Annual Report 2021
Contents
Press Release
Management's Discussion & Analysis
Financial Statements
1
8
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Liminal BioSciences Reports Fourth Quarter and Year End
2021 Financial Results
Planned Phase 1a Single Ascending Dose (“SAD”) clinical trial,
commencing in Q2 2022, to compare fezagepras with sodium
phenylbutyrate as a nitrogen scavenger
Repayment in full of the $39.1M secured loan and release of security
on the Company’s assets
Completion of the Phase 1 Multi-Ascending Dose (“MAD”) clinical
trial of fezagepras
Closing of the sale of the plasma-derived therapeutics business and
sale of a Rare Pediatric Disease Priority Review Voucher
LAVAL, CANADA, and CAMBRIDGE, ENGLAND – March 17, 2022 – Liminal BioSciences Inc.
(Nasdaq: LMNL) (“Liminal BioSciences” or the “Company”), today reported its financial results
for the fourth quarter and year ended December 31, 2021.
“The leadership team and I are pleased to have successfully delivered on our objective of
simplifying our business structure over the past 12 months as part of our evolution in becoming a
streamlined small molecules business,” stated Bruce Pritchard, Chief Executive Officer of Liminal
BioSciences. “Today, Liminal BioSciences is a streamlined and debt-free Company, we believe that
our pipeline is positioned to deliver multiple anticipated value inflection points throughout 2022
with unencumbered intellectual property and a data-driven clinical development plan. We are also
pleased to announce the appointment of Nicole Rusaw, as our Interim Chief Financial Officer
effective as of March 2, 2022. Nicole brings with her over 20 years of financial management
experience in the biotech and pharmaceutical industry, and 17 years of experience in publicly
traded companies. Nicole’s skills and experience complement those of the existing team and will
add additional management bandwidth to allow us to continue delivering on our business
objectives.” Mr. Pritchard added, “We believe we have a solid foundation for growth and our full
attention is on delivering on our upcoming clinical trial for our lead candidate fezagepras, as well
as progressing toward the selection of our lead GPR84 antagonist and OXER1 antagonist preclinical
product candidates.”
Press Release for immediate release
1
Key Corporate and R&D Priorities
The Company has completed its Phase 1 MAD clinical trial, and analysis of the metabolite
data provided evidence to support the hypothesis that fezagepras has nitrogen scavenging
properties. The Company intends on initiating further research, including a Phase 1a single
ascending dose (“SAD”) clinical trial in healthy volunteers, to assess the relative
effectiveness of fezagepras as a nitrogen scavenger in a head-to-head comparison with
sodium phenylbutyrate, an established nitrogen scavenging drug, to obtain comparative
data for the further development of fezagepras. The Company plans to initiate the Phase
1a, randomized, open label, cross over, clinical trial which will aim to evaluate the safety,
tolerability, and pharmacokinetics of SAD of fezagepras compared to sodium phenylbutyrate
in healthy subjects in the second quarter of 2022, subject to the receipt of required
approvals.
The Company continues to work on selecting a lead drug candidate for its GPR84 antagonist
program to progress to the clinic from among the Company’s current lead compounds, with
plans to finalize lead product candidate selection in 2022.
Similarly, the Company expects to be able to finalize lead candidate selection in 2023 for
its OXER-1 program to progress to the clinic.
During 2022, the Company will continue to review its balance sheet position and actively
seek opportunities to monetize non-core assets as well as seeking ways to reduce costs
relating to financial instruments and certain commitments associated with the previous
operations of the organization.
Fourth Quarter and Full Year 2021 Financial Results
The Company has presented the current and comparative period results of its former plasma-
derived therapeutics segment as discontinued operations as a result of its divestment of this
business. All figures presented in this section are in Canadian dollars unless otherwise
specified.
Cash was $108.5 million at December 31, 2021 while the Company’s working capital,
i.e., the current assets net of current liabilities, was $96.1 million at December 31, 2021.
Subsequent to year end, the Company repaid its secured loan for an aggregate amount of
$39.1 million, thereby terminating the consolidated loan agreement with Structure Alpha LP
(“SALP”), releasing the security granted in favor of SALP over the Company’s assets,
including intellectual property; cancelling the warrants issued pursuant to the consolidated
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2
loan agreement and terminating the royalty stream agreement entered into between the
Company and SALP.
Revenues from continuing operations were $643K for the year ended December 31,
2021, compared to $724K for the year ended December 31, 2020.
Research and development (“R&D”) expenses from continuing operations were
$4.5 million for the fourth quarter of 2021 compared to $3.0 million for the fourth quarter
of 2020, and $18.3 million for the year ended December 31, 2021, compared to $14.2
million for the year ended December 31, 2020. The increase in R&D expenses is mainly due
to increases in intangible amortization expenses, as well as a decrease in government
grants, in addition to increases in clinical and preclinical expenses, and consulting fees
on a year-over-year basis. These increases were partially offset by a decrease in share-
based compensation expenses year-over-year.
Administration expenses from continuing operations were $5.8 million for the fourth
quarter of 2021 compared to $7.5 million for the fourth quarter of 2020, and $31.9
million for the year ended December 31, 2021, compared to $32.6 million for the year ended
December 31, 2020. The decrease in administration expenses is primarily due to reduced
directors’ and officers’ insurance premiums resulting from the change in the Company’s
registered office from Quebec to Ontario, as well as the fact that the comparative period
expense contained a one-time charge of approximately $2.2 million relating to additional
warrants issued pursuant to an amended Securities Purchase Agreement dated November
2020 with no equivalent cost in 2021. The decrease in administration expenses during fiscal
2021 was partially offset by increases in share-based payment expenses as well as reduction
in government grants.
Finance costs were $1.6 million for both the fourth quarter of 2021 and 2020, and were
$6.3 million for the year ended December 31, 2021, compared to $2.9 million for the year
ended December 31, 2020. The $3.4 million increase in finance costs year over year
reflects the increase in our level of indebtedness following the issuance of the secured
convertible debentures (“SCD”) in July 2020, which remained outstanding until the SCD
were converted into our common shares in October 2021, and the issuance of additional
long-term debt to SALP in September 2020.
Net loss from continuing operations, net of taxes was $8.8 million for the fourth
quarter of 2021 compared to $12.6 million for the fourth quarter of 2020, and $45.1
million for the year ended December 31, 2021, compared to $49.0 million for the year ended
December 31, 2020. The decrease in loss was mainly due to the reduction in administration
expenses and the increase in the gain on the change in fair value of the warrant liability.
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The decrease in net loss from continuing operations, net of taxes, was partially offset by the
previously discussed increase in research and development expenses and a decrease in
impairment losses.
Gain/loss on sale of subsidiaries was a loss of $0.1 million for the fourth quarter of
2021 compared to a gain of $3.4 million in the fourth quarter of 2020, and a gain of $140.4
million for the year ended December 31, 2021 compared to a gain of $3.4 million for the
year ended December 31, 2020. The gain on sale of subsidiaries during fiscal year 2021 is
a result of the sale of the Pediatric Disease Priority Review Voucher (“PRV”) for gross
proceeds of $132.9 million (USD 105 million) and the proceeds received on the sale of
our subsidiary Prometic Bioproduction Inc. (“PBP”) in July 2021 as well as those received
from the sale of our Prometic Biotherapeutics Inc. (“PBT”) subsidiary in October 2021.
During the fourth quarter of fiscal 2020, the Company finalized the post-closing conditions
of the Prometic Bioseparations Ltd. (“PBL”) sale, resulting in a gain of $3.4 million in the
comparative period.
Net Loss from discontinued operations was a loss of $0.4 million for the fourth quarter
of 2021 compared to a loss of $30.8 million in the fourth quarter of 2020, a decrease of
$30.3 million. This decrease was mainly due to the recognition of an impairment of $19.7
million during the fourth quarter of 2020 and since there were only minor expenses incurred
in the fourth quarter of 2021 until PBT was sold on October 15, 2021 compared to having
the full operations of the plasma-derived therapeutics segment in the comparative period.
The net loss from discontinued operations was $83.1 million for the year ended December
31, 2021, compared to a loss of $73.1 million for the year ended December 31, 2020. The
increase in net loss was due to payments made by PBT to PBP, when PBP was under
the ownership of Kedrion S.p.A., of $45.8 million for R&D services and the recording of
an onerous contract of $21.9 million as a result of the divestiture of the plasma-derived
therapeutic segment. This increase was partially offset by a reduction in impairment
losses and since the discontinued operations results include the results for PBP and PBT
until the date of their sale.
Net income/loss was a loss of $9.3 million for the fourth quarter of 2021 compared
to a loss of $40.0 million for the fourth quarter of 2020, and net income of $12.2 million
for the year ended December 31, 2021 compared to a net loss of $118.8 million for the
year ended December 31, 2020, the decrease in net loss driven by the discontinued
operations.
Press Release for immediate release
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Liminal will host a conference call at 8:30 am (ET) on Friday March 18, 2022. The telephone
numbers to access the conference call are 1-888-390-0605 and 416-764-8609. An audio replay of
the call will be available as of Friday March 18, 2022 at 11:30 am (ET). The numbers to access the
audio replay are 416-764-8677 and 1-888-390-0541 using the following password (876829 #). A
live audio webcast of the conference call will be available by clicking here.
About Liminal BioSciences Inc.
Liminal BioSciences is a clinical stage biopharmaceutical company focused on developing distinctive
novel small molecule therapeutics for inflammatory, fibrotic, and metabolic diseases using our drug
discovery platform and a data driven approach. The Company’s lead small molecule product
candidate, fezagepras, has completed a Phase 1 MAD clinical trial and the Company anticipates
conducting a comparative Phase 1a single ascending dose clinical trial to provide comparative data
to support its development plan. In addition, the Company is also currently developing a selective
GPR84 antagonist candidate and a selective OXER1 antagonist candidate. Our GPR84 and OXER1
antagonist programs are currently at the preclinical stage.
Liminal BioSciences has active business operations in Canada and the United Kingdom.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Some of the forward-looking statements can be identified by the use of forward-looking
words. Statements that are not historical in nature, including the words “anticipate,” “expect,”
“suggest,” “plan,” “believe,” “intend,” “estimate,” “target,” “project,” “should,” “could,” “would,”
“may,” “will,” “forecast” and other similar expressions are intended to identify forward-looking
statements. These statements include those related to Liminal BioSciences’ objectives, strategies
and businesses that involve risks and uncertainties. Forward‐looking information includes
statements concerning, among other things: advancement of Liminal Biosciences’ product
candidates, the outcome of anticipated clinical trials; the analysis of our clinical trial data; the
potential development of Liminal Biosciences’ R&D programs; the properties of our drug
candidates; the timing of initiation or nature of preclinical and clinical trials and potential
therapeutics areas; our ability to actively seek and close on opportunities to monetize non-core
Press Release for immediate release
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assets and reduce costs relating to contracts associated with the previous operations of the
organization.
These statements are "forward-looking" because they are based on our current expectations about
the markets we operate in and on various estimates and assumptions. Actual events or results may
differ materially from those anticipated in these forward-looking statements if known or unknown
risks affect our business, or if our estimates or assumptions turn out to be inaccurate. Among the
factors that could cause actual results to differ materially from those described or projected herein
include, but are not limited to, risks associated with: the Company’s ability to develop,
manufacture, and successfully commercialize product candidates, if ever; the impact of the COVID-
19 pandemic on the Company’s workforce, business operations, clinical development, regulatory
activities and financial and other corporate impacts; the availability of funds and resources to
pursue R&D projects, clinical development, manufacturing operations or commercialization
activities; the successful and timely initiation or completion of clinical trials; the ability to take
advantage of financing opportunities or business opportunities in the pharmaceutical industry; the
Company’s ability to resolve the Nasdaq listing deficiency and regain compliance with the Nasdaq
Listing Rules; uncertainties associated generally with research and development, clinical trials and
related regulatory reviews and approvals; and general changes in economic conditions. You will
find a more detailed assessment of these risks, uncertainties and other risks that could cause actual
events or results to materially differ from our current expectations in the filings and reports the
Company makes with the U.S. Securities and Exchange Commission and Canadian Securities
Administrators, including in the Annual Report on Form 20-F for the year ended December 31,
2021, as well as other filings and reports Liminal Biosciences’ may make from time to time. Such
risks may be amplified by the ongoing COVID-19 pandemic and any related impacts on Liminal
BioSciences’ business and the global economy. As a result, we cannot guarantee that any given
forward-looking statement will materialize. Existing and prospective investors are cautioned not to
place undue reliance on these forward-looking statements and estimates, which speak only as of
the date hereof. We assume no obligation to update any forward-looking statement contained in
Press Release for immediate release
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this press release even if new information becomes available, as a result of future events or for
any other reason, unless required by applicable securities laws and regulations.
For further information please contact:
Corporate Contact
Shrinal Inamdar
Manager, Investor Relations and Communications
s.inamdar@liminalbiosciences.com
+1 450.781.0115
Media Contact
Kaitlin Gallagher
kgallagher@berrypr.com
+1 212.253.8881
Press Release for immediate release
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Management's discussion and analysis
For the quarter and the year ended December 31, 2021
This Management’s Discussion and Analysis, or MD&A, is intended to help the reader to better understand Liminal
BioSciences Inc.’s or Liminal or the Company operations, financial performance and results of operations, as well as the
present and future business environment. This MD&A has been prepared as of March 17, 2022 and should be read in
conjunction with Liminal’s consolidated financial statements for the year ended December 31, 2021, which are prepared
in accordance with International Financial Reporting Standards as issued by the International Accounting Standards
Board, or IFRS. Our financial information is presented in Canadian Dollars and all reference to “$” means Canadian
Dollars. Additional information related to the Company, including the Company’s Annual report on Form 20-F, is available
on SEDAR at www.sedar.com and EDGAR at www.sec.gov/edgar.
FORWARD-LOOKING STATEMENTS
This MD&A contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange
Act, that are based on our management’s beliefs and assumptions and on information currently available to our
management. These statements are “forward-looking” because they represent our expectations, intentions, plans and
beliefs about our business and the markets we operate in and on various estimates and assumptions based on
information available to our management at the time these statements are made. For example, forward-looking
statements around financial performance and revenues are based on financial modelling undertaken by our
management. This financial modelling takes into account revenues that are uncertain. It also includes forward-looking
revenues from transactions based on probability. In assessing probability, management considers the status of
negotiations for any revenue generating transactions, and the likelihood, based on the probability of income, that
associated costs will be incurred. Management then ranks the probabilities in such a way that only those revenues
deemed highly or reasonably likely to be secured are included in the projections.
All statements other than statements of historical facts may be forward-looking statements. Without limiting the
generality of the foregoing, words such as “may”, “will”, “expect”, “believe”, “anticipate”, “intend”, “could”, “might”,
“would”, “should”, “estimate”, “continue”, “plan” or “pursue”, “seek”, “project”, “predict”, “potential” or “targeting” or
the negative of these terms, other variations thereof, comparable terminology or similar expressions, are intended to
identify forward-looking statements although not all forward-looking statements contains these terms and phrases.
Forward-looking statements are provided for the purposes of assisting you in understanding us and our business,
operations, prospects and risks at a point in time in the context of historical and possible future developments and
therefore you are cautioned that such information may not be appropriate for other purposes. Actual events or results
may differ materially from those anticipated in these forward-looking statements if known or unknown risks affect our
business, or if estimates or assumptions turn out to be inaccurate. In particular, forward-looking statements included
in this Annual Report include, without limitation, statements with respect to:
our ability to develop, manufacture and successfully commercialize value-added pharmaceutical products;
our ability to obtain required regulatory approvals;
the availability of funds and resources to pursue research and development projects;
the successful and timely completion of our clinical trials;
our ability to take advantage of business opportunities in the pharmaceutical industry;
potential strategic transactions that we may pursue, including a potential divestment or sale of non-core assets;
our reliance on key personnel, collaborative partners and other third parties;
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the validity and enforceability of our patents and proprietary technology;
expectations regarding our ability to raise capital;
the use of certain hazardous materials;
the availability and sources of raw materials;
our third-party manufacturing capabilities;
currency fluctuations;
the value of our intangible assets;
negative operating cash flow;
the outcome of any current or pending litigation against us;
uncertainties related to the regulatory process and approvals;
increasing data security costs;
costs related to environmental safety regulations;
competing drugs, as well as from current and future competitors;
developing products for the indications we are targeting;
market acceptance of our product candidates by patients and healthcare professionals;
availability of third-party coverage and adequate reimbursement;
general changes in economic or market conditions;
the impact of the ongoing COVID-19 pandemic and other geopolitical tensions, such as Russia's recent incursion
into Ukraine, on our business, our industry and the economy;
volatility of our share price; and
other risks and uncertainties, including those listed in the Annual Report titled “Item 3.D—Risk Factors.”
You should refer to the section of the Annual Report titled “Item 3.D—Risk Factors” for a discussion of important factors
that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements.
As a result of these factors, we cannot assure you that the forward-looking statements in this MD&A will prove to be
accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In
light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a
representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time
frame or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of
new information, future events or otherwise, except as required by law.
You should read this MD&A and the documents that we reference in this MD&A completely and with the understanding
that our actual future results may be materially different from what we expect. We qualify all of our forward-looking
statements by these cautionary statements.
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This MD&A contains market data and industry forecasts that were obtained from industry publications. These data
involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates.
We have not independently verified any third-party information. While we believe the market position, market
opportunity and market size information included in this MD&A is generally reliable, such information is inherently
imprecise.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject.
These statements are based upon information available to us as of the date of this MD&A, and while we believe such
information forms a reasonable basis for such statements, such information may be limited or incomplete. Our
statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially
available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely
upon these statements.
Business Overview
We are a clinical-stage biopharmaceutical company focused on developing distinctive novel small molecule therapeutics
for inflammatory, fibrotic and metabolic diseases using our drug discovery platform and data driven approach. Our lead
small molecule product candidate, fezagepras, has completed a Phase 1 multi-ascending dose clinical trial and we
anticipate conducting a comparative Phase 1a single ascending dose clinical trial to provide comparative data to support
our development plan. In addition, we are currently developing a selective G-protein-coupled receptor 84, or GPR84
antagonist candidate and a selective OXER1 antagonist candidate. Our GPR84 and OXER1 antagonist programs are
currently at the preclinical stage.
We have active business operations in Canada and the United Kingdom.
We previously operated a segment devoted to the development of plasma derived therapeutics and completed this
divestment of this segment in October 2021. In November 2019, we also sold entities that were part of our former
bioseparations segment. The revenues and expenses relating to these activities are presented as discontinued
operations in our audited annual consolidated financial statements for the years ended December 31, 2021 and 2020.
Financial Performance
Amounts in tables are expressed in thousands of CAD, except per share amounts which are in full Canadian dollars.
On July 5, 2019, we performed a 1000 to 1 share consolidation of our issued equity instruments including common
shares, warrants, options and restricted stock units, or RSU. The quantities and per unit prices presented in the MD&A
have been retroactively adjusted to give effect to the share consolidation.On November 25, 2019, we completed a
disposition of all our shares in Prometic Bioseparations Ltd. or PBL to Gamma Biosciences GP LLC, a subsidiary of KKR
& Co. As a result of this transaction, we no longer retain any interest in PBL and its subsidiary Prometic Manufacturing
Inc. or PMI.
The Company entered into two share purchase agreements, or SPAs, with Kedrion S.p.A., or Kedrion, during the quarter
ended June 30, 2021: the first for the sale of Prometic Plasma Resources Inc. (PPR) and Prometic Plasma Resources
USA Inc. (PPR USA), operating the plasma collection centers, which dispositions were completed on May 21, 2021, and
the second for the sale of its Ryplazim® business operated through its subsidiaries Prometic Bioproduction Inc. (PBP),
which was disposed on July 9, 2021, and the Company’s plasma-derived therapeutics manufacturing facility, Prometic
Biotherapeutics Inc. (PBT), the holder of the biologicals license application or BLA and intellectual property rights for
Ryplazim® which was disposed on October 15, 2021.. Additionally, the Company’s subsidiary PBT entered into an
agreement with another party for the sale of the Priority Review Voucher, or PRV, it received on June 4, 2021, in
conjunction with FDA approval of its BLA. This sale closed on September 28, 2021. These disposals cover the majority
of Liminal’s plasma-derived therapeutics segment.
We have ceased to consolidate these entities in our consolidated financial statements as of the date of the disposal. Our
interest in PBL and PMI has been presented separately as “Discontinued Operations” in the comparative results, while
our interest in PPR, PPR USA, PBP and PBT have been presented as discontinued operations in the current and
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comparative results in accordance with the guidance under IFRS 5, Non-Current Asset Held for Sale and Discontinued
Operations.
Financial operations overview
Revenues
Revenues include royalty revenues and rental revenues.
Research and development expenses
Research and development or R&D expenses comprise the costs to have a contract development and manufacturing
organization manufacture the drug product used in pre-clinical studies and clinical trials. It also includes the cost of
external consultants supporting the clinical trials and pre-clinical studies, employee compensation and other operating
expenses involved in research and development activities. Government grant credits for eligible R&D salaries and rent
in Canada reduce the R&D expenses.
Administration expenses
Administration expenses mainly consist of salaries and benefits related to our executive, finance, human resources,
business development, legal, intellectual property, and information technology support functions. Professional fees
reported under administrative expenses mainly include legal fees, accounting fees, audit fees and fees for taxation
advisory. It also includes operating expenses such as insurance costs, office expenses, and travel costs pertaining to
administration. Government grant credits for eligible administrative salaries and rent in Canada are also included in
administration expenses.
Gain on foreign exchange
Gain on foreign exchange includes the effects of foreign exchange variations on monetary assets and liabilities
denominated in foreign currencies between the rates at which they were initially recorded at in the functional currency
at the date of the transaction and when they are retranslated at the functional currency spot rate of exchange at the
reporting date. All differences are included in the consolidated statement of operations.
Finance costs
Finance costs mainly includes interest expense from long-term debt, lease liabilities and banking charges. Finance costs
also includes financing transaction cost associated with financial instruments carried at fair value through profit or loss.
Finance costs are presented net of interest income which primarily results from the interest earned on the cash we hold.
Loss (gain) on extinguishments of liabilities
When the terms of our long-term debt are modified significantly, the then existing debt is considered extinguished and
the carrying amount of the debt before modification is derecognized, and the fair value of the modified debt is
recognized. The difference is recorded as a loss (gain) on extinguishment of liabilities. Similarly, when a debt agreement
is terminated resulting in a cash payment, the difference between the carried amount of the debt and the amount paid
is recorded as a loss (gain) on extinguishment of liabilities.
Change in fair value of financial instruments measured at fair value through profit or loss
Fair value increases and decreases on financial instruments measured at fair value through profit or loss are presented
here. Over the last two years, this caption includes the changes in fair values of the warrant liability.
Impairment losses
Impairment losses includes impairments recorded on long-lived assets, including but not limited to capital assets, right-
of-use assets and intangible assets.
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Income tax expense
Income tax expense includes the current tax expense that will be payable to or collectable from the taxation authorities
in the various jurisdiction in which we operate. Income tax expense also includes deferred income tax expense and
recoveries. Deferred income tax assets are recognized to the extent that it is probable that future tax profits will allow
the deferred tax assets to be recovered.
Discontinued operations
Following the sale of two of our subsidiaries previously included in our bioseparations segment on November 25, 2019,
and following a series of transactions in 2021 resulting in the divestment of four subsidiaries which were formerly part
of the plasma-derived therapeutics segment, we have restated the prior periods to remove the impact of those
operations from all lines in the financial statements (revenues, cost of sales and production cost, R&D and
administration, selling and marketing being the lines most impacted) and have reclassified those results to the income
(loss) from discontinued operations lines in the consolidated financial statements. The amounts showing as loss from
discontinued operations do not equal the results reported in prior periods for the bioseparations nor the plasma-derived
segment since the ownership of one subsidiary that was part of this bioseparations segment was not sold and since
certain corporate expenses that were previously allocated to these two segments were not reclassified in the results of
discontinued operations if those cost remained going forward. The gain on the sale of the subsidiaries is presented
distinctly.
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Operating Results
Comparison of years ended December 31, 2021, 2020 and 2019
The consolidated statements of operations for the year ended December 31, 2021 compared to the corresponding
periods in 2020 and 2019 are presented in the following tables:
Revenues
Expenses
Research and development expenses
Administration expenses
Gain on foreign exchange
Finance costs
Loss (gain) on extinguishments of liabilities
Change in fair value of financial instruments
measured at fair value through profit or loss
Impairment losses
Net loss from continuing operations
before income taxes
Income tax expense (recovery) from continuing
operations:
Current
Deferred
Net loss from continuing operations
Discontinued operations
Gain on sale of subsidiaries, net of income taxes $nil
Net loss from discontinued operations, net of taxes
Total income (loss)
from discontinued
operations
Net income (loss)
Net loss (income) attributable to:
Non-controlling interests - continuing operations
Owners of the parent
- Continuing operations
- Discontinued operations
Net income (loss)
Income (Loss) per share attributable
to the owners of the parent
basic and diluted:
From continuing operations
From discontinued operations
Total income (loss) per share
Weighted average number of outstanding shares
(in thousands)
Year ended December 31
Change
2021
2020
2019
2021 vs
2020
2020 vs
2019
$
643 $
724 $
745 $
(81) $
(21)
18,347
31,928
(1,397)
6,330
(75)
14,234
32,619
(35)
2,899
—
15,873
37,661
(756)
6,867
92,374
4,113
(691)
(1,362)
3,431
(75)
(1,639)
(5,042)
721
(3,968)
(92,374)
(9,886)
341
(850)
1,087
(1,140)
763
(9,036)
(746)
290
324
(44,945) $
(49,230) $ (150,897) $
4,285 $ 101,667
—
118
(144)
(65)
(336)
111
118
(209)
(225)
144
183
327
192
(176)
16
(45,063) $
(49,021) $ (150,672) $
3,958 $ 101,651
140,403
(83,127)
3,380
(73,116)
26,346
(82,427)
137,023
(10,011)
(22,966)
9,311
57,276 $
(56,081) $ 127,012 $
12,213 $ (118,757) $ (206,753) $ 130,970 $
(69,736) $
(13,655)
87,996
(669)
(832)
(1,044)
163
212
(44,394)
57,276
(48,189)
(69,736)
(149,628)
(56,081)
3,795
127,012
101,439
(13,655)
12,882
(117,925)
(205,709)
130,807
87,784
12,213 $ (118,757) $ (206,753) $ 130,970 $
87,996
(1.47) $
1.90
(1.97) $
(2.85)
(9.32) $
(3.49)
0.50 $
4.75
7.34
0.64
0.43 $
(4.83) $
(12.81) $
5.25 $
7.98
30,164
24,438
16,062
5,726
8,376
$
$
$
$
$
$
$
13
Continuing Operations analysis
Revenues
The following table provides the breakdown of total revenues from continuing operations by source of revenue for the
year ended December 31, 2021 compared to the corresponding periods in 2020 and 2019:
Year ended December 31
2021
2020
2019 2021 vs 2020
2020 vs 2019
Change
Royalty revenues
Rental revenue
$
$
565 $
78
572 $
152
575
170
$
643 $
724 $
745
$
(7) $
(74)
(81) $
(3)
(18)
(21)
Revenues include nominal amounts of royalty and rental revenues which remained fairly consistent over the years ended
December 31, 2021, 2020 and 2019. Royalty revenues are dependent on sales made by a third party.
Research and development expenses
R&D expenses increased by $4.1 million during the year ended December 31, 2021 compared to the corresponding
period in 2020. The increase was mainly due to an increase in third party clinical trial expenses of $2.4 million, mostly
related to our fezagepras MAD Phase 1 clinical trial, an increase in third-party preclinical studies expenses of $0.8
million, as well as increases in consulting fees of $0.6 million and intangible amortization expense of $1.1 million.
Additionally, during the year ended December 31, 2021, following the sale of our plasma-derived therapeutic business,
we ceased to be eligible to the Canada Emergency Wage Subsidy program, or CEWS government grant, and the Canada
Emergency Rent Subsidy program, or CERS government grant, two grant programs created in 2020 by the Canadian
government in response to the COVID-19 pandemic. As a result, we recorded a reduction in grant credits of $0.6 million.
These increases in R&D expenses were partially offset by a decrease in share-based compensation expense of $1.5
million explained below under Share-based payments expense.
R&D expenses decreased by $1.6 million for the year ended December 31, 2020 compared to the corresponding period
in 2019. This change was mainly driven by a decrease in compensation expense of $4.7 million due to a reduction in
our workforce dedicated to our small molecule R&D, a decrease in third-party clinical trial expenses of $1.0 million, the
recognition of government grant credits of $1.2 million coming from the CEWS and CERS government grants programs
which started in 2020, and a reduction of $0.4 million in share-based payments expense.
These decreases were offset by an increase in third-party preclinical expenses of $2.1 million and an increase of $0.9
million in laboratory consumables expense. There were also reductions in Québec R&D tax credits during the year ended
December 31, 2020, which resulted in an increased R&D expense of $1.1 million, and an increase of $1.7 million for
consultant services as we relied more on consultants to perform some of the tasks previously performed by employees.
Administration expenses
The decrease of $0.7 million in administration expenses during the year ended December 31, 2021 compared to the
corresponding period in 2020 was attributable in part to a reduction in professional fees of $1.7 million and a reduction
of $0.4 million in office expenses. The decrease is also due to the fact that in 2020 there was a $2.2 million expense
recognized in conjunction with the additional warrants issued following an amendment to the private placement
agreement completed in November of that year with no equivalent cost in 2021. These decreases in expenses were
partially offset by a decrease of $1.1 million in the recognition of credits pertaining to the CEWS government grant,
increases in bonus and termination benefit expenses, and an increase of $0.5 million in share-based payment expenses
explained below.
14
The decrease of $5.0 million in administration expenses during the year ended December 31, 2020 compared to the
corresponding period in 2019 was mainly attributable to a reduction of $11.1 million in share-based payments expense,
a decrease in payroll and related expenses caused in part by the reduction in the workforce and a reduction in bonus
expenses and the recognition of $1.5 million in credits pertaining to the CEWS government grant in 2020, the first year
of the program. These decreases in expenditures were partially offset by an increase of $11.0 million in directors' and
officers' insurance cost resulting from our listing on Nasdaq and the recognition of a $2.2 million expense pertaining to
the additional warrants issued following an amendment to the private placement agreement completed in November
2020.
Share-based payments expense
Share-based payments expense represents the compensation expense recorded as a result of stock options and RSU
issued to employees and board members. The table below shows the share-based payments expense recorded in the
continuing and discontinuing operations results. This expense has been recorded as follows in the consolidated
statements of operations:
Administration expenses
Research and development expenses
Loss from discontinued operations
Year ended December 31
2021
3,760 $
936
(444)
2020
3,248 $
2,430
556
2019
14,315 $
2,836
4,879
Change
2021 vs
2020
512 $
(1,494)
(1,000)
2020 vs
2019
(11,067)
(406)
(4,323)
4,252 $
6,234 $
22,030 $
(1,982) $
(15,796)
$
$
Share-based payments expense for the year ended December 31, 2021 decreased by $2.0 million compared to the
corresponding period in 2020, mainly due to the general reduction in the number of employees that are part of the
Liminal group, mainly as a result of the sale of our former subsidiaries in 2021 that were part of our former plasma-
derived therapeutics segment. This led to an increase in stock option forfeitures which resulted in the reversal of the
share-based payment expense pertaining to unvested stock options as well as a reduction in the number of stock options
granted in 2021. Share-based payments expense also declined because the average grant date fair value of a stock
option has declined over the two-year period. In addition, the impact of the repricing of stock options that took place
during the second quarter of 2020 was higher in 2020 since some of the repriced stock options were vested immediately
and the repricing expense related to those vested options was immediately recognized. Also due to the general
expensing pattern of graded vesting stock options, where the yearly expense of a given grant declines over the years
of vesting, the impact of the 2020 repriced options is lower in 2021.
During 2019, we made significant changes to our long-term equity incentive plan to ensure alignment with performance
and building shareholder value, and attraction and retention of key employees to drive our future growth. The following
changes were made:
the cancellation in June 2019 and August 2019 of the outstanding share options for active employees in return
for the issuance of new vested options having an exercise price reflecting the share price at the time of the
grant subject to stockholder approval;
the modification of the outstanding performance-based RSU into time-vesting RSU; and
the issuance of the 2019 annual stock option grant to employees and executives. The vesting terms were
changed from those set in recent years, especially at the executive level; a portion of the executive grants
vested immediately while the overall vesting period was extended up to a period of 6 years.
Some of these changes triggered an immediate or accelerated recognition of share-based compensation expense
resulting in an impact of approximately $ 14.9 million on the results during the quarter ended June 30, 2019 alone.
15
Finance costs
Our finance costs increased by $3.4 million during the year ended December 31, 2021 compared to the corresponding
period in 2020 reflecting the increase in our level of indebtedness following (i) the issuance of the secured convertible
debentures, or SCD, in July 2020, which remained outstanding until the SCD were converted into our common shares
in October 2021, and (ii) the second term loan in September 2020, as we drew down our full line of credit with SALP.
The finance costs decreased by $4.0 million during the year ended December 31, 2020 compared to the corresponding
period in 2019 reflecting principally the reduction in interest expense on the long-term debt mainly to a lower average
debt level than the previous year despite the long-term debt balance at December 31, 2020 of $40.5 million being
higher by $31.7 million from the prior year-end. The average debt balance was higher in 2019 reflecting the significance
of the debt up until the debt restructuring that took place on April 23, 2019.
Loss on extinguishment of liabilities
The loss on extinguishment of liabilities of $92.4 million in the year ended December 31, 2019 is principally due to the
Company concluding a debt restructuring agreement on April 23, 2019 with our major creditor, SALP where the debt,
subsequently referred to as the first term loan, was reduced to $10.0 million plus interest due, in exchange for the
issuance by us of 15,050,312 of common share to SALP. The details of the computation of this loss on extinguishments
of liabilities is presented in note 17 of our consolidated financial statements for the year ended December 31, 2021.
Change in fair value of financial instruments measured at fair value through profit or loss
On November 3, 2020, as part of the consideration for the private placement, we issued 6,315,788 warrants that expire
on November 3, 2025 with an exercise price initially set at US$5.50. On November 25, 2020, we issued an additional
1,578,946 warrants with the same terms and conditions. These warrants do not meet the definition of an equity
instrument and are treated as a warrant liability which is measured at fair value through profit and loss on a recurring
basis. The change in fair value of the warrant liability from the various issuance dates to December 31, 2020 recognized
in the consolidated statement of operations during the year ended December 31, 2020 was a gain of $0.9 million, or
otherwise a decrease in the warrant liability. The value of the warrant liability continued to decrease during the year
ended December 31, 2021, reflecting the reduction in the market price of our common shares, and resulted in a gain
on the change in fair value of $9.9 million.
In November 2018, as part of the modification of the terms of our four loan agreements existing at the time, we issued
warrants to SALP. Similarly to the warrant issued in November 2020, the warrants were treated as a warrants liability.
The change in fair value of this different warrant liability, recognized in the consolidated statements of operations during
the year ended December 31, 2019 was a gain of $1.1 million. These warrants were cancelled as part of the
Restructuring Transaction on April 23, 2019.
Net loss from continuing operations
The net loss from continuing operations, net of taxes, decreased by $4.0 million during the year ended December 31,
2021 compared to the corresponding period of 2020 mainly due to a favorable change in fair value of financial
instruments measured at fair value through profit and loss of $9.0 million and a favorable foreign exchange variance of
$1.4 million. These were partially offset by an increase in R&D and finance costs of $4.1 million and $3.4 million,
respectively, as explained above.
16
The net loss from continuing operations decreased by $101.7 million during the year ended December 31, 2020
compared to the corresponding period in 2019. This decrease is mainly explained by the following:
the decrease in the loss on extinguishment of liabilities of $92.4 million, related to the debt restructuring that
occurred during the second quarter of 2019;
the decrease in the share-based payments expense of $11.5 million, the majority included in administration
expenses, related to the significant changes made to the Company’s long-term equity incentive plan in June
2019;
an increase of $11.0 million in directors and officers insurance costs;
the decrease in finance cost of $4.0 million for the year ended December 31, 2020 reflecting the lower average
levels of debt since the April 23, 2019 debt restructuring; and
a reduction in employee compensation expenses in combination with an increase in government grants.
Discontinued Operations analysis
The net income (loss) from discontinued operations is made up of the gain we recognized on the sale of our plasma-
derived therapeutics and bioseparations businesses.
Gain on sale of subsidiaries
The table below provides the details of the computation of the gain on sale of our former subsidiaries for the years
ended December 31, 2021, 2020 and 2019.
Year ended December 31
Sale of bioseparation business
Proceeds received
Less:
Carrying amount of net assets sold
Transaction costs
Reclassification of foreign currency translation reserve from
other comprehensive income into
the statement of operations
Gain on sale of bioseparation business
Sale of plasma collection centers
Proceeds received
Less:
Carrying amount of net assets sold
Transaction costs
Reclassification of foreign currency translation reserve
from other comprehensive income
into the statement of operations
Gain on sale of plasma collection centers
Sale of Ryplazim® business
Proceeds received
Less:
Carrying amount of net assets sold
Indemnification adjustments
Transaction costs
Gain on sale of Ryplazim business
Gain on sale of subsidiaries, net of income taxes $nil
2021
2020
2019
$
—
$
3,380 $
51,927
—
—
—
—
—
—
22,015
5,015
—
3,380
(1,449)
26,346
13,570
10,849
204
(44)
2,561
159,787
19,541
116
2,288
137,842
140,403
$
—
—
—
—
—
—
—
—
—
—
$
3,380 $
—
—
—
—
—
—
—
—
—
—
26,346
17
During the year ended December 31, 2021, we recorded a gain on the sale of our subsidiaries that were part of our
former plasma-derived therapeutics segment of $140.4 million. The gain reflects the sale of the Ryplazim® business,
the plasma collection centers and the PRV.
Following the sale of our interests in PBL and PMI in November 2019, we generated a gain of $26.3 million in the year
ended December 31, 2019, the year of the sale, and a gain of $3.4 million in the year ended December 31, 2020 as an
additional amount of proceeds was received upon resolution of a taxation matter.
Results from discontinued operations
The following table summarizes the results of the activities that are presented as discontinued operations in the
consolidated statements of operations for the years ended December 31, 2021, 2020 and 2019.
Revenues
Expenses
Cost of sales and other production expenses
Research and development expenses
Administration expenses
Impairment losses
Gain on foreign exchange
Finance costs
Gain on extinguishment of liabilities
Current income taxes
Deferred income taxes
Loss from discontinued operations, net of
income taxes
Year ended December 31
Change
2021 vs
2021
$
949 $
2020
2,593 $
2019
27,233 $
2020
(1,644) $
1,465
76,733
2,360
1,411
(136)
2,242
—
1
—
1,868
42,757
5,933
19,772
(633)
6,083
(79)
8
—
14,012
65,840
11,009
11,603
(759)
7,926
—
53
(24)
(403)
33,976
(3,573)
(18,361)
497
(3,841)
79
(7)
—
2020 vs
2019
(24,640)
(12,144)
(23,083)
(5,076)
8,169
126
(1,843)
(79)
(45)
24
$
(83,127) $
(73,116) $
(82,427) $
(10,011) $
9,311
Revenues and cost of sales and other production expenses
Revenues from discontinued operations included revenues from the sale of plasma up until May 21, 2021, the date of
the sale of the plasma collection centers and for the entire year for 2020. Revenues for the year ended December 31,
2019 include sales of plasma of $4.7 million and $22.5 million from the bioseparations business, which was sold on
November 25, 2019. Accordingly, the cost related to the sale of those products ceased when these businesses were
sold.
Research and development expenses
R&D expenses increased by $34.0 million during the year ended December 31, 2021 compared to the corresponding
period in 2020. The increase was mainly due to the payment PBT made to PBP, which was under Kedrion’s ownership
at the time, of $39.5 million, representing thirty percent (30%) of the net PRV proceeds, for past R&D services PBP
provided to PBT and a provision for an onerous contract of $22.1 million that was recognized relating to a contract we
have with a contract development and manufacturing organization, or CDMO, which is no longer required as a result of
the plasma-derived therapeutic segment divestment. This increase was partially offset by a gain of $2.5 million
recognized on the reduction of our lease liability. The reduction in lease liability has arisen from the term of the lease
having been reduced since we gave a notice of early termination of a master agreement entered with a CDMO, reducing
the term of the contract by 3.8 years. In addition, the R&D expenses for the year ended December 31, 2021 included
less than one year of operations of PBP and PBT, since they were sold on July 9 and October 15, 2021, respectively. In
the year ended December 31, 2020, we had R&D operations in PBP, PBT and also some R&D costs in the plasma
collection centers for the entire year.
18
R&D expenses decreased by $23.1 million during the year ended December 31, 2020 compared to the corresponding
period of 2019. The decrease is due in part to the absence of the R&D expense from the bioseparations business in
2019 of $5.9 million and a decrease of $9.7 million in the manufacturing cost of plasma-derived product candidates to
be used in clinical trials and for the development of our production processes. Additionally, we recognized a credit of
$4.1 million relating to the CEWS grant. We also recognized $1.3 million in R&D tax credit in the year ended December
31, 2020 compared to a reversal of R&D tax credit of $1.0 million in the comparative period following the resolution of
R&D tax credit uncertainties regarding the eligibility of certain expenses from 2014 to 2019, upon conclusion of an audit
by the taxation authorities in 2020. We also had a reduction in payroll and related expenses of $1.1 million mainly due
a reduction of our workforce in our R&D facility in Rockville, MD and a reduction in share-based payments expense.
These decreases were partially offset by an increase of $0.6 million related to professional fees and operating expenses
incurred to prepare for the FDA audit in connection with the resubmission of the BLA.
Administration expenses
Administration expenses decreased by $3.6 million during the year ended December 31, 2021 compared to the
corresponding period of 2020 and this is mainly due to the fact that the administration expenses for the plasma collection
centers and for the Ryplazim® business ceased to be included in our 2021 results as those activities were sold during
the year, whereas in 2020, we have a full year of these expenses. Administration expenses decreased by $5.1 million
during the year ended December 31, 2020 compared to the corresponding period of 2019, mainly due to the absence
of the administration, marketing and selling expenses from the bioseparations business in 2019 of $3.4 million.
Impairments
During the year ended December 31, 2020, we recorded an impairment of $0.7 million on capital assets, $18.6 million
on right of use assets and $0.5 million on intangible assets related to the Ryplazim® cash generating unit, which was
part of the plasma-derived therapeutic segment, representing an aggregate impairment of $19.8 million.
During the year ended December 31, 2019, we recorded an impairment of $7.1 million and $4.5 million on capital assets
and intangible assets, for an aggregate impairment of $11.6 million following our decision not to pursue any other
indication relating to the human-plasma protein plasminogen a part from the plasminogen congenital deficiency.
19
Comparison of quarters ended December 31, 2021, 2020 and 2019
The consolidated statements of operations for the quarter ended December 31, 2021 compared to the same periods in
2020 and 2019 are presented in the following tables:
Revenues
Expenses
Research and development expenses
Administration expenses
Loss on foreign exchange
Finance costs
Gain on extinguishments of liabilities
Change in fair value of financial instruments
measured at fair value through profit or loss
Impairment losses
Net loss from continuing operations
before income taxes
Income tax expense (recovery) from
continuing operations:
Current
Deferred
Net loss from continuing operations
Discontinued operations
Gain (loss) on sale of subsidiaries, net of income
taxes $nil
Net loss from discontinued operations, net of taxes
Total loss from discontinued operations
Net loss
Net loss (income) attributable to:
Non-controlling interests - continuing operations
Owners of the parent
- Continuing operations
- Discontinued operations
Total loss per share
Net loss
Loss per share attributable
to the owners of the parent
basic and diluted:
From continuing operations
From discontinued operations
Weighted average number of outstanding shares
(in thousands)
Quarter ended December 31
2021
2020
2019
Change
2021 vs
2020
$
238 $
284 $
189 $
(46) $
2020 vs
2019
95
4,539
5,820
226
1,621
(86)
2,953
7,505
654
1,621
—
5,351
8,130
467
195
—
1,586
(1,685)
(428)
—
(86)
(2,398)
(625)
187
1,426
—
(3,250)
—
(850)
1,087
—
763
(2,400)
(1,087)
(850)
324
(8,632) $
(12,686) $
(14,717) $
4,054 $
2,031
—
118
118
—
(65)
(1,587)
111
—
183
1,587
(176)
(65)
(1,476)
183
1,411
(8,750) $
(12,621) $
(13,241) $
3,871 $
620
(134) $
(435)
3,380 $
(30,750)
26,346 $
(27,614)
(3,514) $
30,315
(22,966)
(3,136)
(569) $
(9,319) $
(27,370) $
(39,991) $
(1,268) $
(14,509) $
26,801 $
30,672 $
(26,102)
(25,482)
(75)
(268)
(155)
193
(113)
(8,675)
(569)
(12,353)
(27,370)
(13,086)
(1,268)
3,678
26,801
733
(26,102)
(9,244)
(39,723)
(14,354)
30,479
(25,369)
(9,319) $
(39,991) $
(14,509) $
30,672 $
(25,482)
(0.29) $
(0.02)
(0.51) $
(1.12)
(0.81) $
(0.08)
0.22 $
1.10
0.31
(1.04)
(0.31) $
(1.63) $
(0.89) $
1.32 $
(0.73)
30,164
24,438
16,062
5,726
8,376
$
$
$
$
$
$
$
$
Restatement of the consolidated financial statements for the quarter and nine months ended September
30, 2021
During the preparation of our consolidated financial statements for the year ended December 31, 2021, we identified
an error in the consolidated financial statements for the quarter and nine months ended September 30, 2021.
Consequently, we have determined a restatement of those financial statements is required. The details of the
restatement are provided in item 5A - Summary of quarterly consolidated results.
20
The correction resulted in the recognition a loss of $7.7 million in the third quarter of 2021, increasing the total loss
from discontinued operations during that period instead of reflecting that loss in the results from discontinued operations
during the fourth quarter of 2021, had the correction not been made. The results of discontinued operations discussed
in this section reflect the correction made to the third quarter 2021 financial statements.
Revenues from continuing operations
The following table provides the breakdown of total revenues from continuing operations by source for the quarter ended
December 31, 2021 compared to the corresponding periods in 2020 and 2019:
Royalty revenues
Rental revenue
Research and development expenses
Quarter ended December 31
2021
2020
2019
229 $
9
241 $
43
155 $
34
Change
2021 vs
2020
(12) $
(34)
2020 vs
2019
86
9
238 $
284 $
189 $
(46) $
95
$
$
R&D expenses increased by $1.6 million during the quarter ended December 31, 2021 compared to the corresponding
period in 2020 mainly due to increases in share-based payments expense, payroll and related expenses and intangible
amortization expenses of $0.4 million, $0.9 million and $0.6 million, respectively, and a decrease in the CEWS and CERS
government grants and R&D tax credits of $0.4 million each. These increases were partially offset by a decrease in
laboratory consumables expense of $1.0 million.
R&D expenses during the quarter ended December 31, 2020 decreased by $2.4 million compared to the corresponding
period in 2019 mainly due to a decrease in payroll and related expenses of $3.1 million due to a reduction in our
workforce dedicated to our small molecule R&D and a reduction of $0.7 million in share-based payments expense
explained below. We also recognized credits of $0.4 million for government grants. and These decreases were partially
offset by an increase in laboratory consumables expenses and third-party preclinical studies of $0.9 million and $0.7
million, respectively.
Administration expenses
The decrease of $1.7 million in administration expenses during the quarter ended December 31, 2021 compared to the
corresponding period in 2020 was mainly attributable to lower directors' and officers' insurance cost of $1.0 million,
starting in the fourth quarter of 2021, as a result of a change in the province of our registered office which changed
from Quebec to Ontario. The decrease is also due to the fact that in 2020 there was a $2.2 million expense pertaining
to the additional warrants issued following an amendment to the private placement agreement completed in November
of that year with no equivalent cost in 2021. These decreases were partially offset by an increase in the share-based
payments expense of $1.3 million (explained below) and a reduction in the CEWS and CERS government grants of
$0.5 million.
The decrease of $0.6 million in administration expenses during the quarter ended December 31, 2020 compared to the
corresponding period in 2019 was mainly attributable to a reduction of $2.6 million in share-based payment expense, a
decrease of $0.8 bonus expenses and the recognition of $0.5 million in credits pertaining to the government grants.
This decrease was partially offset by an increase of $1.7 million in directors’ and officers’ insurance cost following our
Nasdaq listing and the recognition of a $2.2 million expense pertaining to the additional warrants issued following an
amendment to the private placement agreement completed in November 2020.
21
Share-based payments expense
Share-based payments expense represents the expense recorded as a result of stock options and RSU issued to
employees and board members. This expense has been recorded as follows in the consolidated statements of operations:
Administration expenses
Research and development expenses
Loss from discontinued operations
Quarter ended December 31
2021
415 $
209
—
2020
(903) $
(232)
173
2019
1,698 $
486
786
Change
2021 vs
2020
1,318 $
441
(173)
2020 vs
2019
(2,601)
(718)
(613)
624 $
(962) $
2,970 $
1,586 $
(3,932)
$
$
Share-based payments expenses increased by $1.6 million during the quarter ended December 31, 2021 compared to
the corresponding period in 2020 principally because there were no significant stock option forfeitures in the current
period as there was in 2020 as we recognized for accounting purposes the impact of the estimated forfeitures of the
unvested stock options held by the former CEO following his resignation in the fourth quarter of 2020. This was partially
offset by a lower stock option expense in the current quarter since we have less employees but also the fair value of
the stock options have gone down reflecting the lower share price.
Share-based payments expenses decreased by $3.9 million during the quarter ended December 31, 2020 compared to
the corresponding period in 2019 mainly due to the accounting impact on the estimated forfeitures for the unvested
stock options held by the former CEO following his resignation in November 2020.
Finance costs
Finance costs increased by $1.4 million for the quarter ended December 31, 2020 compared to the corresponding period
in 2019, reflecting higher interest expense due to an increased debt level following the issuance of secured convertible
debentures in July 2020 and of the second term loan, as we drew down our full line of credit with SALP in September
2020. Financing costs remained at the same level during the fourth quarter of 2021 and 2020.
Change in fair value of financial instruments measured at fair value through profit or loss
The gain on the change in fair value of the warrant liability that is measured at FVPL increased by $2.4 million during
the quarter ended December 31, 2021 compared to the corresponding period in 2020 due to a decrease in fair value of
the warrant liability mainly driven by a higher decrease in the value of the underlying shares between September 30,
2021 and December 31, 2021, than the decrease between the date of issuance of these warrants on November 3 and
25, 2020 and December 31, 2020. The change in fair value between their issuance dates in November 2020 and
December 31, 2020 was a gain of $0.9 million.
Net loss from continuing operations
The net loss from continuing operations decreased by $3.9 million during the quarter ended December 31, 2021
compared to the corresponding period in 2020. This was mainly driven by the reduction in administration expenses of
$1.7 million and the increase in the gain on the change in fair value of the warrant liability that is measured at FVPL
losses of $2.4 million. These decreases were partially offset by an increase in R&D expenses of $1.6 million as explain
above.
The net loss from continuing operations increased by $0.6 million during the quarter ended December 31, 2020
compared to the corresponding period in 2019. This was mainly driven by the reduction in R&D expenses of $2.4 million
and the increase in finance costs of $1.4 million.
22
Loss from discontinued operations
The net losses from discontinued operations, net of taxes decreased by $30.3 million during the quarter ended
December 31, 2021 compared to the corresponding period in 2020. This decrease was mainly due to the recognition of
an impairment of $19.7 million during the fourth quarter of 2020 and due to the fact that we only had a small loss from
discontinued operations of $0.4 million since there were only minor expenses incurred from October 1 to October 15,
2021 when PBT was sold compared to having the full operations of the plasma-derived therapeutics segment in during
the quarter ended December 31, 2020. The gain on sale of subsidiaries declined by $3.5 million during the quarter
ended December 31, 2021 compared to the corresponding period in 2020 as in the 2020 we recognized an additional
gain of $3.4 million upon the resolution of a tax uncertainty in relation to the sale of our bioseparation business.
The net losses from discontinued operations increased by $3.1 million during the quarter ended December 31, 2020
compared to the corresponding period in 2019. The increase is explained in part by the absence of the net income
contribution from the former bioseparations business of $1.1 million. The gain from the sale of the subsidiaries of
$26.3 million during the quarter ended December 31, 2019 comes from the sale of the bioseparations business.
Selected annual information
The following table presents selected audited annual information for the years ended December 31, 2021, 2020 and
2019.
Revenues
Net loss from continuing operations attributable to
owners of the parent
Net loss from continuing operations per share
attributable to owners of the parent
(basic and diluted)
Total assets
Total long-term financial liabilities
$
$
2021
643
2020
724
2019
745
(44,394)
(48,189)
(149,628)
(1.47)
126,053
73,678 $
(1.97)
117,784
78,785 $
(9.32)
165,098
38,721
Revenues include nominal amounts of royalty and rental revenues which remained fairly consistent over the years ended
December 31, 2021, 2020 and 2019. Royalty revenues are dependent on sales made by a third party.
The net loss from continuing operations attributable to the owners of the parent decreased by $3.8 million during the
year ended December 31, 2021 compared to the corresponding period of 2020 mainly due to a reduction in the fair
value of the warrant liability, presented in the profit and loss as a change in fair value of financial instruments measured
at fair value through profit and loss of $9.0 million and a favorable foreign exchange variance of $1.4 million. These
were partially offset by an increase in R&D and finance costs of $4.1 million and $3.4 million, respectively, as explained
above.
The net loss from continuing operations attributable to the owners of the parent decreased by $101.4 million during the
year ended December 31, 2020 compared to the corresponding period in 2019. This decrease is mainly explained by
the following:
the decrease in the loss on extinguishment of liabilities of $92.4 million, related to the debt restructuring that
occurred during the second quarter of 2019;
the decrease in the share-based payments expense of $11.5 million, the majority included in administration
expenses, related to the significant changes made to the our long-term equity incentive plan in June 2019;
an increase of $11.0 million in directors and officers insurance costs;
the decrease in finance cost of $4.0 million for the year ended December 31, 2020 reflecting the lower average
levels of debt since the April 23, 2019 debt restructuring; and
a reduction in employee compensation expenses in combination with an increase in government grants.
23
The net loss from continuing operations per share attributable to the owners of the parent on a basic and diluted basis
reflects the changes in the net loss from continuing operations attributable to the owner of the parent but also the
increase in the number of common shares outstanding from year to year. The number of common shares increased in
2019, as a significant number of common shares were issued in April 2019 upon a debt restructuring transaction and
the issuance of equity following private placements; in 2020, the common shares outstanding increased following a
private placement which was concluded in November 2020 and finally in 2021, the common shares increased following
the conversion of secured convertible debentures into shares in October 2021. The weighted average number of shares
increased from 16,062 thousand common shares in 2019 to 24,438 thousand common shares in 2020 and to 30,164
thousand common shares in 2021.
Total assets increased by $8.3 million from $117.8 million at December 31, 2020 to $126.1 million at December 31,
2021 reflecting the increase in cash of $63.4 million as a result of the proceeds we received from the sale of our plasma-
derived therapeutic business which was mostly offset by the decrease in all of the assets sold.
Total assets decreased by $47.3 million from $165.1 million at December 31, 2019 to $117.8 million at December 31,
2020 mainly due to a reduction in cash and cash equivalents of $16.2 million, a reduction of income tax receivable of
$9.2 million as prior year claims were received and no new claims are being recorded as we are no longer eligible for
U.K. R&D tax credit, and a reduction in the long-term assets following the impairment recorded on certain of the plasma-
derived therapeutic assets in 2020. Total assets increased by $62.2 million from $102.9 million at December 31, 2018
to $165.1 million at December 31, 2019 mainly due to recognition of the right-of-use assets following the adoption of
IFRS 16 and a higher cash and cash equivalents balance at December 31, 2019 by $53.9 million.
Long-term financial liabilities decreased by $5.1 million at December 31, 2021 from December 31, 2020 mainly due to
the liabilities disposed of with the sale of the plasma-derived therapeutic business of $5.9 million, the decrease of the
warrant liability of $9.9 million and the conversion of the secured convertible debt, in 2021, that had a balance of $2.5
million at December 31, 2020. The decreases were mostly offset by the recognition of a provision for onerous contract
of $18.2 million.
Long-term financial liabilities increased by $40.1 million at December 31, 2020 from December 31, 2019, mainly due
our drawdown on the non-revolving line of credit of $29.1 million on September 14, 2020 and to the November 2020
warrants recognized as a warrant liability having a balance of $11.6 million at December 31, 2020. Long-term financial
liabilities decreased by $88.2 million at December 31, 2019 from December 31, 2018, mainly due to the restructuring
of the long-term debt on April 23, 2019, which was partially offset by the recording of the long-term portion of lease
liabilities following the adoption of IFRS 16 on January 1, 2019.
24
Summary of consolidated quarterly results
The following table presents selected quarterly financial information for the last eight quarters:
2021
Q4
Q3
(restated)
Q2
Q1
Q4
Q3
Q2
Q1
2020
Revenues
R&D expenses
Administration expenses
$
238 $
170 $
25 $
4,539
5,820
4,973
9,420
3,951
8,551
210
4,884
8,137
$
$
284
2,953
7,505
$
202
3,285
7,534
36
3,981
8,503
$
202
4,015
9,077
Element attributable to
the owners of the parent:
Net loss from continuing
operations
Net income (loss) from
discontinued operations
Basic and diluted earnings
per share from continuing
operations
Basic and diluted earnings
per share from
discontinuing operations
(8,675)
(9,797)
(12,504)
(13,418)
(12,353)
(11,079)
(13,101)
(11,656)
(569)
84,228
(19,536)
(6,847)
(27,370)
(12,019)
(14,659)
(15,688)
(0.29)
(0.33)
(0.42)
(0.45)
(0.45)
(0.47)
(0.56)
(0.50)
(0.02)
2.82
(0.65)
(0.23)
(1.00)
(0.51)
(0.63)
(0.67)
Restatement of the third quarter 2021 financial statements for the quarter and nine months ended
September 30, 2021
During the preparation of our consolidated financial statements for the year ended December 31, 2021, we noted that
the third quarter 2021 financial statements contained a material misstatement which required a restatement of those
financial statements. In the third quarter financial statements, the carrying value of PBT, which was classified as held
for sale, exceeded its fair value less costs to sell. We have proceeded to restate the third quarter 2021 financial
statements:
by recording a reduction in the carrying amount of the prepaids and intangible assets, both included in the
''Assets of a disposal group held for sale'' on the consolidated statement of financial position at September
30 2021, by $6.3 million and $1.4 million, respectively; and
by recognizing an impairment loss on the intangible assets of $1.4 million and a R&D expense of $6.3 million.
Both items are included in the net loss from discontinued operations. Corresponding adjustments to the
earnings per share amounts were made.
Analysis of the quarterly results
Following the reclassification of the results of the plasma collection centers and the Ryplazim® business as discontinued
operations, the revenues include nominal amounts of royalty and rental revenues.
R&D expenses were generally lower in 2020 than in 2021. This was attributable in most part to the fact that we were
benefiting from the CEWS and CERS government grants from the second quarter of 2020 up until the middle of the
second quarter of 2021. In general, payroll and related expenses recorded in R&D declined between the first quarter of
2020 and the fourth quarter of 2021 due to a reduction in the number of employees. Starting the fourth quarter of 2020
and onwards, we had a general increase in clinical trial expenses as we were conducting our Fezagepras phase 1 MAD
study.
25
Administration expenses where higher during the third quarter of 2021 due to an acceleration of the share-based
payments expense following the departure of one of our executive members and 2) the payroll and related expenses
were higher due to recognition of termination benefits resulting from a reduction in employees and a transaction bonus
following the divestment of our former plasma-derived therapeutics segment. The administration expense for the fourth
quarter of 2021 is lower compared to the previous quarter reflecting the lower staff level and lower directors' and
officers' insurance by $1.3 million, as a result of a change in the province of our registered office which changed from
Quebec to Ontario from the middle of the fourth quarter of 2021.
Both R&D and administration expenses are affected by fluctuations in share-based payment expenses from quarter to
quarter.
The variations in the net loss from continuing operations over the last eight quarters were affected by R&D expenses
and administration expenses variations as explained above. In addition, the following quarters were impacted by an
impairment of intangible assets of $1.1 million for the fourth quarter of 2020 and by gains on the changes in fair value
of the warrant liability that is measured at FVPL, which reduced the net loss from continuing operations by $5.1 million
and $3.3 million during the third quarter of 2021 and the fourth quarter of 2021, respectively.
Net losses from discontinued operations fluctuated significantly over the last eight quarters in part because of the
varying R&D and administration expenses but the main variations are due to significant events impacting the results,
including the recognition of 1) impairment losses of $19.8 million in the fourth quarter of 2020; 2) an expense for an
onerous contract provision of $21.9 million during the second quarter of 2021; 3) a compensation expense for R&D
services of $45.8 million payable during the third quarter of 2021 upon receipt of the PRV proceeds, and 4) the impact
of the sale of former businesses.
In this regard, during the fourth quarter of 2020, we recognized a gain on the sale of the bioseparations business of
$3.4 million, gains of $10.7 million and $129.8 million on the sale of our subsidiaries in the plasma-derived therapeutics
segment during the second quarter and the third quarter of 2021, respectively. The gain of $129.8 million includes the
gain recorded on the sale of the PRV.
The basic and diluted loss per share from continuing operations declined over the last eight quarters, particularly during
the third quarter and the fourth quarter of 2021 principally reflecting the lower losses from continuing operations while
the basic and diluted loss per share from discontinued operations varied in accordance principally with the loss from
discontinued operations for each period. In addition, during the fourth quarter of 2020 and 2021, we issued shares
which ultimately reduce the basic and diluted loss per share from their date of issuance and for the following quarters
because they increase the weighted average number of shares.
Acquisition of Fairhaven Pharmaceuticals Inc.
Pursuant to a share purchase agreement, or SPA, dated July 17, 2020, we acquired 100% of the issued and outstanding
common shares of Fairhaven, a company with a preclinical research program of small molecule antagonists. In payment
of the initial amount of $3.6 million due upon closing of the acquisition, we issued 202,308 common shares recorded at
a fair value of $3.4 million based on the closing price of our common shares at the date of the transaction. Upon
achievement of certain pre-determined research and development milestones prior to the fifth anniversary of the closing
date of the acquisition, additional payments in the form of common shares totaling up to $4.4 million may become due.
As Fairhaven did not meet the definition of a business under IFRS 3, "Business Combinations", the acquisition has been
accounted for as an asset acquisition essentially resulting in the recognition of an intangible asset representing the
licensing rights acquired. Refer to note 5 to the consolidated financial statements for the year ended December 31, 2020
for the complete details regarding the accounting for this transaction.
26
Outstanding share data
We are authorized to issue an unlimited number of common shares. At March 7, 2022, 31,042,560 common shares,
1,776,778 options to purchase common shares and 8,067,469 warrants to purchase common shares were issued and
outstanding.
Transactions between related parties (as defined per IAS 24)
Balances and transactions between our subsidiaries, which are related parties, have been eliminated on consolidation
and are not reported. These transactions have been recorded at the exchange amount, meaning the amount agreed to
between the parties.
At December 31, 2021 and 2020, a former CEO had a balance of $283 and $170, respectively, owing to us under a tax
equalization program, the amounts to be repaid once a refund is received from the taxation authority for each of the
two years covered by the program.
SALP subsequently became our majority shareholder, or our parent entity, following a debt restructuring completed on
April 23, 2019.
All material transactions with SALP are disclosed in notes 16, 18a, 19a, 19c, 28, 30 and 33 in the consolidated financial
statements for the year ended December 31, 2021. The key transactions with our parent entity mainly pertain to
financing transactions and are for significant amounts. Related party transactions with SALP include:
the recording and payment of interest on the loans with SALP with cash;
the reimbursement of the loans;
the payment of a fixed quarterly royalty;
the issuance of common shares, with warrants in exchange for cash; and
the reimbursement of professional fee expenses.
In addition to the above, we revalue our warrant liability, pertaining to warrants that are partly held by SALP, at each
reporting period, which results in variations of the liability on the consolidated statement of financial position and in the
consolidated statement of operations.
Changes in accounting policies
The accounting policies used in our annual consolidated financial statements are consistent with those we applied in our
December 31, 2020 and 2019 audited annual consolidated financial statements except for the amendments to certain
accounting standards which were adopted since January 1, 2020 as described below.
Amendments to IFRS 3, Business Combinations or IFRS 3 - The amendments to IFRS 3 clarifies the definition of a
business and includes an optional concentration test to determine whether an acquired set of activities and assets is a
business. These amendments were adopted on January 1, 2020 and are applied prospectively to acquisitions made on
or after this date.
Amendment to IFRS 16, Leases or IFRS 16 for COVID-19-Related Rent Concessions - IFRS 16 has been revised to
incorporate an amendment issued by the IASB in May 2020. The amendment permits lessees not to assess whether
particular COVID-19-related rent concessions are lease modifications and, instead, account for those rent concessions
as if they were not lease modifications. In addition, the amendment to IFRS 16 provides specific disclosure requirements
regarding COVID-19-related rent concessions. The amendment was adopted by us as of January 1, 2021 and had no
impact on the financial statements for the year ended December 31, 2021 since we have not benefited from COVID-19
related rent concessions.
27
Amendment to IAS 1, Presentation of Financial statements or IAS 1 - IAS 1 has been revised to require the disclosure
of material accounting policies rather significant accounting policies and provides guidance to apply materiality
judgments to accounting policy disclosure. We early adopted these amendments, and consequential amendments to
other standards, for our annual audited financial statements for the year ended December 31, 2021 resulting in a
reduction in our accounting policy disclosures.
New Standards and interpretations not yet adopted
The IFRS accounting standards, amendments, and interpretations that we reasonably expect may have a material
impact on our disclosures, financial position or results of operations when applied at a future date are as follows:
Amendments to IAS 37, Provisions, Contingent Liabilities and Contingent Assets (IAS 37) - IAS 37 has been revised to
specify which costs an entity includes in determining the cost of fulfilling a contract for the purpose of assessing whether
the contract is onerous. The amendments are effective for annual reporting periods beginning on or after January 1,
2022. The cumulative effect of initially applying the amendment, if any, will be recorded as an adjustment to the opening
retained earnings and comparative periods will not be restated. Earlier application is permitted. We have determined
that the adoption of this modification as of January 1, 2022 will not have an impact on the provision presently recorded
at December 31, 2021.
Amendment to IFRS 9 Financial Instruments (IFRS 9) - IFRS 9 has been revised to clarify the fees an entity includes
when assessing whether the terms of a new or modified financial liability are substantially different from the terms of
the original financial liability. The amendment is effective for annual reporting periods beginning on or after January 1,
2022 and is to be applied to financial liabilities that are modified after the date of adoption. Earlier application is
permitted.
Amendments to IAS 8, Accounting policies, Changes in Accounting Estimates and Errors (IAS 8) and IAS 1, Presentation
of Financial Statements (IAS 1) - The amendments to IAS 8 introduce a definition of accounting estimates and provide
clarifications to distinguish accounting policies from accounting estimates. In addition, IAS 1 has been revised to clarify
how to classify debt and other liabilities as current or non-current.
The amendments help to determine whether, in the statement of financial position, debt and other liabilities with an
uncertain settlement date should be classified as current (due or potentially due to be settled within one year) or non-
current. The amendments also include clarifying the classification requirements for debt an entity might settle by
converting it into equity. The amendments are applicable retrospectively and is effective for annual reporting periods
beginning on or after January 1, 2023 with earlier application permitted.
Amendments to IAS 12, Income taxes (IAS 12) - The amendments to IAS 12 clarify the accounting for deferred tax
assets or liabilities arising from a single transaction such as leases, namely that the scope of the recognition exemption
no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary
differences. The amendments are effective for annual reporting periods beginning on or after January 1, 2023 with
earlier application permitted.
We are evaluating the impact the amendments to IAS 8, IAS 1 and IAS 12 will have on our consolidated financial
statements.
28
Significant judgments and estimates
Our management’s discussion and analysis of financial condition and results of operations are based on our financial
statements, which have been prepared in accordance with IFRS. The preparation of these financial statements requires
us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the
disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience,
known trends and events and various other factors that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these estimates under different assumptions or
conditions. In making estimates and judgments, management employs material accounting policies. See Note 2 to our
consolidated financial statements for the year ended December 31, 2021 for a description of our material accounting
policies.
We believe that the most significant management judgments and assumptions in the preparation of our consolidated
financial statements are described below.
Going concern - In assessing whether the going concern assumption is appropriate and whether there are material
uncertainties that may cast significant doubt about our ability to continue as a going concern, we must estimate future
cash flows for a period of at least twelve months following the end of the reporting period by considering relevant
available information about the future. We take into consideration a wide range of factors relating to expected cash
inflows such as whether we will earn other revenues, what will be the next steps in our research and development
programs and the related expenditures as well as the financing strategy we would like to pursue and the potential
sources of debt and equity financing available to us in case further financing is desired. We have also estimated expected
cash outflows such as operating and capital expenditures and debt repayment schedules. These cash flow estimates are
subject to uncertainty.
Functional currency – We review the functional currency of foreign subsidiaries on an ongoing basis to assess if changes
in the underlying transactions, events and conditions have resulted in a change. This assessment is also performed for
new subsidiaries. When assessing the functional currency of a foreign subsidiary, we apply our judgment in order to
determine, amongst other things, the primary economic environment in which an entity operates, the currency in which
the activities are funded and the degree of autonomy of the foreign subsidiary from the reporting entity in its operations
and financially. Judgment is also applied in determining whether the inter-company loans denominated in foreign
currencies form part of our net investment in the foreign subsidiary. Considering such loans as part of the net investment
in the foreign subsidiary results in foreign currency translation gains or losses from the translation of these loans being
recorded in other comprehensive loss instead of the consolidated statement of operations.
Share-based compensation - On March 23, 2020, our board of directors approved a plan to seek shareholder approval
to modify the exercise price of certain stock options as disclosed in note 19b in the consolidated financial statements.
In order to determine when the expense related to this modification is recognized in our consolidated statement of
operations, we evaluated the timing of notification to option holders, the timing and method of determining the exercise
price and the service period. We further considered whether the holders of the stock options had sufficient understanding
of the terms and conditions of the potentially revised awards, the degree of certainty of the approval for the repricing
and whether the service period for earning the rights to the awards had commenced. We concluded that the definition
of the grant date was not met but that the service period had commenced and therefore a preliminary calculation of the
incremental fair value of the repricing of the awards was performed using assumptions as of March 31, 2020. On May
26, 2020, the conditions for a grant date were met and the options exercise price was revised to $15.21 and a final
calculation to determine the incremental fair value of the repriced options was performed.
29
COVID-19 – The negative impact of the COVID-19 pandemic on our financial statements for year ended December 31,
2021 and 2020 has been limited. During a portion of those two years, we were eligible for salary and rent subsidy
programs from the Government of Canada under which we submitted claims. As of the date of this MD&A, there are no
subsidy programs to which we are eligible. Consistent within the global biopharmaceutical sector, some clinical programs
may have been and may be impacted by the shift of resources within hospitals and contract research organizations, or
CRO, to COVID-19 and related matters, resulting in potential delays to recruitment or site initiation on our clinical and
preclinical programs, and potentially causing an adjustment of certain development timelines and activities. The partial
disruption caused by COVID-19 may continue to impact our operations, workforce and overall business by delaying the
progress of our research and development programs, regulatory submissions and reviews, and business and corporate
development activities. There is uncertainty as to the duration of the COVID-19 pandemic and related government
restrictions, including travel bans, the impact on our workforce, and the availability of healthy subjects and patients for
the conduct of clinical trials and its impact on the global economy. The effects of the COVID-19 pandemic continue to
be fluid.
Fair value of financial instruments – The individual fair values attributed to the different components of a financing
transaction, are determined using valuation techniques. We use judgment to select the methods used to determine
certain inputs/assumptions used in the models and the models used to perform the fair value calculations in order to
determine, 1) the values attributed to each component of a transaction at the time of their issuance, 2) the fair value
measurements for certain instruments that require subsequent measurement at fair value on a recurring basis and 3)
the fair value of financial instruments subsequently carried at amortized cost. When the determination of the fair value
of a new loan is required, discounted cash flow techniques which includes inputs that are not based on observable
market data and inputs that are derived from observable market data are used. When determining the appropriate
discount rates to use, we seek comparable interest rates where available. If unavailable, we use those considered
appropriate for the risk profile of a Company in the industry.
In determining the fair value of the warrants issued in November 2020 presented as a warrant liability in the consolidated
statements of financial position at December 31, 2021 and 2020, and considered to be a level 3 measurement, we made
assumptions on unobservable inputs used in the valuation model that have an important impact on the resulting fair
value computed.
Notably, we estimated the timing and the amounts of equity financings we expect to complete before the expiry of those
warrants. The fair value computed could be higher if our actual equity financing needs are higher than those expected.
We also estimated the future volatility of the common shares of Liminal for the contractual life of the warrants. To do
so, we used the historical volatility of our shares and of comparable companies in the same industry as a starting basis
for this estimate and also considered whether there are factors that would indicate that the historical volatility is not
indicative of the future. In addition, we applied an illiquidity discount rate on the resulting Black-Scholes pricing model
to reflect that the November 2020 warrants are not publicly traded instruments and therefore the ability to sell them is
limited. In establishing the illiquidity discount rate, we considered the remaining life of the warrants and the volatility
assumption for the underlying shares. The fair value of the warrants could be higher if we had selected a higher volatility
assumption and/or a lower illiquidity discount rate.
The fair value estimates could be significantly different because of the use of judgment and the inherent uncertainty in
estimating the fair value of these instruments that are not quoted in an active market.
30
Uncertainty over income tax treatments - We measure R&D tax credits for the current and prior periods at the amount
we expect to recover, based on our best estimate and judgment, of the amounts we expects to receive from the tax
authorities as at the reporting date, either in the form of income tax refunds or refundable grants. However, there are
uncertainties as to the interpretation of the tax legislation and regulations, in particular regarding what constitutes
eligible R&D activities and expenditures, as well the amount and timing of recovery of these tax credits. In order to
determine whether the expenses we incur are eligible for R&D tax credits, we must use judgment in determining whether
our complex R&D activities qualify for available tax credits, which makes the recovery of tax credits uncertain. As a
result, there may be a significant difference between the estimated timing and amount recognized in the consolidated
financial statements in respect of tax credits receivable and the actual amount of tax credits received as a result of the
tax administrations' reviews of matters that were subject to interpretation. These uncertainties, relating to entities we
have sold may still affect Liminal as certain indemnification obligations may be called upon, subject to contractual
limitations, when these entities may be subjected to the tax administrations reviews for taxation periods prior to the
sale. The amounts recognized in the consolidated financial statements are based on our best estimates and in our best
possible judgment, as noted above.
Assessing the recoverable amount of long-lived assets - We evaluate the recoverable value of long-lived assets when
indicators of impairment arise or as part of the annual impairment test, if they are intangible assets not yet available
for use. The recoverable value is the higher of the value in use and the FVLCD.
Long-lived assets include capital assets, ROU assets and intangible assets such as patents and licenses and other rights.
Some of these rights are considered not available for use until regulatory approval to commercialize the product
candidate is obtained.
When calculating the net recoverable amounts for the impairments, we make estimates and assumptions regarding the
outcome of certain future events, future cash flows and their timing.
When determining the FVLCD for its Ryplazim® CGU in 2020, significant estimates we made include amongst others,
the outcome of the exercise we had undertaken in evaluating the potential alternatives for the Ryplazim® CGU, including
the probability of completing a sale or closing those activities; the operating cash outflows to support those operations
until one of the alternative strategies was executed; the outcome of the FDA review of the BLA for our Ryplazim® product
candidate and the timing of completion of this review; if we will be able to benefit from the monetization of a Priority
Review Voucher, if received, and what would be the amount received upon its monetization; and whether some assets,
liabilities and commitments could potentially be excluded from the activities sold and for those commitments that could
be retained, the possibility of reducing those commitments and what would be their settlement amount.
A plus or minus 10% change in the probability weighted terminal value would have impacted the impairment we recorded
on the Ryplazim® CGU by $3,638.
In addition, when calculating the FVLCD of an asset or a group of assets for which selling price information for
comparable assets are not readily available, we also must make assumptions regarding the value it may recuperate
from its sale.
Share-based compensation – To determine the fair value of stock options on a given date, we must determine the
assumptions that will be used as inputs to the Black-Scholes option pricing model, including the assumption regarding
the future volatility of our common shares for the expected life of the stock options. We use the historical volatility as a
starting basis for the estimate and also consider whether there are factors that would indicate that the past volatility is
not indicative of the future volatility. In making this assessment, we consider changes in our activities and other factors
such as a significant share consolidation. As the volatility is an assumption that has a significant impact on the calculated
value of a stock option, the impact of this estimate can significantly impact the share-based payment expense over the
vesting period of an award.
Valuation of deferred income tax assets – To determine the extent to which deferred income tax assets can be
recognized, we estimate the amount of probable future taxable profits that will be available against which deductible
temporary differences and unused tax losses can be utilized. We exercise judgment to determine the extent to which
31
realization of future taxable benefits is probable, considering the history of taxable profits, budgets and forecasts and
availability of tax strategies.
Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore
require the exercise of judgment. As of the date of issuance of this MD&A, we are unaware of any specific event or
circumstance that would require us to update our estimates, assumptions and judgments or revise the carrying value
of our assets or liabilities, and we are unable to estimate the potential impact on our future business or our financial
results as of the date of this filing. These estimates may change as new events occur and additional information is
obtained and changes in those estimates are recognized in the consolidated financial statements as soon as they become
known.
Financial instruments
Use of financial instruments
The financial instruments that we use result from our operating and investing activities, namely in the form of accounts
receivables and payables, and from our financing activities resulting usually in the issuance of long-term debt. We do
not use financial instruments for trading purposes and have not issued or acquired derivative financial instruments for
hedging purposes. The following table presents the carrying amounts of our financial instruments at December 31, 2021
and 2020.
Financial assets
Cash
Trade and other receivables
Restricted cash
Long-term deposits
Financial liabilities
Trade payables
Wages and benefits payable
Royalty payment obligations
Provisions
Warrant liability
Long-term debt
$
$
$
$
2021
108,490
788
—
30
5,762
1,297
123
22,195
1,754
38,311
2020
45,075
1,664
178
137
9,153
3,083
3,355
—
11,640
40,532
Impact of financial instruments in the consolidated statements of operations
The following line items in the consolidated statement of operations for the quarter and the year ended December 31,
2021 include income, expense, gains and losses relating to financial instruments:
loss on extinguishments of liabilities;
change in fair value of financial instruments measured at fair value through profit or loss;
finance costs; and
foreign exchange gains.
Liquidity and Capital Resources
Overview
Since completing the divestment of our plasma collection centers and our Ryplazim® business with the sale of the last
entity, PBT, on October 15, 2021, our funding needs for our operations will be focused on our small molecules business
with the exception of the continuing contractual obligation we have retained from our involvement in the Ryplazim®
business towards a CDMO.
32
We have $108.5 million in cash at December 31, 2021. In February 2022, we repaid the $39.1 million of outstanding
long-term debt with SALP. The repayment, despite not being due for another two years, saves us $9.1 million in interest
payments over the remaining term of the two loans. The repayment will also provide us additional flexibility in the future
in relation to potential deal making around our pipeline assets. Our only remaining significant liability is with the CDMO
referred to above, and at the present time, we are unsure about the timing and the amounts that will eventually be
disbursed. The total commitment under this contract is $9.0 million per year up until August 2026. We are investigating
different avenues to potentially reduce the impact of this contract, which we are unable to benefit from, on our future
cash outflows.
In regards to our small molecule research and development activities, we expect our ongoing funding requirements to
increase over time as we continue the research and development of our portfolio of compounds and continue or initiate
potential clinical trials. Furthermore, we expect to continue to incur costs associated with operating as a public company.
Accordingly, until we can generate sufficient and recurring revenues to finance future cash requirement, it is likely that
we will need to secure additional external financing which may include public or private equity offerings, debt financings,
strategic collaborations, alliances and licensing arrangements, grant funding or other sources. Despite our efforts to
obtain the necessary funding and further reduce the costs of our operations, there can be no assurance of our access
to further funding on acceptable terms, if at all. To the extent that we raise additional capital through the sale of equity
or convertible debt securities, shareholder ownership interest may be diluted, and the terms of any additional securities
may include liquidation or other preferences that adversely affect the rights of shareholders.
Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take
specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends.
If we raise funds through additional collaborations, strategic alliances, or licensing arrangements with third parties, we
may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product
candidates, or to grant licenses on terms that may not be favorable to us. If we are unable to raise capital when needed
or on attractive terms, we could be forced to delay, reduce or eliminate our R&D programs, clinical trials or grant rights
to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Liquidity position at December 31, 2021 and analysis of going concern
For the year ended December 31, 2021, we incurred a net loss from continuing operations of $45.1 million. We had a
working capital position of $96.1 million which comprised $108.5 million of cash at December 31, 2021. The increase in
our liquidities since December 31, 2020 reflects the proceeds received form the divestment of our former plasma-
derived therapeutics segment and the lower cash-burn of our small molecules business. Since December 31, 2021, we
repaid the entirety of our long-term debt reducing our cash position by $39.1 million as a result.
33
Considering our main activities continue to be related to the preclinical and clinical stage, our cash runway is dependent
on the research programs that are currently underway, the pace of their progression and the results they render, as
well as those planned to be undertaken in the short term. As such, there is always a degree of uncertainty in regards
to the outcome or cost of those programs. The cash runway is also dependent on decisions we make in terms of
managing our capital, including raising capital through the issuance of debt and equity or repaying financial obligations
before their maturity, and our ability to conclude such financing transactions at an acceptable cost. As such, there is
uncertainty whether our current financial position will be sufficient to fund our operations for at least the next 12 months
and it is likely that additional sources of funding will be required during this time. Additional external financing may
include public or private equity offerings, debt financings, strategic collaborations, alliances and licensing arrangements,
grant funding or other sources. It may also come from the monetization of certain non-core assets.
Despite the Company’s efforts to obtain the necessary funding and improve profitability of its operations, there can be
no assurance of its success in doing so, especially with respect to its access to further funding on acceptable terms, if
at all.
Until we are successful in completing one or more significant financing transactions that may change our financial
condition (which may not be available on acceptable terms, if at all), our current circumstances indicate the existence
of a material uncertainty that may cast significant doubt about our ability to continue as a going concern. The perception
that we may not be able to continue as a going concern may also make it more difficult to operate our business due to
concerns about our ability to meet our contractual obligations and may make it more difficult to obtain a reasonable
value on assets we may decide to sell. Further, if we are unable to secure additional capital, we may be required to
curtail our research and development initiatives and take additional measures to reduce costs in order to conserve our
cash in amounts sufficient to sustain operations and meet our obligations. These measures could cause significant delays
in our preclinical, clinical and regulatory efforts, which are critical to the realization of our business plan. See “Item
3.D—Risk Factors”.
The audited consolidated financial statements as of December 31, 2021 do not include any adjustments to the amounts
and classification of assets and liabilities that might be necessary should we be unable to continue as a going concern.
Such adjustments could be material.
Tabular Disclosure of Contractual Obligations
The timing and expected contractual outflows required to settle our financial obligations recognized in the consolidated
statement of financial position at December 31, 2021 and unrecognized purchase obligations and commitments are
presented in the table below:
Accounts payable and
accrued liabilities 1)
Other Long-term liabilities
Lease liabilities
Long-term debt 2)
Provisions
Carrying
amount
Less than
1 year
1-3
years
3 - 5
years
More than
5 years
Contractual Cash flows
$
$
7,343 $
98
22,471
38,311
22,195
90,418 $
7,343 $
—
7,369
3,945
3,961
22,618 $
— $
51
10,629
44,297
9,094
64,071 $
— $
51
8,285
—
9,544
17,880 $
— $
197
—
—
—
197 $
Total
7,343
299
26,283
48,242
22,599
104,766
1) Short term portions of the royalty payment obligations and of other employee benefit liabilities are included in the account payable
and accrued liabilities.
2) Under the terms of the consolidated loan agreement, SALP may decide to cancel a portion of the principal value of the loans as
payment upon the exercise of their 168,735 warrants and 3,947,367 November 2020 warrants. The maximum repayment due on the
loan has been included in the above table. On February 15, 2022, the entirety of the long-term debt was repaid in advance of the
maturity date as discussed above.
34
Royalties
At December 31 2021, SALP had a right to receive a 2% royalty on future revenues relating to patents of a specified
small molecule product candidate and analogues, existing as of the date the royalty stream agreement was signed. On
February 15, 2022, following the repayment of the entirety of the long-term debt, the royalty stream agreement with
SALP was terminated resulting in the derecognition of the royalty payment obligation to SALP.
In the normal course of business, we enter into license agreements for the market launching or commercialization of
product candidates, if approved. Under these licenses, including the ones mentioned above, we have committed to pay
royalties ranging generally between 0.5% and 12.0% of net sales from products we may commercialize, if approved,
and 3% of license revenues in regard to certain small molecule product candidates.
Debt Facility
Line of credit and term loans
On November 11, 2019, we entered into an amendment to our April 23, 2019 consolidated loan agreement with SALP
to include a non-revolving $75.0 million secured line of credit, or the LOC. On September 14, 2020, we drew down
$29.1 million, which represented the entire balance available on the LOC, which resulted in the issuance of the second
term loan. On February 15, 2022, we repaid the entirety of the first and second term loan, for an aggregate amount of
$39.1 million, by making a payment in cash, thus terminating the consolidated loan agreement with SALP and releasing
of the security interests granted over our assets pursuant to the loan agreement and related documents. The repayment
also terminated the royalty stream agreement with SALP resulting in the derecognition of the royalty payment obligation
of $0.1 million due to SALP and the 168,735 warrants held by SALP, having an exercise price of $15.21 per common
shares were cancelled.
Secured convertible debentures
Concurrently with the Fairhaven acquisition that closed on July 17, 2020, we issued secured convertible debentures, or
SCD, to certain former Fairhaven shareholders, for an aggregate principal amount of $2.4 million and bearing an interest
rate of 8% per annum, compounded quarterly.
On October 20, 2021, the Company exercised its right to convert the entirety of its SCD, having a balance of $2,664 on
the conversion date into 1,098,577 of our common shares, using a conversion price of $2.42 (USD 1.96) calculated as
the volume weighted average trading price of the shares in the five trading days immediately preceding the conversion.
Our conversion right became exercisable upon the occurrence of an event which resulted in the Company having a cash
balance over $75,000. The difference between the carrying value of the SCD and the fair value of the common shares
issued and recorded in share capital of $2,589, calculated using the closing trading price on the conversion date, was
$75 and was recorded as a gain on extinguishment of a liability. The security on the SCD on the assets of Fairhaven
was released when the debt was extinguished.
The other parties to the share purchase agreement dated July 17, 2020 and the Company entered into an amendment
to this agreement in November 2021 to terminate 1) the collective rights of certain sellers to purchase additional SCD
issued by us for an aggregate principal amount of up to $5,740 with substantially the same terms and conditions as set
out in the original SCD and 2) our right, if the pre-determined events allowing us to trigger the conversion of the SCD
occur prior to the maturity date, to require certain sellers to purchase additional SCD for an aggregate principal amount
of up to $5,740, which would then be converted into our common shares.
35
Cash flow analysis
The following major cash flow components are presented on a total company basis, inclusive of continuing and
discontinued operations.
The summarized consolidated statements of cash flows for continuing and discontinued operations in aggregate, for the
year ended December 31, 2021 and the corresponding periods in 2020 and 2019 are presented below.
Cash flows used in operating activities
Cash flows (used in) from financing activities
Cash flows from investing activities
Net change in cash during the year
Net effect of currency exchange rate on cash
Cash, beginning of the year
Cash, end of the year
Year ended December 31
Change
$
2021
(99,603) $
(8,424)
170,692
62,665
750
45,075
$ 108,490 $
2020
(75,917) $
57,405
2,305
(16,207)
(3)
61,285
2019
(99,390) $
117,919
36,096
54,625
(729)
7,389
2021 vs
2020
(23,686) $
(65,829)
168,387
78,872
753
(16,210)
2020 vs
2019
23,473
(60,514)
(33,791)
(70,832)
726
53,896
45,075 $
61,285 $
63,415 $
(16,210)
Cash flows used in operating activities increased by $23.7 million during the year ended December 31, 2021 compared
to the corresponding period in 2020. The increase is mainly due to the payments made by PBT, to PBP after it became
under the ownership of Kedrion for past and future research and development services totaling $45.8 million. This was
partially offset by lower operating expenses mainly because the cost of operation for the different entities sold were
only there for the portion of 2021, when they were under our ownership. In addition, those operating expenses were
reduced while we were awaiting the outcome of the FDA review of the BLA.
Cash flows used in operating activities decreased by $23.5 million during the year ended December 31, 2020 compared
to the same period in 2019. The decrease can be explained by a reduction in R&D expenses and by the receipt of grants
from the Canadian government through programs to support businesses during the COVID-19 pandemic and a reduction
in payments to suppliers compared to in the prior year when we settled payments in arrears following the receipt of
funding during the quarter ended June 30, 2019. These decreases were partially offset by an increase in directors’ and
officers’ insurance costs.
Cash flows used in financing activities increased by $65.8 million during the year ended December 31, 2021 compared
to the corresponding period in 2020 since we did not receive any proceeds from the issuance of long-term debt in 2021
when in 2020 we received $31.5 million from the combined issuance of the second term loan with SALP and the secured
convertible debentures. Similarly, in 2020 we had proceeds from the issuance of shares and warrants of $40.0 million
while there were not equity financings in 2021.
Cash flows from financing activities decreased by $60.5 million during the year ended December 31, 2020 compared to
the same period in 2019 as gross proceeds raised from equity financing declined by $78.8 million, since in 2020 we
raised gross proceeds of $39.9 million in a private placement in November 2020 compared to the gross proceeds raised
in the April 2019 private placements and in the rights offering in June 2019 of $75.0 million and $39.4 million
respectively. The decline was partially offset by an increase of $11.7 million from financings where long-term debt was
issued, mainly due to our draw down of $29.1 million in September 2020 on the non-revolving line of credit we had with
SALP, representing the entire balance available, which resulted in the issuance of the second term loan. The second
term loan bears an annual interest rate of 10% compounded monthly and payable quarterly and matures on April 23,
2024.
Cash flows from investing activities increased by $168.4 million during the year ended December 31, 2021 compared
to the corresponding period in 2020 mainly due to the proceeds, net of selling costs of $170.1 million we received in
connection with the divestiture of the plasma-derived therapeutics segment compared to the proceeds we received in
2020 in relation to the sale of our former bioseparations business.
Cash flows from investing activities decreased by $33.8 million during the year ended December 31, 2020 compared to
the same period in 2019 as the proceeds we received from the sale of our bioseparations business, net of transaction
36
costs paid, in 2020, as adjustments to the initial purchase price and following the resolution of a tax matter was
significantly lower to the initial payment received upon the closing of the sale, net of the cash divested and transaction
costs by $36.0 million.
Research and Development, Patents and Licenses
For a discussion of our research and development activities, see “Item 4.B—Business Overview” and “Item 5.A—
Operating Results.” of the Annual Report.
Trend Information
Other than as disclosed elsewhere in this MD&A, we are not aware of any trends, uncertainties, demands, commitments
or events for the period from January 1, 2021 to December 31, 2021 that are reasonably likely to have a material
adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that caused the disclosed
financial information to be not necessarily indicative of future operating results or financial conditions. For a discussion
of trends, see “Item 4.B.—Business overview,” “Item 5.A.—Operating results,” and “Item 5.B.—Liquidity and capital
resources.” of the Annual Report.
Off-balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet financing
arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes
referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-
balance sheet arrangements or other contractually narrow or limited purposes.
Quantitative and Qualitative Disclosures About Market Risk
We have exposure to credit risk, liquidity risk and market risk. Our Board of Directors has the overall responsibility for
the oversight of these risks and reviews our policies on an ongoing basis to ensure that these risks are appropriately
managed.
i) Credit risk:
Credit risk is the risk of financial loss to our company if a customer, partner or counterparty to a financial instrument
fails to meet its contractual obligations, and arises principally from the Company’s cash and receivables. The carrying
amount of the financial assets represents the maximum credit exposure.
Our exposure to credit risk is generally limited since we have limited revenues and thus limited accounts receivable. We
mitigate credit risk through a credit risk assessment, when credit is granted and subsequently at each reporting period.
ii) Liquidity risk:
Liquidity risk is the risk that we will not be able to meet financial obligations as they come due. We manage our liquidity
risk by continuously monitoring forecasts and actual cash flows. Our current liquidity situation is discussed in the liquidity
and contractual obligation section of this MD&A.
37
iii) Market risk:
Market risk is the risk that changes in market prices, such as interest rates and foreign exchange rates, will affect our
income or the value of its financial instruments.
a) Interest risk:
Our interest-bearing financial liabilities have fixed rates and as such there is limited exposure to changes in interest
payments as a result of interest rate risk. In February 2022, our loans were repaid in full.
b) Foreign exchange risk:
We are exposed to the financial risk related to the fluctuation of foreign exchange rates. We have had operations and
suppliers in the U.S. and the U.K. during the past years and therefore a portion of our expenses are in USD and in GBP.
The majority of the revenues from the sale of products in 2021 and 2020, that are part of its discontinued operations
were in USD which served to mitigate a portion of the U.S. foreign exchange risk relating to the expenditures. In 2021,
the proceeds received from the divestment of our discontinued operations were in USD resulting in an increased
exposure to the USD which is partially mitigated by expenditures denominated in USD from our continuing operations.
Financial instruments that have exposed us to foreign exchange risk have been cash, receivables, trade and other
payables, lease liabilities, license payment obligations. We manage foreign exchange risk by holding foreign currencies
we receive to support forecasted cash outflows in foreign currencies.
Disclosure controls and procedures and internal controls over financial reporting
Evaluation of Disclosure Controls and Procedures
Our chief executive officer and chief financial officer, after evaluating the effectiveness of our disclosure controls and
procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of December 31, 2021, have concluded that, as of
such date, our disclosure controls and procedures were not effective due to a material weakness in internal control over
financial reporting, as described below.
Our disclosure controls and procedures are designed to provide reasonable assurance of achieving the desired control
objectives. Our management recognizes that any control system, no matter how well designed and operated, is based
upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met.
Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not
occur or that all control issues and instances of fraud, if any, have been detected.
Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal controls over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) and for the assessment of the effectiveness of our
internal control over financial reporting. Under the supervision and with the participation of our chief executive officer
(principal executive officer and principal financial officer), management assessed our internal control over financial
reporting based upon the framework in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, our management concluded
that, as of December 31, 2021, our internal control over financial reporting was not effective because a material
weakness in internal control over financial reporting existed as of that date, as described below.
38
Material Weakness in Internal Control over Financial Reporting
In connection with the preparation of our financial statements as of December 31, 2021 and 2020 and for the fiscal
years ended December 31, 2021, 2020 and 2019, we identified a material weakness in our internal control over financial
reporting. A material weakness was identified in our control environment related to an error in the carrying value of our
held-for-sale assets. Specifically, the financial statements for the period ended September 30, 2021, contained a
misstatement in the carrying value of PBT, which was classified as held for sale, which exceeded the fair value less costs
to sell.
The deficiency in internal controls relates to our control regarding the accounting analysis of complex transactions, in
this particular instance, the transactions relating to the sale of PBT, a transaction that was not in the ordinary course of
business and required significant analysis and research by the Finance team, in addition to the extra workload required
for presenting the divested or soon to be divested subsidiaries as discontinued operations. This situation, coupled with
the fact that the third quarter financial reporting process was conducted without a Chief Financial Officer from September
3, 2021, exacerbated the resource challenge within the Finance team. Consequently, the accounting analysis for this
complex transaction was incomplete and did not go through an exhaustive internal review.
Management and our audit committee concluded that it was appropriate to restate our previously issued financial results
for the period ended September 30, 2021, as shown in the Summary of Consolidated Quarterly Results contained in
Item 5A of the AIF.
Remediation Plan
The finance team has revisited the close timetable and will ensure any subsequent complex accounting matters are
given priority from a timing perspective. In addition, an interim CFO has been hired to ensure the accounting and finance
team has the appropriate depth and bandwidth to ensure that this type of error does not occur again. Testing to date
of ICFR on complex transactions analysis has indicated that this control appears to be designed appropriately and was
otherwise effective for the sample tested. We believe this deficiency occurred given the complexity and timing of the
transaction in question.
Changes in Internal Control Over Financial Reporting
Except as described above under Material Weakness in Internal Controls over Financial Reporting and under Remediation
Plan, there were no changes in our internal control over financial reporting that occurred during the period covered by
this MD&A that have materially affected, or that are reasonably likely to materially affect, our internal control over
financial reporting.
39
Audited annual consolidated financial
statements of Liminal BioSciences Inc.
December 31, 2021
40
Report of Independent Registered Public Accounting Firm
To the Board of Directors and the Shareholders of Liminal BioSciences Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial position of Liminal BioSciences Inc. and its
subsidiaries (together, the Company) as of December 31, 2021 and 2020, and the related consolidated statements of
operations, statements of comprehensive income (loss), statements of changes in equity, and statements of cash flows for
each of the three years in the period ended December 31, 2021, including the related notes (collectively referred to as the
consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2021 and 2020, and its financial performance and its
cash flows for each of the three years in the period ended December 31, 2021 in conformity with International Financial
Reporting Standards as issued by the International Accounting Standards Board.
Substantial Doubt About the Company's Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a
going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses
from continuing operations and has a net deficit, and negative cash outflows from operating activities that raise
substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also
described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this
uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting
firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are
required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such
opinion.
PricewaterhouseCoopers LLP
PwC Centre, 354 Davis Road, Suite 600, Oakville, Ontario, Canada L6J 0C5
T: +1 905 815 6300, F: +1 905 815 6499
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
41
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our
audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers
Chartered Professional Accountants, Licensed Public Accountants
Oakville, Canada
March 17, 2022
We have served as the Company's auditor since 2019.
PricewaterhouseCoopers LLP
PwC Centre, 354 Davis Road, Suite 600, Oakville, Ontario, Canada L6J 0C5
T: +1 905 815 6300, F: +1 905 815 6499
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
42
LIMINAL BIOSCIENCES INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands of Canadian dollars)
At December 31
ASSETS
Current assets
Cash
Accounts receivable and others (note 7)
Inventories (note 8)
Prepaids
Total current assets
Other long-term assets (note 9)
Capital assets (note 10)
Right-of-use assets (note 11)
Intangible assets (note 12)
Deferred tax assets (note 26)
Total assets
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities (note 13)
Current portion of lease liabilities (note 14)
Current portion of provisions (note 15)
Total current liabilities
Long-term portion of lease liabilities (note 14)
Provisions (note 15)
Warrant liability (note 16)
Long-term debt (note 17)
Other long-term liabilities (note 18)
Total liabilities
EQUITY
Share capital (note 19a)
Contributed surplus (note 19b)
Warrants (note 19c)
Accumulated other comprehensive loss
Accumulated other comprehensive income
of disposal group held for sale
Deficit
Equity attributable to owners of the parent
Non-controlling interests (note 20)
Total equity
Total liabilities and equity
Going concern (note 1), Commitments (note 30), Subsequent event (note 33)
The accompanying notes are an integral part of the consolidated financial statements.
$
$
$
$
$
$
2021
2020
$
108,490
1,068
—
5,071
114,629
362
5,483
1,609
3,516
454
45,075
4,081
9,377
14,486
73,019
1,353
18,791
8,557
15,492
572
126,053
$
117,784
$
7,343
7,194
3,957
18,494
15,277
18,238
1,754
38,311
98
16,835
6,946
—
23,781
26,506
—
11,640
40,532
313
92,172
$
102,772
$
979,849
44,109
95,856
(3,010)
977,261
39,877
95,856
(3,030 )
—
(1,074,167)
184
(1,087,049 )
42,637
(8,756)
33,881
23,099
(8,087 )
15,012
126,053
$
117,784
43
LIMINAL BIOSCIENCES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of Canadian dollars except for per share amounts)
Years ended December 31
Revenues (note 22)
$
2021
643
$
2020
724
$
2019
745
Expenses
Research and development expenses
Administration expenses
Gain on foreign exchange
Finance costs (note 23a)
Loss (gain) on extinguishments of liabilities (note 17)
Change in fair value of financial instruments measured at fair
value through profit or loss (note 16)
Impairment losses (note 25)
Loss from continuing operations before
income taxes
Current income tax
Deferred income tax
Income tax expense (recovery) on continuing operations
(note 26)
Net loss from continuing operations
Discontinued operations
Gain on sale of subsidiaries, net of income
taxes $nil (note 6)
Loss from discontinued operations, net of income
taxes (note 6)
Total income (loss) from discontinued operations
Net income (loss)
Net income (loss) attributable to:
Non-controlling interests - continuing operations (note 20)
Owners of the parent
- Continuing operations
- Discontinued operations
Net income (loss)
18,347
31,928
(1,397)
6,330
(75)
(9,886)
341
14,234
32,619
(35)
2,899
—
(850)
1,087
15,873
37,661
(756)
6,867
92,374
(1,140)
763
(44,945) $
(49,230) $
(150,897)
—
118
118
$
(144) $
(65)
(209)
(336)
111
(225)
(45,063) $
(49,021) $
(150,672)
140,403
3,380
26,346
(83,127)
57,276
(73,116)
(69,736)
(82,427)
(56,081)
12,213
$
(118,757) $
(206,753)
(669) $
(832) $
(1,044)
(44,394)
57,276
(48,189)
(69,736)
(149,628)
(56,081)
12,882
12,213
$
$
(117,925) $
(205,709)
(118,757) $
(206,753)
$
$
$
$
$
$
$
Income (Loss) per share attributable to the owners of
the parent basic and diluted:
From continuing operations
From discontinued operations
Total income (loss) per share
Weighted average number of outstanding shares
(in thousands) (note 27)
The accompanying notes are an integral part of the consolidated financial statements.
1.90
0.43
30,164
(1.47) $
$
$
$
(1.97) $
(2.85)
(4.83) $
(9.32)
(3.49)
(12.81)
24,438
16,062
44
LIMINAL BIOSCIENCES INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Years ended December 31
Net income (loss)
2021
$
12,213
$
2020
(118,757) $
2019
(206,753)
Other comprehensive (loss) income
Items that may be subsequently reclassified
to profit and loss:
Exchange differences on translation of foreign operations
from continuing operations
Exchange differences on translation of foreign operations
from discontinued operations
Reclassification of exchange differences on translation
of foreign operations sold to consolidated statement
of operations (note 6)
Total other comprehensive (loss) income
Total comprehensive income (loss)
Total comprehensive income (loss) attributable to:
Non-controlling interests
Owners of the parent
- Continuing operations
- Discontinued operations
Total comprehensive income (loss)
20
(140)
104
149
180
(578)
(44)
—
(1,449)
(164) $
253
$
(1,847)
12,049
$
(118,504) $
(208,600)
(669) $
(832) $
(1,044)
(44,374)
57,092
(48,085)
(69,587)
(149,448)
(58,108)
12,049
$
(118,504) $
(208,600)
$
$
$
$
The accompanying notes are an integral part of the consolidated financial statements.
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L
LIMINAL BIOSCIENCES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of Canadian dollars)
Years ended December 31
Cash flows used in operating activities
Net loss from continuing operations during the year
Net income (loss) from discontinued operations during the year
Adjustments to reconcile net loss to cash flows used in
operating activities:
Finance costs and foreign exchange
Loss (gain) from disposition of capital and intangible assets
Non-cash issuance of warrants (note 16)
Gain on sale of subsidiaries (note 6)
Change in fair value of financial instruments measured at
fair value through profit or loss (note 16)
Impairment losses (notes 6, 25)
Deferred income taxes (note 26)
Gain (loss) on extinguishments of liabilities (note 17)
Provision expense (note 15)
Share-based payments expense (note 19b)
Depreciation of capital assets (note 10)
Depreciation of right-of-use assets (note 11)
Amortization of intangible assets (note 12)
Change in non-cash working capital items
Cash flows from (used in) financing activities
Proceeds from share issuances (with or without warrants) (note 19a)
Proceeds from long-term debt (with or without warrants) (note 17)
Repayment of principal on long-term debt (note 17)
Repayment of interest on long-term debt (note 17)
Exercise of options (note 19b)
Proceeds from exercise of pre-funded warrants (note 19c)
Payments of principal on lease liabilities (note 14)
Payment of interest on lease liabilities (note 14)
Debt, share and warrants issuance costs
Cash flows from (used in) investing activities
Additions to capital assets
Additions to intangible assets
Proceeds from sale of discontinued operations business (note 6)
Transaction costs paid relating to the sale of discontinued operations
business
Proceeds from disposal of capital assets
Release of restricted cash
Interest received
Net change in cash and cash equivalents during the year
Net effect of currency exchange rate on cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Comprising of:
Cash
Cash equivalents
Cash flows from discontinued operations presented in note 6
The accompanying notes are an integral part of the consolidated financial statements.
2021
2020
2019
$
(45,063) $
57,276
(49,021) $
(69,736)
(150,672)
(56,081)
4,317
(6)
—
(140,403)
(9,886)
1,752
118
(75)
22,367
4,232
1,368
1,013
1,963
(101,027)
1,424
(99,603) $
—
—
—
(3,945)
—
—
(3,241)
(1,080)
(158)
(8,424) $
(293)
(170)
173,357
(2,492)
52
165
73
$
$
8,307
(15)
2,228
(3,380)
(850)
20,859
—
(79)
—
6,194
2,779
4,578
1,090
(77,046)
1,129
(75,917) $
39,960
31,533
(165)
(1,879)
82
1
(7,069)
(2,098)
(2,960)
57,405 $
(966)
(1,080)
4,555
(787)
133
—
450
$
170,692 $
2,305 $
62,665
750
45,075
$
108,490 $
108,490
—
$
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(16,207)
(3)
61,285
45,075 $
45,075
—
45,075 $
12,809
196
—
(26,346)
(1,140)
12,366
87
92,374
—
21,609
3,734
4,913
1,259
(84,892)
(14,498)
(99,390)
118,785
19,859
(988)
(3,540)
—
—
(7,563)
(1,767)
(6,867)
117,919
(2,741)
(1,703)
43,958
(4,228)
—
65
745
36,096
54,625
(729)
7,389
61,285
41,761
19,524
61,285
47
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
1. Nature of operations and going concern
Liminal BioSciences Inc. or Liminal, or the Company, is incorporated under the Canada Business Corporations Act and
is a publicly traded clinical stage biopharmaceutical company (Nasdaq symbol: LMNL) focused on developing distinctive
novel small molecule therapeutics for inflammatory, fibrotic and metabolic diseases using our drug discovery platform
and data driven approach. Our lead small molecule product candidate, fezagepras, has completed a Phase 1 multi-
ascending dose, or MAD, clinical trial and we anticipate conducting a comparative Phase 1a single ascending dose clinical
trial to provide comparative data to support our development plan. In addition, the Company is currently developing a
selective G-protein-coupled receptor 84, or GPR84 antagonist candidate and an oral, selective OXER1 antagonist
candidate. The GPR84 and OXER1 antagonist programs are currently at the preclinical stage.
The Company previously operated a segment devoted to the development of plasma-derived therapeutics, leveraging
Liminal’s experience in bioseparation technologies used to isolate and purify biopharmaceuticals from human plasma
and received approval, from the U.S. Food and Drug Administration or FDA in June 2021 for its plasma-derived product
Ryplazim® (plasminogen) or Ryplazim®, a highly purified glu-plasminogen derived from human plasma that acts as a
plasminogen replacement therapy for patients deficient in plasminogen protein. The Company has completed the
divestment of this segment in October 2021. These activities are also presented as discontinued operations in the
audited annual consolidated financial statements for the years ended December 31, 2021 and 2020 (note 6).
The Company’s registered office is located at 231 Dundas Street East, Belleville, Ontario, K8N 1E2 and its principal
executive office is located at 440, Boul. Armand-Frappier, suite 300, Laval, Québec, Canada, H7V 4B4. Liminal has
active business operations in Canada and the United Kingdom.
Structured Alpha LP or SALP has been Liminal’s majority and controlling shareholder since the debt restructuring on
April 23, 2019 (note 17) and is considered Liminal’s parent entity for accounting purposes. Thomvest Asset Management
Ltd., or Thomvest, is the general partner of SALP and the ultimate controlling parent, for accounting purposes, of Liminal
is The 2003 TIL Settlement.
The consolidated financial statements for the year ended December 31, 2021 have been prepared in accordance with
International Financial Reporting Standards, or IFRS, as issued by the International Accounting standards Board, or
IASB, on a going concern basis, which presumes 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.
During the year ended December 31, 2021, the Company incurred a net loss from continuing operations of $45.1 million
($49.0 million for the year ended December 31, 2020) and had negative operating cash flows, including continuing and
discontinued operations, of $99.6 million ($75.9 million for the year ended December 31, 2020). At December 31, 2021,
the Company had an accumulated deficit of $1,074.2 million ($1,087.0 million at December 31, 2020) and a working
capital of $96.1 million ($49.2 million at December 31, 2020). The December 31, 2021 working capital position reflects
the proceeds the Company received as a result of the various transactions it concluded as part of the divestment of the
plasma-derived therapeutics segment (note 6). In February 2022, the Company used $39.1 million of the proceeds from
the divestment to repay the full amount of its long-term debt (note 33).
48
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
Considering Liminal’s main activities continue to be related to the preclinical and clinical stage, the Company’s cash
runway is dependent on the research programs currently underway, the pace of their progression and the results they
render, as well as those planned to be undertaken in the short term. As such, there is always a degree of uncertainty
in regards to the outcome or cost of those programs. The cash runway is also dependent on decisions the Company
makes in terms of managing its capital, including raising capital through the issuance of debt and equity or repaying
financial obligations before their maturity, and the Company's ability to conclude such financing transactions at an
acceptable cost. As such, there is uncertainty whether the Company’s current financial position will be sufficient to fund
its operations for at least the next 12 months and it is likely that additional sources of funding will be required during
this time. Additional external financing may include public or private equity offerings, debt financings, strategic
collaborations, alliances and licensing arrangements, grant funding or other sources.
Despite the Company’s efforts to obtain the necessary funding and improve profitability of its operations, there can be
no assurance of its success in doing so, especially with respect to its access to further funding on acceptable terms, if
at all.
These circumstances indicate the existence of a material uncertainty that may cast substantial doubt about the
Company’s ability to continue as a going concern. If the Company is unable to secure additional capital, it may be
required to curtail its research and development initiatives and take additional measures to reduce costs in order to
conserve its cash in amounts sufficient to sustain operations and meet its obligations. These measures could cause
significant delays in the Company’s preclinical, clinical and regulatory efforts, which are critical to the realization of its
business plan. These consolidated financial statements do not include any adjustments to the amounts and classification
of assets and liabilities that might be necessary should the Company be unable to continue as a going concern. Such
adjustments could be material.
49
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
2. Material accounting policies
Statement of compliance
These audited annual consolidated financial statements for the year ended December 31, 2021, or consolidated financial
statements, have been prepared in accordance with IFRS as issued by the IASB and were approved by the Board of
Directors on March 17, 2022.
Functional and presentation currency
The consolidated financial statements are presented in Canadian dollars, ($ or CAD) which is also the Company’s
functional currency. The use of other currencies will be specified.
Basis of consolidation
The consolidated financial statements include the accounts of Liminal BioSciences Inc., and those of its subsidiaries. The
Company’s subsidiaries at December 31, 2021, 2020 and 2019 are as follows:
Name of subsidiary
Segment activity
Place of incorporation and
operation
Fairhaven Pharmaceuticals Inc.
Liminal R&D BioSciences Inc.
Liminal BioSciences Holdings Limited
Liminal BioSciences Limited
Prometic Pharma SMT B.V
Prometic Bioproduction Inc.
Prometic Plasma Resources Inc.
Telesta Therapeutics Inc.
NantPro Biosciences, LLC
Prometic Biotherapeutics Inc.
Prometic Plasma Resources USA Inc.
Prometic Biotherapeutics Ltd
Prometic Biotherapeutics B.V.
Pathogen Removal and Diagnostic
Technologies Inc.
Small molecule therapeutics
Small molecule therapeutics
Small molecule therapeutics
Small molecule therapeutics
Small molecule therapeutics
Plasma-derived therapeutics
Plasma-derived therapeutics
Plasma-derived therapeutics
Plasma-derived therapeutics
Plasma-derived therapeutics
Plasma-derived therapeutics
Plasma-derived therapeutics
Plasma-derived therapeutics
Quebec, Canada
Quebec, Canada
Cambridge, United Kingdom
Cambridge, United Kingdom
Amsterdam, Netherlands
Quebec, Canada
Winnipeg, Canada
Quebec, Canada
Delaware, U.S.
Delaware, U.S.
Delaware, U.S.
Cambridge, United Kingdom
Amsterdam, Netherlands
Proportion of ownership interest held
by group
2020
100%
100%
100%
100%
100%
100%
100%
100%
73%
100%
100%
100%
100%
2021
100%
100%
100%
100%
100%
nil*
nil*
100%
73%
nil*
nil*
100%
100%
2019
nil
100%
100%
100%
N/A
100%
100%
100%
73%
100%
100%
100%
N/A
Corporate
Delaware, U.S.
77%
77%
77%
* Entity sold in 2021 as part of our divestment of the plasma-derived therapeutics segment.
The Company consolidates investees when, based on the evaluation of the substance of the relationship with the
Company, it concludes that it controls the investees. The financial statements of the subsidiaries are prepared for the
same reporting period as the parent Company, using consistent accounting policies. All intra-group transactions,
balances, income and expenses are eliminated in full upon consolidation.
When a subsidiary is not wholly-owned the Company recognizes the non-controlling interests’ share of the net assets
and results of operations in the subsidiary.
50
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
Financial instruments
Recognition and derecognition
Financial instruments are recognized in the consolidated statement of financial position when the Company becomes a
party to the contractual obligations of the instrument. On initial recognition, financial instruments are recognized at
their fair value plus, in the case of financial instruments not at fair value through profit or loss (“FVPL”), transaction
costs that are directly attributable to the acquisition or issue of financial instruments. Financial assets are subsequently
derecognized when payment is received in cash or other financial assets or if the debtor is discharged of its liability.
A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires. When an
existing liability is replaced by another from the same creditor on substantially different terms, or the terms of the
liability are substantially modified, such an exchange or modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the
consolidated statement of operations.
Classification
Subsequent to initial recognition, financial instruments are measured according to the category to which they are
classified. Financial instruments are measured at amortized cost unless they are classified as fair value through other
comprehensive income, or FVOCI, classified as FVPL or designated as FVPL, in which case they are subsequently
measured at fair value.
The classification of financial asset debt instruments is driven by the Company’s business model for managing the
financial assets and their contractual cash flow characteristics. Assets that are held to collect contractual cash flows
where those cash flows represent solely payments of principal and interest are measured at amortized cost. Equity
instruments that are held for trading (including all equity derivative instruments) are classified as FVPL. Financial
liabilities are measured at amortized cost, unless they are required to be measured at FVPL (such as instruments held
for trading or derivatives) or the Company has opted to measure them at FVPL.
The Company classifies cash, trade receivables, other receivables, restricted cash, and long-term deposits as financial
assets measured at amortized cost and trade payables, wages and benefits payable, royalty payment obligations and
long-term debt as financial liabilities measured at amortized cost.
The Company classifies the warrant liability as a financial liability at FVPL for which the variation in fair value is recorded
in consolidated statement of operations.
Inventories
Inventories of raw materials and finished goods are valued at the lower of cost and net realizable value. Cost is
determined on a first in, first out basis. The cost of manufactured inventories comprises all costs that are directly
attributable to the manufacturing process, such as raw materials, direct labour and manufacturing overhead based on
normal operating capacity. Net realizable value is the estimated selling price in the ordinary course of business and the
estimated selling costs except for raw materials for which it is determined using replacement cost.
51
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
Capital assets
Capital assets are recorded at cost less any government assistance, accumulated depreciation and accumulated
impairment losses, if any. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets,
as described below.
Capital asset
Buildings and improvements
Leasehold improvements
Production and laboratory equipment
Furniture
Computer equipment
Government assistance
Period
20 years
The lower of the lease term and the useful life
5 - 20 years
5 - 10 years
3 - 5 years
Government assistance programs, including investment tax credits on research and development expenses and salary
and rent subsidies are reflected as reductions to the cost of the assets or to the expenses to which they relate and are
recognized when there is reasonable assurance that the assistance will be received and all attached conditions are
complied with.
Right-of-use assets
The Company recognizes a right-of-use, or ROU, asset at the commencement date of a lease which is when the date at
which the underlying asset is available for use. Right-of-use assets are measured at cost, less any accumulated
depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. Unless the Company is
reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognized right-of-use
asset is depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term.
Intangible assets
Intangible assets are carried at cost less accumulated amortization. Amortization commences when the intangible asset
is available for use and is calculated over the estimated useful lives of the intangible assets acquired using the straight-
line method. The maximum period used for each category of intangible asset are presented in the table below.
Intangible asset
Licenses and other rights
Donor lists
Patents
Software
Impairment of long-lived assets
Period
30 years
10 years
20 years
5 years
At the end of each reporting period, the Company reviews the carrying amounts of its capital, ROU and intangible assets
to determine whether there is any indication that those assets have suffered an impairment loss. If impairment indicators
exist, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any.
For intangible assets not yet available for use, an impairment test is performed annually at November 30, until
amortization commences, whether or not there are impairment indicators.
52
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
The recoverable amount is the higher of the fair value less costs to sell 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 which the estimates of future
cash flows have not been adjusted.
An impairment loss is recognized when the carrying amount of an asset or a cash-generating unit, or CGU, exceeds its
recoverable amount by the amount of this excess. An impairment loss is recognized immediately in profit or loss in the
period during which the loss is incurred. An impairment loss can be subsequently reversed, if certain conditions are met
and the amount of the reversal will not exceed the carrying amount that would have been determined had an impairment
loss not been recognized for the asset or CGU in prior periods. A reversal of an impairment loss is recognized immediately
in profit or loss.
Lease liabilities
At the commencement date of a lease, the Company recognizes a lease liability measured at the present value of lease
payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed
payments) less any lease incentives, variable lease payments that depend on an index or a rate, and amounts expected
to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option
reasonably certain to be exercised by the Company and payments of penalties for terminating a lease, if the lease term
reflects the Company exercising the option to terminate. The variable lease payments that do not depend on an index
or a rate are recognized as expense in the period on which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Company uses the incremental borrowing rate at the lease
commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date,
the amount of a lease liability is increased to reflect the accretion of interest and reduced for the lease payments made.
In addition, the carrying amount of a lease liability is remeasured if there is a modification, a change in the lease term,
a change in the in-substance fixed lease payments or a change in the assessment whether the underlying asset will be
purchased.
The Company applies the short-term lease recognition exemption to leases of 12 months or less, as well as the lease of
low-value assets recognition exemption. Lease payments on short-term leases and leases of low-value assets are
recognized as expense on a straight-line basis over the lease term.
The Company has elected, for the class of assets related to the lease of building space, 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.
Provisions
If changes in circumstances render a contract to be onerous, meaning the unavoidable cost of meeting the contract
exceeds the economic benefits expected under it, the Company recognizes the present value of the obligations as a
provision. Before a separate provision for an onerous contract is established, an entity recognizes any impairment loss
that has occurred on assets dedicated to that contract. The amount recognized as a provision is the best estimate of
the cash disbursements required to settle the present obligation at the end of a reporting period and as such, a provision
will change if the estimate changes. The discount rate used is the pre-tax rate that reflects the market assessment of
the time value of money and the risks specific to the liability.
53
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
Revenue recognition
Sale of goods
Revenue from sale of goods is recognized when the terms of a contract with a customer have been satisfied. This occurs
when:
The control over the product has been transferred to the customer; and
The product is received by the customer or transfer of title to the customer occurs upon shipment.
Following delivery, the customer bears the risks of obsolescence and loss in relation to the goods. Revenue is recognized
based on the price specified in the contract, net of estimated sales discounts and returns. Revenue from the sale of
goods is presented as part of the results from discontinued operations.
Royalty revenue
Royalty revenues are recognized once the sale of products to which the royalties gives rise occurs.
Rental revenue
The Company accounts for the lease or sub-lease with its tenant as an operating lease when the Company has not
transferred substantially all of the risks and benefits of ownership of its property or leased property. Revenue recognition
under an operating lease commences when the tenant has a right to use the leased asset, and the total amount of
contractual rent to be received from the operating lease is recognized on a straight-line basis over the term of the lease.
Rental revenue also includes recoveries of operating expenses and property taxes.
Research and development expenses
Expenditure on research activities is recognized as an expense in the period during which it is incurred. An internally
generated intangible asset arising from development (or from the development phase of an internal project) is
recognized if, and only if, all of the following have been demonstrated:
the technical feasibility of completing the intangible asset so that it will be available for use or sale;
the intention to complete the intangible asset and use or sell it;
the ability to use or sell the intangible asset;
how the intangible asset will generate probable future economic benefits;
the availability of adequate technical, financial and other resources to complete the development and to use or
sell the intangible asset; and
the ability to measure reliably the expenditures attributable to the intangible asset during its development.
To date, the Company has not capitalized any development costs.
54
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
Foreign currency translation
Transactions and balances
Transactions in foreign currencies are initially recorded by the Company and its entities at their respective functional
currency rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies
are retranslated at the functional currency spot rate of exchange at the reporting date. All differences are taken to the
consolidated statement of operations. Non-monetary items that are measured in terms of historical cost in a foreign
currency are translated using the exchange rates at the dates when the initial transactions took place.
Group companies
The assets and liabilities of foreign operations are translated into Canadian dollars at the rate of exchange prevailing at
the reporting date and their statements of operations are translated at exchange rates prevailing at the dates of the
transactions. The exchange differences arising on the translation are recognized in other comprehensive loss. On
disposal of a foreign operation, the component of other comprehensive loss relating to that particular foreign operation
is reclassified from the consolidated statement of comprehensive loss to the consolidated statement of operations as
part of the gain or loss on the disposal of the foreign operation.
Share-based payments
The fair value of stock options granted by the Company is determined at the grant date using the Black-Scholes option
pricing model and is expensed over the vesting period of the options. Grants with graded vesting are considered to be
multiple awards for fair value measurement. An estimate of the number of awards that are expected to be forfeited is
also made at the time of grant and revised periodically if actual forfeitures differ from those estimates.
The Company also made use of a restricted share unit plan as part of its long-term incentive plan up until the end of
2020. The fair value of Restricted Share Units, or RSU, is determined using the market value of the Company’s shares
on the grant date. The expense associated with RSU awards that vest over time are recognized over the vesting period.
When the vesting of RSU is dependent on meeting performance targets as well as a service requirement, the Company
will estimate the outcome of the performance targets to determine the expense to recognize over the vesting period,
and revise those estimates until the final outcome is determined.
An estimate of the number of awards that are expected to be forfeited is also made at the time of grant and revised
periodically if actual forfeitures differ from those estimates.
The Company’s policy is to issue new shares upon the exercise of stock options and the release of RSU for which
conditions have been met.
55
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
Assets held for sale and discontinued operations
The Company classifies non-current assets and disposal groups as held for sale at the end of a given reporting period if
their carrying amounts will be recovered principally through a sale rather than through continuing use. Such non-current
assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and their fair
value less cost to sell. Costs to sell are the incremental costs directly attributable to the sale, excluding finance costs
and income tax expense. Such assets are only presented as held for sale when the sale is highly probable and the assets
or disposal group are available for immediate sale in their present condition. Actions required to complete the sale
should indicate that it is unlikely that significant changes to the sale will be made or that the sale will be withdrawn.
Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale
within one year from the date of classification.
Capital assets included as part of the assets held for sale are not depreciated once classified as held for sale. Assets and
liabilities classified as held for sale are presented separately as current items in the consolidated statement of financial
position.
The results of discontinued operations are presented net of tax in the consolidated statement of operations. Incremental
cost related to the disposition and income taxes are allocated to discontinued operations. The discontinued operations
also include the gain or loss on the disposal, which will also include the reclassification of historical exchange differences
on translation of foreign operations sold. The results of discontinued operations exclude the allocation of the corporate
finance costs and general corporate overhead in the form of management fees if the costs will continue to be incurred
by Liminal following the disposition. The prior period results from discontinued operations are reclassified and presented
in the consolidated statements of operations.
Share and warrant issue expenses
The Company records share and warrant issue expenses as an increase to the deficit.
3. Significant accounting judgements and estimation uncertainty
The preparation of these consolidated financial statements requires the use of judgments, estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and liabilities and the accompanying disclosures. The
uncertainty that is often inherent in estimates and assumptions could result in material adjustments to assets or
liabilities affected in future periods. The significant judgments made and estimates used in the preparation of these
consolidated financial statements are explained below.
Significant judgments
Going concern - In assessing whether the going concern assumption is appropriate and whether there are material
uncertainties that may cast significant doubt about the Company’s ability to continue as a going concern, management
must estimate future cash flows for a period of at least twelve months following the end of the reporting period by
considering relevant available information about the future. Management has considered a wide range of factors relating
to expected cash inflows such as whether the Company will earn other significant revenues, what will be the next steps
in its research and development programs and the related expenditures as well as the financing strategy it would like
to pursue and the potential sources of debt and equity financing available to it in case further financing is desired.
Management has also estimated expected cash outflows such as operating and capital expenditures and debt repayment
schedules. These cash flow estimates are subject to uncertainty.
56
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
Functional currency – The functional currency of foreign subsidiaries is reviewed on an ongoing basis to assess if
changes in the underlying transactions, events and conditions have resulted in a change. This assessment is also
performed for new subsidiaries. When assessing the functional currency of a foreign subsidiary, management’s judgment
is applied in order to determine, amongst other things, the primary economic environment in which an entity operates,
the currency in which the activities are funded and the degree of autonomy of the foreign subsidiary from the reporting
entity in its operations and financially. Judgment is also applied in determining whether the inter-company loans
denominated in foreign currencies form part of the parent Company’s net investment in the foreign subsidiary.
Considering such loans as part of the net investment in the foreign subsidiary results in foreign currency translation
gains or losses from the translation of these loans being recorded in other comprehensive loss instead of the consolidated
statement of operations. During the year ended December 31, 2020, the functional currency of the Pathogen Removal
and Diagnostic Technologies Inc., or PRDT, subsidiary changed from GBP to USD.
Share-based compensation - On March 23, 2020, the board of directors of the Company approved a plan to seek
shareholder approval to modify the exercise price of certain stock options as disclosed in note 19b. In order to determine
when the expense related to this modification is recognized in the consolidated statement of operations, management
evaluated the timing of notification to option holders, the timing and method of determining the exercise price and the
service period. Management further considered whether the holders of the stock options had sufficient understanding
of the terms and conditions of the potentially revised awards, the degree of certainty of the approval for the repricing
and whether the service period for earning the rights to the awards had commenced. Management concluded that the
definition of the grant date was not met but that the service period had commenced and therefore a preliminary
calculation of the incremental fair value of the repricing of the awards was performed using assumptions as of March
31, 2020. On May 26, 2020, the conditions for a grant date were met and the options exercise price was revised to
$15.21 and a final calculation to determine the incremental fair value of the repriced options was performed.
Estimates and assumptions
COVID-19 – The negative impact of the COVID-19 pandemic on the financial statements for years ended December 31,
2021 and 2020 has been limited. During a portion of those two years, however, the Company was eligible for salary
and rent subsidy programs from the Government of Canada under which it submitted claims (note 22). As of the date
of these consolidated financial statements, there are no subsidy programs to which the Company is eligible. Consistent
within the global biopharmaceutical sector, some clinical programs may have been and may be impacted by the shift of
resources within hospitals and contract research organizations, or CRO, to COVID-19 and related matters, resulting in
potential delays to recruitment or site initiation on our clinical and preclinical programs, and potentially causing an
adjustment of certain development timelines and activities. The partial disruption caused by COVID-19 may continue to
impact the Company’s operations, workforce and overall business by delaying the progress of our research and
development programs, regulatory submissions and reviews, and business and corporate development activities. There
is uncertainty as to the duration of the COVID-19 pandemic and related government restrictions, including travel bans,
the impact on our workforce, the availability of healthy subjects and patients for the conduct of clinical trials and its
impact on the global economy. The effects of the COVID-19 pandemic continue to be fluid.
Fair value of financial instruments – The individual fair values attributed to the different components of a financing
transaction, are determined using valuation techniques. Management uses judgment to select the methods used to
determine certain inputs/assumptions used in the models and the models used to perform the fair value calculations in
order to determine, 1) the values attributed to each component of a transaction at the time of their issuance, 2) the
fair value measurements for certain instruments that require subsequent measurement at fair value on a recurring basis
and 3) the fair value of financial instruments subsequently carried at amortized cost. When the determination of the fair
value of a new loan is required, discounted cash flow techniques which includes inputs that are not based on observable
market data and inputs that are derived from observable market data are used.
57
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
When determining the appropriate discount rates to use, Management seeks comparable interest rates, where available.
If unavailable, it uses those considered appropriate for the risk profile of a Company in the industry.
In determining the fair value of the warrants issued in November 2020 (note 16), which are presented as a warrant
liability in the consolidated statement of financial position and considered to be a level 3 measurement, the Company
made assumptions on unobservable inputs used in the valuation model that have an important impact on the resulting
fair value computed.
Notably, the Company estimated the timing and the amounts of equity financings it expects to complete before the
expiry of those warrants. The fair value computed could be higher if the actual equity financing needs of the Company
are higher than those expected. The Company also estimated the future volatility of the common shares of Liminal for
the contractual life of the warrants. To do so, the Company used the historical volatility of its own shares and of
comparable companies in the same industry as a starting basis for this estimate and also considered whether there are
factors that would indicate that the historical volatility is not indicative of the future. In addition, the Company applied
an illiquidity discount rate on the resulting Black-Scholes pricing model to reflect that the November 2020 warrants are
not publicly traded instruments and therefore the ability to sell them is limited. In establishing the illiquidity discount
rate, the Company considered the remaining life of the warrants and the volatility assumption for the underlying shares.
Had the Company selected a higher volatility rate and/or a lower illiquidity discount rate, the fair value of the warrant
liability would have been higher.
The fair value estimates could be significantly different because of the use of judgment and the inherent uncertainty in
estimating the fair value of these instruments that are not quoted in an active market.
Uncertainty over income tax treatments - R&D tax credits for the current and prior periods are measured at the
amount the Company expects to recover, based on its best estimate and judgment, of the amounts it expects to receive
from the tax authorities as at the reporting date, either in the form of income tax refunds or refundable grants. However,
there are uncertainties as to the interpretation of the tax legislation and regulations, in particular regarding what
constitutes eligible R&D activities and expenditures, as well as the amount and timing of recovery of these tax credits.
In order to determine whether the expenses it incurs are eligible for R&D tax credits, the Company must use judgment
in determining whether its complex R&D activities qualify for available tax credits, which makes the recovery of tax
credits uncertain. As a result, there may be a significant difference between the estimated timing and amount recognized
in the consolidated financial statements in respect of tax credits receivable and the actual amount of tax credits received
as a result of the tax administrations' review of matters that were subject to interpretation. These uncertainties, relating
to entities the Company has sold may still affect Liminal as certain indemnification obligations may be called upon,
subject to contractual limitations, when these entities may be subjected to the tax administrations reviews for taxation
periods prior to the sale. The amounts recognized in the consolidated financial statements are based on the best
estimates of the Company and in its best possible judgment, as noted above.
Assessing the recoverable amount of long-lived assets - The Company evaluates the recoverable value of long-
lived assets when indicators of impairment arise or as part of the annual impairment test, if they are intangible assets
not yet available for use. The recoverable value is the higher of the value in use and the fair value less costs of disposal,
or FVLCD.
Long-lived assets include capital assets, ROU assets and intangible assets such as patents and licenses and other rights.
Some of these rights are considered not available for use until regulatory approval to commercialize the product
candidate is obtained. When calculating the net recoverable amounts for the impairments on continuing operations (note
24) and discontinued operations (note 6), management made estimates and assumptions regarding the outcome of
certain future events, future cash flows and their timing.
58
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
When determining the FVLCD for its Ryplazim® CGU (note 6), significant estimates made included amongst others, the
outcome of the exercise it had undertaken in evaluating the potential alternatives for the Ryplazim® CGU, including the
probability of completing a sale or closing those activities; the operating cash outflows to support those operations until
one of the alternative strategies was executed; the outcome of the FDA review of the Company’s Biological License
Application, or BLA for its Ryplazim® product candidate and the timing of completion of the review; if the Company
would be able to benefit from the monetization of a Priority Review Voucher, if received, and what would be the amount
received upon its monetization; and whether some assets, liabilities and commitments could potentially be excluded
from the activities sold and for those commitments that could be retained, the possibility of reducing those commitments
and what would be their settlement amount. A 10% change in the probability weighted terminal value would have
impacted the impairment recorded on the Ryplazim® CGU by $ 3,638.
When calculating the FVLCD of an asset or a group of assets for which selling price information for comparable assets
are not readily available, management also must make assumptions regarding the value it may recuperate from its sale.
Share-based compensation - To determine the fair value of stock options on a given date, the Company must
determine the assumptions that will be used as inputs to the Black-Scholes option pricing model, including the
assumption regarding the future volatility of the common shares of Liminal for the expected life of the stock options.
The Company uses the historical volatility as a starting basis for the estimate and also considers whether there are
factors that would indicate that the past volatility is not indicative of the future volatility. In making this assessment,
management considers changes in the Company's activities and other factors such as a significant share consolidation.
As the volatility is an assumption that has a significant impact on the calculated value of a stock option, the impact of
this estimate can significantly impact the share-based payment expense over the vesting period of an award.
Valuation of deferred income tax assets – To determine the extent to which deferred income tax assets can be
recognized, management estimates the amount of probable future taxable profits that will be available against which
deductible temporary differences and unused tax losses can be utilized. Management exercises judgment to determine
the extent to which realization of future taxable benefits is probable, considering the history of taxable profits, budgets
and forecasts and availability of tax strategies.
Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore
require the exercise of judgment. As of the date of issuance of these financial statements, the Company is not aware of
any specific event or circumstance that would require it to update its estimates, assumptions and judgments or revise
the carrying value of its assets or liabilities, and the Company is unable to estimate the potential impact on its future
business or its financial results as of the date of this filing. These estimates may change as new events occur and
additional information is obtained and changes in those estimates are recognized in the consolidated financial statements
as soon as they become known.
4. Change in standards, interpretations and accounting policies
a) Adoption of new accounting standards
The accounting policies used in these annual consolidated financial statements are consistent with those applied by the
Company in its December 31, 2020 and 2019 audited annual consolidated financial statements except for the
amendments to certain accounting standards which are relevant to the Company and were adopted by the Company
since January 1, 2020 as described below.
59
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
Amendments to IFRS 3, Business Combinations or IFRS 3
The amendments to IFRS 3 clarifies the definition of a business and includes an optional concentration test to determine
whether an acquired set of activities and assets is a business. These amendments were adopted on January 1, 2020
and are applied prospectively to acquisitions made on or after this date.
Amendment to IFRS 16, Leases or IFRS 16 for COVID-19-Related Rent Concessions - IFRS 16 has been revised
to incorporate an amendment issued by the IASB in May 2020. The amendment permits lessees not to assess whether
particular COVID-19-related rent concessions are lease modifications and, instead, account for those rent concessions
as if they were not lease modifications. In addition, the amendment to IFRS 16 provides specific disclosure requirements
regarding COVID-19-related rent concessions. The amendment was adopted as of January 1, 2021 and had no impact
on the financial statements for the year ended December 31, 2021 since the Company has not benefited from COVID-
19 related rent concessions.
Amendment to IAS 1, Presentation of Financial statements or IAS 1 - IAS 1 has been revised to require the
disclosure of material accounting policies rather than significant accounting policies and provides guidance to apply
materiality judgments to accounting policy disclosure. The Company early adopted these amendments, and
consequential amendments to other standards, for its annual audited financial statements for the year ended December
31, 2021 resulting in a reduction of its accounting policy disclosure in note 2 - Material accounting policies.
b) New Standards and interpretations not yet adopted
The IFRS accounting standards, amendments, and interpretations that the Company reasonably expects may have a
material impact on the disclosures, the financial position or results of operations of the Company when applied at a
future date are as follows:
Amendments to IAS 37, Provisions, Contingent Liabilities and Contingent Assets (IAS 37) - IAS 37 has been
revised to specify which costs an entity includes in determining the cost of fulfilling a contract for the purpose of
assessing whether the contract is onerous. The amendments are effective for annual reporting periods beginning on or
after January 1, 2022. The cumulative effect of initially applying the amendment, if any, will be recorded as an
adjustment to the opening retained earnings and comparative periods will not be restated. Earlier application is
permitted. The Company has determined that the adoption of this modification as of January 1, 2022 will not have an
impact on the provision presently recorded at December 31, 2021.
Amendment to IFRS 9 Financial Instruments (IFRS 9) - IFRS 9 has been revised to clarify the fees an entity
includes when assessing whether the terms of a new or modified financial liability are substantially different from the
terms of the original financial liability. The amendment is effective for annual reporting periods beginning on or after
January 1, 2022 and is to be applied to financial liabilities that are modified after the date of adoption. Earlier application
is permitted.
60
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
Amendments to IAS 8, Accounting policies, Changes in Accounting Estimates and Errors (IAS 8) and IAS 1,
Presentation of Financial Statements (IAS 1) - The amendments to IAS 8 introduce a definition of accounting
estimates and provide clarifications to distinguish accounting policies from accounting estimates. In addition, IAS 1 has
been revised to clarify how to classify debt and other liabilities as current or non-current. The amendments help to
determine whether, in the statement of financial position, debt and other liabilities with an uncertain settlement date
should be classified as current (due or potentially due to be settled within one year) or non-current. The amendments
also include clarifying the classification requirements for debt an entity might settle by converting it into equity. The
amendments are applicable retrospectively and is effective for annual reporting periods beginning on or after January
1, 2023 with earlier application permitted.
Amendments to IAS 12, Income taxes (IAS 12) - The amendments to IAS 12 clarify the accounting for deferred
tax assets or liabilities arising from a single transaction such as leases, namely that the scope of the recognition
exemption no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible
temporary differences. The amendments are effective for annual reporting periods beginning on or after January 1,
2023 with earlier application permitted.
The Company is evaluating the impact of the amendments to IAS 8, IAS 1 and IAS 12 on its consolidated financial
statements.
5. Acquisition of Fairhaven Pharmaceuticals Inc.
Pursuant to a share purchase agreement, or SPA, dated July 17, 2020, the Company acquired 100% of the issued and
outstanding common shares of Fairhaven Pharmaceuticals Inc., or Fairhaven, a company with a preclinical research
program of small molecule antagonists. As consideration for the acquisition, the Company issued 202,308 common
shares. Upon achievement of certain pre-determined research and development milestones prior to July 17, 2025, the
Company may be obligated to make additional payments in the form of common shares totalling up to $4,374. The
number of shares to be issued, if any, upon completion of a milestone, will be calculated using the five-trading day
volume weighted average trading price, or VWAP of the Company’s common shares on Nasdaq prior to the achievement
of such milestone events.
As Fairhaven did not meet the definition of a business under IFRS 3, the acquisition has been accounted for as an asset
acquisition, the total cost of the net assets acquired being the fair value of the consideration paid. The shares issued
were recorded at a fair value of $3,441, based on the closing price of Liminal’s common shares at the date of the
transaction. The transaction costs of $308 incurred by the Company were capitalized and allocated to the net assets
acquired. Any future milestone payments would be recognized if and when the triggering event occurs.
61
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
The consideration paid and the allocation thereof to the net assets acquired were as follows:
Cost of acquisition
Fair value of common shares issued
Cash payment
Total consideration paid
Transaction fees
Total cost of acquisition
Net assets acquired
Current assets
Licenses and other rights (note 12)
Current liabilities
Total net assets acquired
6. Discontinued operations
$
$
$
$
$
3,441
50
3,491
308
3,799
217
3,796
(214)
3,799
The Company has entered into several share purchase agreement(s), or SPA(s), in 2019 and in 2021 for the sale of
businesses that were no longer part of its core strategy.
2019 and 2020
On November 25, 2019, the Company sold two subsidiaries in its bioseparations segment, Prometic Bioseparations Ltd
and Prometic Manufacturing Inc., to Gamma Biosciences GP LLC, representing the majority of its bioseparations
operations and all of the bioseparations revenues.
As of December 31, 2019, the Company had received $50,752 in cash and recorded an amount receivable of $1,175.
This amount was received in the beginning of 2020 and then later during the year, an additional amount of $3,380 in
proceeds was recorded and received upon resolution of a taxation matter. In the event the operations sold achieve
certain yearly performance criteria during the four years following the transaction, additional cash payments will be
received; for the two first years following the sale, the performance criteria were not met. As of the date of these
consolidated financial statements, the aggregate cash consideration that could still be earned until the end of 2023 is
$13,724 (£8,000,000). At the time of the sale and since then the fair value of the contingent consideration available
has been evaluated as $nil as its receipt is dependent on future target achievement that is out of the Company’s
influence and is primarily dependent on the growth of the operations sold.
2021
The Company entered into two SPAs with Kedrion S.p.A., or Kedrion, during the quarter ended June 30, 2021: the first
for the sale of Prometic Plasma Resources Inc. and Prometic Plasma Resources USA Inc., operating the plasma collection
centers, and the second for the sale of its Ryplazim® business operated through its subsidiaries Prometic Bioproduction
Inc., or PBP, and the Company’s plasma-derived therapeutics manufacturing facility and PBT, the holder of the
biologicals license application or BLA and intellectual property rights for Ryplazim®. Additionally, the Company’s
subsidiary PBT entered into an agreement, during the quarter ended September 30, 2021, with another party for the
sale of the Priority Review Voucher, or PRV, it received on June 4, 2021, in conjunction with FDA approval of its BLA.
These disposals cover the majority of Liminal’s plasma-derived therapeutics segment.
62
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
The sale of the plasma collection centers was closed on May 21, 2021. Concurrently with the closing of this transaction,
the Company entered into an option agreement, or Option, which granted Kedrion the right to acquire the Ryplazim®
business by June 15, 2021 which was subsequently extended to June 22, 2021. The SPA for the Ryplazim® business
was signed on June 22, 2021, with the sale of PBP subsequently closing on July 9, 2021. Between the original expiry
date of the Option and the sale of PBP, the Company received additional proceeds compensating the Company for the
extension of the Option and the operating costs of PBP until that date. On August 6, 2021, PBT entered into a definitive
agreement for the sale of the PRV with another party for proceeds of USD 105 million. The sale of the PRV closed on
September 28, 2021 with PBT receiving $130,966 (net of selling costs of $1,891). The sale of PBT to Kedrion closed on
October 15, 2021.
As part of the SPAs signed with Kedrion, the Company could be required to indemnify the buyer if certain events occur
following the closing of each sale transactions, the whole subject to contractual limitations on such indemnifications.
Estimates of potential payments and actual payments, if any, will be recorded against the gain on sale of subsidiaries.
Gain on sale of subsidiaries
The details of the gain on sale of subsidiaries during the years ended December 31, 2021, 2020 and 2019 is provided
in the table below:
Year ended December 31
Sale of bioseparation business
Proceeds received
Less:
Carrying amount of net assets sold
Transaction costs
Reclassification of foreign currency translation reserve from other
comprehensive income into the statement of operations
Gain on sale of bioseparation business
2021
2020
2019
$
—
$
3,380 $
51,927
—
—
—
—
$
—
—
22,015
5,015
—
3,380 $
(1,449)
26,346
$
Sale of plasma collection centers
Proceeds received
Less:
Carrying amount of net assets sold
Transaction costs
Reclassification of foreign currency translation reserve from other
comprehensive income into the statement of operations
Gain on sale of plasma collection centers
Sale of Ryplazim business
Proceeds received
Less:
Carrying amount of net assets sold
Indemnification adjustments
Transaction costs
Gain on sale of Ryplazim business
Gain on sale of subsidiaries, net of income taxes $nil
$
13,570
$
— $
10,849
204
(44)
$
2,561
$
—
—
—
— $
$ 159,787
$
— $
19,541
116
2,288
$ 137,842
$ 140,403
$
$
—
—
—
—
—
—
—
—
—
— $
3,380 $
—
—
26,346
63
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
The carrying amounts of the assets and liabilities of the entities sold during the year ending December 31, 2021, as
part of the sale of the plasma collection centers and the Ryplazim® business, on the dates control of the entities were
transferred to the purchaser, are as follows:
Cash
Accounts receivable
Inventories
Prepaids
Other long-term assets
Capital assets
Right-of-use assets
Intangible assets
Deferred tax assets
Total assets
Accounts payable and accrued liabilities
Deferred revenue
Current portion of lease liabilities
Long-term portion of deferred revenues
Long-term portion of lease liabilities
Total liabilities
Net assets sold
Bioseparation
Plasma
collection
business
centers
$
6,794 $
1,148
8,313
236
48
8,483
3,300
370
12
— $
137
8,441
21
54
2,376
2,000
1,092
—
Ryplazim
business
—
1,879
4,640
399
50
9,304
3,795
7,277
—
$
28,704 $
14,121 $
27,344
2,163
370
809
87
3,260
639
—
665
—
1,968
6,689 $
3,272 $
2,887
—
986
—
3,930
7,803
22,015 $
10,849 $
19,541
$
$
Results and cash flows from discontinued operations
During the quarter ended March 31, 2021, the Company had determined that the plasma collection centers met the
criteria to be presented as discontinued operations and therefore the results of operations and other comprehensive
loss of that disposal group have been presented as discontinued operations since that quarter. Following the signing of
the SPA for the Ryplazim® business during the quarter ended June 30, 2021, the results of PBP and PBT have also been
presented as discontinued operations since that quarter and as well as the results of Prometic Biotherapeutics Ltd, a
subsidiary that was also part of the plasma-derived therapeutics segment but was not sold and which operations will
cease. The results of the former bioseparation entities have been presented as discontinued operations since the disposal
on November 25, 2019.
The revenues and costs relating to all the above entities were reclassified and presented retrospectively in the
consolidated statements of operations, statement of comprehensive loss for the years ended December 31, 2021, 2020
and 2019 and notes to the consolidated financial statements as discontinued operations. When presenting the result of
discontinued operations, certain adjustments are made to past cost allocations if those costs are expected to be retained
by the continuing operations. As such, the results from discontinued operations will not equal the historical losses from
the plasma-derived therapeutic segment.
Effective with the period ended June 30, 2021, Liminal is no longer presenting segmented information as the Company’s
continuing operations all pertain to the small molecule segment.
64
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
The net loss from discontinued operations for the years ended December 31, 2021, 2020 and 2019 are presented below:
Year ended December 31
Revenues
Expenses
Cost of sales and other production expenses
Research and development expenses 1) 2)
Administration expenses
Gain on foreign exchange
Impairment losses 3)
Gain on extinguishment of liabilities
Finance costs
Loss from discontinued operations,
net of taxes
Current income tax (note 26)
Deferred income tax (note 26)
2021
2020
2019
$
949
$
2,593
$
27,233
1,465
76,733
2,360
(136)
1,411
—
2,242
1,868
42,757
5,933
(633)
19,772
(79)
6,083
$ (83,126) $
(73,108) $
1
—
8
—
14,012
65,840
11,009
(759)
11,603
—
7,926
(82,398)
53
(24)
Net loss from discontinued operations
$ (83,127) $
(73,116) $
(82,427)
1) The expense relating to an agreement with a contract development and manufacturing organization, or CDMO, which
is considered an onerous contract (note 15) is included in research and development expenses for the year ended
December 31, 2021.
2) On September 29, 2021 prior to the closing of the sale of PBT, PBT paid PBP, which ownership had already passed
to Kedrion, $39,457 representing 30% of the net proceeds it received from the sale of the PRV, as compensation
for past research and development services. A second payment made by PBT to PBP of $6,357 in prepayment for
future R&D services on the same date was recognized as R&D expense since this amount would not be recoverable
upon the sale of PBT.
3) During the year 2019, the Company, evaluated its intellectual property and the related market opportunities in the
context of the Company’s financial situation and has made further decisions about the areas the Company will or
will not pursue.
One of these decisions affecting our plasma-derived therapeutic segment was to no longer pursue further indications
relating to the human-plasma protein plasminogen. As such, the Company decided it would retain sufficient staff to
complete and resubmit a BLA, for congenital plasminogen deficiency and to build ongoing manufacturing supply,
but then it would cease all R&D activities in the plasma-derived therapeutics segment not relating to Ryplazim®.
Because of this, the Company’s long-term production forecasts for plasminogen were reduced and it was decided
that one of its planned manufacturing facilities and a technical transfer facility would no longer be required. The
Company also decided to close its R&D facility in Rockville, MD by the end of 2020. Consequently, the capital and
intangible assets in the Plasma-derived therapeutics segment that were no longer to be used as originally planned
were reviewed for impairment and written-down to their net recoverable value determined as the FVLCD using a
market approach. The Company assessed the resale value of the property, plant and equipment, the licenses and
patents, in their present condition, less cost of disposal and consequently, recorded an impairment of $7,070 and
$4,535 on capital assets and intangible assets, respectively for the year ended December 31, 2019.
65
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
At September 30, 2021, the carrying amount of the net assets of PBT, presented as assets of disposal group held
for sale, exceeded the amount of the proceeds to be received upon the closing of the sale transaction that occurred
on October 15, 2021. As assets held for sale must be carried at the lowest of their carrying amount or their fair
value less cost to sell, an impairment of $1,389 was recorded on the intangible assets during the quarter ended
September 30, 2021 (note 12).
At the beginning of 2021, the Company announced it had undertaken to evaluate potential alternatives aimed at
minimizing the plasma-derived therapeutics segment cash burn which may result in divestment in whole or part of
this business, or other courses of action including but not limited to the closure of the Ryplazim® related operations,
in order to focus our resources on the small molecules segment. As the capital, intangible and ROU assets in the
Ryplazim® CGU were no longer to be used as originally planned, management proceeded to review them for
impairment and writing them down to their net recoverable value determined as the FVLCD using a market approach.
The Ryplazim® CGU includes the assets involved in production, R&D and commercialization activities relating to the
Ryplazim® product candidate that has yet to receive regulatory approval for commercialization. The Ryplazim® CGU
evaluated excluded the assets pertaining to the plasma collection activities since these can generate distinct cash
inflows and could potentially be divested separately from the Ryplazim® assets. The plasma collection assets were
not considered impaired.
The FVLCD was calculated using a discounted cash flow model for one year and a terminal value of $58.1 million
using a post-tax discount rate of 7.75%. The fair value computed by management is considered as a level 3
computation in the fair value hierarchy under IFRS 13, Fair value measurement. As part of this valuation exercise,
management needed to make several key assumptions which affected the cash inflows and outflows considered in
the model. The significant estimates used in determining the FVLCD are disclosed in note 3.
As a result of this exercise, the Company recorded impairment of $665 on capital assets (note 10), $18,553 on ROU
assets (note 11) and $480 on intangible assets (note 12), respectively, representing an aggregate impairment of
$19,698 on these plasma-derived therapeutic assets for the year ended December 31, 2020. Also during the year,
the Company recorded other impairments on ROU assets amounting to $74.
The consolidated statements of cash flows for the years ended December 31, 2021 and 2020 were not restated to
present the cash flows from the discontinued operations separately as the Company selected to provide this information
in the present note. The cash flows from the discontinued operations and the gain on sale of subsidiaries for the years
ended December 31, 2021 and 2020 are presented in the following table:
Year ended December 31
Cash flows from (used in) in operating activities 1)
Cash flows used in financing activities
Cash flows from (used in) investing activities
Net effect of currency exchange rate on cash
Cash flows generated during the year
Total cash flows generated from
discontinued operations
2021
2020
$ (43,089) $
(3,470)
171,225
(30)
$ 124,636 $
$ 124,636 $
8,015
$
(7,943)
(729)
76
2019
19,493
(8,446)
36,275
(3)
(581) $
47,319
(581) $
47,319
1) When compiling the cash flows from discontinued operations which include only certain entities from the Liminal
group of companies, intra-group cash transfers between entities in the discontinued operations group and those
part of continuing activities, for example the funding provided by Liminal to the discontinued operations, have been
classified as part of the operating activities cash flows.
66
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
7. Accounts receivable and others
Trade receivables
Tax credits and government grants
receivable
Sales taxes receivable
Restricted cash
Other receivables
8. Inventories
Raw materials
Finished goods
December 31,
2021
December 31,
2020
$
229
$
—
280
—
559
$
1,068
$
943
1,808
431
178
721
4,081
December 31,
2021
December 31,
2020
$
$
—
—
—
$
$
9,138
239
9,377
Inventories sold in the amount of $376, $1,102 and $12,441 were recognized in cost of sales and other production
expenses from discontinued operations during the years ended December 31, 2021, 2020 and 2019, respectively.
Inventory write-downs affecting the results from discontinued operations were $nil, $nil and $642 during the years
ended December 31, 2021, 2020 and 2019, respectively.
9. Other long-term assets
Long-term deposits
Tax credits receivable
December 31,
2021
30
332
$
December 31,
2020
137
1,216
$
$
362
$
1,353
67
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
10. Capital assets
Cost
Balance at January 1, 2020
Additions
Disposals
Effect of foreign exchange differences
Balance at December 31, 2020
Additions
Disposals
Sold - discontinued operations (note 6)
Effect of foreign exchange differences
Balance at December 31, 2021
Accumulated depreciation
Balance at January 1, 2020
Depreciation expense
Disposals
Impairments (note 25)
Effect of foreign exchange differences
Balance at December 31, 2020
Depreciation expense
Impairments (note 6)
Disposals
Sold - discontinued operations (note 6)
Effect of foreign exchange differences
Balance at December 31, 2021
Carrying amounts
At December 31, 2021
At December 31, 2020
$
$
$
$
$
$
Land and
Buildings
Leasehold and laboratory
Production Furniture and
computer
improvements
equipment
equipment
Total
$
4,567 $
—
—
—
8,558 $
214
(1,380)
(43)
32,417 $
295
(2,791)
(17)
4,567 $
7,349 $
29,904 $
—
—
—
—
—
(399)
(6,324)
(107)
99
(1,516)
(21,525)
(45)
3,223 $ 48,765
1,059
(4,575)
(64)
550
(404)
(4)
3,365 $ 45,185
112
(2,221)
(30,105)
(161)
13
(306)
(2,256)
(9)
4,567 $
519 $
6,917 $
807 $ 12,810
609 $
195
—
—
—
804 $
195
—
—
—
—
3,429 $
710
(1,380)
167
(25)
2,901 $
268
—
(400)
(2,400)
(12)
20,796 $
1,450
(2,527)
498
(9)
20,208 $
662
22
(1,301)
(14,281)
(7)
2,460 $ 27,294
2,779
(4,311)
665
(33)
424
(404)
—
1
243
—
(306)
2,481 $ 26,394
1,368
22
(2,007)
(18,425)
(25)
(6)
(1,744)
999 $
357 $
5,303 $
668 $
7,327
3,568 $
3,763
162 $
4,448
1,614 $
9,696
139 $
884
5,483
18,791
Impairment losses of $22, $665 and $7,070 were recorded on capital assets that were part of the discontinued
operations (note 6) during the years ended December 31, 2021, 2020 and 2019, respectively.
The depreciation expense for the year ended December 31, 2019 was $3,734.
68
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
11. Right-of-use assets
Balance at January 1, 2020
Additions
Lease modifications and other remeasurements
Depreciation expense
Impairments (note 6)
Effect of foreign exchange differences
Net book value at December 31, 2020
Lease modifications and other remeasurements
Sold - discontinued operations (note 6)
Depreciation expense
Effect of foreign exchange differences
Net book value at December 31, 2021
$
Production
and laboratory
equipment
912
151
—
(561 )
(70 )
(6 )
$
Buildings
$
32,246
378
(1,998)
(3,956)
(18,553)
(31)
$
8,086
3
$
(5,497)
(906)
(77)
$
1,609
$
$
426
(53 )
(272 )
(95 )
(6 )
$
—
The depreciation expense for the year ended December 31, 2019 was $4,913.
$
Other
96
15
—
(61 )
(4 )
(1 )
45
(2 )
(26 )
(12 )
(5 )
$
—
$
Total
33,254
544
(1,998 )
(4,578 )
(18,627 )
(38 )
8,557
(52 )
(5,795 )
(1,013 )
(88 )
1,609
69
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
12. Intangible assets
Cost
Balance at January 1, 2020
Additions (note 5)
Disposals
Effect of foreign exchange differences
Balance at December 31, 2020
Additions
Disposals
Sold - discontinued operations (note 6)
Effect of foreign exchange differences
Licenses and
other rights
Patents Software
Total
$
158,268 $
3,796
—
—
$
162,064 $
—
(1,300)
(15,006)
1
6,309 $
668
(179)
(15)
6,783 $
114
(61)
(1,403)
(2)
3,648 $ 168,225
4,493
(541)
(24)
29
(362)
(9)
3,306 $ 172,153
113
(1,394)
(19,372)
(20)
(1)
(33)
(2,963)
(19)
Balance at December 31, 2021
$
145,759 $
5,431 $
290 $ 151,480
Accumulated amortization
Balance at January 1, 2020
Amortization expense
Disposals
Impairments (notes 6, 25)
Effect of foreign exchange differences
Balance at December 31, 2020
Amortization expense
Disposals
Sold - discontinued operations (note 6)
Impairments (notes 6, 25)
Effect of foreign exchange differences
$
149,870 $
242
—
480
—
$
150,592 $
316
(1,298)
(8,698)
1,389
16
3,039 $
289
(23)
1,072
(12)
4,365 $
1,248
(51)
(533)
341
(13)
1,470 $ 154,379
1,090
(356)
1,567
(19)
559
(333)
15
(7)
1,704 $ 156,661
1,963
(1,383)
(11,003)
1,730
(4)
399
(34)
(1,772)
—
(7)
Balance at December 31, 2021
$
142,317 $
5,357 $
290 $ 147,964
Carrying amounts
At December 31, 2021
At December 31, 2020
$
3,442 $
11,472
74 $
2,418
— $
1,602
3,516
15,492
Impairment losses of $341, $1,087 and $763 were recorded on certain licenses and patents pertaining to continuing
operations (note 6) during the years ended December 31, 2021, 2020 and 2019, respectively, while impairment losses
of $1,389, $480 and $4,533 were recorded on intangible assets pertaining to discontinued operations during the years
ended December 31, 2021, 2020 and 2019, respectively.
The amortization expense for the year ended December 31, 2019 was $1,259.
70
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
13. Accounts payable and accrued liabilities
Trade payables
Wages and benefits payable
Refundable tax credits
Current portion of royalty payment obligations
(note 18)
Current portion of other employee benefit
liabilities (note 18)
14. Lease liabilities
$
December 31,
2021
5,762
1,297
113
$
December 31,
2020
9,153
3,083
—
25
146
7,343
$
3,248
1,351
16,835
$
The transactions affecting the lease liabilities during the years ended December 31, 2021 and 2020 were as follows:
Balance at January 1
Additions
Interest expense
Payments
Derecognized - discontinued
operations (note 6)
Lease modification and other remeasurements
Effect of foreign exchange differences
Balance at December 31
Less current portion of lease liabilities
Long-term portion of lease liabilities
$
2021
$
33,452
—
3,754
(4,321)
(7,549)
(2,588)
(277)
$
$
22,471
(7,194)
15,277
$
$
2020
38,237
544
6,030
(9,167)
—
(1,934)
(258)
33,452
(6,946)
26,506
Interest expense on lease liabilities is included as part of finance costs in the consolidated statement of operations.
Interest on the lease liabilities was $7,068 for the year ended December 31, 2019.
On August 12, 2021, the Company gave a notice of early termination of a master services agreement entered into with
a CDMO with whom it has a contract pertaining to its former plasma-derived therapeutics business, using the available
5-year early cancellation notification period set forth under the CDMO contract which resulted in a decrease in the term
of the contract by 3.8 years. A portion of the commitments under this CDMO contract are accounted for as a lease
liability while the non-lease commitment is being accounted for as an onerous contract provision since June 2021
(note 15). The financial impact of revising the lease term to reflect the effect of exercising the termination option was
a decrease in lease liabilities of $2,529 and the gain on this transaction was recorded as part of the net loss from
discontinued operations for the year ended December 31, 2021.
71
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
15. Provisions
Initial recognition of provisions at June 30, 2021
Increase to provisions during the period
Effect of foreign exchange difference
Interest expense
Balance at December 31, 2021
Less current portion of provisions
Long-term portion of provisions
$
$
$
21,928
439
(262)
90
22,195
(3,957)
18,238
The Company has a long-term contract with a CDMO for which it has no use following its decision to exit the plasma-
derived therapeutics business (note 14). As such, the Company recorded in June 2021, an initial provision for onerous
contract for the non-lease portion of the contract calculated as the discounted value of the estimated purchase
commitment set forth under the contract using the available 5-year early cancellation notification period. In August
2021, the Company sent the CDMO an early termination notice and the provision was adjusted to reflect the revised
maturity date of the contract. The payments under the lease and non-lease portions are variable since there is a
CAD/USD foreign exchange variation component that affects each portion, however the total purchase commitment
under the lease remains the same at $9,000 per year. As such, the effects the foreign exchange differences have on
the computation of the carrying value of the provision from period to period essentially offset by the opposite variation
of the foreign exchange differences on the lease portion, or the lease liability, of this same contract (note 14).
The Company is investigating different avenues to potentially reduce the impact of this contract on its future cash
outflows. Changes in the provision expense are included as part of the net loss from discontinued operations. The gain
or losses on foreign exchange and the interest expense recorded on this CDMO contract are included in the results from
continuing operations.
16. Warrant liability
2019
As consideration for the modification of the terms of the loan agreements between Liminal and SALP on November 14,
2018, the Company had a commitment to issue warrants, or Warrants #9, to SALP on or before March 20, 2019. The
exact number of warrants to be issued was based on the number of warrants necessary to increase the ownership of
SALP to 19.99% on a fully diluted basis at the date of issuance.
On February 22, 2019, the Company further amended the fourth loan agreement with SALP with the addition of two
tranches, one of US$10 million and another one of US$5 million, that were drawn on February 22, 2019 and March 22,
2019, respectively. As consideration for the modification to the fourth loan agreement, the Company amended the terms
applicable at the time of issuance of Warrants #9 to reduce the originally agreed exercise price from $1,000.00 to
$156.36 per preferred share and to issue the Warrants #9 concurrently with this modification. Accordingly, the Company
issued 19,402 warrants on February 22, 2019. Each warrant entitled the holder to acquire one preferred share at a price
of $156.36 per preferred share expiring on February 22, 2027. The Warrants #9 did not meet the definition of an equity
instrument since the underlying preferred shares qualify as a liability instrument, and therefore they were accounted
for as a financial instrument carried at fair value through profit or loss and were presented in the consolidated statement
of financial position as a warrant liability.
72
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
The change in fair value of the warrant liability between December 31, 2018, when it was valued at $157 and prior to
its modification on February 22, 2019, in the amount of $218 was recorded in the consolidated statement of operations.
The Company recorded the increase in fair value of the warrants of $1,137 resulting from the reduction of the exercise
price of Warrants #9 on February 22, 2019 against the two additional tranches of the credit facility, treating the increase
as financing fees. The change in fair value of the warrant liability between February 22, 2019, after the modification,
and March 31, 2019 was an increase of $11 and a decrease in fair value of $1,369 (a gain) between March 31, 2019 to
April 23, 2019. Both variations were recorded in the consolidated statements of operations. The estimated fair value of
these warrants at April 23, 2019 was $153.
As part of the debt restructuring agreement entered into on April 23, 2019 (note 17), all the outstanding warrants
belonging to SALP, including the Warrants #9, were cancelled and replaced by 168,735 warrants having an exercise
price of $15.21 (note 19c). The cancellation and the issuance of new warrants was treated as a modification. Following
this modification, the Warrants #9 no longer meet the definition of a liability instrument and the Company reclassified
the fair value of the Warrants #9 as of April 23, 2019 of $153 from warrant liability to warrants classified as equity.
2020 and 2021
As part of the consideration for the private placement completed on November 3, 2020 (note 19a) where SALP and
another investor participated equally, and a subsequent amendment to this private placement agreement made on
November 25, 2020, the Company issued a total of 7,894,734 warrants that expire on November 3, 2025. Both of these
issuances combined are referred to as the November 2020 warrants. Each warrant can be exercised to acquire one
common share at an exercise price initially set at USD 5.50 and that can be reduced if equity financings are completed
at a lower price before its expiry. The November 2020 warrants do not meet the definition of an equity instrument since
the exercise price is denominated in USD which is different than the functional currency of Liminal which is the CAD.
Consequently, they are accounted for as a financial instrument, presented as a warrant liability in the consolidated
statement of financial position and carried at fair value through profit or loss.
The fair value of the warrants issued on November 3, 2020 and November 25, 2020 were $10,263 and $2,227,
respectively. The portion of the total issuance cost pertaining to the private placement allocated to the issuance of the
November 3, 2020 warrants of $709 and the fair value of the additional warrants issued on November 25, 2020 were
recorded in the consolidated statement of operation transactions in financing costs and administration, selling and
marketing expenses respectively. The fair value of the warrant liability of the November 2020 warrants was $11,640 at
December 31, 2020. The gain of $850 resulting from the change in fair value of the warrants since their issuance was
recognized in the statement of operations for the year ended December 31, 2020. The fair value of the November 2020
warrants was $1,754 at December 31, 2021 and the gain of $9,886, resulting from the change in fair value of the
November 2020 warrants during the year ended December 31, 2021 was recognized in the consolidated statement of
operations. The fair value for the November 2020 warrants held by SALP was $877 and $5,820 at December 31, 2021
and 2020.
73
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
The fair value of the November 2020 warrants on the various dates discussed above was calculated using a Black-
Scholes option pricing model in a Monte Carlo simulation in order to evaluate the downward adjustment mechanism to
the exercise price. The assumptions used at the different valuation dates are provided in the table below:
Underlying common share fair value (in USD)
Remaining life until expiry
Volatility
Risk-free interest rate
Expected dividend rate
Fair value of a warrant calculated using a
Black-Sholes pricing model (in USD)
Fair value of exercise price adjustment mechanism
(in USD)
Illiquidity discount
Fair value of a warrant (in USD)
Fair value of a warrant (in CAD)
17. Long-term debt
Balance at January 1
Stated and accreted interest
Drawdown on non-revolving line of credit
(second term loan)
Issuance of secured convertible debentures
Conversion of secured convertible debt into shares
Repayment of principal
Repayment of stated interest
$
December 31,
2021
1.09
3.8
56.0%
1.13%
—
$
$
$
$
0.08
0.16
28.0%
0.18
0.22
$
$
$
$
$
$
2021
40,532 $
4,388
—
—
(2,664)
—
(3,945)
December 31,
2020
4.20
4.8
49.0%
0.34%
—
1.41
0.22
29.0%
1.16
1.47
2020
8,834
2,209
29,123
2,410
—
(165)
(1,879)
Balance at December 31
$
38,311 $
40,532
At December 31, 2021 and 2020, the carrying amount of the debt comprised the following loans:
First term loan having a principal of $10,000 maturing
on April 23, 2024 bearing stated interest of 10% per annum
(effective interest rate of 15.05%) 1)
Second term loan having a principal of $29,123 maturing on
April 23, 2024 bearing stated interest of 10% per annum
(effective interest rate of 10.47%) 1)
Secured convertible debentures having an aggregate principal
amount of $2,410 maturing on March 31, 2022 bearing
stated
interest of 8% per annum (effective interest rate of 8.24%) 2)
Less current portion of long-term debt
Long-term portion of long-term debt
December 31,
2021
December 31,
2020
$
9,188
$
8,910
29,123
29,123
—
2,499
$
38,311
$
40,532
—
—
$
38,311
$
40,532
74
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
1) The first and second term loans issued under the consolidated loan agreement with SALP are secured by all the
assets of the Company and require that certain covenants be respected including maintaining an adjusted working
capital ratio. In February 2022, these loans were repaid in full (note 33).
2) The secured convertible debentures were secured by all the assets of Fairhaven. The Company’s security interest
granted in connection with its consolidated loan agreement with SALP, its parent, was subordinated to the security
interest on the Fairhaven assets granted in favor of the holder of the secured convertible debentures.
2019
On April 23, 2019, the Company entered into a debt restructuring agreement with the long-term debt holder whereby
the entirety of the principal on the Credit Facility plus a portion of the interest due, the entirety of the First and Second
Original Issue Discount (“OID”) loans and the majority of the Third OID loan would be repaid by Liminal by the issuance
of common shares, at a conversion price, rounded to the nearest two decimals, of $15.21 per common share.
Consequently, the US$95 million of principal plus interest due on the Credit Facility was reduced to $663 and the
aggregate face value of the three OID loans was reduced by $99,552 to $10,000 with the remaining balance of the
Third OID loan modified into an interest-bearing loan at a stated interest of 10% payable quarterly.
This resulted in the reduction of the long-term debt recorded on the consolidated statement of financial position by
$141,536. The Company issued 15,050,312 common shares on that date which were recorded in share capital at a
value of $228,915. The difference between the carrying amount of the debt converted into common shares and the
increase in the value of the share capital is recognized as a loss on extinguishment of a loan of $87,379. The balance
of interest due on the credit facility of $663 was paid in cash. The deferred financing fees pertaining to the extinguished
loans of $653 was expensed.
The 15,050,312 common shares issued as part of the debt restructuring contained trading restrictions and accordingly,
the Company determined that their quoted price did not fairly represent the value of the shares issued. As such, the
issued shares were recorded at fair value using a market approach under a level 2 fair value measurement of $15.21
per share, resulting in a value of the shares issued of $228,915. The fair value was based on a share issuance for cash
on the same date with a non-related party.
Pursuant to the debt restructuring, the Company cancelled the warrants previously held by SALP and replaced them
with 168,735 new warrants having an exercise price rounded to the nearest two decimals of $15.21 per common share,
expiring on April 23, 2027 (note 19c). The incremental fair value of the replacement warrants of $408 was recognized
in warrants equity and as part of the loss on the debt extinguishment together with the legal fees incurred to finalize all
the related legal agreements.
The modification in terms of the remaining balance of the Third OID loan of $10,000 was accounted for as an
extinguishment of the long-term debt and the re-issuance of a new interest-bearing loan, the first term loan. The
difference between the carrying amount of the loan extinguished of $4,667 and the $8,521 recognized as the fair value
of the new loan with the parent was recorded as a loss on debt extinguishment of $3,854. The fair value of the modified
loan was determined using a discounted cash flow model with a market interest rate of 15.1%.
75
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
As a result of this transaction and the extinguishments of liabilities that occurred earlier in the beginning of 2019
following payments made to suppliers by the issuance of equity (note 19a), the consolidated statement of operations
for the year ended December 31, 2019, includes a loss on extinguishment of liabilities of $92,374 detailed as follows:
Loss on extinguishment of liabilities due to April 23, 2019 loan modification
Comprising the following elements:
Debt to equity conversion
Expensing of financing fees on loan extinguishment
Extinguishment of previous loan
Recognition of modified loan
Expensing of increase in the fair value of the warrants (note 19c)
Loss on extinguishment of liabilities due to April 23, 2019 loan modification
Loss on extinguishment of liabilities to suppliers (note 19a)
Loss on extinguishments of liabilities
$
$
$
87,379
653
(4,667)
8,521
408
92,294
80
92,374
During the year ended December 31, 2019, the aggregate stated and accreted interest on the long-term debt was
$7,874.
2020
Concurrently with the Fairhaven acquisition that closed on July 17, 2020, the Company issued secured convertible
debentures, or SCD, to certain former Fairhaven shareholders, for an aggregate principal amount of $2,410 and bearing
an interest rate of 8% per annum, compounded quarterly. The SCD are due on the earlier of i) March 31, 2022, the
maturity date, unless converted into common shares of the Company prior to the maturity date or ii) upon a change of
control event. At any time prior to the maturity date, the SCD holders have the right to convert the SCD into common
shares of the Company. Liminal has the right to convert the SCD into common shares under certain pre-determined
events. The five-trading day VWAP of Liminal’s common shares immediately preceding the date of any conversion will
be used to determine the number of common shares of the Company that will be issued. The SCD were recorded as
financial liabilities. The conversion features were determined to have no value.
At any time prior to the maturity date and until the amendment discussed below, the holders had a collective right to
purchase additional SCD issued by the Company for an aggregate principal amount of up to $5,740 with substantially
the same terms and conditions as set out in the original SCD. If the pre-determined events allowing the Company to
trigger the conversion of the SCD occur prior to the maturity date, the Company has the right to require the holders of
the SCD to purchase additional SCD for an aggregate principal amount of up to $5,740, which would then be converted
into common shares.
On November 11, 2019, the consolidated loan agreement with SALP was amended to provide for a non-revolving line
of credit bearing the same terms and conditions as the first term loan. On September 14, 2020, the Company drew
down $29,123 on the non-revolving line of credit representing the entire balance available, which resulted in the
issuance of the second term loan. The second term loan bears an annual interest rate of 10% compounded monthly , is
payable quarterly and matures on April 23, 2024.
76
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
2021
On October 20, 2021, the Company exercised its right to convert the entirety of its SCD, having a balance of $2,664 on
the conversion date into 1,098,577 common shares of Liminal, using a conversion price of $2.42 (USD 1.96) calculated
as the volume weighted average trading price of the shares in the five trading days immediately preceding the
conversion. Liminal’s conversion right became exercisable upon the occurrence of an event which resulted in the
Company having a cash balance over $75,000. The difference between the carrying value of the SCD and the fair value
of the common shares issued and recorded in share capital of $2,589, calculated using the closing trading price on the
conversion date, was $75 and was recorded as a gain on extinguishment of a liability.
The Company and the parties to the share purchase agreement dated July 17, 2020 entered into an amendment to this
agreement in November 2021 to terminate 1) the collective rights of certain sellers to purchase additional SCD issued
by the Company for an aggregate principal amount of up to $5,740 with substantially the same terms and conditions
as set out in the original SCD and 2) the Company’s right, if the pre-determined events allowing the Company to trigger
the conversion of the SCD occur prior to the maturity date, to require certain sellers to purchase additional SCD for an
aggregate principal amount of up to $5,740, which would then be converted into common shares.
At December 31, 2021, the Company was in compliance with all of its covenants under its long-term debt agreement.
Subsequent to December 31, 2021, the consolidated loan agreement with SALP was terminated and the first and second
term loans were repaid (note 33).
18. Other long-term liabilities
Royalty payment obligations (a)
Other employee benefit liabilities
Less:
Current portion of royalty payment obligations (note 13)
Current portion of other employee benefit liabilities (note 13)
a) Royalty payment obligations
i) Royalty payment obligations to SALP
December 31,
2021
123
146
$
December 31,
2020
3,355
1,557
$
$
$
269
$
4,912
(25)
(146)
(3,248)
(1,351)
98
$
313
During 2018, the Company signed a royalty stream agreement with SALP at the same time as certain conditions
pertaining to the second advance of the credit facility were modified. The financial commitments that remain under this
agreement at December 31, 2021 and 2020 include 1) a minimum royalty payment of USD 5,000,000 per quarter until
approximately 2034 and a liability of $123 was recognized in the consolidated statement of financial position at
December 31, 2021 ($132 at December 31, 2020), and 2) a net sales royalty commitment (note 30) for which no
liabilities have yet to be recorded in the consolidated financial statements. On February 15, 2022, the royalty stream
agreement was terminated (note 33).
77
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
ii) Royalty payment obligation for reacquired rights
As part of the consideration given by the Company in 2016 for the reacquisition of the rights to 50% of the worldwide
profits pertaining to the sale of plasminogen for the treatment of plasminogen congenital deficiency which were
previously granted to a licensee under a license agreement, the Company agreed to make royalty payments on the
sales of plasminogen for congenital deficiency, using a rate of 5% up to a total of USD 2.5 million, the unpaid balance
becoming due at December 31, 2020. At December 2020, the Company recognized a royalty payment obligation of
$3,223 (USD 2.5 million) in the consolidated statement of financial position. The balance was paid in 2021.
19. Share capital and other equity instruments
a) Share capital
Authorized and without par value
Common shares: unlimited number authorized, participating, carrying one vote per share, entitled to dividends.
Preferred shares: unlimited number authorized, issuable in one or more series.
- Series A preferred shares: unlimited number authorized, no par value, non-voting, ranking in priority to the
common shares, entitled to the same dividends as the common shares, non-transferable, redeemable at the
redemption amount offered for the common shares upon a change in control event.
Changes in the issued and outstanding common shares during the year ended December 31, 2021 and 2020 were as
follows:
Balance - beginning of year
Issued to acquire assets
Exercise of stock options (note 19b)
Exercise of pre-funded warrants (note 19c)
Shares issued pursuant to a restricted share
units plan (note 19b)
Shares issued for cash
Shares issued upon conversion of debt
Balance - end of year
Number
29,943,839 $
—
—
—
144
—
1,098,577
31,042,560 $
2021
Amount
977,261
—
—
—
—
—
2,588
979,849
Number
23,313,164 $
299,141
5,391
557,894
10,355
5,757,894
—
29,943,839 $
2020
Amount
932,951
4,681
167
2,624
9,764
27,074
—
977,261
2021
On October 20, 2021, the Company exercised its right to convert, the entirety of its secured convertible debt (note 17)
into 1,098,577 of its common shares.
2020
On January 29, 2020, the Company issued 96,833 common shares as a consideration for the final payment for a license
acquired in January 2018. This transaction was accounted for as an extinguishment of the license acquisition payment
obligation and the difference between the carrying value of the liability of $1,319 and the amount recorded for the
shares issued of $1,240, which were valued at the market price of the shares on their date of issuance, was recorded
as a gain on extinguishment of liabilities of $79 during the year ended December 31, 2020.
78
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
On July 17, 2020 the Company issued 202,308 common shares in payment for the acquisition of Fairhaven, which has
been accounted for as an asset acquisition (note 5). The common shares issued were valued at the market price of the
shares, on their date of issuance for an aggregate value of $3,441.
On November 3, 2020, the Company completed a private placement for a total gross proceed of $39,960 in exchange
for the issuance of 5,757,894 common shares, 557,894 prefunded warrants (note 19c) and 6,315,788 warrants (note
16, 19c). SALP’s participation in the private placement was for gross proceeds of $19,980.
The total gross proceeds were allocated to the warrant liability based on its fair value of $10,263 on that date with the
residual value being allocated between the common shares and the pre-funded warrants. The value attributed to the
common share was $27,074. The total transaction costs of $2,755 were allocated to the three instruments issued based
on their relative fair values. The amount allocated to the common shares and the pre-funded warrants, of $2,048, was
recognized in the deficit.
On December 30, 2020, the 557,894 pre-funded warrants were exercised resulting in the issuance of 557,894 common
shares and the receipt of $1 in cash. An amount of $2,623 was reclassified from warrants to common shares.
2019
On February 25 and 27, 2019, the Company issued a total of 1,472 common shares in payment for amounts due to
certain suppliers. This transaction was accounted for as an extinguishment of liabilities and the difference between the
carrying value of the accounts payable of $465 and the amount recorded for the shares issued of $545, which were
valued at the market price of the shares on their date of issuance, was recorded as a loss on extinguishment of liabilities
of $80 (note 17).
As part of the settlement agreement concluded in April 2019 with the former CEO of the Company, common shares held
in escrow as security for a share purchase loan of $400 to the former CEO were released and the loan extinguished in
exchange for the receipt of a payment of $137, representing the fair value of the shares at the time of the settlement.
In May 2019, the Company announced a Rights Offering to the holders of its common shares at the close of business
on May 21, 2019 to subscribe for up to 20 additional common shares, for each share they held, for a subscription price
rounded to the nearest two decimals of $15.21 per common share. The Right Offering was subject to a proration to
ensure that no more than $75,000 was raised. In June 2019, the Company issued 2,592,628 common shares for gross
proceeds of $39,434 as part of the Right Offerings less transactions costs of $271 recorded in deficit, for total net
proceeds of $39,163.
b) Contributed surplus (Share-based payments)
Stock options
The Company has established a stock option plan for its directors, officers, employees and service providers. The plan
provides that the aggregate number of shares reserved for issuance at any time under the plan may not exceed
3,749,714 common shares and the maximum number of common shares, which may be reserved for issuance to any
individual, may not exceed 5% of the outstanding common shares. The stock options issued under the plan may be
exercised over a period not exceeding ten years from the date they were granted. Most of the stock options outstanding
have a contractual life of 10 years.
79
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
The vesting period of the stock options varies from immediate vesting to vesting over a period not exceeding six years,
most of them vesting over four years. Participants meeting certain service and age requirements may see the vesting
of certain awards accelerate upon retirement. The vesting conditions are established by the Board of Directors on the
grant date. The exercise price is based on the weighted average share price for the five business days prior to the grant.
For stock options having a CAD exercise price, the changes in the number of stock options outstanding during the years
ended December 31, 2021 and 2020 were as follows:
Weighted
average
exercise price
($)
Number
2,485,555 $
18.70 2,209,864 $
2021
2020
Number
—
14.34
—
—
40.70
—
—
436,570
(153,982)
(5,391)
—
(1,506)
(1,929,685)
1,929,685
Number
21,625 $
Weighted
average
exercise price
($)
38.72
14.06
19.33
15.21
—
2,462.46
35.14
15.21
18.70 2,209,864 $
2,218,810
(16,774)
—
(11,713)
(2,084)
—
—
2019
Weighted
average
exercise price
($)
1,464.49
33.13
159.61
—
1,237.94
1,176.20
—
—
38.72
1,027,778 $
21.39 2,485,555 $
Balance - beginning of year
Granted
Forfeited
Exercised
Cancelled
Expired
Repriced - options before repricing
Repriced - options after repricing
Balance - end of year
—
(1,321,651)
—
—
(136,126)
—
—
For options having a USD exercise price, the changes in the number of stock options outstanding during the years ended
December 31, 2021 and 2020 were as follows:
Balance - beginning of year
Granted
Forfeited
Expired
Balance - end of year
Number
305,000
492,000
(38,000)
(10,000)
749,000
2021
Weighted
average
exercise price
(USD)
4.70
2.80
4.10
4.27
3.49
$
$
2020
Weighted
average
exercise price
(USD)
—
4.70
—
—
4.70
Number
—
305,000
—
—
305,000
$
$
80
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
2021
In January 2021, 40,000 stock options having an exercise price of USD 5.34, of which 20,000 stock options vested
immediately and the remaining stock options vest over a period up to one year, were issued to a member of the Board
of Directors. In June 2021, 50,000 stock options having an exercise price of USD 4.09, of which 25,000 stock options
vested immediately and the remaining stock options vest over a period up to one year, were issued to a member of the
Board of Directors. In July 2021, 50,000 stock options having an exercise price of USD 3.93, of which 12,500 stock
options vested on October 1, 2021 and the remaining stock options vest over a period up to one year, were issued to
members of the Board of Directors. In October 2021, 352,000 stock options, having an exercise price of USD 2.17 and
vesting over a period of up to four years, were issued to employees.
2020
In March 2020, Liminal’s board of directors approved a plan to reduce the exercise price of the stock options issued in
June 2019, held by active employees and directors at the time of the repricing. On May 26, 2020, a revised exercise
price, pending approval, of $15.21 was determined, changing the exercise price to the higher of (i) $15.21 and (ii) the
five trading-day VWAP of Liminal common shares on the repricing date. On June 8, 2020, the repricing of 1,929,685 of
the outstanding stock options having exercise prices of $27.00 and $36.00 to the revised exercise price was approved
at the Company’s annual shareholder meeting.
Although the stock options were not repriced until May 26 2020, management concluded that the service period for
employees and directors to earn the modified awards had commenced from the date the Company informed the holders
of these stock options of the repricing proposal and the expense resulting from the repricing plan should be recognized
starting from that date. Using the revised exercise price of $15.21, the Company calculated the final incremental fair
value of the repricing on the grant date of May 26, 2020 to be $3,000. This incremental fair-value will be amortized
from the services commencement date of March 25 over the remaining vesting period of the repriced options. The
incremental grant date fair value of the repriced options was estimated based on the Black-Scholes option-pricing model
calculated before and after the effect of the repricing. The following Black-Scholes assumption were used:
Expected dividend rate
Expected volatility of share price
Risk-free interest rate
Expected life in years
Weighted average grant date incremental fair value
—
93.2%
0.4%
6.3
1.55
$
In June 2020, 436,570 stock options, having an exercise price of $14.06 and vesting over a period of up to four years,
were issued to employees and directors. In October 2020, 20,000 stock options, having an exercise price of US$10.80
and vesting over a period of three years were issued to a new director. In December 2020, 285,000 stock options having
an exercise price of US$4.27, of which 95,000 stock options vested immediately and the remaining stock options vest
over a period up to three years, were issued to key management.
During the year ended December 31, 2020, 5,391 stock options were exercised resulting in cash proceeds of $82 and
a transfer from contributed surplus to share capital of $85. The weighted average share price on the date of exercise of
the stock options during the year ended December 31, 2020 was $18.47.
81
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
2019
On January 24, 2019, 1,622 stock options were granted at an exercise price of $300.00 and vesting on December 31,
2019. On June 4, 2019, 1,794,224 stock options were granted to management at a strike price of $36.00 of which
248,825 stock options vested immediately and the remaining vest over a period up to six years. On June 19, 2019,
251,714 stock options were issued at a strike price of $27.00 of which 60,717 stock options vested immediately and
the remaining vest over a period up to four years. On September 3, 2019, 71,250 stock options were issued at a strike
price of $11.99 and on December 3, 2019, 100,000 stock options were issued at a strike price of $7.86, both of these
grants having a vesting period of up to four years. The weighted average grant date fair value of the stock options
issued in 2019 was $12.74.
In June and August 2019, the Company cancelled the options that were issued prior to June 2019, as the exercise price
of these options were so above the market price at the time, that it was highly unlikely that they would ever be exercised.
In compensation for their agreement to the cancellation, key management and employees, received the new options
granted to them in June 2019 discussed above. Consequently, 11,084 stock options with a weighted average exercise
price of $1,256.73 were cancelled. There was no exercise of stock options in 2019.
The Company uses the Black-Scholes option pricing model to calculate the fair value of stock options at the date of
grant. The weighted average inputs into the model and the resulting grant date fair values during the years ended
December 31, 2021, 2020 and 2019 were as follows:
Expected dividend rate
Expected volatility of share price
Risk-free interest rate
Expected life in years
Weighted average grant date fair value
2021
—
115.0%
1.21%
6.7
2.85
$
2020
—
100.5%
0.5%
6.7
8.66
$
2019
—
45.0%
1.4%
7.2
12.74
$
At December 31, 2021, stock options issued and outstanding denominated in CAD and USD by range of exercise price
are as follows:
Range of exercise
price for stock option
issued in CAD
$7.86-$11.99
$14.06
$15.21
$27.00-$2,220.00
Range of exercise
price for stock option
issued in USD
$2.17
$3.93-$5.34
$10.80
Number
outstanding
30,000
141,650
800,778
55,350
1,027,778
Number
outstanding
349,000
380,000
20,000
749,000
(in years)
($) exercisable
Weighted
average
remaining
Weighted
average
contractual life exercise price
7.7 $
8.4
7.4
7.3
7.6 $
11.99
14.06
15.21
134.61
21.39
Weighted
average
remaining
Weighted
average
contractual life exercise price
(in years)
(USD) exercisable
9.8 $
9.1
8.8
9.4 $
2.17
4.31
10.80
3.49
Weighted
average
Number exercise price
($)
11.99
14.06
15.21
130.88
24.45
16,875 $
78,112
522,862
54,985
672,834 $
Weighted
average
Number exercise price
(USD)
—
4.34
10.80
4.55
192,500
6,666
199,166 $
— $
82
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
A share-based payment compensation expense of $4,252 was recorded for the stock options for the year ended
December 31, 2021 ($6,169 and $12,212 for the year ended December 31, 2020 and 2019 respectively).
Restricted share units
The Company has established an equity-settled RSU plan for executive officers of the Company, as part of its incentive
program designed to align the interests of its executives with those of its shareholders, and in accordance with its long-
term incentive plan. The vesting conditions are established by the Board of Directors on the grant date. Participants
meeting certain service and age requirements may see the vesting of certain awards accelerate upon retirement. Each
vested RSU gives the right to receive a common share. There have been no RSU grants since 2018 and all the RSU that
were earned have since been settled.
Changes in the number of RSU outstanding during the years ended December 31, 2021, 2020 and 2019 were as follows:
Balance - beginning of year
Granted
Forfeited
Released
Paid in cash
Cancelled
Balance - end of year
2021
2021
4,216
—
(48)
(144)
(4,024)
—
—
2020
17,565
—
(46)
(10,355)
(2,948)
—
4,216
2019
18,299
12,564
(409)
—
(8,396)
(4,493)
17,565
There was $nil share-based payment compensation expense recorded in regards to the RSU during the year ended
December 31, 2021.
During the year ended December 31, 2021, 4,024 RSU were paid in cash resulting in a reduction to contributed surplus
of $20.
2020
During the year ended December 31, 2020, 2,948 RSU were paid in cash resulting in a reduction to contributed surplus
of $40. As at December 31, 2020, all 4,216 outstanding RSU were vested. A share-based payment compensation
expense of $65 was recorded during the year ended December 31, 2020.
2019
On January 31, 2019, the Company granted 12,564 RSU at a grant price of $300.00 and a one-year vesting period. On
May 30, 2019, the Company decided to vest the 12,564 RSU and the employees were given the choice to receive the
then current value of the shares in cash or to receive the shares at a later date. As a result, 8,396 RSU were released
and paid in cash resulting in a reduction to contributed surplus of $421.
On May 7, 2019 the 12,886 performance based RSU pertaining to the “2017-2019” cycle and the “2018-2020” cycle
were modified by removing the performance conditions and converting them into time-vesting RSU. The quantity
modified into time-vesting units was equivalent to the 100% achievement range whereby in the past, the outcome of
the performance conditions could go from zero to 150%. Historically, the Company has always reported the quantity of
RSU outstanding as the maximum number of shares that could be issued under the plan. This change resulted in the
cancellation of 4,305 units.
83
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
At December 31, 2019, 13,262 vested RSU and 4,303 unvested RSU were outstanding. Share-based payments
compensation expense of $9,818 was recorded during the year ended December 31, 2019.
Share-based payments expense
The total share-based payments compensation expense, comprising the above-mentioned expenses for stock options
and RSU, has been included in the consolidated statements of operations for the years ended December 31, 2021, 2020
and 2019 as indicated in the following table:
Administration expenses
Research and development expenses
Loss from discontinued operations
c) Warrants
$
2021
3,760
936
$
(444)
$
4,252
$
2020
3,248 $
2,430
556
6,234 $
2019
14,315
2,836
4,879
22,030
The following table presents the number of warrants outstanding with an exercise price in CAD during the years ended
December 31, 2021 and 2020:
Balance of warrants - end of year
2021
Weighted
average
exercise price
($)
84.33
Number
172,735 $
2020
Weighted
average
exercise price
($)
84.33
Number
172,735 $
The following table presents the changes in the number of warrants outstanding with an exercise price in USD during
the years ended December 31, 2021 and 2020:
Balance of warrants - beginning of year
Issued for cash
Issued for no consideration
Exercised
Balance of warrants - end of year
2021
Weighted
average
exercise price
Number
(USD)
7,894,734 $
—
—
—
7,894,734 $
5.50
—
—
—
5.50
2020
Weighted
average
exercise price
(USD)
—
5.05
5.50
—
5.50
Number
— $
6,873,682
1,578,946
(557,894)
7,894,734 $
The 7,894,734 warrants shown in the table above, are those accounted for as a warrant liability (note 16) and are
included in this note in order that all the outstanding warrants are presented in aggregate in the tables above.
84
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
2020
As a consideration to the private placement on November 3, 2020 (note 19a), the Company issued 6,315,788 warrants
and 557,894 pre-funded warrants. The gross proceeds allocated to the pre-funded warrants was $2,623. The pre-funded
warrants exercise price was US$0.001 and a term of five years.
On November 25, 2020, the Company issued 1,578,946 additional warrants with the same terms and conditions as
described above, following an amendment to the private placement agreement, for a total of 7,894,734 warrants (note
16). On December 30, 2020, the pre-funded warrants were fully exercised and 557,894 common shares were issued
(note 19a).
The warrants outstanding as at December 31, 2021, their exercise price in CAD or in USD, expiry rate and the overall
weighted average exercise price in both currency are as follows:
Warrants outstanding with an exercise price in CAD
Warrants outstanding with an exercise price in USD
Number
4,000
168,735
172,735
Expiry
date
January 2023 $
April 2027
$
Number
7,894,734
Expiry
date
November 2025 $
Exercise
price
(CAD)
3,000.00
15.21
84.33
Exercise
price
(USD)
5.50
On February 15, 2022, the 168,735 warrants having an exercise price of $15.21 were cancelled (note 33).
85
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
20. Non-controlling interests
The Company held less than 100% interest in the following two entities during the last three fiscal years. The Company's
interest in these subsidiaries at December 31, 2021 and 2020 was as follows:
Name of subsidiary
Pathogen Removal and Diagnostic
Technologies Inc.
NantPro Biosciences, LLC
Segment activity
Place of incorporation and
operation
Proportion of ownership
interest held by group
Corporate
Plasma-derived therapeutics
Delaware, U.S.
Delaware, U.S.
77%
73%
NantPro Biosciences, LLC or Nantpro, wound up its activities in 2019. There have been no operating costs since 2020.
The carrying value of NantPro’s assets and liabilities was $nil at December 31, 2021 and 2020 and consequently, the
share of the NCI in the NantPro statement of financial position is $nil at December 31, 2021 and 2020.
The summarized statements of financial position for Pathogen Removal and Diagnostic Technologies Inc, or PRDT, and
the summarized statements of operations for PRDT are provided below. This information is based on amounts before
inter-company eliminations.
Summarized statements of financial position for PRDT:
Receivables (current)
Capital and intangible assets (long-term)
Trade and other payables (current)
Intercompany loan
Total equity (negative equity)
Attributable to non-controlling interests
$
December 31,
2021
227
74
(987)
(17,329)
(18,015) $
(8,756) $
$
$
$
December 31,
2020
233
113
(877)
(16,846)
(17,377)
(8,087)
The share of the NCI in PRDT’s statement of financial position represents an asset on the Company’s consolidated
statement of financial position.
Summarized statement of operations of PRDT:
Year ended December 31
Royalty revenues
Royalty expenses
Research and development expenses
Administration expenses
Impairment loss
Net loss and comprehensive loss
Attributable to non-controlling interests
$
$
$
2021
565 $
(88)
(244)
(946)
—
(713) $
(669) $
2020
572 $
(128)
(196)
(1,506)
—
(1,258) $
(832) $
2019
585
(132)
(215)
(896)
(129)
(787)
(713)
86
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
21. Capital management
The Company defines its capital as shareholders’ equity including warrants presented as a liability and financial
instruments of a long-term nature (including the current portion) less cash.
Warrant liability
Lease liabilities
Provisions
Long-term debt
Total equity
Cash
Total capital
December 31,
December 31,
$
2021
$
1,754
22,471
22,195
38,311
33,881
(108,490)
2020
11,640
33,452
—
40,532
15,012
(45,075)
$
10,122
$
55,561
The Company manages its capital resources to fund the growth and development of its business and to ensure it has
sufficient liquidities to support the working capital required to maintain its ability to continue as a going concern and to
pay long-term obligations upon maturity. The Company monitors its ability to meet its financial obligations and evaluates
funding requirements by forecasting cash requirements. Financial covenants of existing debt agreements, including
capital requirements (note 17) are reviewed by management on an ongoing basis to monitor compliance.
At the present time, the Company favors financing by issuing equity instruments in order to minimize future financial
obligations, however it considers all sources of financing reasonably available, including but not limited to the issuance
of equity instruments, debt and the sale of assets. The Company considers the cost of capital, the terms and conditions
and the dilutive effect on shareholders when considering the different forms financings that it may prevail upon.
22. Revenues from continuing operations
Royalty revenues
Rental revenue
2021
565 $
78
643 $
$
$
2020
572 $
152
724 $
2019
575
170
745
All the rental revenues are generated from subleasing right-of-use assets.
87
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
23. Supplemental information
a) Supplemental information regarding the consolidated statements of operations
i) Government assistance
For the years ended December 31, 2021 and 2020, the Company recognized, government grants in connection with the
Canada Emergency Wage Subsidy program and the Canada Emergency Rent Subsidy program, two subsidies program
created by the Government of Canada in 2020 in response to the COVID-19 pandemic that the Company benefits from.
Following the sale of its plasma-derived business in the middle of the second quarter of 2021, the Company was no
longer eligible to these programs.
The Company also recognized research and development tax credits during the years ended December 31, 2021 and
2020. These grants were recorded as a reduction of salary expenses and other related charges and are recognized as
follows in the consolidated statement of operations:
Year ended December 31
Government grants recognized in research
and development expenses, continuing operations:
Salary subsidy
Rent subsidy
Research and development tax credits
Government grants recognized in
administration expenses, continuing operations:
Salary subsidy
Rent subsidy
Government grants recognized in loss from
discontinued operations:
Salary subsidy
Rent subsidy
Research and development tax credits
ii) Finance costs
Year ended December 31
Interest accretion on long-term debt
Amortization of fees for credit facility
Financing fees on warrant liability
Interest expense on provisions
Other interest expense, transaction and bank fees
Interest expense on lease liabilities
Interest income
2021
2020
2019
372 $
140
124
1,017 $
108
426
636 $
1,551 $
325 $
86
1,457 $
63
411 $
1,520 $
2,502 $
682
116
4,758 $
426
1,332
3,300 $
6,516 $
—
—
572
572
—
—
—
—
—
—
—
2021
4,388 $
—
—
90
413
3,754
(73)
2020
2,209 $
—
709
—
485
6,030
(451)
2019
7,874
10
—
—
594
7,068
(753)
8,572 $
8,982 $
14,793
$
$
$
$
$
$
$
$
The table above includes financing costs from continuing and discontinued operations. Financing costs from discontinued
operations for the years ended December 31, 2021, 2020 and 2019 were $2,242, $6,083 and $7,926, respectively, and
mainly represented interest expense on lease liabilities (note 6).
88
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
iii) Employee compensation expense
Year ended December 31
Wages and salaries
Employer's benefits
Share-based payments expense
2021
19,731 $
3,201
4,252
2020
32,410 $
5,443
6,234
2019
48,846
8,263
22,030
27,184 $
44,087 $
79,139
$
$
The table above includes employee compensation expense from continuing and discontinued operations. Employee
compensation expenses from discontinued operations for the year ended December 31, 2021, 2020 and 2019 were
$9,958, $23,146 and $40,536, respectively.
b) Information by geographic area
i) Capital, intangible and right-of-use assets by geographic area
Canada
United Kingdom
United States
ii) Revenues by location from continuing operations
Canada
United Kingdom
$
$
2021
10,041
567
—
10,608
$
$
2020
28,231
2,092
12,517
42,840
2021
78
565
643 $
2020
152
572
724 $
2019
170
575
745
$
Revenues are attributed to countries based on the location of the third party.
24. Pension Plan
The Company maintains a defined contribution pension plan for its permanent employees. The Company matches the
contributions made by employees who elect to participate in the plan up to a maximum percentage of their annual
salary. The Company’s contributions recognized as an expense, for continuing and discontinued operations in aggregate,
for the year ended December 31, 2021 amounted to $598 ($1,055 and $1,495 for the years ended December 31, 2020
and 2019, respectively).
89
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
25. Impairment losses
2021
During the quarter ended June 30, 2021, the Company decided it would not be moving fezagepras into a Phase 2 clinical
study in Idiopathic Pulmonary Fibrosis or IPF, and a phase 1a/2b study in hypertriglyceridemia following its analysis of
the interim PK results from the ongoing fezagepras phase 1 MAD clinical trial. As a result of these decisions which were
considered impairment indicators, the Company recorded an impairment on the carrying value of the intangible assets
for the related patents of $341 reducing their value to their estimate recoverable value of $nil. Other fezagepras patents
were unaffected by the above decisions.
2020
At the end of 2020, in reviewing its portfolio of compounds in the small molecule therapeutics segment, the Company
identified impairment indicators for certain patents. One of the patent families impaired concerned a molecule that had
entered into a phase 1 clinical trial in 2019 that was subsequently discontinued after the review of the pharmacokinetic
data for the first three cohorts obtained. Following additional pre-clinical studies conducted in 2020 to further the
Company’s understanding of the mechanism of action, or MOA, lead to findings that the MOA included engaging a
receptor which has been known in other products which engage the same receptor to occasionally cause undesirable
side effects. Subsequently, management decided that the preclinical and clinical development activities associated with
demonstrating that such molecule did not induce such side effects would be both time-consuming and costly and
therefore the future development has been suspended. Another patent family impaired concerned another molecule
that is licensed for development with a third party, whose research and development work we believe to be delayed
from the agreed upon timelines and is unlikely to perform significant development in the near future. Further, the
development of another compound was deprioritized, as the Company wishes to prioritize development of its lead
compound fezagepras, as well as GPR84 and OXER1 drug candidates, which led to the impairment of the related patents.
These small molecules patents were written down to their net recoverable amount of $nil, as both the FVLCD and the
value in use were determined to be insignificant, resulting in an impairment of $1,072 for the year ended December 31,
2020 (note 12). During the year, the Company also recorded software impairments amounting to $15 (note 12).
2019
In reviewing its portfolio of compounds in the small molecule therapeutics segment, the Company identified compounds
that where not within the areas of fibrosis on which it intends to focus and evaluated the net recoverable value of those
related patents as $nil, determined as the fair value less cost of disposal using a market approach. An impairment on
intangible assets of $634 was recognized for the year ended December 31, 2019.
As a result of the bioseparations business sale, some intellectual property including patents retained by the company
are no longer expected to be developed. The company evaluated the net recoverable value of those patents is $nil,
using a FVLCD using a market approach. An impairment on intangible assets of $127 was recognized for the year ended
December 31, 2019.
90
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
26. Income taxes
The income tax expense (recovery) reported in the consolidated statement of operations for the years ended December
31, 2021, 2020 and 2019 are as follows:
Current income tax expense (recovery)
Deferred income tax expense (recovery)
Income tax expense (recovery) from continuing operations
Current income tax expense (recovery)
from discontinued operations (note 6)
Deferred income tax expense (recovery)
from discontinued operations (note 6)
Total income tax expense (recovery)
$
$
2021
— $
118
118
1
—
2020
(144) $
(65)
(209)
8
—
2019
(336)
111
(225)
53
(24)
119 $
(201) $
(196)
The following table provides a reconciliation of the income tax expense (recovery) calculated at the combined statutory
income tax rate to the income tax expense (recovery) for both continuing and discontinued operations, recognized in
the consolidated statements of operations.
Net loss before tax from continuing operations
Net income before tax from discontinued operations
Combined Canadian statutory income tax rate
2021
2020
2019
$ (44,945)
57,277
$ (49,230)
(69,728)
$ (150,897)
(56,052)
26.5%
26.5%
26.6%
Income tax expense (recovery) at combined income tax rate
3,268
(31,524)
(55,048)
Increase (decrease) in income taxes resulting from:
Unrecorded potential tax benefit arising from
current-period losses and other deductible
temporary differences
Effect of tax rate differences in foreign subsidiaries
Non-deductible or taxable items
Change in tax rate
Non-deductible loss (taxable gain) on debt renegotiation
Research and development tax credit
Non-taxable gain on disposition of subsidiary (note 6)
Other
Income tax expense (recovery)
1,658
9,756
(6,149)
(5,354)
—
(3,012)
—
(48)
33,238
1,101
(157)
(1,455)
—
(494)
(896)
(14)
31,962
4,989
(696)
1,609
24,572
(740)
(6,903)
59
$
119
$
(201)
$
(196)
The following table presents the deferred tax assets (recoveries) related to R&D expenditures at December 31, 2021
and 2020.
Balance - beginning of year
Credited to profit and loss
Balance - end of year
$
$
2021
(572) $
118
(454) $
2020
(507)
(65)
(572)
91
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
Available temporary differences not recognized at December 31, 2021 and 2020 are as follows:
Tax losses (non-capital)
Tax losses (capital)
Unused research and development
expenses
Undeducted financing expenses
Interest expenses carried forward
Trade and other payable
Capital assets
Intangible assets
Start-up expense
Unrealized loss on exchange rate
Lease obligations
Other
$
2021
371,146
185,085
$
2020
569,542
305
25,170
16,914
22,616
22,592
4,575
2,578
1,908
—
21,583
51
84,556
27,053
32,475
1,640
3,392
68,329
5,358
5,430
15,494
1,071
$
674,218
$
814,645
At December 31, 2021, the Company has non-capital losses of $439,706 of which $371,146 are available to reduce
future taxable income for which the benefits have not been recognized. These non-capital losses expire at various dates
from 2022 to 2041 except for the non-capital losses in the United Kingdom and US losses that arose after 2017 which
do not expire. Capital losses arising in Canada can only be utilized to shelter future capital gains. At December 31, 2021,
the Corporation also has federal unused research and development expenses of $33,283 (provincial $17,552), of which
$31,570 are available to reduce future taxable income for which the benefits have not been recognized. These expenses
can be carried forward indefinitely.
At December 31, 2021, the Corporation also has unused federal tax credits available to reduce future income tax in the
amount of $8,980 expiring between 2024 and 2041. Those credits have not been recorded and no deferred income tax
assets have been recognized in respect to those tax credits.
92
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
The unused non-capital losses expire as indicated in the table below:
At December 31, 2021
Losses carried forward expiring in:
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
Not expiring - UK
Not expiring - US (post 2017) 1)
Canada
Federal
Provincial
Foreign
Countries
$
3,510 $
3,495
—
—
—
—
995
4,606
9,807
12,563
22,678
7,394
6,595
26,305
37,751
39,904
$ 162,568 $ 172,093
—
—
—
—
1,001
4,610
7,760
12,565
14,468
7,393
7,003
26,441
37,884
39,933
$
$
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
270,144
—
—
$ 162,568 $ 172,093
2,821
$
272,965
1) US tax rules impose restrictions that will impact how $114,107 of losses are available to shelter income in future
taxation years. As a result, approximately $111,286 of losses will no longer be available to the company and are not
presented in the available tax loss table presented above.
27. Basic and diluted earnings per share
The Company presents basic and diluted earnings per share, or EPS, data for its common shares. Basic EPS is calculated
by dividing the profit or loss attributable to common shareholders of the Company by the weighted average number of
common shares outstanding during the period.
For the years ended December 31, 2021, 2020 and 2019, all warrants, stock options and RSU were anti-dilutive since
the Company reported net losses from continuing operations. The secured convertible debentures issued in 2020 and
subsequently converted into common shares in 2021 were also anti-dilutive during the period they were outstanding.
The numbers for the average basic and diluted shares outstanding presented in the consolidated statements of
operations for the year ended December 31, 2019 have been adjusted in order to reflect the effect of the bonus element
of the Rights Offering that occurred in June 2019 (note 19a).
93
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
28. Related party transactions
Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have
been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Company and
other related parties are disclosed below and in other notes according to the nature of the transactions. These
transactions have been recorded at the exchange amount, meaning the amount agreed to between the parties.
At December 31, 2021 and 2020, a former CEO had a balance of $283 and $170, respectively, owing to the Company
under a tax equalization program, the amounts to be repaid once a refund is received from the taxation authority for
each of the two years covered by the program.
All material transactions with SALP are disclosed in notes 16, 17, 18a, 19a, 19c, and 33 where the particular transactions
are disclosed, and otherwise in this note.
During the year ended December 31, 2021, the Company recorded an interest expense and paid interest on the loan
with its parent, SALP, of $4,222 and of $3,945, respectively ($2,121 and $1,879, respectively, for the year ended
December 31, 2020).
During the year ended December 31, 2021, the Company also recorded and paid legal expenses of $326 and of $181
respectively ($nil for the year ended December 30, 2020), incurred by SALP that it is required to reimburse pursuant to
the subscription agreement signed with SALP on April 14, 2019. On October 1, 2021, the Company entered into a
forbearance agreement with SALP and Thomvest to forbear the reimbursement of such legal fees incurred between
October 1, 2021 and June 30, 2022, until the latter date.
In February 2022, the Company repaid its loan with SALP (note 33).
29. Compensation of key management personnel
The Company’s key management personnel comprise the external directors, officers and executives which included 16
individuals in 2021, 20 individuals in 2020 and 28 individuals in 2019. The remuneration of the key management
personnel during the years ended December 31, 2021 and 2020 was as follows:
Current employee benefits1)
Pension costs
Share-based payments
Termination benefits
$
2021
5,466
78
4,351
406
$
2020
6,153
115
4,917
319
2019
10,083
267
16,842
2,919
10,301
$
11,504
$
30,111
$
$
1) Current employee benefits include salaries, bonuses, other employee benefits other than those listed in the table
and director fees paid in cash.
94
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
30. Commitments
In the normal course of business, the Company enters into license agreements for the market launching or
commercialization of products. Under a royalty stream agreement entered into January 2022, the Company has made
a minimum upfront payment of $400 which can be used to reduce future royalty payments calculated as a low-single
digit percentage of net sales on products and a low-single digit percentage of license revenues in regard to certain small
molecule product candidates targeted by the agreement. A licensing agreement requires a royalty calculated as a low-
single digit percentage of net sales on products for a certain small molecule drug candidate. Under licensing agreements
pertaining to the Company's former bioseparations business, the Company must pay royalties ranging from a low-single
digit to a mid-double digit percentage on the royalty revenues it earns from a sub-licensing agreement.
At December 31, 2021, SALP had the right to receive, under a royalty stream agreement, minimum royalty payments
(note 18) and a 2% royalty on future revenues relating to patents of a specified small molecule product candidate and
analogues. The obligations under this royalty agreement were secured by all the assets of the Company until the expiry
of the last patent covered by this agreement. In the case where royalties based on revenues became payable, the
minimum royalty previously paid would be deducted from future remittances. In February 2022, the royalty stream
agreement was terminated (note 33).
31. Legal proceedings
The Company is, in the course of its business, subject to lawsuits and other claims. On April 15, 2019, the Company
announced its intention to enter into a series of related arrangements to restructure its outstanding indebtedness,
reduce its interest and certain other payment obligations, and raise sufficient cash to build a robust balance-sheet for
the next phase of its development (collectively, the “Refinancing Transactions”).
On March 2, 2021, Liminal was served with an action instituted by multiple individual shareholder plaintiffs (the
“Plaintiffs”) against Liminal, SALP, Thomvest, Consonance Capital Management LP (“Consonance”), as well as the
directors (the “Directors”) that were on the Company’s Board on March 31, 2019 or on April 15, 2019 and certain officers
of the Company (the “D&Os”, together with Liminal, SALP, Thomvest and Consonance, the “Defendants”). Such action
was publicly disclosed on March 24, 2021. On November 2, 2021, Liminal received service of an amended proceeding.
The Plaintiffs’s request in damages has gone from almost $700 million initially to almost $950 million in damages,
approximately $905 million of which is based on the loss of future value of the Company’s shares.
The Company believes that the Plaintiffs’ claims are completely without merit and intends to vigorously defend itself.
Defense and settlement costs associated with such lawsuits and claims can be substantial, even when these lawsuits
and claims have no merit. Due to the inherent uncertainty of the litigation process, the resolution of any particular legal
proceeding could have an adverse effect on the Company’s operating results or financial performance. No provisions
have been recorded in the interim financial statements in regards to these claims.
95
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
32. Financial instruments and financial risk management
a) Fair value
As at December 31, 2021, the fair value of financial liabilities for which fair value disclosure is required include the
royalty payment obligation, the license acquisition payment obligations and the long-term debt. The fair value of those
liabilities approximate the carrying amount of such instruments, except for the long-term debt at December 31, 2021,
where the fair value of the debt was estimated at $39,132 while the carrying amount was $38,311 (at December 31,
2020 the fair value was estimated at $41,922 while the carrying amount was $40,532).
The fair value of the long-term debt at December 31, 2021 was calculated using a discounted cash flow model and the
market interest rates specific to the term of the debt instruments of 10.47% (2020 - 10%).
Fair value hierarchy
Financial instruments recorded at fair value on the consolidated statements of financial position are classified using a
fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy
has the following levels:
Level 1 – valuation based on quoted prices observed in active markets for identical assets or liabilities.
Level 2 – valuation techniques based on inputs that are quoted prices of similar instruments in active markets; quoted
prices for identical or similar instruments in markets that are not active; inputs other than quoted prices used in a
valuation model that are observable for that instrument; and inputs that are derived principally from or corroborated
by observable market data by correlation or other means.
Level 3 – valuation techniques with significant unobservable market inputs.
A financial instrument is classified to the lowest level of the hierarchy for which a significant input has been considered
in measuring fair value.
Cash and restricted cash are considered to be level 1 fair value measurements.
The long-term deposits, royalty payment obligation, license acquisition payment obligations, provisions and long-term
debt are level 2 measurements.
The warrant liability is considered to be a level 3 measurements. Further discussion regarding assumptions used in
determining its fair value are discussed in notes 3 and 16.
b) Financial risk management
The Company has exposure to credit risk, liquidity risk and market risk. The Company’s Board of Directors has the
overall responsibility for the oversight of these risks and reviews the Company’s policies on an ongoing basis to ensure
that these risks are appropriately managed.
Credit risk:
Credit risk is the risk of financial loss to the Company if a customer, partner or counterparty to a financial instrument
fails to meet its contractual obligations, and arises principally from the Company’s cash and receivables. The carrying
amount of the financial assets represents the maximum credit exposure.
96
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
The Company's exposure to credit risk is generally limited since it has limited revenues and thus limited accounts
receivable. Liminal mitigates credit risk through a credit risk assessment, when credit is granted and subsequently at
each reporting period.
Following the sale of its bioseparations business and its plasma-derived business, the Company no longer has product
sales and as such the Company’s exposure to customer credit risk is limited.
Liquidity risk:
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. The
Company manages its liquidity risk by continuously monitoring forecasts and actual cash flows. The Company’s current
liquidity situation is discussed in note 1.
The following table presents the contractual maturities of the financial liabilities as of December 31, 2021:
Accounts payable and accrued
liabilities 1)
Long-term portion of royalty
payment obligations
Lease liabilities
Provisions
Long-term debt 2)
Carrying
amount
Less than
1 year
2-3
years
4 - 5
years
More
than
5 years
Total
Contractual Cash flows
$
7,343 $
7,343 $
— $
— $
— $
7,343
98
22,471
22,195
38,311
—
7,369
3,961
3,945
51
10,629
9,094
44,297
51
8,285
9,544
—
197
—
—
—
299
26,283
22,599
48,242
$
90,418 $
22,618 $ 64,071 $ 17,880 $
197 $ 104,766
1) Short-term portions of the royalty payment obligations and of other employee benefit liabilities are included in the account payable
and accrued liabilities.
2) The Company has fully repaid its long-term debt in February 2022 (note 33).
Market risk:
Market risk is the risk that changes in market prices, such as interest rates and foreign exchange rates, will affect the
Company’s income or the value of its financial instruments.
i)
Interest risk
The Company’s interest-bearing financial liabilities have fixed rates and as such, there is limited exposure to changes
in interest payments as a result of interest rate risk. In February 2022, the Company fully repaid its interest bearing
long-term debt (note 33).
97
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
ii)
Foreign exchange risk:
The Company is exposed to the financial risk related to the fluctuation of foreign exchange rates. The Company has had
operations and suppliers in the U.S. and the U.K. during the past years and therefore a portion of its expenses incurred
are in USD and in GBP. The majority of the Company’s revenues from the sale of products in 2021 and 2020, that are
part of its discontinued operations were in USD which served to mitigate a portion of the U.S. foreign exchange risk
relating to the expenditures. In 2021, the proceeds received from the divestment of its discontinued operations (note
6) were in USD resulting in an increased exposure to the USD which is partially mitigated by expenditures denominated
in USD from its continuing operations. Financial instruments that have exposed the Company to foreign exchange risk
have been cash, receivables, trade and other payables, lease liabilities, license payment obligations. The Company
manages foreign exchange risk by holding foreign currencies it received to support forecasted cash outflows in foreign
currencies.
As at December 31, 2021 and 2020, the Company’s net exposure to currency risk through financial assets and financial
liabilities denominated respectively in USD and GBP was as follows:
2021
2020
Exposure in USD
Cash
Accounts receivable
Other long-term assets
Accounts payable and accrued liabilities
Lease liabilities
Other long-term liabilities
Long-term derivatives
Net exposure
Exposure in GBP
Cash
Accounts receivable
Accounts payable and accrued liabilities
Lease liabilities
Amount
in USD
Amount
in USD
Equivalent in
full CAD
Equivalent in
full CAD
78,045,915 99,094,899 17,281,338 22,018,153
1,129,121
57,880
(6,023,877) (7,675,022)
— (10,918,525) (13,911,293)
(206,404)
—
185,954
—
(951,284)
—
(77,075)
(1,381,603)
236,106
—
(1,207,845)
886,211
45,428
(97,862)
(1,754,221)
75,821,907 96,271,077
1,108,575
1,412,435
(162,000)
—
2021
2020
Amount
in GBP
Equivalent in
full CAD
134,605
2,832,439 4,859,049
230,914
(1,026,984) (1,761,791)
(348,566)
(203,186)
Amount
in GBP
Equivalent in
full CAD
4,619,225 8,032,832
400,993
230,588
(983,697) (1,710,649)
(472,352)
(271,623)
Net exposure
1,736,873 2,979,606
3,594,493 6,250,824
Based on the above net exposures as at December 31, 2021, and assuming that all other variables remain constant, a
10% depreciation or appreciation of the CAD against the USD would result in a decrease or an increase of the
consolidated total comprehensive loss of approximately $9,627 while a 10% depreciation or appreciation of the CAD
against the GBP would result in a decrease or an increase of the consolidated total comprehensive loss of approximately
$298. If we exclude cash denominated in USD from our net exposure at December 31, 2021, a 10% depreciation or
appreciation of the CAD against the USD would result in a decrease or an increase of the consolidated net loss of
approximately $282. The Company has not hedged its exposure to currency fluctuations.
98
LIMINAL BIOSCIENCES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021
(In thousands of Canadian dollars, except for per share amounts)
33. Subsequent event
On February 15, 2022, the Company repaid the entirety of the first and second term loans, for an aggregate amount of
$39,123 (note 17), thus terminating the consolidated loan agreement with SALP and releasing of the security interests
granted by the Company over its assets pursuant to the loan agreement and related documents. The repayment also
terminated the royalty stream agreement with SALP resulting in the derecognition of the royalty payment obligation to
SALP (note 18a) and the 168,735 warrants held by SALP, having an exercise price of $15.21 per common share (note
19c), were cancelled. The Company is presently evaluating the accounting for these transactions.
99