 categories. There
were no changes to the carrying value of the Company’s financial instruments resulting from this reclassification
and accordingly there was no impact to the Company’s opening balance of deficit as at April 1, 2018, as a result
of the adoption of IFRS 9.
14
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2019 and 2018
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES, JUDGEMENTS, and
ASSUMPTIONS (continued)
Impairment of financial assets
The Company assesses on a forward-looking basis the expected credit losses (“ECLs”) associated with its
financial instruments carried at amortized cost. Accounts receivable are subject to lifetime ECLs, which are
measured as the difference in the present value of the contractual cash flows that are due under the contract, and
the cash flows that are expected to be received. The Company applies the simplified approach at each reporting
date on its trade and other receivables and considers current and forward-looking macro-economic factors that
may affect historical default rates when estimating ECL.
Financial assets, together with the associated allowance, are written off when there is no realistic prospect of
future recovery and all collateral has been realized or has been transferred to the Company. If, in a subsequent
year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the
impairment was recognized, the previously recognized impairment loss is increased or decreased by adjusting
the carrying value of the loan or receivable. If a past write-off is later recovered, the recovery is recognized in the
consolidated statements of loss and comprehensive loss.
There were no changes to the carrying value of the Company’s financial instruments resulting from this new
impairment model and accordingly there was no impact to the Company’s opening balance of deficit as at
April 1, 2018, as a result of the adoption of IFRS 9.
The following were the financial instrument policies prior to April 1, 2018, under IAS 39:
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.
15
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2019 and 2018
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES, JUDGEMENTS, and
ASSUMPTIONS (continued)
(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.
(vi) Financial instruments –
IFRS 9, Financial Instruments (“IFRS 9”) was issued in 2010 and is to replace IAS 39, Financial Instruments:
Recognition and Measurement (“IAS 39”). 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. The Company has adopted the
new standard using the modified retrospective application method with no restatement of comparative
information.
(vii) Revenue –
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.
Other than the inclusion of additional revenue disclosures required under IFRS 15, the adoption of this standard
did not have an impact on the consolidated financial statements.
(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:
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.
16
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2019 and 2018
4. TRADE AND OTHER RECEIVABLES
Trade receivables
SR&ED tax credits receivable
Value-added taxes receivable
Harmonized Sales Tax receivable
Allowance for doubtful accounts
Employee advances [note 7]
2019
$
1,092,916
38,590
17,075
124,530
(1,275)
1,271,836
20,911
1,292,747
2018
$
897,593
-
4,696
188,932
(793)
1,090,428
16,559
1,106,987
5.
INTANGIBLE ASSETS
Intangible assets consist of the following:
Cost
As at March 31, 2017
Additions
As at March 31, 2018
As at April 1, 2018
Additions
As at March 31, 2019
Amortization
As at March 31, 2017
Charge for the year
As at March 31, 2018
As at April 1, 2018
Charge for the year
Trademarks
and brands
$
License
$
Customer lists
$
Patents
$
Total
$
3,094,018
-
3,094,018
3,094,018
-
3,094,018
316,810
-
316,810
316,810
-
316,810
177,080
-
177,080
177,080
-
177,080
18,872
-
18,872
18,872
-
18,872
3,606,780
-
3,606,780
3,606,780
-
3,606,780
451,812
309,402
761,214
761,214
309,402
-
-
-
-
-
17,708
35,416
11,935
800
481,455
345,618
53,124
12,735
827,073
53,124
12,735
827,073
35,416
800
345,618
As at March 31, 2019
1,070,616
-
88,540
13,535
1,172,691
Carrying amount
As at March 31, 2018
As at March 31, 2019
2,332,804
2,023,402
316,810
316,810
123,956
88,540
6,137
5,337
2,779,707
2,434,089
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, 2019, 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.
17
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2019 and 2018
6. CREDIT FACILITY INDEBTEDNESS
On June 29, 2018, Citagenix fully repaid all of the outstanding amounts on its operating line facility with a
Canadian chartered bank, and as at that date, the facility was cancelled.
On June 29, 2018, Citagenix replaced its bank operating line facility with a $2.25 million secured revolving credit
facility (the “Credit Facility”) provided by Bloom Burton Healthcare Lending Trust (“BBHLT”). The Credit
Facility matures on June 29, 2020. Amounts outstanding under the Credit Facility bear interest at a rate of 7%
compounded monthly, payable quarterly. Citagenix can prepay any amount of the facility at any time subject to
a 1% fee of the prepaid principal amount. Any prepayment of the facility can be reborrowed. Additionally, there
are mandatory prepayment terms stipulated in the Credit Facility whereby all proceeds received will be applied
against borrowed amounts if any of such following events take place: if Citagenix sells or otherwise disposes of
any assets in excess of $300,000.
The obligations of Citagenix under the Credit Facility are secured against all of the assets of Citagenix, and are
guaranteed by the Company. In connection with the Credit Facility, the Company agreed to issue to BBHLT
578,572 common shares (“Bonus Shares”) of the Company at a deemed issue price of $0.385 per common share.
Given the Bonus Shares were subject to a statutory hold period of four months and one day from the date of
issuance, the fair value was determined to be $0.31 per Bonus Share. The fair value was calculated considering
a volatility rate of 88% over a four-month period.
The Credit Facility has been accounted for using amortized cost. Transaction costs directly attributable to the
Credit Facility totaled $284,407. These costs were proportionally allocated based on the relative fair value of the
components of the Credit Facility and are amortized over the two-year term of the facility.
As at March 31, 2019, the cumulative amount of interest paid for the Credit Facility was $118,488, and the
accretion of loan costs totaled $106,653.
7. RELATED PARTY TRANSACTIONS
As part of the prospectus offering during the year ended March 31, 2019 (as described in note 9), one officer of
the Company purchased 80,000 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”).
During the year, the Company advanced $118,730 (2018 – $36,841) to AHI (AHI owns 6.2% of the common
shares of the Company). As at March 31, 2019, $293,128 (2018 – $174,398) was receivable. This balance bears
no interest, is payable on demand and is unsecured.
Employee advances for year totaled $20,911 (2018 – $16,559), and consisted of cash advances, payments to the
Company cell phone plan on behalf of employees, use of Company courier services, and petty cash in foreign
currencies. Currently, the Company has one employee receiving cash advances.
18
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2019 and 2018
8. CONVERTIBLE DEBENTURES
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.
Balance, beginning of the year
Accretion interest
Amortization of transaction costs
Debentures converted to shares
Balance, end of the year
2019
$
246,117
15,876
8,944
(270,937)
2018
$
2,631,818
611,471
83,413
(3,080,585)
-
246,117
On April 10 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, 1,231,534 common shares were issued at
$0.22 per share for a total conversion of $270,937.
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
Revision of exercised warrants and
options [note 2(f)]
Warrants exercised
Options exercised
Restricted share units vested and shares issued
Debentures converted
Shares issued for Citagenix loan facility [note 6]
Prospectus 2017 (“P2017a”)
Prospectus 2017 (“P2017b”)
Share issuance costs P2017a, P2017b
Prospectus 2019 (“P2019”)
Share issuance costs P2019
Balance, end of the year
2019
2018
Shares
198,549,753
-
16,660,918
3,155,031
216,668
1,231,534
578,572
-
-
-
23,000,000
-
243,392,476
Amount
$
29,507,301
(2,586,642)
5,140,602
996,143
166,501
270,937
179,357
-
-
-
3,971,103
(659,401)
36,985,901
Shares
113,018,314
Amount
$
15,517,895
-
21,699,781
-
-
14,002,659
-
40,498,999
9,330,000
-
-
-
-
8,520,802
-
-
3,080,585
-
2,481,234
585,590
(678,805)
-
-
198,549,753
29,507,301
19
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2019 and 2018
9.
SHARE CAPITAL (continued)
On February 27, 2019, the Company closed a bought deal public offering of 23,000,000 units (the “Units”) at a
price of $0.25 per Unit (the “Offering Price”) for aggregate gross proceeds of $5,750,000 (the “Offering”), which
included the exercise in full of the Underwriters’ over-allotment option. The Offering was made pursuant to an
underwriting agreement dated February 8, 2019, with a syndicate of underwriters (collectively, the
“Underwriters”). The units were offered and sold by way of a short form.
Each Unit comprised one common share of the Company (a “Common Share”) and one-half of one common
share purchase warrant. Each full common share purchase warrant (a “Warrant”) is exercisable to purchase one
Common Share at any time prior to February 27, 2022, at a price of $0.35 per Common Share.
As consideration for the services rendered by the Underwriters in connection with the Offering, the Company
paid the Underwriters a cash commission equal to 7% of the gross proceeds raised under the Offering and granted
the Underwriters non-transferable broker warrants equal to 7% of the number of Units sold under the Offering,
exercisable at any time prior to February 27, 2021, at an exercise price equal to the Offering Price.
The following provides additional information on the prospectus raises completed during the years ended
March 31, 2019 and 2018:
Closing date
Prospectus
Number of
units1 /
shares issued
Number of
warrants
issued
Price
per
unit
$
Gross
proceeds2
$
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
Feb 27, 2019
P2019
23,000,000
11,500,000
0.25
5,750,000
Warrant
exercise
price
Warrant
expiry date
$
0.15
0.15
0.35
Jun 21, 2020
Jun 21, 2020
Feb 27, 2022
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.
With respect to the prospectus raises completed during the years ended March 31, 2019 and 2018, the Company
issued the following warrants to brokers:
Closing
date
Prospectus
Number
of broker
warrants
issued
Total
issuance
costs
$
Jun 21, 2017
P2017a
2,834,930
522,725
Aug 18, 2017
P2017b
653,101
156,080
Feb 27, 2019
P2019
1,610,000
954,787
Non-cash cost from
issuance of
warrants to brokers
$
255,200
53,830
228,086
Broker
warrant
exercise
price
$
0.10
0.10
0.25
Broker
warrant
expiry date
Jun 21, 2019
Jun 21, 2019
Feb 27, 2021
All issuance costs were offset against share capital and common share purchase warrants in proportion to the
allocation of proceeds.
20
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2019 and 2018
9.
SHARE CAPITAL (continued)
The following is a summary of all warrants exercised during the years ended March 31, 2019 and 2018:
Exercise price
$
0.10
0.15
0.22
0.31
2019
2018
Number of
warrants
exercised
106,500
6,877,600
7,976,818
1,700,000
16,660,918
Gross
proceeds
Number of
warrants
exercised
$
10,650
1,031,640
1,754,901
527,000
3,324,191
2,211,854
14,108,508
1,019,419
4,360,000
21,699,781
Gross
proceeds
$
221,185
2,116,276
224,273
1,351,600
3,913,334
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
option-pricing model, 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 on 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. On August 28, 2018, the Company’s Board of Directors determined
that the main performance goals had been met by all executives. The estimated fair value of these options
calculated using the BSM on the grant date was $691,549. During the year, $607,915 was expensed and
included in contributed surplus. The following assumptions were used in the BSM to determine the fair value
of the stock-based compensation expense for the performance options on the grant date: risk-free interest rate
of 1.59%, expected volatility of 157%, expected dividend yield of nil, expected life of options 10 years,
share price of $0.20, and exercise price of $0.20.
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.
21
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2019 and 2018
9.
SHARE CAPITAL (continued)
The following is a summary of all options to purchase common shares that are outstanding as at March 31, 2019
and 2018, as well as details on exercise prices and expiry dates:
2019
2018
Balance, beginning of the year
Granted during the year
Exercised during the year
Expired during the year
Options
20,840,368
519,393
(3,155,031)
(314,123)
Weighted
average
exercise price
$
0.25
0.39
0.16
0.28
Balance, end of the year
17,890,607
0.27
Number of options
12,000
12,000
24,000
2,700,000
18,000
37,500
36,000
18,000
90,000
18,000
150,000
805,000
560,000
4,229,714
150,000
8,637,000
151,515
41,878
100,000
100,000
17,890,607
Options
21,134,000
73,500
(343,132)
(24,000)
20,840,368
Weighted
average
exercise price
$
0.25
0.19
0.19
0.52
0.25
Exercise
price
$
0.13
0.23
0.19
0.33
0.20
0.09
0.29
0.38
0.35
0.25
0.55
0.66
0.14
0.15
0.19
0.20
0.50
0.40
0.37
0.29
Expiry date
June 10, 2019
September 6, 2019
January 18, 2020
January 25, 2020
March 31, 2020
October 20, 2020
February 27, 2021
June 25, 2021
October 3, 2021
December 19, 2021
October 21, 2023
March 4, 2024
July 13, 2025
March 9, 2026
January 18, 2027
March 31, 2027
April 11, 2028
May 8, 2028
June 25, 2028
March 11, 2029
The number of options exercisable as at March 31, 2019, is 15,272,149 and the weighted average exercise price
of these options is $0.24.
22
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2019 and 2018
9.
SHARE CAPITAL (continued)
The following assumptions were used in the BSM to determine the fair value of the stock-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
(d) Restricted share unit plan
2019
2018
1.75% - 2.32%
104% - 149%
0.00%
3 - 10 years
$0.39
$0.25 - $0.50
1.53% - 1.89%
121% - 173%
0.00%
3 years
$0.19
$0.09 - $0.29
On June 25, 2018, the Company adopted a restricted share unit (the “RSU”) plan. The Board of Directors of
the Company has the full power to administer the RSU plan including determining to whom RSUs may be
awarded, and the terms and conditions of such awards. The maximum number of shares issuable is limited
to 18,623,589 shares. The fair value of the RSUs is measured as of the grant date, using the share price on the
grant date, 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 RSUs expected to vest.
On October 3, 2018, and November 23, 2018, 17,700,000 and 40,000 RSUs, respectively, were granted to
directors, officers, employees and consultants. All RSUs are subject to a service condition; one third (1/3) of the
RSUs granted will vest on each of the first, second and third anniversaries of the grant date. In the case of RSUs
granted to special advisor consultants, one twelfth (1/12) of the RSUs will vest on the grant date, and an additional
1/12 of the RSUs will vest on the last day of each calendar quarter thereafter over three years.
Included in the RSUs granted on October 3, 2018, are 6,465,000 performance RSUs granted to key senior
executives of Antibe and Citagenix. Vesting of these RSUs is subject to the successful achievement of certain
goals that are designed to reflect the successful execution of the Company’s business plan and strategy. The
estimated fair value of these RSUs calculated using the share price on the grant date is $2,392,050. As at
March 31, 2019, it was determined that the probability and timing of achieving the performance criteria
was greater than 50%, and as such, $716,500 was expensed during the year ended March 31, 2019, and
included in contributed surplus.
The total fair value of RSUs granted during the year was $6,559,800, determined based on the share price
on the grant date. For the year ended March 31, 2019, $1,964,883 has been included within stock-based
compensation in the consolidated statement of loss and comprehensive loss.
The following is a summary of all RSUs that are outstanding as at March 31, 2019:
2019
RSUs
Balance, beginning of the year
Granted during the year
Vested during the year
Balance, end of the year
-
17,740,000
(450,003)
17,289,997
2018
RSUs
-
-
-
-
23
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2019 and 2018
9.
SHARE CAPITAL (continued)
(e) Common share purchase warrants
In conjunction with the prospectus capital raises, the following broker and finder warrants were granted during
the years ended March 31, 2019 and 2018:
Closing date
Prospectus
Number of
broker
warrants
issued
Non-cash cost
from issuance
of warrants to
brokers
Broker
warrant
exercise price
Broker
warrant expiry
date
Jun 21, 2017
Aug 18, 2017
P2017a
P2017b
2,834,930
653,101
$
255,200
53,830
Mar 31, 2018*
P2017a and
P2017b
1,045,928
-
Feb 27, 2019
P2019
1,610,000
228,086
$
0.10
0.10
0.15
0.25
Jun 21, 2019
Jun 21, 2019
Jun 21, 2020
Feb 27, 2021
Mar 31, 2019*
P2017a and
P2017b
53,250
-
0.15
Jun 21, 2020
*The broker warrants issued under the June 21, 2017, and August 18, 2017, prospectus capital raise entitled the
holder, upon exercise, to receive one common share of the Company and one-half broker warrant. Each whole
broker warrant entitles the holder to purchase one common share of the Company at an exercise price of $0.15
and expires June 21, 2020. For the year ended March 31, 2019, 106,500 (2018 – 2,091,854) P2017a and P2017b
broker warrants were exercised, resulting in the issuance of 53,250 (2018 – 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.
24
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2019 and 2018
9.
SHARE CAPITAL (continued)
The following is a summary of all warrants to purchase common shares that are outstanding as at
March 31, 2019 and 2018, as well as details on exercise prices and expiry dates:
Balance, beginning of the year
Issued during the year
Exercised during the year
Expired during the year
Balance, end of the year
2019
2018
Warrants
38,766,448
13,163,250
(16,660,918)
(579,757)
34,689,023
Weighted
average
exercise price
$
0.18
0.34
0.20
0.38
0.23
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
Number of warrants
907,500
1,289,677
19,381,846
1,610,000
11,500,000
34,689,023
Exercise
price
$
0.83
0.10
0.15
0.25
0.35
Expiry date
June 1, 2019
June 21, 2019
June 21, 2020
February 27, 2021
February 27, 2022
The following assumptions were used in the BSM to determine the fair value of warrants in the year:
Risk-free interest rate
Expected volatility
Expected dividend yield
Expected life of warrants
Weighted average share price
Exercise price
2019
1.77 - 1.78%
94% - 100%
0.00%
2 - 3 years
$0.27
$0.25 - $0.35
2018
0.91% - 1.59%
104% - 176%
0.00%
2 - 3 years
$0.14
$0.10 - $0.15
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.
25
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2019 and 2018
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.
The segmented performance of these two businesses for the years ended March 31, 2019 and 2018 is as follows:
2019
2018
Antibe
$
Citagenix
$
Consolidated
$
Antibe
Citagenix
Consolidated
$
$
$
-
-
-
(10,533,865)
9,538,942
(5,989,387)
3,549,555
(5,697,636)
9,538,942
(5,989,387)
3,549,555
(16,231,501)
-
-
-
(6,118,502)
8,510,149
(5,134,909)
3,375,240
(4,961,331)
8,510,149
(5,134,909)
3,375,240
(11,079,833)
(10,533,865)
(2,148,081)
(12,681,946)
(6,118,502)
(1,586,091)
(7,704,593)
Revenue
Cost of sales
Gross profit
Expenses
Loss before
income taxes
There is no single customer who comprises more than 10% of revenue.
Revenue by geographic region for the year ended March 31, 2019, is as follows:
Canada– 60%
United States – 25%
Europe – 2%
Rest of World – 13%
The Company’s assets and liabilities by each business as at March 31, 2019 and 2018 are as follows:
2019
2018
Antibe
Citagenix Consolidated
Antibe
Citagenix Consolidated
$
$
$
$
$
$
Assets
Current
Non-current
6,207,310
1,835,897
4,356,628
2,419,274
10,563,938
4,255,171
4,158,760
1,600,031
4,151,869
2,580,270
8,310,629
4,180,301
Total assets
8,043,207
6,775,902
14,819,109
5,758,791
6,732,139
12,490,930
Liabilities
Current
Non-current
1,228,325
2,399,295
1,678,482
2,072,245
2,906,807
4,471,540
526,507
1,083,540
2,905,743
-
3,432,250
1,083,540
Total liabilities
3,627,620
3,750,727
7,378,347
1,610,047
2,905,743
4,515,790
26
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2019 and 2018
12. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
The following table summarizes accounts payable and accrued liabilities as at March 31, 2019 and 2018:
Accounts payable
Antibe
Citagenix
BMT
Accrued liabilities
Antibe
Citagenix
BMT
2019
$
868,304
1,231,289
249,137
2,348,730
360,022
121,668
76,387
558,077
2018
$
114,692
1,257,619
99,800
1,472,111
165,696
158,446
98,621
422,763
Total accounts payable and accrued liabilities
2,906,807
1,894,874
13. DEFERRED REVENUE
On February 24, 2017, Antibe entered into an exclusive long-term license and distribution agreement (“License
Agreement 1”) with Laboratoires Acbel SA (“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 License Agreement 1, Antibe was issued
an upfront payment of €800,000 (CAD$1,142,400) 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.
On September 4, 2018, Antibe entered into an exclusive licensing agreement (“License Agreement 2”) with
Kwangdong Pharmaceutical Co., Ltd (“Kwangdong”) for the development and commercialization of ATB-346
in the Republic of Korea (“Region”). Under the terms of License Agreement 2, Antibe was issued an upfront
payment of US$1,000,000 (CAD$1,315,755), which is reflected in deferred revenue until the point that
Kwangdong can benefit from the license. Additionally, Antibe will receive a double-digit royalty on net sales in
the Region. Under the terms of License Agreement 2, Antibe will be issued payment upon achievement of the
following milestones:
• US$1,000,000 upon receipt of regulatory approval from the Food and Drug Administration in the USA;
• US$1,000,000 upon market launch of ATB-346 or the first offer for sale of ATB-346 in the Region;
• US$1,000,000 upon total net sales in the Region exceeding US$5,000,000 for the first time;
• US$1,000,000 upon total net sales in the Region exceeding US$10,000,000 for the first time;
• US$1,000,000 upon total net sales in the Region exceeding US$20,000,000 for the first time;
• US$1,000,000 upon total net sales in the Region exceeding US$30,000,000 for the first time;
• US$1,500,000 upon total net sales in the Region exceeding US$40,000,000 for the first time; and
• US$1,500,000 upon total net sales in the Region exceeding US$50,000,000 for the first time.
Fees paid to an agent used in obtaining License Agreement 2 have been recorded as deferred contracts on the
consolidated statement of financial position in the amount of $235,866 as at March 31, 2019.
The amount of the upfront payments for both licenses is included on the consolidated statements of financial
position as deferred revenue and will be recorded through the consolidated statements of loss and comprehensive
loss at the same point when the license revenue is recognized.
27
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2019 and 2018
14. GENERAL AND ADMINISTRATIVE EXPENSES
The nature of the general and administrative expenses for the years ended March 31, 2019 and 2018 is
summarized as follows:
Salaries and wages
Professional and consulting fees
Office expenses
Other expenses
Total general and administrative
2019
$
1,786,835
2,112,879
717,674
253,686
4,871,074
2018
$
1,284,160
904,244
524,471
132,609
2,845,484
15. SELLING AND MARKETING
The nature of the selling and marketing expenses for the years ended March 31, 2019 and 2018 is
summarized as follows:
Salaries and wages
Commissions
Advertising and promotions
Travel and entertainment
Total selling and marketing
16. RESEARCH AND DEVELOPMENT
2019
$
1,889,757
601,284
474,699
555,209
3,520,949
2018
$
1,866,562
544,835
508,081
461,801
3,381,279
The nature of the research and development expenses for the years ended March 31, 2019 and 2018 is
summarized as follows:
Salaries and wages
Professional and consulting fees
Development costs
Scientific Research and Experimental
Development (“SR&ED”)
Total research and development
2019
$
661,044
284,315
3,199,587
(201,883)
3,943,063
2018
$
478,395
114,497
2,208,752
(59,168)
2,742,476
17. STOCK-BASED COMPENSATION
The function of the stock-based compensation expense for the year ended March 31, 2019 and 2018 is
summarized as follows:
General and administrative
Research and development
Total stock-based compensation
2019
$
2,168,023
818,234
2,986,257
2018
$
469,202
223,794
692,996
28
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2019 and 2018
18. FINANCE AND RELATED COSTS
The components of the finance and related costs for the years ended March 31, 2019 and 2018 are as
follows:
Interest on convertible debentures
Accretion interest
Interest and bank charges
Unrealized foreign currency translation
Total finance and related costs
2019
$
143,925
122,529
163,835
95,061
525,350
2018
$
412,452
611,471
154,029
(120,146)
1,057,806
29
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2019 and 2018
19. INCOME TAXES
The income tax provision recorded differs from the income tax obtained by applying the statutory income
tax rate of 26.50% (2018 – 26.50%) to the loss before income taxes for the year, and is reconciled as
follows:
Loss before income taxes
2019
$
(12,681,946)
2018
$
(7,704,593)
Expected income tax recovery at the combined basic federal
and provincial tax rate:
Decrease (increase) resulting from:
Non-deductible expenses
Share Issuance costs
Foreign withholding tax paid
Others
Amount related to unrecognized deferred tax assets
Provision for (recovery of) income taxes
(3,360,716)
(2,041,717)
806,455
(192,576)
131,576
(114,124)
2,863,509
134,125
320,956
(309,362)
-
28,917
1,726,445
(274,761)
The Company has incurred losses of $24,026,164 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
2039
Indefinitely
$
258,166
607,722
735,014
875,160
1,426,628
2,006,240
2,858,123
3,002,487
4,027,247
7,516,469
712,908
24,026,164
The cumulative carry-forward pool of SR&ED expenditures as at March 31, 2019, applicable to future years,
with no expiry date, is $6,610,965.
30
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2019 and 2018
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
2019
$
464,903
(536,202)
(22,659)
8,567
23,978
61,413
-
2018
$
578,774
(625,192)
(20,337)
630
13,723
52,402
-
Deferred tax expense of $2,549 (2018 – $9,733) 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
Amount related to deferred revenue
2019
$
5,979,167
71,168
1,751,906
14,310
683,982
87,298
389,032
611,406
9,588,269
2018
$
4,541,168
67,099
1,249,954
14,178
461,975
39,248
351,138
-
6,724,760
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.
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.
31
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2019 and 2018
21. FINANCIAL INSTRUMENTS (continued)
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) and the investment in Red Rock (note 24).
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: share capital, common share purchase
warrants, contributed surplus, and accumulated other comprehensive income (loss), which total $7,440,762
(March 31, 2018 – $7,975,140). 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: credit risk, liquidity risk , 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 of Directors. 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 of Directors as follows:
Credit risk
The Company's credit risk is primarily attributable to accounts receivable, amounts 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 operations, 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.
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, 2019, the Company’s financial obligations, including applicable interest, are due as follows:
Less than one year
1 – 2 years After 2 years
Accounts payable and accrued liabilities
2,906,807
$
$
-
Loan payable
-
2,072,245
2,906,807
2,072,245
$
-
-
-
Total
$
2,906,807
2,072,245
4,979,052
32
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2019 and 2018
23. FINANCIAL RISK MANAGEMENT (continued)
Foreign currency risk
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 currency risk.
Interest rate risk
Interest rate 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.
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.
The Company made no milestone payments in the year ended March 31, 2019.
(b) Royalty agreement
On November 16, 2015, the Company announced the signing of an exclusive long-term license and distribution
agreement with Knight Therapeutics Inc. (“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.
The Company received no royalties from Knight in the year ended March 31, 2019.
33
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2019 and 2018
24. COMMITMENTS AND CONTINGENCIES (continued)
(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 (the “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 URIST to the Canadian market.
As at March 31, 2019, 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
$
271,862
1,359,310
1,631,172
(e) Retention bonus
Certain Company executives are eligible to receive retention bonuses of up to $475,000 based on achieving
certain profitability targets. To date, no accrual has been made for such bonuses as the probability of payout is
uncertain.
(f) Convertible debenture
On September 14, 2018, the Company purchased a $100,000 convertible debenture in Red Rock Regeneration
Inc. (“Red Rock”), a company that has purchased a technology (OP-1), but which requires significant additional
investment to commercialize. The convertible debenture can be converted into common shares of Red Rock
should Red Rock be successful in raising the significant additional funds. The convertible debentures earns
interest at the rate of 4% per annum, payable semi-annually.
34
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2019 and 2018
25. SUBSEQUENT EVENTS
(a) The following is a summary of all warrants exercised in the period from April 1, 2019 to the date of issuance
of these consolidated financial statements:
Exercise price
Number of
warrants exercised
$
0.10
0.15
1,289,677
378,346
1,668,023
Proceeds
$
128,968
56,752
185,720
Each of the warrants entitled the bearer to purchase one common share of the Company.
(b) On May 22, 2019, the $100,000 Red Rock convertible debenture plus accrued interest was repaid in
full.
35