ANTIBE THERAPEUTICS INC.
CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2020 and 2019
(Expressed in Thousands of Canadian Dollars)
INDEPENDENT AUDITOR’S REPORT
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, 2020 and 2019 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, 2020 and 2019, 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 $19,342,000 during the year ended March 31, 2020 and, as of that date, the Group had an accumulated
deficit of $59,673,000. 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.
Chartered Professional Accountants
Licensed Public Accountants
Toronto, Canada
July 23, 2020
ANTIBE THERAPEUTICS INC.
Consolidated Statements of Financial Position
As at March 31, 2020 and 2019
(Expressed in thousands of Canadian Dollars)
ASSETS
Current
Cash
Term deposits
Trade and other receivables [note 5]
Inventory
Prepaid expenses
Due from Antibe Holdings Inc. [note 8]
Total current assets
Non-current assets
Property and equipment, net
Deposits
Deferred contract costs
Investment in Red Rock Regeneration Inc.
Intangible assets, net [note 6]
Goodwill [note 4]
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current
Bank indebtedness
Accounts payable and accrued liabilities [note 12]
Current portion of loan payable [note 7,25(c)]
Current portion of lease liability [note 3]
Total current liabilities
Non-current liabilities
Loan payable [note 7]
Deferred revenue [note 23]
Lease liability [note 3]
Total non-current liabilities
TOTAL LIABILITIES
SHAREHOLDERS’ EQUITY
Share capital [note 9]
Common share purchase warrants
Contributed surplus
Accumulated other comprehensive income (loss)
Deficit
TOTAL SHAREHOLDERS’ EQUITY
2020
$
6,182
25
1,332
3,424
162
382
11,507
303
20
236
-
1,772
-
2,331
13,838
4
5,262
2,214
115
7,595
-
2,399
65
2,464
10,059
49,666
2,626
11,142
18
(59,673)
3,779
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
13,838
Commitments and contingencies [note 24]
(Signed) Daniel Legault Daniel Legault, Director
(Signed) John Wallace
John Wallace, Director
2019
$
5,993
25
1,296
2,803
155
293
10,565
181
20
236
100
2,434
1,283
4,254
14,819
-
2,907
-
-
2,907
2,072
2,399
-
4,471
7,378
36,986
2,756
8,035
(5)
(40,331)
7,441
14,819
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, 2020 and 2019
(Expressed in thousands of Canadian Dollars, except per share amounts)
REVENUE
Product sales
COST OF SALES
GROSS PROFIT
EXPENSES
Research and development [note 15]
General and administrative [note 13]
Selling and marketing [note 14]
Stock-based compensation [note 16]
Impairment of goodwill [note 4]
Amortization and depreciation
Total expenses
LOSS FROM OPERATIONS
Finance and related costs [note 17]
Finance income
LOSS BEFORE INCOME TAXES
PROVISION FOR (RECOVERY OF) INCOME TAXES
Current [note 18]
Deferred [note 18]
Total provision for (recovery of) income taxes
2020
$
9,987
6,098
3,889
8,077
5,706
3,792
3,376
1,283
572
22,806
2019
$
9,539
5,989
3,550
3,943
4,871
3,521
2,986
-
416
15,737
(18,917)
(12,187)
531
(99)
(19,349)
1
(8)
(7)
525
(31)
(12,681)
132
3
135
NET LOSS FOR THE YEAR
(19,342)
(12,816)
OTHER COMPREHENSIVE INCOME (LOSS)
Exchange differences on translation of foreign operations subject to
future reclassification
23
(7)
COMPREHENSIVE LOSS
Basic and diluted loss per share [note 10]
(19,319)
(12,823)
(0.07)
(0.06)
Basic and diluted weighted average number of shares
outstanding [note 10]
272,669,544
214,867,861
See accompanying notes to the consolidated financial statements
3
Contributed
surplus
Accumulated
other
comprehensive
income (loss)
Deficit
Total shareholders’
equity
ANTIBE THERAPEUTICS INC.
Consolidated Statements of Changes in Shareholders’ Equity
For the Years Ended March 31, 2020 and 2019
(Expressed in thousands of Canadian Dollars)
Number of
common
shares
Share
capital
$
Balance, March 31, 2018
198,549,753
29,507
Shares issued
23,000,000
3,971
Common
share
purchase
warrants
$
501
1,779
Share issuance costs
Revision of exercised
warrants and options
Shares issued for exercised
warrants
Shares issued for exercised
options
Shares issued for vested
restricted share units
Shares issued on debenture
conversion
-
-
(659)
(295)
(2,587)
2,587
16,660,918
5,141
(1,816)
3,155,031
996
216,668
167
1,231,534
271
Stock-based compensation
-
Shares issued for Citagenix
loan facility
Net loss for the year
Exchange differences on
translation of foreign
operations
578,572
-
-
-
179
-
-
-
-
-
-
-
-
-
Balance, March 31, 2019
243,392,476
36,986
Shares issued
26,833,332
5,087
2,756
2,963
Share issuance costs
-
(782)
(455)
Shares issued for exercised
warrants
Shares issued for exercised
options
Shares issued for vested
restricted share units
Stock-based compensation
Net loss for the year
Exchange differences on
translation of foreign
operations
21,333,527
7,653
(2,638)
255,761
1,866,671
-
-
-
118
604
-
-
-
-
-
-
-
-
$
5,479
-
228
-
-
(491)
1,798
-
1,021
-
-
-
-
393
-
(58)
2,496
276
-
-
$
(27,515)
-
-
-
-
-
-
-
-
-
$
7,974
5,750
(726)
-
3,325
505
1,965
271
1,021
179
(12,816)
(12,816)
-
(7)
7,441
7,441
8,050
(844)
5,015
60
3,100
276
-
-
-
-
-
-
$
2
-
-
-
-
-
-
-
-
-
-
(7)
(5)
-
-
-
-
-
-
-
(19,342)
(19,342)
23
-
23
Balance, March 31, 2019
243,392,476
36,986
2,756
8,035
(40,331)
8,035
(5)
(40,331)
Balance, March 31, 2020
293,681,767
49,666
2,626
11,142
18
(59,673)
3,779
See accompanying notes to the consolidated financial statements
4
ANTIBE THERAPEUTICS INC.
Consolidated Statements of Cash Flows
For the Years Ended March 31, 2020 and 2019
(Expressed in thousands of Canadian Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the year
Items not affecting cash:
Stock-based compensation [note 16]
Accretion interest [note 17]
Write-off of license options [note 13]
Amortization of transaction costs
Depreciation of property and equipment
Amortization of intangible assets [note 6]
Interest on capitalized lease payments
Increase in deferred revenue
Impairment of goodwill [note 4]
Changes in non-cash working capital:
Trade and other receivables [note 5]
Inventory
Prepaid expenses
Income taxes recoverable
Deposits
Deferred contract costs
Accounts payable and accrued liabilities
Net change in non-cash working capital balances
2020
$
2019
$
(19,342)
(12,816)
3,376
142
317
-
226
346
26
-
1,283
(13,626)
(39)
(621)
(7)
3
-
-
2,355
1,691
2,986
123
-
9
70
346
-
1,315
-
(7,967)
(186)
303
15
-
2
(236)
1,012
910
Cash flows used in operating activities
(11,935)
(7,057)
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of Red Rock Regeneration Inc. convertible debenture
Purchase of computer software
Purchase of equipment
Cash flows provided by (used in) investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Advances to Antibe Holdings Inc. [note 8]
Net proceeds from loan payable
Capitalized lease payments
Net change to bank indebtedness
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 gain (loss) on translation
Cash, beginning of the year
Cash, end of the year
100
(2)
-
98
(89)
-
(192)
4
8,050
5,015
60
(845)
12,003
166
23
5,993
6,182
(100)
-
(157)
(257)
(119)
1,966
-
(1,290)
5,929
3,324
505
(726)
9,589
2,275
(7)
3,725
5,993
See accompanying notes to the consolidated financial statements
5
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2020 and 2019
(Expressed in thousands of Canadian Dollars, except per share amounts and where noted)
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 5.1% of the Company’s common shares are held by Antibe Holdings Inc. (“AHI”) as at
March 31, 2020.
These consolidated financial statements were authorized for issuance by the Board of Directors on July 23, 2020.
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. 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%
Citagenix, the parent company of BMT, was acquired on October 15, 2015. Citagenix was incorporated under
the Business Corporations Act (Quebec) on December 8, 1997, and operates in Canada. BMT was incorporated
and operates in Germany.
All intercompany balances and transactions have been eliminated on consolidation.
6
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2020 and 2019
(Expressed in thousands of Canadian Dollars, except per share amounts and where noted)
2. BASIS OF PRESENTATION (continued)
(c) Going concern –
The consolidated financial statements have been prepared assuming that the Company will continue as a going
concern. As at March 31, 2020, the Company had working capital of $3,912 (2019 – $7,658), incurred a net loss
for the year then ended of $19,342 (2019 – $12,816), had negative cash flows from operations of $11,935
(2019 – $7,056) and an accumulated deficit of $59,673 (2019 - $40,331).
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 7, 21, 22 and 25.
All of the factors above indicate the existence of 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.
If the going concern assumption were not appropriate for these consolidated financial statements, then
adjustments would be necessary to the carrying value of assets and liabilities, the reported revenue and expenses,
and the classifications used in the consolidated statements of financial position. The consolidated financial
statements do not include adjustments that would be necessary if the going concern assumption 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, as 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, estimation of inventory reserves, impairment of goodwill and 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, 2020 and 2019
(Expressed in thousands of Canadian Dollars, except per share amounts and where noted)
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 entity’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 year, assets and liabilities are translated at the exchange rate at
the end of the year, and equity is translated at historical exchange rates. Translation adjustments resulting from
the process of translating the local currency financial statements into Canadian dollars are included in other
comprehensive income (loss).
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES, JUDGEMENTS, and
ASSUMPTIONS
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.
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.
8
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2020 and 2019
(Expressed in thousands of Canadian Dollars, except per share amounts and where noted)
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES, JUDGEMENTS, and
ASSUMPTIONS (continued)
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.
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.
9
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2020 and 2019
(Expressed in thousands of Canadian Dollars, except per share amounts and where noted)
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES, JUDGEMENTS, and
ASSUMPTIONS (continued)
Goodwill and intangible assets impairment –
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. 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. The Company reviews the carrying value of non-financial assets for potential impairment when
events or changes in circumstances indicate that the carrying amount may not be recoverable. However, goodwill
is tested for impairment annually at year end. The impairment test on Citagenix is carried out by comparing the
carrying amount of Citagenix and its recoverable amount. The recoverable amount has been determined by
management using the higher of value in use and fair value less costs to sell. 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 for the extrapolation.
Related party transactions –
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or
exercise significant influence over the other party in making financial and operating decisions. Parties are also
considered to be related if they are subject to common control or common significant influence. Related parties
may be individuals or corporate entities. A transaction is considered to be a related party transaction when there
is a transfer of resources or obligations between related parties.
Income taxes –
Income taxes are accounted for using the liability method. Deferred income 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 income 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 income 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.
10
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2020 and 2019
(Expressed in thousands of Canadian Dollars, except per share amounts and where noted)
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES, JUDGEMENTS, and
ASSUMPTIONS (continued)
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 (“SR&ED”) 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.
Research and development expense –
Research costs are expensed as incurred. Development costs are expensed in the year incurred unless they meet
certain criteria for capitalization. No development costs have been capitalized to date.
Revenue recognition –
Product sales
Revenue from product sales is recognized when control of the goods is transferred to the customer at an amount
that reflects the consideration to which the Company expects to be entitled in exchange for those goods. 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.
11
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2020 and 2019
(Expressed in thousands of Canadian Dollars, except per share amounts and where noted)
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, Share-based
Payments, 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.
Measurement of 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 (“FVTPL”), amortized
cost, or fair value through other comprehensive income (loss).
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.
12
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2020 and 2019
(Expressed in thousands of Canadian Dollars, except per share amounts and where noted)
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES, JUDGEMENTS, and
ASSUMPTIONS (continued)
The financial instruments of the Company are classified 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
Loan payable
Financial instruments
IFRS 9
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
FVTPL
Amortized cost
Amortized cost
Amortized cost
Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions
of the instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have
expired or have been transferred and the Company has transferred substantially all risks and rewards of
ownership.
The purchase and sale of financial assets are recognized using trade date accounting. Financial liabilities are
derecognized when the obligation is discharged, cancelled or expires.
Financial assets and liabilities are offset and the net amount reported when there is a legally enforceable right to
offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the
liability simultaneously.
There are three measurement categories in which the Company classifies its financial assets:
· Amortized cost: Financial instruments that are held for collection of contractual cash flows, where those
cash flows represent solely payments of principal and interest, are measured at amortized cost. Interest
income from these financial instruments is recorded in net income (loss) using the effective interest rate
method.
·
Fair value through other comprehensive income (“FVOCI”): Debt instruments that are held for
collection of contractual cash flows and for selling the financial instruments, where the financial
instruments’ cash flows represent solely payments of principal and interest, are measured at FVOCI.
Movements in the carrying amount are taken through OCI, except for the recognition of impairment
gains or losses, interest income and foreign exchange gains and losses that are recognized in net income
(loss). When the financial instrument is derecognized, the cumulative gain or loss previously recognized
in OCI is reclassified from equity to net income (loss) and recognized in other gains (losses). Interest
income from these financial instruments is included in interest using the effective interest rate method.
Foreign exchange gains (losses) is presented in other gains (losses) and impairment expenses in other
expenses.
13
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2020 and 2019
(Expressed in thousands of Canadian Dollars, except per share amounts and where noted)
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES, JUDGEMENTS, and
ASSUMPTIONS (continued)
·
Fair value through profit (loss) (“FVTPL”): Financial instruments that do not meet the criteria for
amortized cost or FVOCI are measured at FVTPL. A gain or loss on a financial instrument that is
subsequently measured at FVTPL and is not part of a hedging relationship is recognized in net income
(loss) and presented net in comprehensive income (loss) within other gains (losses) in the period in
which it arises.
Financial liabilities are either classified as amortized cost or FVTPL. For financial liabilities held at amortized
cost, when the Company revises its estimates of the amount and timing of payments, it will adjust the gross
carrying amount of the amortized cost of a financial liability to reflect actual and revised estimated contractual
cash flows. The Company recalculates the gross carrying amount of the amortized cost of the financial liability
as the present value of the estimated future contractual cash flows that are discounted at the financial instrument's
original effective interest rate. The adjustment is recognized in net income (loss).
The Company classifies its financial instruments as follows:
· Cash, cash equivalents, accounts receivable, due from related parties, accounts payable and accrued
liabilities, due to related parties and long-term debt are measured at amortized cost. Interest income and
interest expense are recorded in net income (loss), as applicable.
Impairment of financial assets
At each reporting date, the Company assesses on a forward-looking basis the expected credit losses (“ECLs”)
associated with its financial instruments carried at amortized cost and whether there is objective evidence that a
financial asset is impaired. Trade and other receivables 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.
Accounting standards adopted and applied: IFRS 16, Leases (“IFRS 16”) –
IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and
requires lessees to account for all leases under a single on-balance sheet model, with certain exemptions. The
standard includes two recognition exemptions for lessees – leases of “low-value” assets and short-term leases
with a lease term of 12 months or less. At the commencement date of a lease, a lessee will recognize a liability
to make lease payments and an asset representing the right to use the underlying asset during the lease term.
Lessees will be required to separately recognize the interest expense on the lease liability and the depreciation
expense on the right-of-use asset. Lessees are also required to remeasure the lease liability upon the occurrence
of certain events such as a change in lease term. The lessee will generally recognize the amount of the
remeasurement of the lease liability as an adjustment to the right-of-use asset. The new standard was effective
for annual periods beginning on or after January 1, 2019.
14
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2020 and 2019
(Expressed in thousands of Canadian Dollars, except per share amounts and where noted)
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES, JUDGEMENTS, and
ASSUMPTIONS (continued)
The Company adopted IFRS 16 using the modified retrospective transition approach and elected to use the
exemptions proposed by the standard on lease contracts for which the lease term ends within 12 months as of the
lease commencement date (“short-term leases”) and the lease contracts where the underlying asset is of low value.
Leases as at and for the year ended March 31, 2019, are presented in accordance with IAS 17.
The effect of adoption of IFRS 16 as at April 1, 2019, was as follows:
March 31, 2019
$
IFRS 16 adjustments
$
Assets
Property and equipment, net
Liabilities
Current lease liabilities
Non-current lease liabilities
Shareholders’ equity
181
-
-
-
356
202
154
-
April 1, 2019
$
537
202
154
-
The Company recognized a right-of-use asset based on the amount equal to the lease liability, adjusted for any
related prepaid and accrued lease payments previously recognized. The lease liability was recognized based on
the present value of remaining lease payments, discounted using the incremental borrowing rate at the date of
initial application.
The Company also applied the following available practical expedients:
·
·
Excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial
application; and
Elected not to separate non-lease components from lease components, and instead account for each lease
component and any associated non-lease components as a single lease component.
The carrying amounts of the Company’s right-of-use assets and lease liabilities and movements during the year
were as follows:
Balance, April 1, 2019
Other
Depreciation expense
Interest expense
Payments
Balance, March 31, 2020
Right-of-use assets
$
356
(10)
(172)
-
-
174
Lease liabilities
$
356
(10)
-
26
(192)
180
The Company recognized rent expense from short-term leases of $124 for the year ended March 31, 2020. As at
March 31, 2020, the Company is committed to paying $195 towards short-term leases. In note 24 (d) of the
Company’s March 31, 2019 audited consolidated financial statements, the future minimum payments under lease
agreements were $1,631. However, this assumed that the Company renewed its leases at maturity (in all cases
less than five years). Under IFRS 16, the present value of these lease liabilities are recognized for the term of
current lease agreements. As of April 1, 2019 there were no other reconciling items.
15
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2020 and 2019
(Expressed in thousands of Canadian Dollars, except per share amounts and where noted)
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, ESTIMATES, JUDGEMENTS, and
ASSUMPTIONS (continued)
New and amended standards and interpretations
The Company has not early adopted any standards, interpretations or amendments that have been issued but not
yet effective.
4.
IMPAIRMENT OF GOODWILL
The Company conducted its annual test for goodwill impairment of the Citagenix CGU. Based on the Company’s
annual assessment, the recoverable amount of Citagenix using fair value less costs to sell did not exceed its
carrying value. Therefore, the Company recorded a goodwill impairment charge of $1.28 million as at March 31,
2020 to fully impair the carrying value of goodwill recorded on the Citagenix acquisition. The goodwill
impairment was primarily driven by changes to the Company’s forecasted performance, which resulted in a lower
fair value for the Citagenix business. The performance of Citagenix in fiscal 2021 is being adversely affected by
the COVID-19 crisis. Any adverse changes in assumptions may result in additional impairment of other assets in
the CGU.
5. TRADE AND OTHER RECEIVABLES
Trade receivables
Allowance for doubtful accounts
Warrant exercise receivable
SR&ED tax credits receivable
Value-added taxes receivable
Harmonized Sales Tax receivable
Employee advances [note 8]
2020
$
1,044
(1)
50
67
5
147
1,312
20
1,332
2019
$
1,092
(1)
-
39
17
128
1,275
21
1,296
16
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2020 and 2019
(Expressed in thousands of Canadian Dollars, except per share amounts and where noted)
6.
INTANGIBLE ASSETS
Intangible assets consist of the following:
Trademarks
and brands
$
License
$
Customer lists
$
Patents
$
Cost
As at March 31, 2018
Additions / (disposals)
As at March 31, 2019
As at April 1, 2019
Additions / (disposals)
As at March 31, 2020
Amortization
As at March 31, 2018
Charge for the year
As at March 31, 2019
As at April 1, 2019
Charge for the year
As at March 31, 2020
Carrying amount
As at March 31, 2019
As at March 31, 2020
3,094
-
3,094
3,094
-
3,094
761
310
1,071
1,071
310
1,381
2,023
1,713
317
-
317
317
(317)
-
-
-
-
-
-
-
317
-
177
-
177
177
-
177
53
35
88
88
35
123
89
54
19
-
19
19
-
19
13
1
14
14
1
15
5
4
Total
$
3,607
-
3,607
3,607
(317)
3,290
827
346
1,173
1,173
346
1,519
2,434
1,772
The $317 write-off relates to impairment of licensed intangible assets. The first commercial sale from these
licenses is likely many years in the future and, as a result, the Company has decided to write off the value of this
license.
7. CREDIT FACILITY INDEBTEDNESS
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.
The obligations of Citagenix under the Credit Facility are collateralized by all of the assets of Citagenix and are
guaranteed by the Company. In connection with the Credit Facility, the Company issued 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.
17
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2020 and 2019
(Expressed in thousands of Canadian Dollars, except per share amounts and where noted)
7. CREDIT FACILITY INDEBTEDNESS (continued)
The Credit Facility has been accounted for using amortized cost. Transaction costs directly attributable to the
Credit Facility totalled $284. 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, 2020, the cumulative amount of interest paid for the Credit Facility was $277, and the accretion
of loan costs totalled $249. On June 29, 2020, the Credit Facility was repaid in full (see note 25).
8. RELATED PARTY TRANSACTIONS
As part of the prospectus offering during the year ended March 31, 2020 (as described in note 9), one director
and one officer of the Company purchased a total of 201,667 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 ended March 31, 2020, the Company advanced $89 (2019 – $119) to AHI (as at March 31, 2020,
AHI owns 5.1% of the common shares of the Company). As at March 31, 2020, $382 (March 31, 2019 – $293)
represent amounts owing by AHI to the Company. This balance bears no interest, is payable on demand and is
unsecured.
Employee advances for the year ended March 31, 2020, were reduced by $1 (March 31, 2019, increased by $4)
and consisted of cash advances, payments to the Company’s 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.
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
Warrants exercised
Options exercised
Restricted share units vested and shares issued
Debentures converted
Shares issued for Citagenix loan facility [note 7]
Prospectus February 27, 2019 (“P2019A”)
Prospectus August 13, 2019 (“P2019B”)
Share issuance costs - P2019
Balance, end of the year
Shares
243,392,476
-
21,333,527
255,761
1,866,671
-
-
-
26,833,332
-
293,681,767
2020
Amount
$
36,986
-
7,653
118
604
-
-
-
5,087
(782)
49,666
2019
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
(2,587)
5,141
996
167
271
179
3,971
-
(659)
36,986
18
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2020 and 2019
(Expressed in thousands of Canadian Dollars, except per share amounts and where noted)
9.
SHARE CAPITAL (continued)
On August 13, 2019, the Company closed a public offering of 26,833,332 units (the “Units”) at a price of $0.30
per Unit (the “Offering Price”) for aggregate gross proceeds of $8,050 (the “Offering”). The Offering was made
pursuant to an amended and restated agreement dated August 7, 2019, with a syndicate of agents (collectively,
the “Agents”). The Units were offered and sold by way of a short form prospectus.
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 August 13, 2022, at a price of $0.40 per Common Share. The estimated fair
value of these investor warrants calculated using the BSM was $2,963 (see note 9e).
As consideration for the services rendered by the Agents in connection with the Offering, the Company paid the
Agents a cash commission equal to 7% of the gross proceeds raised under the Offering and granted the Agents
non-transferable broker warrants equal to 7% of the number of Units sold under the Offering, exercisable at any
time prior to August 13, 2021, at an exercise price equal to the Offering Price. The estimated fair value of these
broker warrants calculated using the BSM was $393 (see note 9e).
The following provides additional information on the prospectus raises completed during the years ended
March 31, 2020 and 2019:
Closing date
Prospectus
Number of
units1 /
shares issued
Number of
warrants
issued
Feb. 27, 2019
Aug. 13, 2019
P2019A
P2019B
23,000,000
26,833,332
11,500,000
13,416,666
Price
per
unit
$
0.25
0.30
Gross
proceeds2
$
5,750
8,050
Warrant
exercise
price
$
0.35
0.40
Warrant
expiry date
Feb. 27, 2022
Aug. 13, 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, 2020 and 2019, the Company
issued the following warrants to brokers:
Closing date
Prospectus
Number of
broker
warrants
issued
Feb. 27, 2019
Aug. 13, 2019
P2019A
P2019B
1,610,000
1,878,333
Total
issuance
costs
$
954
1,237
Non-cash cost from
issuance of
warrants to brokers
$
228
393
Broker
warrant
exercise
price
$
0.25
0.30
Broker
warrant
expiry date
Feb. 27, 2021
Aug. 13, 2021
All issuance costs were offset against share capital and common share purchase warrants in proportion to the
allocation of proceeds.
19
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2020 and 2019
(Expressed in thousands of Canadian Dollars, except per share amounts and where noted)
9.
SHARE CAPITAL (continued)
The following is a summary of all warrants exercised during the years ended March 31, 2020 and 2019:
2020
2019
Exercise price
$
0.10
0.15
0.22
0.25
0.30
0.31
0.35
0.40
Number of
warrants
exercised
1,289,677
10,410,685
-
1,482, 000
926,000
-
4,274,250
2,950,915
21,333,527
Gross
proceeds
$
129
1,562
-
370
278
-
1,496
1,180
5,015
Number of
warrants
exercised
106,500
6,877,600
7,976,818
-
-
1,700,000
-
-
16,660,918
Gross
proceeds
$
11
1,031
1,756
-
-
527
-
-
3,325
Each of the warrants entitled the bearer to purchase one common share of the Company. Within $5,015 of
gross proceeds received for the exercise of warrants, an amount of $50 was received by the Company post-year
end.
(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.
On April 26, 2019, the Company granted a consultant options in exchange for services provided under the terms
of a consulting agreement. The options give the consultant the right to purchase a total of 200,000 common shares
pursuant to the Company’s stock option plan. These options have an exercise price of $0.34 and expire on
April 6, 2022. Twenty-five per cent of the granted options vest on the grant date and the remainder vest quarterly.
The estimated fair value of these options calculated using the BSM was $44.
On August 27, 2019, the Company granted a consultant options in exchange for investor relations services. The
options give the consultant the right to purchase a total of 350,000 common shares pursuant to the Company’s
stock option plan. These options have an exercise price of $0.30 and expire on August 27, 2022. Twenty-five per
cent of the granted options vest on the grant date and the remainder vest quarterly. The estimated fair value of
these options calculated using the BSM was $75.
20
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2020 and 2019
(Expressed in thousands of Canadian Dollars, except per share amounts and where noted)
9.
SHARE CAPITAL (continued)
The following is a summary of all options to purchase common shares that are outstanding as at March 31, 2020
and 2019, as well as details on exercise prices and expiry dates:
2020
2019
Options
Weighted
average price
Options
Weighted
average price
Balance, beginning of the year
Granted during the year
Exercised during the year
Expired during the year
Forfeited during the year
Balance, end of the year
17,890,607
550,000
(255,761)
-
(37,506)
18,147,340
$
0.27
0.31
0.23
-
0.37
0.27
20,840,368
519,393
(3,155,031)
(314,123)
-
17,890,607
$
0.25
0.39
0.16
0.28
-
0.27
Number of options
2,700,000
37,500
36,000
18,000
90,000
18,000
200,000
350,000
150,000
805,000
560,000
4,213,714
150,000
8,525,733
151,515
41,878
100,000
18,147,340
Exercise
price
$
0.33
0.09
0.29
0.38
0.35
0.25
0.34
0.30
0.55
0.66
0.14
0.15
0.19
0.20
0.50
0.40
0.29
Expiry date*
January 25, 2020*
October 20, 2020
February 27, 2021
June 25, 2021
October 3, 2021
December 19, 2021
April 26, 2022
August 27, 2022
October 21, 2023
March 4, 2024
July 13, 2025
March 9, 2026
January 18, 2027
March 31, 2027
April 11, 2028
May 8, 2028
March 11, 2029
* The expiry date of these options occurs within a blackout period, and as such the expiry date for such options
has been extended to the tenth trading day following the end of the blackout period.
The number of options exercisable as at March 31, 2020, is 17,879,965 and the weighted average exercise price
of these options is $0.24.
The total fair value of options not yet recognized as an expense is $20.
21
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2020 and 2019
(Expressed in thousands of Canadian Dollars, except per share amounts and where noted)
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 during the years ended March 31, 2020 and 2019:
Weighted average risk-free interest rate
Weighted average expected volatility
Expected dividend yield
Weighted average expected life of options
Weighted average share price
Weighted average exercise price
(d) Restricted share unit plan –
2020
1.37%
95%
0.00%
3.0 years
$0.35
$0.31
2019
2.09%
137%
0.00%
8.3 years
$0.39
$0.39
On June 25, 2018, the Company adopted a restricted share unit (the “RSU”) plan. On July 2, 2019, the Company
received shareholder approval to amend and restate 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. Under the amended and restated RSU plan, the maximum number
of shares issuable is limited to 26,522,748 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 November 28, 2019 and February 24, 2020, 7,630,000 and 390,000 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. The total fair
value of the RSUs was $3,221, determined based on the share price on the grant date.
Included in the RSUs granted on November 28, 2019, are 2,835,000 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 $1,106. As at
March 31, 2020, it was determined that the probability and timing of achieving the performance criteria
was greater than 50%, and as such, $198 was expensed during the year ended March 31, 2020, and included
in contributed surplus.
For the year ended March 31, 2020, $3,376 ($3,100 related to RSUs and $276 related to options) has been
included within stock-based compensation in the consolidated statements of loss and comprehensive loss.
The following is a summary of all restricted share units that are outstanding as at March 31, 2020:
Balance, beginning of the year
Granted during the period
Vested during the period
Balance, end of the year
2020
RSUs
17,289,997
8,020,000
(3,758,336)
21,551,661
2019
RSUs
-
17,740,000
(450,003)
17,289,997
The total fair value of RSUs not yet recognized as an expense is $4,707, based upon the share price on the date
of the grant.
22
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2020 and 2019
(Expressed in thousands of Canadian Dollars, except per share amounts and where noted)
9.
SHARE CAPITAL (continued)
(e) Common share purchase warrants –
The following is a summary of all warrants to purchase common shares that are outstanding as at March 31, 2020
and 2019, as well as details on exercise prices and expiry dates:
2020
2019
Warrants
Weighted
average price
Warrants
Weighted
average price
Balance, beginning of the year
Issued during the year
Exercised during the year
Expired during the year
Balance, end of the year
34,689,023
15,939,838
(21,333,527)
(907,500)
28,387,834
$
0.23
0.38
0.24
0.83
0.29
38,766,448
13,163,250
(16,660,918)
(579,757)
34,689,023
$
0.18
0.34
0.20
0.38
0.23
Number of warrants
9,616,000
128,000
952,333
7,225,750
10,465,751
28,387,834
Exercise
price
$
0.15
0.25
0.30
0.35
0.40
Expiry date
June 21, 2020
February 27, 2021
August 13, 2021
February 27, 2022
August 13, 2022
The following assumptions were used in the BSM to determine the fair value of warrants during the years ended
March 31, 2020 and 2019:
Weighted average risk-free interest rate
Weighted average expected volatility
Expected dividend yield
Weighted average expected life of warrants
Weighted average share price
Weighted average exercise price
2020
1.29%
91%
0.00%
2.9 years
$0.39
$0.39
2019
1.78%
99%
0.00%
2.9 years
$0.27
$0.34
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 period. All unexercised share options and warrants
were excluded from calculating diluted loss per share.
23
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2020 and 2019
(Expressed in thousands of Canadian Dollars, except per share amounts and where noted)
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, 2020 and 2019, is as follows:
Antibe
$
-
-
-
17,361
2020
Citagenix
$
9,987
6,098
3,889
5,877
Consolidated
$
9,987
6,098
3,889
23,238
Antibe
$
-
-
-
-
-
10,462
2019
Citagenix
$
9,539
5,989
3,550
5,769
Consolidated
$
9,539
5,989
3,550
16,231
(17,361)
(1,988)
(19,349)
(10,462)
(2,219)
(12,681)
Revenue
Cost of sales
Gross profit
Expenses
Loss before
income taxes
There is no single customer who constitutes more than 10% of revenue.
Revenue by geographic region for the year ended March 31, 2020, is as follows:
Canada – 53%
United States – 32%
Europe – 4%
Rest of World – 11%
The Company’s assets and liabilities by each business as at March 31, 2020 and 2019, are as follows:
2020
2019
Antibe
Citagenix Consolidated
Antibe
Citagenix Consolidated
$
$
$
$
$
$
Assets
Current
Non-current
Total assets
Liabilities
Current
Non-current
6,319
236
6,555
3,133
2,399
Total liabilities
5,532
5,188
2,095
7,283
4,462
65
4,527
11,507
2,331
13,838
7,595
2,464
10,059
6,207
1,836
8,043
1,227
2,399
3,626
4,358
2,418
6,776
1,680
2,072
3,752
10,565
4,254
14,819
2,907
4,471
7,378
24
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2020 and 2019
(Expressed in thousands of Canadian Dollars, except per share amounts and where noted)
12. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
The following table summarizes accounts payable and accrued liabilities as at March 31, 2020 and 2019:
Accounts payable
Antibe
Citagenix
BMT
Accrued liabilities
Antibe
Citagenix
BMT
Total accounts payable and accrued liabilities
13. GENERAL AND ADMINISTRATIVE EXPENSES
2020
$
2,112
1,793
73
3,978
1,022
196
66
1,284
5,262
2019
$
869
1,231
249
2,349
360
122
76
558
2,907
The nature of the general and administrative expenses for the years ended March 31, 2020 and 2019, is
summarized as follows:
Salaries and wages
Professional and consulting fees
Office expenses
Other expenses
Total general and administrative expenses
2020
$
1,845
2,678
638
545
5,706
2019
$
1,787
2,113
717
254
4,871
Other expenses includes the $317 write-off of impairment charges relating to licensed intangible assets. The first
commercial sale from these licenses is likely many years in the future and, as a result, the Company has decided to
write off the value of this license.
14. SELLING AND MARKETING EXPENSES
The nature of the selling and marketing expenses for the years ended March 31, 2020 and 2019, is
summarized as follows:
Salaries and wages
Commissions
Advertising and promotion
Travel and entertainment
Total selling and marketing expenses
2020
$
2,089
698
423
582
3,792
2019
$
1,890
601
475
555
3,521
25
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2020 and 2019
(Expressed in thousands of Canadian Dollars, except per share amounts and where noted)
15. RESEARCH AND DEVELOPMENT EXPENSES
The nature of the research and development expenses for the years ended March 31, 2020 and 2019, is
summarized as follows:
Salaries and wages
Professional and consulting fees
Research & clinical trial costs
SR&ED (rebate)
Total research and development expenses
2020
$
655
169
7,399
(146)
8,077
2019
$
661
187
3,297
(202)
3,943
16. STOCK-BASED COMPENSATION
The function of the stock-based compensation expense for the years ended March 31, 2020 and 2019, is
summarized as follows:
General and administrative
Research and development
Total stock-based compensation
17. FINANCE AND RELATED COSTS
2020
$
2,505
871
3,376
2019
$
2,168
818
2,986
The components of the finance and related costs for the years ended March 31, 2020 and 2019, are as
follows:
Interest on loan payable
Accretion interest
Interest and bank charges
Unrealized foreign currency translation
Total finance and related costs
2020
2019
$
185
142
173
31
531
$
144
123
163
95
525
26
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2020 and 2019
(Expressed in thousands of Canadian Dollars, except per share amounts and where noted)
18. INCOME TAXES
The income tax provision recorded differs from the income tax obtained by applying the statutory income
tax rate of 26.50% (2019 – 26.50%) to the loss before income taxes for the year, and is reconciled as
follows:
Loss before income taxes
Expected income tax recovery at the combined basic 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
2020
$
(19,349)
2019
$
(12,681)
(5,127)
(3,360)
921
(223)
-
(528)
4,950
(7)
806
(193)
132
(114)
2,864
135
The Company has incurred losses of $31,529 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
2040
Indefinitely
$
258
608
735
875
1,427
2,006
2,506
3,002
4,027
4,799
10,292
993
31,528
The cumulative carry-forward pool of SR&ED expenditures as at March 31, 2020, applicable to future years,
with no expiry date, is $13,664.
27
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2020 and 2019
(Expressed in thousands of Canadian Dollars, except per share amounts and where noted)
19. DEFERRED INCOME TAXES
The recognized temporary differences and tax losses are attributable to the following:
2020
2019
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 to capital property
Amount related to eligible capital property
Amounts related to other
Net deferred income tax liabilities
$
454
(454)
(14)
6
70
-
(62)
-
$
465
(536)
(23)
9
24
61
-
-
Deferred tax recovery of $8 (2019 – expense $3) related to the foreign exchange translation gains was
recognized in other comprehensive loss 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
2020
$
7,990
311
3,621
34
1,301
217
432
636
14,542
2019
$
5,979
71
1,752
14
684
87
389
611
9,587
Deferred income tax assets have not been recognized in respect of these items because it is not probable
that future taxable profit will be available against which the Company will be able to use these benefits.
28
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2020 and 2019
(Expressed in thousands of Canadian Dollars, except per share amounts and where noted)
20. FINANCIAL INSTRUMENTS
The carrying values of cash, term deposits, 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.
Financial instruments that are measured subsequent to initial recognition at fair value are grouped into a hierarchy
based on the degree to which the fair value is observable. Level 1 fair value measurements are derived from
unadjusted, quoted prices in active markets for identical assets or liabilities. Level 2 fair value measurements are
derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability
directly or indirectly. Level 3 fair value measurements are derived from valuation techniques that include inputs
for the assets or liabilities that are not based on observable market data.
Financial instruments classified as Level 1 include cash, term deposits and bank indebtedness. At the current
time, the Company does not have financial instruments classified in Level 2 or Level 3.
21. 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 $3,779
(March 31, 2019 – $7,441). The Company is not subject to externally imposed capital requirements.
22. 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 and interest rate 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 trade and other receivables, 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. See notes 2(c) and 25.
29
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2020 and 2019
(Expressed in thousands of Canadian Dollars, except per share amounts and where noted)
22. FINANCIAL RISK MANAGEMENT (continued)
As at March 31, 2020, the Company’s financial obligations, including applicable interest, are due as follows:
Accounts payable and accrued liabilities
Lease liability
Loan payable
Foreign currency risk
Less than 1 year
$
5,262
115
2,214
7,591
1 – 2 years After 2 years
$
-
65
-
65
$
-
-
-
-
Total
$
5,262
180
2,214
7,656
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.
23. 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 (CAD$1,142) 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 (CAD$1,316), 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 upon receipt of regulatory approval from the Food and Drug Administration in the USA;
· US$1,000 upon market launch of ATB-346 or the first offer for sale of ATB-346 in the Region;
· US$1,000 upon total net sales in the Region exceeding US$5,000,000 for the first time;
· US$1,000 upon total net sales in the Region exceeding US$10,000,000 for the first time;
· US$1,000 upon total net sales in the Region exceeding US$20,000,000 for the first time;
· US$1,000 upon total net sales in the Region exceeding US$30,000,000 for the first time;
· US$1,500 upon total net sales in the Region exceeding US$40,000,000 for the first time; and
· US$1,500 upon total net sales in the Region exceeding US$50,000,000 for the first time.
30
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2020 and 2019
(Expressed in thousands of Canadian Dollars, except per share amounts and where noted)
23. DEFERRED REVENUE (continued)
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.
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 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 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 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 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 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 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, 2020.
(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, 2020.
25. SUBSEQUENT EVENTS
(a) COVID-19 pandemic
In December 2019, COVID-19 emerged in Wuhan, China. Since then, it has spread to most other countries and
infections have been reported around the world. On March 11, 2020, the World Health Organization declared the
outbreak of COVID-19 a global pandemic. In response to the outbreak, governmental authorities in Canada and
internationally have introduced various recommendations and measures to try to limit the pandemic, including
travel restrictions, border closures, nonessential business closures, quarantines, self-isolations, shelters-in- place
and social distancing. The COVID-19 outbreak and the response of governmental authorities to try to limit it are
31
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2020 and 2019
(Expressed in thousands of Canadian Dollars, except per share amounts and where noted)
25. SUBSEQUENT EVENTS (continued)
having a significant impact on the private sector and individuals, including unprecedented business, employment
and economic disruptions.
The COVID-19 pandemic has impacted the Company’s business to some extent. The Company’s Phase 2 trial
took an additional six weeks to complete due to factors such as the COVID-19 related closure of medical clinics,
doctors becoming ill from COVID-19, and staff working from home, all of which slowed the collation of the trial
data. The need to engage the consulting staff responsible for administering the trial for an additional six weeks
increased the costs of the trial correspondingly. COVID-19 has also particularly impacted the Company’s wholly-
owned subsidiary, Citagenix, by causing a significant COVID-19 related decline in sales. The sales decline is
solely due to a decline in customer demand, which the Company attributes to COVID-19. COVID-19 could
further impact our expected timelines, operations and the operations of our third-party suppliers, manufacturers,
and CROs as a result of quarantines, facility closures, travel and logistics restrictions and other limitations in
connection with the outbreak. The most significant risk posed by the COVID-19 pandemic is that it could also
significantly impact the progress and completion of the pre-clinical trials.
What further impact, if any, the COVID-19 pandemic may have on the Company is unpredictable. The continued
spread of COVID-19 nationally and globally could also lead to a deterioration of general economic conditions
including a possible national or global recession. Due to the speed with which the COVID-19 situation is
developing and the uncertainty of its magnitude, outcome and duration, it is not possible to estimate its impact
on our business, operations or financial results; however, the impact could be material.
(b) Prospectus raise
On June 30, 2020, the Company closed a bought deal public offering of 62,500,000 units of the Company (the
“June Units”) at a price of $0.40 per Unit (the “June Offering Price”) plus the exercise in full of the Underwriters’
over-allotment option of 9,375,000 Units for aggregate gross proceeds of $28,750 (the “June Offering”). The
June Offering was made pursuant to an underwriting agreement dated June 15, 2020 with a syndicate of
underwriters.
Each Unit was comprised of one Common Share and one-third of one common share purchase warrant. Each full
warrant is exercisable to purchase one Common Share at any time prior to June 30, 2022 at a price of $0.60 per
Common Share.
The Company intends to use the net proceeds of the June Offering to fund certain activities required to support
large market partnering and begin the Phase 3 program for ATB-346, for business development activities, and
for advancing the other drugs in the Company’s pipeline including ATB-352. The remainder of the net proceeds
will be used for working capital and general corporate purposes.
As consideration for the services rendered by the Underwriters in connection with the June Offering, the
Company has paid the Underwriters a cash commission equal to 7% of the gross proceeds raised under the June
Offering and has granted the Underwriters non-transferable broker warrants equal to 7% of the number of June
Units sold under the June Offering, exercisable at any time prior to June 30, 2022 at an exercise price equal to
the June Offering Price.
(c) Payment of Credit Facility
On June 29, 2020, the maturity date of the BBHLT Credit Facility, the Company paid in full the principal amount
of $2,250, plus outstanding interest of $40.
32
ANTIBE THERAPEUTICS INC.
Notes to Consolidated Financial Statements
March 31, 2020 and 2019
(Expressed in thousands of Canadian Dollars, except per share amounts and where noted)
25. SUBSEQUENT EVENTS (continued)
(d) Exercised options
The following is a summary of all options exercised during the period from April 1, 2020 to the date of issuance
of these consolidated financial statements:
Exercise price
$
0.085
0.140
0.145
0.200
0.290
0.245
0.330
0.350
0.380
Number of options
exercised
30,000
200,000
2,600,000
92,500
36,000
18,000
2,250,000
90,000
18,000
5,334,500
Proceeds
$
3
28
377
19
10
4
743
31
7
1,222
Each of the options entitled the bearer to purchase one common share of the Company.
(e) Exercised warrants
The following is a summary of all warrants exercised during the period from April 1, 2020 to the date of issuance
of these consolidated financial statements:
Exercise price
Number of
warrants exercised
Proceeds
$
0.15
0.25
0.30
0.35
0.40
9,156,500
31,000
81,000
2,686,500
2,466,033
14,421,033
$
1,374
8
24
940
986
3,332
Each of the warrants entitled the bearer to purchase one common share of the Company.
33