MICROBIX
BIOSYSTEMS INC.
ANNUAL REPORT 2020
Message to Shareholders
The balance of 2020 continued to present Microbix
both opportunities and challenges. In our QAPs
business, we’ve seized the opportunities to create
multiple leading-edge products to help ensure the
accuracy of testing for the virus causing COVID-19
disease, leading to greater recognition of Microbix by
industry and accelerating QAPs sales growth. For our
broad portfolio of antigens, COVID-related pressure
on sales volumes has continued and led to a decline
in sales versus fiscal 2019.
Specifically, for the fourth fiscal quarter of 2020 (fQ4)
and the full fiscal year (f2020), sales results were
mixed and, on balance, down year-over-year (Y/Y).
QAPs sales rose by 24% Y/Y for fQ4, reflecting just the
first distributor re-orders following initial stocking
in June, and rose 41% across f2020. Encouragingly,
QAPs sales comprised 19% of total revenues in fQ4, up
from 11% the prior year Q4 and showing progress for
the category. Lower antigen sales offset those gains,
with Y/Y declines of 30% in fQ4 and 27% for f2020.
Such pressure has been felt across our industry,
and is believed due to the overwhelming focus on
COVID-19 testing to the exclusion of the many other,
more regular, infectious disease tests.
Going forward, we see a high level of COVID-19
related QAPs sales continuing through fiscal 2021
and into fiscal 2022, with a gradual return to a more
diversified mix of sales within QAPs and a recovery
of antigen sales. With its many antigen products and
growing portfolio of QAPs, Microbix appears well
positioned for such market evolutions.
Shortly after the fiscal year end (Sept 30), Microbix
announced a $1.45 million grant agreement with the
Province of Ontario. Earlier in f2020, we identified
the likelihood of shortages of a product critical for
molecular (RT-PCR) testing for the SARS-CoV-2 virus
– the viral transport media (VTM) needed to stabilize
patient samples for subsequent lab-based testing.
As a result, Microbix was invited to work to become
a backbone domestic supplier of VTM to Ontario, a
project that should become a third-leg of revenues
equal-or-greater in significance to Microbix’s sales of
antigens and QAPs. We are targeting to begin sales of
this exciting new product in January, 2021.
As an overview of f2020, management believes we
have created products that meaningfully help public
health and industry respond to the pandemic, and
that will result in sustainably-higher sales even after
the pandemic finally begins to ebb.
Presently however, circumstances compel us to take
two non-cash asset write-downs in fQ4. One relates to
the deferred tax assets (DTAs) first recorded as an asset
in f2014. Those DTAs recognized part of the benefit of
past losses in reducing future corporate income taxes.
With the heightened instability from the pandemic, a
$1.5 million “intangible” DTA value could no longer be
justified. Similarly, the pandemic has made partnering
Kinlytic® urokinase both more challenging and less
predictable in timing. As a result, the Company has
recorded an impairment charge of $3.1 million to fully
conform with “IFRS” accounting rules – even though
efforts to partner Kinlytic are ongoing.
This year has also seen a change in our senior
leadership, with the retirement of our founder and
Executive Chairman, Bill Gastle. On behalf of all
Microbix stakeholders, I thank Bill for his courage,
skill, and persistence in creating Microbix and for
assembling the best team I’ve had the privilege to
lead. Please also join me in wishing Bill and his lovely
wife Susan a happy retirement and thanking Martin
Marino for becoming Independent Chairman.
In summary, f2020 did not achieve the financial
goals we had set-out at the start of the year – due in
large part due to the COVID-19 pandemic. However,
what we have achieved is dramatic progress in
transforming Microbix from a lower-profile maker of
test ingredients into an internationally-recognized
creator, manufacturer, and marketer of innovative,
registered, and branded medical
proprietary,
devices. This transformation opens-up myriad new
revenue opportunities for Microbix and, we believe,
is the means to achieve growing sales, expanding
margins, sustained and growing net earnings, and
share price appreciation.
Personally and on behalf of our team, I thank you for
your continuing support and wish you all the best.
Cameron L. Groome
Chief Executive Officer and President
1
Canadian Funds MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 2020 AND 2019
The Company’s Management’s Discussion and Analysis (“MD&A”) should be read in conjunction with the audited
Consolidated Financial Statements and notes for the year ended September 30, 2020, prepared in accordance with
International Financial Reporting Standards (“IFRS”) and filed on SEDAR. Additional information relating to the
Company, including its Annual Information Form (“AIF”), can be found on SEDAR at www.sedar.com. Reference to “we”,
“us”, “our”, or the “Company” means Microbix Biosystems Inc. unless otherwise stated. All amounts are presented in
Canadian dollars unless otherwise stated. Statements contained herein, which are not historical facts, are forward
looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially
from those set forth or implied. These forward-looking statements include, without limitation, discussion of financial
results or the outlook for the business, risks associated with its financial results and stability, its antigens and quality
assessment products business, development projects such as those referenced herein, sales to foreign jurisdictions,
engineering and construction, production (including control over costs, quality, quantity and timeliness of delivery),
foreign currency and exchange rates, maintaining adequate working capital and raising further capital on acceptable
terms or at all, and other similar statements concerning anticipated future events, conditions or results that are not
historical facts. These statements reflect management’s current estimates, beliefs, intentions and expectations; they
are not guarantees of future performance. The Company cautions that all forward looking information is inherently
uncertain and that actual performance may be affected by a number of material factors, many of which are beyond the
Company’s control. Accordingly, actual future events, conditions and results may differ materially from the estimates,
beliefs, intentions and expectations expressed or implied in the forward looking information. All statements are made
as of the date of this disclosure and represent the Company’s judgment as of that date and the Company disclaims any
intent or obligation to update such forward-looking statements.
The Management Discussion and Analysis is dated December 17, 2020.
COMPANY OVERVIEW
Microbix Biosystems Inc. (Microbix or the Company) (TSX: MBX) is an award-winning life sciences innovator and
exporter making critical ingredients that enable the production of clinical diagnostics (antigens) and creating
medical devices that help ensure test accuracy (quality assessment products, also known as QAPs™). In the context of
Microbix’s business, antigens are purified and inactivated bacteria and viruses, which are used in the immunoassay
format of medical tests to assess exposure to, or immunity from, those pathogens. QAPs are inactivated and
stabilized samples of a pathogen or an analogue to a pathogen, that are created to resemble patient samples in
order to support one or more of (i) the proficiency testing of clinical labs, (ii) test development, instrument validation
and technician training, or (iii) the quality management of patient tests by clinical laboratories. Microbix’s antigens
and QAPs are sold to more than 100 customers worldwide, primarily to multinational diagnostics companies and
laboratory accreditation organizations.
Microbix also applies its biological expertise and infrastructure to develop other proprietary products and
technologies, most notably its emerging project to manufacture viral transport media (VTM) for stabilizing patient
samples to enable lab-based molecular (PCR) testing, and Kinlytic® urokinase, a biologic thrombolytic drug used
to treat blood clots.
It must be recognized that the COVID-19 pandemic is impacting all industries, including medical diagnostics.
As a result trend discussions here may be disrupted. For example, in fiscal 2020 sales of antigens were depressed
due to fewer patients seeking or receiving care for diseases other than COVID-19. However, more broadly speaking,
revenue from the antigens and QAPs business (Antigens & QAPs) is expected to continue growing for the foreseeable
future. Antigen sales growth may be largely driven by certain public health tests becoming more widely used in
the Asia Pacific region and, more recently, increased global testing for respiratory pathogens. QAPs sales growth
may be driven by Microbix’s creation of new value-added, branded and proprietary products and by increasing
European and American quality-management regulation of clinical laboratories. Resulting sales are expected to
provide free cash flow to cover operating and debt service costs, and funding for business initiatives that leverage
Microbix’s expertise.
2
Canadian Funds COMPANY OVERVIEW (Continued)
Microbix owns and operates a biologicals manufacturing facility at 265 Watline Avenue in Mississauga, Ontario.
For that facility, Microbix has a Pathogen and Toxin license issued by the Public Health Agency of Canada. The
Company’s administrative offices, along with further production and lab spaces, are in a leased building located
at 235 Watline Avenue, Mississauga, Ontario. Microbix is ISO 9001 & 13485 accredited, FDA & Health Canada
establishment licensed, and provides CE marked products.
FINANCIAL OVERVIEW
Year ending September 30, 2020 (“2020”)
2020 revenue was $10,524,904, a 22% decrease from 2019 revenues of $13,412,341. Included were antigen product
revenues of $8,688,239 (2019 - $11,980,527), QAPs revenues were $1,527,998 (2019 - $1,087,200) and royalties were
$308,667 (2019 - $344,614). Antigen sales declined 27% versus the prior year, due to global focus upon testing for
COVID-19 disease at the expense of more routine diagnoses. In contrast, Microbix’s sales of QAPs grew by 41%
versus 2019, reflective of continuing sales of white-labelled products to lab accreditation organizations, initial
stocking orders of branded QAPs to the five distribution partners engaged in the spring, and revenues from the
custom QAPs development agreement announced in June.
Gross margin for this year was 44%, down from 49% last year. Margins were impacted by changes in product mix
year over year, and most specifically due to problems with bioreactor equipment and supplier materials reliability
that resulted in multiple lost batches. This occurred principally in the first-ever quarter of constant usage of all
bioreactor units (fiscal Q3) and had a large negative impact on margin and bottom-line results. Those problems are
being addressed with heightened scrutiny of suppliers, process monitoring, and preventative maintenance, and are
thereby targeted to be non-recurring.
Operating expenses decreased by 4% from 2019, primarily a result of slightly higher foreign exchange gains, wage
subsidies and lower travel and trade show costs in the last half of the year, due to COVID-19 travel restrictions. The
company also determined that the deferred tax asset balance of $1,568,237 was to be written down during the fourth
quarter due to the heightened business uncertainties related to the COVID-19 pandemic. Additionally, the asset
value of Kinlytic® urokinase of $3,078,585 has been written down during the fourth quarter, likewise as a result of the
increased difficulty in securing partner funding for this project during the pandemic and a consequent inability to
reliably project the timing to conclude such an alliance. These two asset write downs have not affected the company’s
cash balances.
Lower sales, fewer gross margin dollars, the write down of the deferred tax assets and the impairment of assets
for the year led to an operating loss of $1,580,703 and net loss of $6,227,525 versus an operating income of $43,681
and net income of $31,918 in 2019. Cash from operations was $8,566, compared to cash from operations of $44,368
in 2019.
At the end of 2020, Microbix’s current ratio (current assets divided by current liabilities) was 1.59 and its debt to
equity ratio (total debt over shareholders’ equity) was 1.36.
Quarter Ending September 30, 2020 (“Q4”)
Q4 revenue was $2,705,732, a 25% decrease from Q4 2019 revenue of $3,587,285. Included were antigen product
revenues of $2,151,767 (2019 - $3,092,285), QAPs revenues were $505,898 (2019 - $406,831) and royalties were $48,067
(2019 - $84,016). Q4 sales were impacted by lower antigen sales as outlined above and changes in product mix. This
was offset by QAPs Q4 sales which increased by 24% vs. prior year.
Q4 gross margin was 35%, down from 44% in 2019, due to lower margin product mix in Q4 2020, along with the
aforementioned bioreactor issues.
3
Canadian Funds COMPANY OVERVIEW (Continued)
Quarter Ending September 30, 2020 (“Q4”) (Continued)
Operating expenses in Q4 decreased by 25% from 2019, primarily due to receipt of government wage subsidies
and lower travel and trade show costs. As outlined above, the deferred tax asset and an intangible asset (Kinlytic®
urokinase) were written down during the quarter. Lower sales and fewer gross margin dollars during the quarter
led to an operating loss of $336,175 and net loss of $4,982,997 versus an operating loss of $127,738 and net loss of
$48,816 in Q4 2019. Cash used in operations was $216,083, compared to cash from operations of $574,570 in 2019.
Financial Highlights
As at and for the quarter ended
Total Revenue
Gross Margin
SG&A Expenses
R&D Expense
Financial Expenses
Operating Loss for the year, before Impairment
of Assets and Income Taxes
2020
2019
$ 10,524,904
$
13,412,341
4,660,897
4,172,372
1,013,126
1,056,102
(1,580,703)
Net Income (Loss) and Comprehensive Income (Loss) for the year
Cash Provided (Used) by Operating Activities
(6,227,525)
8,566
Cash
Accounts receivable
Total current assets
Total assets
Total current liabilities
Total liabilities
Total shareholders’ equity
Current ratio
Debt to equity ratio
SELECTED QUARTERLY FINANCIAL INFORMATION
92,661
1,877,009
6,492,832
15,598,011
4,090,038
8,978,534
6,619,477
1.59
1.36
6,547,447
4,395,496
1,042,192
1,066,078
43,681
31,918
44,368
95,571
1,709,470
6,452,308
19,629,573
4,765,895
9,092,165
10,537,408
1.35
0.86
Dec-31-18
$
Mar-31-19
$
Jun-30-19
$
Sep-30-19
$
Dec-31-19
$
Mar-31-20
$
Jun-30-20
$
Sep-30-20
$
Sales
2,460,812
4,253,629
3,110,615
3,587,285
2,046,348
2,874,496
2,898,328
2,705,732
Net Income (Loss) and
Comprehensive Income (Loss)
Operating Loss before
Impairment of assets
(119,296)
391,352
(191,322)
(48,816)
(585,265)
(219,030)
(440,233)
(4,982,997)
(119,296)
482,037
(191,322)
(127,738)
(585,265)
(219,030)
(440,233)
(336,175)
4
Canadian Funds
OUTLOOK
Microbix’s primary business is the result of three decades of experience manufacturing high quality viral and bacterial
antigens – for use in the medical diagnostic testing industry. Its many antigen products have received widespread
and longstanding acceptance by “immunoassay” diagnostic test makers, with continuing growth in demand being
the general trend. Microbix antigens are now used by over 100 diagnostics manufacturers and are the critical biology
inside tens of millions of medical tests for bacterial and viral diseases.
From 2017 until the emergence of the COVID-19 pandemic, growth in demand for Microbix’s antigens had been
stronger to end-customers in both established and emerging markets. Much of that growth was believed to be due
to a number of diagnostics for infectious diseases important to public health beginning to be adopted in the Asia-
Pacific region. In fiscal 2018, we saw the emergence of this Asian demand materialize in orders from our distribution
partner for such markets, as well as from customers based in North America and Europe that were achieving growing
sales into Asia. While we believe Asia-Pacific demand for antigens should continue to grow over time, sales to this
newer market were also adding to the quarter-to-quarter volatility of Microbix’s revenues. In 2020, antigen demand
has demonstrated further volatility as a result of the COVID-19 pandemic and its impacts on patient behaviours and
global allocation of testing resources.
Beyond COVID-19, the long-term effect of increasing Asia-Pacific test usage may be to take Microbix’s potential
market from being the population of North America and Western Europe to closer to the much larger overall global
population. As a leading global supplier of such vital native antigens that has created and validated leading-edge
production techniques, Microbix believes it is now well-prepared to fulfill such demand growth.
In 2020, a further potential antigens market driver emerged in the form of the COVID-19 pandemic. While Microbix
does not currently supply native or recombinant antigens for immunoassay tests for the Coronavirus that causes
COVID-19 disease (properly called the SARS-CoV-2 virus), it does expect to see lasting long-term benefits within its
antigens business. Such benefits would initially come from increased testing capacity in general, and specifically
from increased testing for respiratory pathogens other than the SARS-CoV-2 virus. Notably, healthcare practitioners
are likely to want a definitive diagnosis of the reason for illness if a patient tests negative for SARS-CoV-2 (i.e., if
not that, then what?) and will need to know if a patient is co-infected with another respiratory pathogen if they
test positive for SARS-CoV-2 (e.g., at greater risk because co-infected with an influenza virus or a resulting bacterial
infection). Microbix has begun to see its flow of orders for some of its respiratory antigens increase, as its products
form an integral part of some approved tests. However, in the short term, patient testing for diseases other than
COVID-19 are being disrupted as a result of several factors, including testing resources limitations, patient reluctance
to see medical professionals for non-emergency issues, and recurring societal lockdowns. It is important to note that
these factors are not unique to Microbix, but are affecting the entire diagnostics industry on a worldwide basis.
Microbix’s QAPs business involves the use of antigens and nucleic acids for purposes beyond the large-scale
manufacturing of medical test kits. This newer usage packages a very small amount of stabilized and inactivated
bacteria, virus, or representative analogue, into individual small vials (e.g., 1.0 ml) or dried onto sample collection
swabs (i.e., Copan® “FLOQSwabs®”). Such samples are used as tools to establish whether the quality objectives
of clinical laboratories are being met – for example to assess whether testing equipment is functioning properly,
if staff has been adequately trained and is performing properly, or if reagents have spoiled. Such innovative,
proprietary, and branded quality assessment products (QAPs™, pronounced as “caps”) are a high value end-use of
Microbix’s biologicals expertise and there is a growing need for such products as regulators progressively tighten
their surveillance of the competence of medical testing labs. Notable drivers for such demand are the U.S. “CLIA”
regulations, European Union IVD-D and IVD-R regulations, and ISO 15189 standards, that are all encouraging labs to
increase use of quality products from qualified third parties across their ever-broadening portfolio of tests. Microbix
now derives close to 20% of its sales from providing QAPs – to laboratory accreditation organizations, diagnostic test
and instrument-makers and to clinical laboratories (directly and via distributors).
5
Canadian Funds OUTLOOK (Continued)
The COVID-19 pandemic has presented a pertinent illustration of the need for QAPs and Microbix’s capabilities to
create, license/register, and manufacture such products. As Microbix concluded this emerging pathogen had potential
to create a pandemic, it began the development of QAPs products directed at supporting the accuracy of emerging
molecular (RT-PCR) tests for the virus. Discussions around the development of this product began in February and
culminated in the announcement of an internally and externally validated prototype on March 30, Health Canada
(MDEL) licensing of commercial products on April 21, U.S. FDA registration on May 7, and the European Union “CE
Mark” on June 5. Microbix announced the first shipment of QAPs as licensed medical devices to support accuracy of
the testing programs of Canadian clinical labs on May 6, to European distributors on June 15, and to Microbix’s U.S.
distributor on June 30. Subsequent to the September 30 fiscal year-end, Microbix announced two further projects
to support the fight against the pandemic – A project to produce viral transport media (VTM) in support of Ontario’s
RT-PCR testing for COVID-19 disease (October 13), and the creation of QAPs to support antigen-based testing for
COVID-19 disease (October 20). Throughout this very challenging year, everyone at Microbix has been working hard to
help conquer the new challenges to human health and well-being.
Due to the positive prospects of each of the above lines of its business and products, Microbix continues to reinvest
to better ensure that it can meet expected growth in demand. Such work includes upgrading its manufacturing
technologies, quality systems, processes and training, capacity and allocation of resources, along with developing
and launching new products. This has involved many steps to both de-bottleneck and de-risk our production
processes, work that will be ongoing as Microbix continues to grow sales across our product lines. Starting in fiscal
2018, multiple upgrades to facilities have been completed and further investments will be made in infrastructure
going forward, such as those announced on May 27 and October 13. Additionally, Microbix will be investing in our
people – with efforts to enhance training, career progression, and retention.
Initial benefits of the manufacturing upgrades were seen in the sales of fiscal 2018 and 2019, which demonstrated
an annual compound growth rate of 15%, over the two year period. In fiscal 2020, Microbix has been positioning for
continuing sales growth, particularly of its QAPs product lines, alongside material improvement to its percentage
gross margins, with margin gains being driven by the use of new production technologies and a growing proportion
of higher margin products.
Fiscal 2020 proved to be challenging for many companies, including Microbix. The COVID-19 pandemic is disrupting
normal antigen ordering patterns and has delayed the widespread uptake of Microbix’s novel and innovative QAPs for
high-risk Human Papilloma Virus (HPV) molecular testing. The development and registration of leading-edge QAPs to
support COVID-19 test accuracy have partially, but not fully, offset these disruptions and delays.
Also notable has been the departure from our fiscal 2020 yield/margin objectives for bioreactor production –
principally in Q3. Specifically, equipment and materials failures, as we moved to a more intensive level of production,
led to an unacceptably high rate of batch failures over the period. Steps have been undertaken to correct that situation,
including heightened preventative maintenance and part-change programs, tighter scrutiny on materials, along with
process-related steps to increase the yield of successful batches. Management at all levels took responsibility for the
resulting margin losses, which were largely responsible for the net loss reported in Q3. Progress upon Corrective and
Preventative Actions (CAPAs) has been material, with a near cessation of batch losses and significant improvements
to average net yields.
Going forward, Microbix is continuously working to improve its percentage gross margin while also growing its sales
of antigens and QAPs, and commencing sales of VTM. Percentage gross margin improvements should be achievable
by way of an increasing proportion of bioreactor-driven antigen sales, improving antigen yields on a broader basis,
larger sales of a broader suite of quality assessment products, and making VTM a meaningful third source of sales.
Achievement of Microbix’s sales and gross margin goals is expected to lead to meaningful quarterly net earnings.
6
Canadian Funds OUTLOOK (Continued)
Quarterly reporting will update shareholders on progress with such operational goals.
With regards to Kinlytic urokinase, Microbix’s biologic clot-buster therapeutic, it is management’s opinion that the
COVID-19 pandemic has increased the difficulty of securing a partnering agreement to obtain the required re-development
funding. This is for two reasons: (i) the pandemic has disrupted the business of the hospital-oriented product companies
that are the logical partners for this asset (due to fewer normal-course procedures being done) and thereby constrained the
new product budgets of such companies, and (ii) ongoing restrictions on physical travel (i.e., closed borders, quarantines,
etc.) are making it more difficult to advance negotiations, conclude partnerships, and manage off-site manufacturing or
clinical trial work.
Accordingly, Microbix cannot represent a precise timeline for securing a funding partner to advance the re-development
of Kinlytic to sBLA filing and renewed commercial sales. As a consequence, management is required to follow International
Financial Reporting Standards (IFRS) and fully impair the book value of this asset, incurring a non-cash charge to earnings
and reducing the carried value of Kinlytic to zero on Microbix’s financial statements. Even though this asset has been
written down, management intends to continue efforts to partner this asset and return the drug to the United States
market for its catheter-clearance sub-indication.
To summarize, the company continues to target double-digit annual percentage growth in sales, while concurrently
expanding gross margins and net earnings. Sustainable growth and consistent profitability are core goals for Microbix.
Those objectives should be attainable based on increasing long-term demand for antigens, implementation of innovative
antigen production methods, the launch of new QAPs product lines, the commercialization of VTM, and successful
partnering of Kinlytic. It is intended for success with such initiatives to drive share price appreciation.
LIQUIDITY, CASH FLOWS AND CAPITAL RESOURCES
The consolidated financial statements have been prepared in accordance with the International Financial Reporting
Standards (“IFRS”) on a going concern basis, which presumes the Company will continue operating for the foreseeable
future and will be able to realize a return on its assets and discharge its liabilities and commitments in the normal course
of business.
The Company has incurred historical losses resulting in an accumulated deficit of $41,894,010 as at September 30,
2020. Management continuously monitors the financial position of the Company with respect to working capital needs, as
well as long-term capital requirements compared to the annual operating budget. Variances are highlighted and actions
are taken to ensure the Company is appropriately capitalized.
Future Liquidity and Capital Needs
The Company primarily funds new product development activities and capital expenditures from profits earned by its
business and, periodically from additional equity and/or debt.
Over the course of fiscal 2021, cash flow is expected to improve due to: 1) continued growth in antigen and quality
product sales, 2) improvements in product pricing or other sales terms, 3) commencement of sales of higher percentage
gross margin product from the Company’s bioreactor production process, and 4) other business development and
financial initiatives. Management expects these developments will significantly improve the overall liquidity position, as
the Company’s plans come to fruition.
To support the continued growth of the business, on January 30, 2020, the Company completed a non-brokered
private placement offering of an aggregate of 11,800,000 units for total gross proceeds of $2,360,000. Each unit consisted
of one common share of Microbix and one common share purchase warrant. Each whole warrant entitles the holder to
purchase one additional common share at an exercise price of $0.36 for five years. The financing was non-brokered. Cash
commissions of $104,300 were paid and an aggregate of 521,500 Broker’s Warrants were issued in the private placement
offering. Each Broker’s Warrant entitles the holder to purchase one common share at a price of $0.36 for a period of five
years. All securities issued under the private placement will be subject to a hold period expiring four months and one day
from the date of closing.
7
Canadian Funds LIQUIDITY, CASH FLOWS AND CAPITAL RESOURCES (Continued)
Future Liquidity and Capital Needs (Continued)
Microbix will continue to monitor and manage its cash position, with the objective of anticipating and meeting all
future liquidity and capital needs.
Outstanding Share Capital
Share capital issued and outstanding as at September 30, 2020 was $35,357,144 for 108,772,705 common shares and
September 30, 2019 was $33,912,460 for 96,972,705 common shares.
Global Pandemic
In early 2020, the coronavirus (“COVID-19”) was confirmed in multiple countries throughout the world and on March 11,
2020, the World Health Organization declared a global pandemic.
As a result of the continued and uncertain economic and business impact of the COVID-19 pandemic, the Company
has reviewed the estimates, judgments and assumptions used in the preparation of its financial statements, including
with respect to the determination of whether indicators of impairment exist for its tangible and intangible assets and the
credit risk of its counterparties.
The extent to which COVID-19 and any other pandemic or public health crisis impacts the Company’s business, affairs,
operations, financial condition, liquidity, availability of credit and results of operations will depend on future developments
that are highly uncertain and cannot be predicted with any meaningful precision, including new information which may
emerge concerning the severity of the COVID-19 virus and the actions required to continue to contain the COVID-19 virus
or remedy its impact, among others.
Any of these developments, and others, could have a material adverse effect on the Company’s business, financial
condition, operations and results of operations. In addition, because of the severity and global nature of the COVID-19
pandemic, it is possible that estimates in the Company’s financial statements will change in the near term and the effect of
any such changes could be material, which could result in, among other things, impairment of long-lived assets or a change
in the estimated credit losses on accounts receivable. The Company is constantly evaluating the situation and monitoring
any impacts or potential impacts to its business.
See the “Risks and uncertainties” section of this MD&A for a further discussion of the COVID-19 pandemic.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future
material effect on its financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or
capital resources.
TREND INFORMATION
Historical spending patterns are no indication of future expenditures. Investment in the new products and technologies is
at the discretion of management and the board of directors. The Company is not aware of any material trends related to
its business that have not been discussed in this Management Discussion and Analysis dated December 17, 2020.
RISKS AND UNCERTAINTIES
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, including through the use of financial instruments where appropriate. Further
discussion of the management of such risks is included in note 20 to the audited consolidated financial statements for the
year ended September 30, 2020.
8
Canadian Funds RISKS AND UNCERTAINTIES (Continued)
COVID-19 Pandemic
As previously discussed, the Company’s business may be negatively impacted by the COVID-19 pandemic, which has
created, and continues to create, significant societal and economic disruptions. The changing and rapidly-evolving
effects of the COVID-19 pandemic – the duration, extent and severity of which are currently unknown – on investors,
businesses, the economy, government bodies, society and the financial markets could, among other things, add
volatility to the global stock markets and change interest rate environments. The COVID-19 pandemic and measures to
prevent its spread may negatively impact the Company, its customers, counterparties, employees, third-party service
providers and other stakeholders, as applicable, in a number of ways, including, but not limited to, by: (i) adversely
affecting the business operations of the Company, including the Company’s planned sales and marketing processes
for its approved products; (ii) disrupting the Company’s supply chain, including the manufacture and/or delivery of
its products to its customers and distributors on which the Company relies; (iii) adversely affecting local, national or
international economies and employment levels; (iv) causing business interruptions, including as a result of steps
taken by the Company in compliance with government recommendations and orders, such as requiring employee to
work remotely, which may cause strain on such existing resources as information technology systems, and suspension
of all non-essential travel; (v) disrupting public and private infrastructure, including communications and financial
services, which could disrupt the Company’s normal business operations; (vi) disrupting health care delivery;
disrupting or prolonging business development initiatives such as the partnering of Kinlytic® urokinase. At this point,
the extent to which the COVID-19 pandemic will or may impact the Company is uncertain and these factors are beyond
the Company’s control; however, any of these events, in isolation or in combination, could have a material adverse
effect on the Company’s business, results of operations and financial condition and the market price of the Company’s
securities. The Company is exposed to business risks, both known and unknown, which may or may not affect its
operations. Management works continuously to mitigate unacceptable risk, while still allowing the business to grow
and prosper. These risk factors include the following:
A significant portion of Antigens Product sales are dependent on key clients, open borders, international transportation
systems, and access to raw materials.
A significant share of the Company’s antigens products sales are sold to a few key customers globally. These products
contributed a significant share of the revenues. The loss of a key customer, or restrictions on export, import, or
international transportation of its products, raw materials or insufficient marketing resources, could materially impact
revenue and profitability.
Environmental, safety and other regulatory
Microbix’s research and manufacturing operations involves potentially hazardous materials. The Company takes
extensive precautions to appropriately manage these materials as regulated by the applicable environmental and
safety authorities. Changes in environmental and safety legislation may limit the Company’s activities or increase
costs. An environmental accident could adversely impact its operations. Microbix’s antigen products are considered a
production ingredient and not directly regulated by governments in Canada or other jurisdictions. Commercialization
of certain quality assessment products require approval of regulatory agencies such as the FDA, in which case Microbix
will not receive revenue until regulatory approval is obtained.
Quality Assessment Products in development
The Company has multiple quality assessment products under development, with the goal of building its sales of
this category of product. There is no assurance that these development activities will result in the completion of new
commercial products. If the Company is unable to develop and commercialize products, it will be unable to recover its
related product development investments.
9
Canadian Funds RISKS AND UNCERTAINTIES (Continued)
Product commercialization requires strategic relationships
To commercialize large market products in development, Microbix may need to establish strategic partnerships, joint
ventures or licensing relationships with pharmaceutical, biotechnology or animal genetics companies. It is possible
the Company may be unable to negotiate mutually acceptable terms.
Operating and capital requirements
Microbix seeks to earn a profit on the sale of its Antigens & QAPs, which is a major source of funding for its research
and development activities. The Company believes that cash generated from operations is sufficient to meet normal
operating and capital requirements. However, the Company may need to raise additional funds, from time to time
for several reasons including, to expand production capacity, to advance its current research and development
programs, to support various collaboration initiatives with third parties, to underwrite the cost of filing, prosecuting
and enforcing patents and other intellectual property rights, to invest in acquisitions, new technologies and new
market developments. Additional financing may not be available, and even if available, may not be offered on
acceptable terms.
Future success may depend on successfully commercializing new products or technologies
In the nearer term, Microbix must maintain and grow its existing product sales. To survive and prosper over the longer
term, Microbix may need to commercialize new products or technologies. Such work is inherently uncertain and there
is no guarantee that Microbix will be successful with its efforts.
Failure to obtain and protect intellectual property could adversely affect business
Microbix’s future success depends, in part, on its ability to obtain patents, or licenses to patents, maintain trade secret
protection and enforce its rights against others. The Company’s intellectual property includes trade secrets and know-
how that may not be protected by patents. There is no assurance that the Company will be able to protect its trade
know-how. To help protect its intellectual property, the Company requires employees, consultants, advisors and
collaborators to enter into confidentiality agreements. However, these agreements may not adequately protect trade
secrets, know-how or other proprietary information in the event of any unauthorized use or disclosure. Protection of
intellectual property may also entail prosecuting claims against others who the Company believes are infringing its
rights or securing its freedom to operate relative to the rights of other parties. Involvement in intellectual property
litigation could result in significant costs, adversely affecting the development of products or sales of the challenged
product, or intellectual property, and divert the efforts of its scientific and management personnel, whether or not
such litigation is resolved in the Company’s favour.
Microbix will continue to face significant competition
Competition from life sciences companies, and academic and research institutions is significant. Many competitors
have substantially greater resources and may have greater general capabilities in the areas of scientific and product
development, legal review, manufacturing, sales and marketing, and financial support than Microbix. While the
Company continues to expand its technological, commercial, legal and financial capabilities in order to remain
competitive, Microbix’s competitors may also be making significant investments in all of these areas, which could
make it more difficult for Microbix to commercialize its products and technologies.
10
Canadian Funds FINANCIAL RISK MANAGEMENT
The primary risks affecting the Company are summarized below and have not changed during the fiscal year. The list
does not cover all risks, nor is there an assurance that the strategy of management to mitigate the risks is sufficient to
eliminate the risk.
Credit risk:
The Company’s cash is held in accounts or short-term interest bearing accounts at one of the major Canadian
chartered banks. Management perceives the credit risk to be low. Typically the outstanding trade receivable balance
is relatively concentrated with a few large customers representing the majority of the value. As at September 30,
2020, five customers accounted for 83% (September 30, 2019 - five customers accounted for 78%) of the outstanding
balance. The Company has had minimal bad debts over the past several years and accordingly management has
recorded an allowance of $10,000 (September 30, 2019 - $25,625).
Currency risk:
The Company is exposed to currency risk given its global customer base. Over 90% of its revenue is denominated in
either U.S. dollars or Euros. The Company does not use financial instruments to hedge this currency risk. At September
30, 2020, the significant balances, quoted in Canadian dollars, held in foreign currencies are:
US dollars
2020
2019
Euros
2020
2019
Cash
Accounts receivable
Accounts payable and accrued liabilities
$ 15,397 $
1,186,876
150,600
88,820
797,352
197,551
$
1,551
273,858
-
$
5,223
591,454
-
Based upon 2020 results, the impact of a 5% increase in the U.S. dollar against the Canadian dollar would result in an
increase in annual U.S. dollar based revenue of approximately $327,900 Cdn. The impact of a 5% increase in the Euro
against the Canadian dollar would result in an increase in annual Euro based revenue of approximately $180,200.
Correspondingly, the impact of a 5% decrease in the U.S. dollar against the Canadian dollar would result in a loss in
annual U.S. dollar based revenue of approximately $327,900 Cdn. The impact of a 5% decrease in the Euro against the
Canadian dollar would result in a loss in annual Euro-based revenue of approximately $180,200.
Liquidity risk
Liquidity risk measures the Company’s ability to meet its financial obligations when they fall due. To manage this
situation, the Company projects and monitors its cash requirements to accommodate changes in liquidity needs. In
addition, during fiscal 2017 the Company announced that it has arranged a secured revolving credit facility with The
Toronto-Dominion Bank (“TD Bank”) and Export Development Canada (“EDC”). The credit facility is being used to fund
the Company’s need for working capital to grow its existing business. This facility is helping to satisfy the Company’s
liquidity needs and to manage the liquidity risk going forward.
Interest rate risk
Financial instruments that potentially subject the Company to interest rate risk include those assets and liabilities
with a variable interest rate. Exposure to interest rate risk is primarily on the BDC debt that has a variable rate pegged
to the bank rate. The rate can be fixed, if the outlook indicates interest rates will move higher. The only other variable
debt the Company has is the $2,000,000 line of credit that bears interest at the bank’s prime lending rate plus 2.0%.
As at September 30, 2020 the Company has not drawn on this line of credit. A 1% increase in the bank rate would cost
the Company approximately $30,000 per year for BDC and about $20,000 on the line of credit usage if it were fully used
throughout the fiscal year.
11
Canadian Funds
FINANCIAL RISK MANAGEMENT (Continued)
Market risk
Market risk reflects changes in pricing for both Antigens & QAPs and raw materials based on supply and demand
criteria; also market forces can affect foreign currency exchange rates as well as interest rates which could affect the
Company’s financial performance or the value of its financial instruments. Microbix products are valuable components
in our customers’ products and cannot be easily replaced. The Company works closely with customers to ensure its
products meet their specific criteria.
Fair value
The fair value of a financial instrument is approximated by the consideration that would be agreed to in an arm’s
length transaction between willing parties and through appropriate valuation methods, but considerable judgement
is required for the Company to determine the value. The actual amount that could be realized in a current market
exchange could be different than the estimated value.
The fair values of financial instruments included in current assets and current liabilities approximate their carrying
values due to their short-term nature.
The fair value of the long-term debt is based on rates currently available for items with similar terms and maturities.
The convertible and non-convertible debenture fair values are not readily determinable as the convertible debentures
have been issued to shareholders of the Company. The fair values of financial instruments in other long-term liabilities
approximate their carrying values as they are recorded at the net present values of their future cash flows, using an
appropriate discount rate.
CRITICAL ACCOUNTING ESTIMATES
The preparation of these interim condensed consolidated financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. The
Company’s audited consolidated financial statements are prepared in accordance with IFRS and the reporting currency
is Canadian dollars. On an on-going basis, management bases its estimates on historical and other experience and
assumptions, which it believes are reasonable in the circumstances. The significant accounting policies that the
Company believes are the most critical in fully understanding and evaluating the reported financial results include:
Intangible Assets
Intangible assets include technology costs, patents, trademarks and licenses. Each is recorded at cost and amortized
on a straight-line basis over the term of the agreements or useful life of the asset. Amortization commences when the
intangible asset is available for use. Intangibles with definite lives but not yet available for use are assessed at least
annually for impairment or more frequently if there are indicators of impairment.
Impairment of Long-lived Assets
The Company reviews the carrying value of non-financial assets with definite lives for potential impairment when
events or changes in circumstances indicate that the carrying amount may not be recoverable. The carrying value of
non-financial assets with definite lives but are not ready for use, are assessed at least annually for impairment based
on the impairment test on cash-generating units (CGUs). The impairment test on CGUs is carried out by comparing the
carrying amount of the CGU and its recoverable amount. The recoverable amount of a CGU is the higher of fair value
less costs to sell and its value in use. This complex valuation process entails the use of methods such as the discounted
cash method which requires numerous assumptions to estimate future cash flows.
The recoverable amount is impacted significantly by the discount rate selected to be used in the discounted cash flow
model, as well as the quantum and timing of risk-adjusted future cash flows and the growth rate used for the extrapolation.
The impairment loss is calculated as the difference between the fair value of the asset and its carrying value.
12
Canadian Funds CRITICAL ACCOUNTING ESTIMATES (Continued)
Non-Convertible and Convertible Debentures
Management determines the fair value of the debenture using valuation techniques. Those techniques are significantly
affected by the estimated assumptions used, including discount rates, expected life and estimates of future cash flows.
Deferred income taxes
Deferred income tax assets and liabilities are recognized for the estimated income tax consequences attributable
to differences between financial statement carrying amounts of assets and liabilities and their respective income
tax bases. Deferred income tax assets and liabilities are measured using tax rates expected to be in effect when the
temporary differences are expected to be recovered or settled. The effects of changes in income tax rates are reflected
in future income tax assets and liabilities in the year that the rate changes are substantively enacted.
Share-based payments
The Company applies the fair value method of accounting for stock-based compensation for awards granted to
officers, directors, employees and consultants of the Company. The fair value of the award at the time of granting is
determined using the Black-Scholes option pricing model, and recognized as a compensation expense on a straight-
line basis over the vesting period with an offsetting amount recorded to contributed surplus. The amount of the
compensation cost recognized at any date at least equals the value of the portion of the options vested at that date.
When stock options are exercised, the consideration paid by employees or directors, together with the related amount
in contributed surplus, is credited to capital stock. When an employee leaves the Company, vested options must be
exercised within 90 days, or the options expire. Any options that are unvested are reversed in the period that the
employee leaves.
FINANCIAL INSTRUMENTS
The fair value of a financial instrument is approximated by the consideration that would be agreed to in an arm’s
length transaction between willing parties and through appropriate valuation methods, but considerable judgment
is required for the Company to determine the value. The actual amount that could be realized in a current market
exchange could be different than the estimated value.
The carrying amounts of cash and cash equivalents, accounts receivable, bank indebtedness and accounts payable
and accrued liabilities approximate fair value due to the short-term maturities of these instruments. Based on available
market information, the fair value of the obligation under capital lease approximates its carrying value.
The fair value of the long-term debt is based on rates currently available for items with similar terms and maturities.
The fair value of the liability for each convertible debenture has been calculated and the residual is accounted for in
equity. The Company does not have any off balance sheet financial instruments.
Disclosure Controls
The Chief Executive Officer and the Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure
controls and procedures, as defined in the National Instrument 52-109 Certification of Disclosure in Issuer’s Annual
Filings (NI 52-109F1). As at September 30, 2020, management has concluded that the disclosure controls are effective
in providing reasonable assurance that information required to be disclosed in the Company’s reports is recorded,
processed summarized and reported within the time periods specified in the Canadian Securities Administrator’s
rules and forms.
13
Canadian Funds FINANCIAL INSTRUMENTS (Continued)
Internal Controls Over Financial Reporting
The design of internal controls over financial reporting (“ICFR”) within the company is a management responsibility
to provide reasonable assurance that the reliability of financial reporting and that the preparation of financial
statements for external purposes is in accordance with generally accepted accounting principles of IFRS. While
the CEO and CFO believe that the internal controls are adequate to provide the above information, the process to
evaluate and document all policies and procedures that could impact financial reporting is continuously reviewed
with consultation with the Audit Committee. Shareholders should be aware that Microbix is a small company
without the department resources associated with larger firms. Management is using the Committee of Sponsoring
Organization of the Treadway Commission (“COSO”). Framework and has concluded that the Internal Control over
Financial Reporting (“ICFR”) as defined in NI 52-109 is effective as at the period ended September 30, 2020.
Examination by the Chief Executive Officer and the Chief Financial Officer showed that there were no changes
to the internal controls over financial reporting during the period ended September 30, 2020 that have materially
affected, or are reasonably thought to materially affect, the internal control over financial reporting.
IMPACT OF NEW ACCOUNTING STANDARDS
Certain new standards, interpretations, amendments and improvements to existing standards were issued by the
IASB or IFRS Interpretation Committee (“IFRIC”) that are mandatory at certain dates or later. Management is still
assessing the effects of the pronouncements on the Company. The standards impacted that may be applicable to the
Company are described below.
NEW ACCOUNTING PRONOUNCEMENTS ADOPTED IN FISCAL 2020
The Company has adopted new amendments to the following accounting standards effective for its interim and
annual consolidated financial statements commencing October 1, 2019. The effect of these pronouncements on the
Company’s results and operations are described below.
IFRS 16, Leases (“IFRS 16”)
On January 13, 2016, the IASB issued IFRS 16, which outlines requirements for lessees to recognize assets and liabilities
for most leases. Lessees are required to recognize the lease liability for the obligations to make lease payments and
a right-of-use asset for the right to use the underlying asset for the lease term. Lease liability is measured at the
present value of lease payments to be made over the term of the lease. The right-of-use asset is initially measured at
the amount of the lease liability and adjusted for prepayments, direct costs and incentives received.
IFRS 16 – Leases supersedes IAS 17 – Leases, IFRIC 4 – Determining whether an Arrangement contains a Lease, SIC
15 – Operating Leases - Incentives and SIC 27 – Evaluating the Substance of Transactions Involving the Legal Form of a
Lease. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases
and requires lessees to account for most leases under a single on–balance sheet model.
Lessor accounting is substantially unchanged from IAS 17. Lessors will continue to classify leases as either
operating or finance leases using similar principles as in IAS 17. The Company is not currently a lessor.
The Company applied IFRS 16 using the modified retrospective approach. Accordingly, the comparative
information presented for 2019 has not been restated. The lease liabilities were recorded as the present value of the
remaining lease payments discounted at the Company’s incremental borrowing rate as at the date of application.
The right-of-use assets were recorded at an amount equal to the lease liabilities, adjusted for any prepaid or accrued
lease payments (nil).
14
Canadian Funds NEW ACCOUNTING PRONOUNCEMENTS ADOPTED IN FISCAL 2020 (Continued)
IFRS 16, Leases (“IFRS 16”) (Continued)
The Company elected to use the practical expedient on transition allowing the standard to be applied only to
contracts that were previously identified as leases under IAS 17 at the date of initial application. The Company also
elected to use the recognition exemptions for lease contracts that, at the commencement date, have a lease term
of 12 months or less and do not contain a purchase option (‘short-term leases’), and lease contracts for which the
underlying asset is of low value (‘low-value assets’).
The Company did not change the initial carrying amounts of recognized assets and liabilities at the date of
initial application for leases previously classified as finance leases (i.e., the right-of-use assets and lease liabilities
equal the leased assets and liabilities recognized under IAS 17). The requirements of IFRS 16 was applied to these
leases from October 1, 2019. The opening right-of-use assets includes $319,321 that was previously recognized as
a lease asset and the opening lease liability included $249,527 that was previously recognized as a lease liability
under IAS 17.
Impact on the financial statements on transition
On transition to IFRS 16 at October 1, 2019, the Company recognized right-of-use assets of $763,541 and lease
liabilities of $693,747, respectively. There was no impact on retained earnings.
Lease liabilities for leases that were classified as operating leases at September 30, 2019 were discounted using
the incremental borrowing rate at October 1, 2019. The weighted average rate applied was 3.7%.
Activity within right-of-use assets and lease liabilities during the period were as follows:
Right-of-Use Assets
Property
Equipment
Lease
Liabilities
Balance, October 1, 2019
Additions
Depreciation Expense
Interest Accretion
Payments
Balance, September 30, 2020
$ 419,843
-
(74,088)
-
-
$ 345,755
$ 343,698
6,695
(47,600)
-
-
$ 302,793
$
693,747
6,695
-
15,146
(173,649)
541,939
$
Right-of-use assets are included in property, plant and equipment on the statement of financial position.
IFRS Interpretation Committee Interpretation 23, Uncertainty over Income Tax Treatments (“IFRIC 23”)
IFRIC 23 was issued in June 2017 and is effective for years beginning on or after January 1, 2019 and was adopted
by the Company effective October 1, 2019, to be applied retrospectively. IFRIC 23 provides guidance on applying
the recognition and measurement requirements in IAS 12, Income Taxes, when there is uncertainty over income
tax treatments including, but not limited to, whether uncertain tax treatments should be considered together or
separately based on which approach better predicts resolution of the uncertainty. The adoption of this interpretation
did not have a material impact on the consolidated financial statements.
15
Canadian Funds
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Microbix Biosystems Inc.
We have audited the consolidated financial statements of Microbix Biosystems Inc. and its subsidiaries (the Group), which
comprise the consolidated statements of financial position as at September 30, 2020 and 2019, and the consolidated
statements of income (loss) and comprehensive income (loss), consolidated statements of changes in shareholders’ equity
and consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements,
including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects the consolidated
financial position of the Group as at September 30, 2020 and 2019, and its consolidated financial performance and its
consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to
our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Other information
Management is responsible for the other information. The other information comprises:
• Management’s Discussion and Analysis; and
• The information, other than the consolidated financial statements and our auditor’s report thereon,
in the Annual Report.
Our opinion on the consolidated financial statements does not cover the other information and we do not and will not express
any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis and Annual Report prior to the date of this auditor’s report. If, based on
the work we have performed, we conclude that there is a material misstatement of this other information, we are required to
report that fact in this auditor’s report. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance
with IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally
accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these consolidated financial statements.
16
Canadian Funds
INDEPENDENT AUDITOR’S REPORT (Continued)
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment
and maintain professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting
a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions
that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that
a material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure, and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the group audit. We remain solely
responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we identify during
our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be
thought to bear on our independence, and where applicable, related safeguards.
The engagement partner on the audit resulting in this independent auditor’s report is Laura Sluce.
Toronto, Canada
December 17, 2020
17
Canadian Funds
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS AT SEPTEMBER 30, 2020 AND 2019
ASSETS
CURRENT ASSETS
Cash
Accounts receivable (Note 20)
Inventories (Note 5)
Prepaid expenses and other assets
Investment tax credit receivable
TOTAL CURRENT ASSETS
LONG-TERM ASSETS
Deferred tax asset (Note 15)
Property, plant and equipment (Note 4, 6)
Intangible assets (Note 7)
TOTAL LONG-TERM ASSETS
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities
Bank indebtedness (Note 9)
Current portion of long-term debt (Note 9)
Current portion of debentures (Note 8)
Current portion of lease liability (Note 4)
Deferred revenue (Note 22)
TOTAL CURRENT LIABILITIES
Non-convertible debentures (Note 8)
Convertible debentures (Note 8)
Lease liability (Note 4)
Long-term debt (Note 9)
TOTAL LONG-TERM LIABILITIES
TOTAL LIABILITIES
SHAREHOLDERS’ EQUITY
Share capital (Note 10)
Equity component of
convertible debentures (Note 8)
Contributed surplus
Accumulated deficit
TOTAL SHAREHOLDERS’ EQUITY
Canadian Funds
2020
2019
$
92,661
1,877,009
4,292,664
220,065
10,433
6,492,832
$
95,571
1,709,470
4,480,192
99,201
67,874
6,452,308
-
7,363,155
1,742,024
9,105,179
1,568,237
6,650,380
4,958,648
13,177,265
$ 15,598,011
$ 19,629,573
$ 1,488,312
-
235,230
892,125
158,633
1,315,738
4,090,038
$ 1,462,616
1,400,000
408,260
774,178
80,378
640,463
4,765,895
713,853
1,419,834
383,306
2,371,503
4,888,496
750,350
1,353,905
169,149
2,052,866
4,326,270
$ 8,978,534
$ 9,092,165
$ 35,357,144 $ 33,912,460
2,903,789
10,252,554
(41,894,010)
$ 6,619,477
2,903,789
9,387,644
(35,666,485)
$ 10,537,408
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY
$ 15,598,011
$ 19,629,573
Commitments and Contingencies (Note 24)
(Signed) “Martin Marino”
Martin Marino
Director
(Signed) “Cameron L. Groome”
caMeron L. GrooMe
Director
The accompanying notes and summary of significant accounting policies are an integral part of these consolidated financial statements.
18
Canadian Funds
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
For the years ended September 30, 2020 and 2019
Canadian Funds
SALES
Antigens and QAPs
Royalties
TOTAL SALES
COST OF GOODS SOLD
Antigen and QAPs (Notes 5, 14)
Royalties
TOTAL COST OF GOODS SOLD
GROSS MARGIN
EXPENSES
Selling and business development (Note 14)
General and administrative (Note 14)
Research and development (Note 14)
Financial expenses (Note 17)
OPERATING INCOME (LOSS)
BEFORE IMPAIRMENT OF ASSETS
Impairment of long-lived assets (Note 7)
OPERATING INCOME (LOSS) FOR THE YEAR,
BEFORE INCOME TAXES
INCOME TAXES
Deferred income taxes
NET INCOME (LOSS) AND COMPREHENSIVE
INCOME (LOSS) FOR THE YEAR
NET LOSS PER SHARE
Basic (Note 13)
Diluted (Note 13)
2020
2019
$ 10,230,107
294,797
10,524,904
$ 13,067,727
344,614
13,412,341
5,808,978
55,029
5,864,007
6,796,735
68,159
6,864,894
4,660,897
6,547,447
632,554
3,539,818
1,013,126
1,056,102
651,460
3,744,036
1,042,192
1,066,078
(1,580,703)
43,681
3,078,585
-
(4,659,288)
43,681
1,568,237
11,763
$ (6,227,525) $
31,918
$
$
(0.059)
(0.059)
$
$
0.000
0.000
The accompanying notes and summary of significant accounting policies are an integral part of these consolidated financial statements.
19
Canadian Funds
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended September 30, 2020 and 2019
OPERATING ACTIVITIES
Net Income (Loss) for the Year
Items not affecting cash
Amortization and depreciation (Note 21)
Accretion of debentures (Note 8)
Stock options and warrants expense (Note 12)
Accretion interest expense
Deferred tax asset (Note 3)
Impairment of long-term assets (Note 7)
Change in non-cash working capital balances (Note 16)
CASH PROVIDED BY OPERATING ACTIVITIES
INVESTING ACTIVITIES
Purchase of property, plant and equipment (Note 6)
Additions from internal development
of intangible assets (Note 7)
CASH USED IN INVESTING ACTIVITIES
FINANCING ACTIVITIES
Repayments of long-term debt (Note 9)
Proceeds from equipment Loan
and government loan (Note 9)
Repayments of non-convertible debentures (Note 8)
Payment of lease liabilities
Issue of common share units, net of issue costs
Proceeds (repayments) of credit facility (Note 9)
CASH PROVIDED BY FINANCING ACTIVITIES
NET CHANGE IN CASH - DURING THE YEAR
CASH - BEGINNING OF YEAR
CASH - END OF YEAR
Canadian Funds
2020
2019
$ (6,227,525) $
31,918
690,087
255,883
158,836
23,027
1,568,237
3,078,585
461,436
568,822
208,592
151,988
-
11,763
-
(928,715)
8,566
44,368
(812,708)
(433,233)
(1,200)
(81,567)
(813,908)
(514,800)
(408,260)
(438,120)
742,085
(108,504)
(173,648)
2,150,759
(1,400,000)
-
(99,609)
(80,626)
-
1,140,000
802,432
521,645
(2,910)
51,213
95,571
44,358
$
92,661
$
95,571
The accompanying notes and summary of significant accounting policies are an integral part of these consolidated financial statements.
20
Canadian Funds
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
As at September 30, 2020 and 2019
SHARE CAPITAL (Note 10)
STATED
NUMBER OF
CAPITAL
SHARES
CONTRIBUTED
SURPLUS
DEFICIT
Canadian Funds
EQUITY
COMPONENT OF
DEBENTURE
TOTAL
SHAREHOLDERS’
EQUITY
BALANCE, SEPTEMBER 30, 2018
96,972,705
$33,912,460
$9,235,656 $(35,698,403) $2,903,789 $10,353,502
Share-based compensation
expense
Net income and comprehensive
income for the year
-
-
151,988
-
-
151,988
-
-
-
31,918
-
31,918
BALANCE, SEPTEMBER 30, 2019 96,972,705 $33,912,460 $ 9,387,644 $(35,666,485) $2,903,789 $10,537,408
Share-based compensation
expense
Issue of Warrants pursuant to
Private Placement
Share Issuance pursuant to
Private Placement
-
-
158,836
-
-
158,836
-
-
748,550
-
-
748,550
11,800,000
1,611,450
-
-
-
1,611,450
Share Issue Costs pursuant to
Private Placement
Net loss and comprehensive loss
for the year
-
(166,766)
(42,476)
-
-
(209,242)
-
-
-
(6,227,525)
-
(6,227,525)
BALANCE, SEPTEMBER 30, 2020 108,772,705 $35,357,144 $10,252,554 $(41,894,010) $2,903,789 $6,619,477
The accompanying notes and summary of significant accounting policies are an integral part of these consolidated financial statements.
21
Canadian Funds
Notes to the Consolidated Financial Statements
As at and for the years ended September 30, 2020 and 2019
1. NATURE OF THE BUSINESS
Microbix Biosystems Inc. (the “Company” or “Microbix”), incorporated under the laws of the Province of Ontario,
develops and commercializes proprietary biological and technology solutions for human health and wellbeing.
Microbix manufactures a wide range of critical biological materials for the global diagnostics industry, notably antigens
(Antigen business) used in immunoassays or quality assessment and proficiency testing controls (QAPs business).
The registered office and principal place of business of the Company is located at 265 Watline Avenue, Mississauga,
Ontario, L4Z 1P3.
2. BASIS OF PREPARATION
The Company’s management prepared these consolidated financial statements in accordance with International
Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”). The Board
of Directors approved these consolidated financial statements on December 17, 2020.
Basis of Measurement
The consolidated financial statements have been prepared under the historical cost convention, except for the
revaluation of certain financial assets and financial liabilities to fair value. The consolidated financial statements are
presented in Canadian dollars, which is the Company’s functional currency.
Basis of consolidation
These consolidated financial statements include the accounts of the Company and its wholly owned subsidiary,
Crucible Biotechnologies Limited, over which the Company has control. Control exists when the entity is exposed, or
has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through
its power over the entity. The non-controlling interest component, if any, of the Company’s subsidiaries is included in
equity. All significant intercompany transactions have been eliminated upon consolidation.
Global pandemic
In early 2020, the Coronavirus (“COVID-19”) was confirmed in multiple countries throughout the world and on March 11,
2020, the World Health Organization declared a global pandemic. As a result of the continued and uncertain economic
and business impact of the COVID-19 pandemic, the Company has reviewed the estimates, judgments and assumptions
used in the preparation of its financial statements, including with respect to the determination of whether indicators of
impairment exist for its tangible and intangible assets and the credit risk of its counterparties.
The extent to which COVID-19 and any other pandemic or public health crisis impacts the Company’s business,
affairs, operations, financial condition, liquidity, availability of credit and results of operations will depend on future
developments that are highly uncertain and cannot be predicted with any meaningful precision, including new
information which may emerge concerning the severity of the COVID-19 virus and the actions required to continue to
contain the COVID-19 virus or remedy its impact, among others.
Any of these developments, and others, has had a material adverse effect on the Company’s business, financial
condition, operations and results of operations. In addition, because of the severity and global nature of the COVID-19
pandemic, it is possible that estimates in the Company’s financial statements will change in the near term and the effect
of any such changes could be material, which could result in, among other things, an impairment of long-lived assets
or a change in the estimated credit losses on accounts receivable. The Company is constantly evaluating the situation
and monitoring any impacts or potential impacts to its business. The duration and impact of the COVID-19 outbreak are
unknown at this time, as is the efficacy of the government and central bank interventions. It is not possible to reliably
estimate the length and severity of these developments and the impact on the financial results and condition of the
Company in future periods.
22
Canadian Funds Notes to the Consolidated Financial Statements
As at and for the years ended September 30, 2020 and 2019
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of estimates and judgments
The preparation of financial statements requires management to make estimates and judgments that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from
estimates and such differences could be material.
Key areas of managerial judgments and estimates are as follows:
Property, plant and equipment:
Measurement of property, plant and equipment involves the use of estimates for determining the expected useful lives of
depreciable assets. Management’s judgment is also required to determine depreciation methods and an asset’s residual value
and whether an asset is a qualifying asset for the purposes of capitalizing borrowing costs.
Internally generated intangible assets:
Management monitors the progress of each internal research and development project. Significant judgment is required to
distinguish between the research and development phases. Development costs are recognized as an asset when the following
criteria are met: (i) technical feasibility; (ii) management’s intention to complete the project; (iii) the ability to use or sell; (iv)
the ability to generate future economic benefits; (v) availability of technical and financial resources; (vi) ability to measure
the expenditures reliably. Research costs are expensed as incurred. Management also monitors whether the recognition
requirements for development assets continue to be met and whether there are any indicators that capitalized costs may be
impaired. The amortization period and amortization method for intangible assets are reviewed at least at the end of each
reporting period.
Financial assets and liabilities:
Estimates and judgments are also made in the determination of fair value of financial assets and liabilities and include
assumptions and estimates regarding future interest rates, the relative creditworthiness of the Company to its counterparties,
the credit risk of the Company’s counterparties relative to the Company, the estimated future cash flows and discount rates.
Income taxes:
The Company recognizes deferred tax assets, related tax-loss carry-forwards and other deductible temporary differences where
it is probable that sufficient future taxable income can be generated in order to fully utilize such losses and deductions. This
requires significant estimates and assumptions regarding future earnings, and the ability to implement certain tax planning
opportunities in order to assess the likelihood of utilizing such losses and deductions.
Fair value of share-based compensation:
The Company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity
instruments at the date on which they are granted. Estimating fair value for share-based compensation transactions requires
determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate
also requires determining the most appropriate inputs to the valuation model including the expected life of the share option,
volatility, dividend yield and forfeiture rates and making assumptions about them.
Impairments:
Long-lived assets are reviewed for impairment upon the occurrence of events or changes in circumstances indicating that the
carrying value of the asset may not be recoverable. For the purpose of measuring recoverable amounts, assets are grouped
at the lowest levels for which there are separately identifiable cash flows (cash-generating units). The recoverable amount is
the higher of an asset’s fair value less costs to sell and value in use. An impairment loss is recognized for the amount by which
the asset’s carrying amount exceeds its recoverable amount. Management evaluates impairment losses for potential reversals
when events or circumstances warrant such consideration.
23
Canadian Funds
Notes to the Consolidated Financial Statements
As at and for the years ended September 30, 2020 and 2019
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition
Revenues from product sales are recognized when control of the promised good is transferred to the Company’s customers, in
an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods.
Revenues from licensing of the Company’s intangible assets are recognized when the service is rendered and control
of the service is transferred to the Company’s customers. Royalty income is recognized based on activity at the point
in time each service instance is provided.
The Company may invoice certain customers in advance for contracted product sales. Amounts received in advance
of control of the product transferring to the customer are deferred and recognized as revenue in the period control
is transferred.
Cash
Cash consists of cash on hand and deposits with banks and investments in highly liquid instruments with original maturities
of three months or less. There are no cash equivalents held at September 30, 2020 or 2019.
Financial assets and liabilities
The Company’s financial assets and liabilities (financial instruments) include cash, accounts receivable, accounts payable and
accrued liabilities, long-term debt, bank indebtedness, convertible and non-convertible debentures. All financial instruments
are recorded at fair value at recognition. Financial instruments are measured by grouping them into classes upon initial
recognition, based on the purpose of the individual instruments.
Subsequent to initial recognition, the classification and measurement of the Company’s financial assets are included in one
of the following categories:
•
• Amortized cost: Financial instruments that are held for collection of contractual cash flows, where those cash flows
represent solely payments of principal and interest, are measured at amortized cost. Interest income (expense)
from these financial instruments is recorded in net income (loss) using the effective interest rate method.
Fair value through other comprehensive income (FVOCI): Debt instruments that are held for collection of
contractual cash flows and for selling the financial instruments, where the financial instruments’ cash flows
represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying
amount are taken through OCI, except for the recognition of impairment gains or losses, interest income and
foreign exchange gains and losses that are recognized in net income (loss). When the financial instrument is
derecognized, the cumulative gain or loss previously recognized in OCI is reclassified from equity to net income
(loss) and recognized in other gains (losses). Interest income (expense) from these financial instruments is
included in interest using the effective interest rate method. Foreign exchange gains (losses) is presented in other
gains (losses) and impairment expenses in other expenses.
Fair value through profit (loss) (“FVTPL”): Financial instruments that do not meet the criteria for amortized cost
or FVOCI are measured at FVTPL. A gain or loss on a financial instrument that is subsequently measured at FVTPL
and is not part of a hedging relationship is recognized in net income (loss) and presented net in comprehensive
income (loss) within other gains (losses) in the period in which it arise.
•
Subsequent to initial measurement financial liabilities are either classified as amortized cost or FVTPL when the Company
revises its estimates of payments of a financial liability to reflect actual and revised estimated contractual cash flows. Gross
carrying amount of the amortized cost of the financial liability as the present value of the estimated future contractual cash
flows that are discounted adjustment is recognized in income.
24
Canadian Funds
Notes to the Consolidated Financial Statements
As at and for the years ended September 30, 2020 and 2019
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The following summarizes the Company’s classification and measurement of financial assets and liabilities as at
September 30:
Financial assets:
Cash
Accounts receivable
Financial liabilities:
Accounts payable and accrued liabilities
Bank Indebtedness
Non-convertible debentures
Convertible debentures
Long-term-debt
Inventories
Classification and
Measurement
Method
2020
2019
FVTPL
Amortized cost
$
92,661
1,877,009
$
95,571
1,709,470
Amortized cost
Amortized cost
Amortized cost
Amortized cost
Amortized cost
$ 1,488,312
-
1,221,617
1,804,195
2,606,733
$
1,462,616
1,400,000
1,199,619
1,678,814
2,461,126
Inventory is carried at the lower of cost and market. Cost consists of direct materials, direct labour and an overhead allocation
and is determined on a first-in, first-out basis. Market is defined as net realizable value, which is defined as the summation
of the estimated selling price less the cost to complete less the cost to sell. Management reviews its reserve for obsolete
inventory at each reporting date for finished goods and work-in-process.
Property, plant and equipment
Property, plant and equipment are measured at cost less accumulated depreciation and impairment (if any). Cost includes the
cost of material, labour and other costs directly attributable to bringing the asset to a working condition for its intended use.
Depreciation is calculated at rates which will reduce the original cost to estimated residual value over the estimated useful life
of each asset. Depreciation commences once the asset is available for use.
Depreciation is provided for at the following basis and rates:
Research and development equipment
Other equipment and fixtures
Buildings
Declining balance, 10-100%
Declining balance, 10-30%
Straight line, 50 years
Land is not depreciated. Depreciation methods, useful lives and residual values are reviewed at each reporting date and
adjusted prospectively, if appropriate.
Intangible assets
Intangible assets include technology costs, patents, trademarks and licenses. Each is recorded at cost and amortized on a
straight-line basis over the term of the agreements or useful life of the asset. Amortization commences when the intangible
asset is available for use. Intangibles with definite lives but not yet available for use are assessed at least annually for
impairment or more frequently if there are indicators of impairment.
25
Canadian Funds
Notes to the Consolidated Financial Statements
As at and for the years ended September 30, 2020 and 2019
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Impairment of long-lived assets
An impairment charge is recognized for long-lived assets, including intangible assets with definite lives, when an event or
change in circumstances indicates that the assets’ carrying value may not be recoverable. The impairment loss is calculated
as the difference between the carrying value of the asset and the recoverable amount. The recoverable amount is the higher
of the fair value less costs to sell and value in use.
Borrowing costs
Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Borrowing
costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period
of time to get ready for its intended use or sale are capitalized as part of the cost of the asset. All other borrowing costs are
expensed in the period they are incurred.
Share-based compensation
The Company applies the fair value method of accounting for share-based compensation for awards granted to officers,
directors and employees of the Company. The fair value of the award at the time of granting is determined using the Black-
Scholes option pricing model, and recognized as a compensation expense over the vesting period with an offsetting amount
recorded to contributed surplus. Each tranche in an award is considered a separate award with its own vesting period and
grant date fair value.
Share options issued to consultants of the Company are based on the fair value of the services provided. The amount of the
compensation cost recognized at any date at least equals the value of the portion of the options vested at that date. When
stock options are exercised, the consideration paid by employees or directors, together with the related amount in contributed
surplus, is credited to share capital. When an employee leaves the Company, vested options must be exercised within 90 days,
or the options expire. Any options that are unvested are reversed in the period that the employee leaves. No forfeiture rate
is incorporated into the assumptions on awarding options. To the extent actual forfeitures occur, share-based compensation
related to these awards will be different from the Company’s estimate and are revised.
Foreign currency translation
For each entity, the Company determines the functional currency and items included in the financial statements of each entity
are measured using the functional currency, which represents the currency of the primary economic environment in which
each entity operates.
Foreign currency denominated revenues and expenses are translated by use of the exchange rate in effect at the end of the
month in which the transaction occurs. Foreign currency denominated monetary assets and liabilities are translated at the
period-end date. Exchange gains and losses arising on these transactions are included in the consolidated statements of
income (loss) and comprehensive income (loss) for the period.
Income (loss) per common share
The Company calculates basic income per share amounts for profit or loss attributable to ordinary equity holders. Basic
income (loss) per share is calculated using the weighted average number of common shares outstanding during the period.
Diluted income per share is calculated in the same manner as basic income per share except for adjusting the profit or loss
attributable to ordinary equity holders and the weighted average number of shares outstanding for the effects of all dilutive
potential ordinary shares.
26
Canadian Funds
Notes to the Consolidated Financial Statements
As at and for the years ended September 30, 2020 and 2019
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Deferred taxes
Deferred income tax assets and liabilities are recognized for the estimated income tax consequences attributable to
differences between financial statement carrying amounts of assets and liabilities and their respective income tax bases.
Deferred income tax assets are recognized to the extent that it is probable that future taxable income will be available
against which temporary differences can be utilized. Deferred income tax assets and liabilities are measured using tax rates
expected to be in effect when the temporary differences are expected to be recovered or settled. The effects of changes in
income tax rates are reflected in deferred income tax assets and liabilities in the year that the rate changes are substantively
enacted, with a corresponding charge to income. The amount of deferred tax assets recognized is limited to the amount
that is more likely than not to be realized.
Research and development expenses
Costs associated with research and development activities are expensed during the year in which they are incurred net of
tax credits earned, except where product development costs meet the criteria under IFRS for deferral and amortization.
Investment tax credits
The Company is entitled to Canadian federal and provincial investment tax credits which are earned as a percentage of
eligible research and development expenditures incurred in each taxation year. Investment tax credits are accounted for
as a reduction of the related expenditure for items of a current nature and a reduction of the related asset cost for items of
a long-term nature. These credits are only recognized to the extent that it is probable that there will be sufficient taxable
profits against which to utilize the benefits of the credits in the foreseeable future.
Finance lease obligation
Leases that transfer substantially all of the benefits and risks of ownership of the asset to the Company are accounted
for as finance leases. At the time a finance lease is entered into, an asset is recorded together with its related long-term
obligation, reflecting the fair value of future lease payments, discounted at the appropriate interest rates. Finance lease
obligations are amortized over their estimated useful lives at the same rates used for other equipment and fixtures. All
other leases are classified as operating leases and expensed on a straight-line basis.
Leases – policy applicable from October 1, 2019
The Company as lessee
The Company determines whether a contract is or contains a lease at inception of the contract. A contract is, or contains, a
lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
(i) Right-of-use assets
The Company recognizes a right-of-use asset and a lease liability based on the present value of future lease payments when
the lessor makes the leased asset available for use by the Company. The right-of-use asset is initially measured at cost, which
comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement
date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset. The right-
of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the
end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are
determined on the same basis as those of property, plant and equipment. Right-of-use assets are subject to impairment.
27
Canadian Funds
Notes to the Consolidated Financial Statements
As at and for the years ended September 30, 2020 and 2019
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Leases – policy applicable from October 1, 2019 (Continued)
(ii) Lease liabilities
The Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term,
discounted using the interest rate implicit in the lease. The lease payments include fixed payments (including in-substance
fixed payments), variable payments that depend on an index or a rate, renewal options that are reasonably certain to be
exercised less any lease incentives receivable. Variable lease payments that do not depend on an index or rate are recognized
as an expense in the period in which the event that triggers the payment occurs. In addition, the carrying amount of lease
payments is reassessed if there is a modification, a change in the lease term or a change in the in-substance fixed lease
payments. The Company has elected to apply the practical expedient to not separate the lease component and its associated
non-lease component.
Management exercises judgment in the process of applying IFRS 16 and determining the appropriate lease term on a lease by
lease basis. Renewal options are only included if Management are reasonably certain that the option will be renewed.
As most of the Company’s operating lease contracts do not provide the implicit interest rate, nor can the implicit interest rate
be readily determined, the Company uses its incremental borrowing rate as the discount rate for determining the present
value of lease payments. The Company’s incremental borrowing rate for a lease is the rate that the Company would pay to
borrow an amount necessary to obtain an asset of a similar value to the right-of-use asset on a collateralized basis over a
similar term.
(iii) Short term leases and leases of low-value assets
The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases of property, plant and
equipment that have a lease term of 12 months or less and leases of low-value assets, e.g. laptop computers. The Company
recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
Government Financing and Assistance
Government assistance that requires repayment and that is non-interest bearing is accounted for at its fair value, based on
management’s best estimate. The difference between the assistance amount and its fair value is accounted for as a government
grant and recognized in income over the period in which the related costs they are intended to compensate are recognized.
In fiscal 2020, the Company determined that it was eligible for the Canada Emergency Wage Subsidy. Funding from this program
provides a reimbursement for a portion of salaries paid out to employees during the COVID-19 pandemic and is recorded as a
reduction of salary expense when eligible expenditures are made and there is reasonable assurance of realization.
28
Canadian Funds
Notes to the Consolidated Financial Statements
As at and for the years ended September 30, 2020 and 2019
4. IMPACT OF NEW ACCOUNTING STANDARDS
NEW ACCOUNTING PRONOUNCEMENTS ADOPTED IN FISCAL 2020
The Company has adopted new amendments to the following accounting standards effective October 1, 2019. The
effect of these pronouncements on the Company’s results and operations are described below.
IFRS 16, Leases (“IFRS 16”)
On January 13, 2016, the IASB issued IFRS 16, which outlines requirements for lessees to recognize assets and liabilities for
most leases. Lessees are required to recognize the lease liability for the obligations to make lease payments and a right-
of-use asset for the right to use the underlying asset for the lease term. Lease liability is measured at the present value of
lease payments to be made over the term of the lease. The right-of-use asset is initially measured at the amount of the lease
liability and adjusted for prepayments, direct costs and incentives received.
IFRS 16 – Leases supersedes IAS 17 – Leases, IFRIC 4 – Determining whether an Arrangement contains a Lease, SIC 15 –
Operating Leases - Incentives and SIC 27 – Evaluating the Substance of Transactions Involving the Legal Form of a Lease.
The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires
lessees to account for most leases under a single on–balance sheet model.
Lessor accounting is substantially unchanged from IAS 17. Lessors will continue to classify leases as either operating or
finance leases using similar principles as in IAS 17. The Company is not currently a lessor.
The Company applied IFRS 16 using the modified retrospective approach. Accordingly, the comparative information
presented for 2019 has not been restated. The lease liabilities were recorded as the present value of the remaining lease
payments discounted at the Company’s incremental borrowing rate as at the date of application. The right-of-use assets
were recorded at an amount equal to the lease liabilities, adjusted for any prepaid or accrued lease payments (nil).
The Company elected to use the practical expedient on transition allowing the standard to be applied only to contracts
that were previously identified as leases under IAS 17 at the date of initial application. The Company also elected to use the
recognition exemptions for lease contracts that, at the commencement date, have a lease term of 12 months or less and
do not contain a purchase option (‘short-term leases’), and lease contracts for which the underlying asset is of low value
(‘low-value assets’).
The Company did not change the initial carrying amounts of recognized assets and liabilities at the date of initial application
for leases previously classified as finance leases (i.e., the right-of-use assets and lease liabilities equal the lease assets
and liabilities recognized under IAS 17). The requirements of IFRS 16 was applied to these leases from October 1, 2019.
The opening right-of-use assets includes $319,321 that was previously recognized as a lease asset and the opening lease
liability included $249,527 that was previously recognized as a lease liability under IAS 17.
Impact on the financial statements on transition
On transition to IFRS 16 at October 1, 2019, the Company recognized right-of-use assets of $763,541 and lease liabilities of
$693,747, respectively. There was no impact on retained earnings.
Lease liabilities for leases that were classified as operating leases at September 30, 2019 were discounted using the
incremental borrowing rate at October 1, 2019. The weighted average rate applied was 3.7%.
29
Canadian Funds Notes to the Consolidated Financial Statements
As at and for the years ended September 30, 2020 and 2019
4. IMPACT OF NEW ACCOUNTING STANDARDS (Continued)
NEW ACCOUNTING PRONOUNCEMENTS ADOPTED IN FISCAL 2020 (Continued)
IFRS 16, Leases (“IFRS 16”) (Continued)
Activity within right-of-use assets and lease liabilities during the period were as follows:
Balance, October 1, 2019
Additions
Depreciation Expense
Interest Accretion
Payments
Balance, September 30, 2020
Right-of-Use Assets
Property
Equipment
Lease
Liabilities
$
419,843
-
(74,088)
-
-
$
345,755
$ 343,698
6,695
(47,600)
-
-
$
302,793
$
$
693,747
6,695
-
15,146
(173,649)
541,939
Right-of-use assets are included in property, plant and equipment on the statement of financial position.
IFRS Interpretation Committee Interpretation 23, Uncertainty over Income Tax Treatments (“IFRIC 23”)
IFRIC 23 was issued in June 2017 and is effective for years beginning on or after January 1, 2019 and was adopted
by the Company effective October 1, 2019, to be applied retrospectively. IFRIC 23 provides guidance on applying
the recognition and measurement requirements in IAS 12, Income Taxes, when there is uncertainty over income tax
treatments including, but not limited to, whether uncertain tax treatments should be considered together or separately
based on which approach better predicts resolution of the uncertainty. The adoption of this interpretation did not
have a material impact on the consolidated financial statements.
5. INVENTORIES
Inventories consist of the following:
Raw materials
Work in process
Finished goods
September 30, 2020 September 30, 2019
$
$
710,587
1,122,584
2,459,493
4,292,664
$
$
496,021
1,387,824
2,596,347
4,480,192
During the year ended September 30, 2020, inventories in the amount of $5,808,978 (2019 - $6,796,735) were
recognized as an expense through cost of sales. The allowance for inventory impairment as at September 30, 2020
was $241,378 (September 30, 2019 - $55,747).
30
Canadian Funds
Notes to the Consolidated Financial Statements
As at and for the years ended September 30, 2020 and 2019
6. PROPERTY, PLANT AND EQUIPMENT
The freehold land and buildings have been pledged as security for bank loans under a mortgage (see Note 9). Property,
plant and equipment consists of:
Building
Research and
Development
Equipment
Other
Equipment
and Fixtures
Right of Use
Assets
Land
Total
COST
Balance, as at September 30, 2018
Additions
Disposals
$ 4,923,033 $ 500,709
16,422
-
64,074
-
$ 5,349,475
352,737
-
$ -
-
-
$ 800,000
-
-
$ 11,573,217
433,233
-
Balance, as at September 30, 2019
IFRS 16 Adoption (Note 4)
Additions
Disposals
$ 4,987,107 $ 517,131
-
40,177
-
-
179,818
-
$ 5,702,212
(403,989)
592,713
-
$ -
848,209
6,695
-
$ 800,000
-
-
-
$ 12,006,450
444,220
819,403
-
Balance, as at September 30, 2020
5,166,925
557,308
5,890,936
854,904
800,000
13,270,073
ACCUMULATED DEPRECIATION
Balance, as at September 30, 2018
Depreciation
Disposals
Balance, as at September 30, 2019
IFRS 16 Adoption (Note 4)
Depreciation
Disposals
1,406,798
167,060
-
1,573,858
-
170,986
-
423,354
10,635
-
433,989
-
12,518
-
3,096,334
251,888
-
3,348,222
(84,668)
245,656
-
-
-
-
-
84,668
121,688
-
-
-
-
-
-
-
-
4,926,487
429,583
-
5,356,070
-
550,848
-
Balance, as at September 30, 2020
1,744,844
446,507
3,509,210
206,356
-
5,906,917
NET BOOK VALUE
Balance, September 30, 2019
Balance, September 30, 2020
3,413,249
$ 3,422,081
83,142
$ 110,801
2,353,990
$ 2,381,726
-
$ 648,548
800,000
$ 800,000
6,650,380
$ 7,363,155
31
Canadian Funds
Notes to the Consolidated Financial Statements
As at and for the years ended September 30, 2020 and 2019
7. INTANGIBLE ASSETS
Intangible assets consist of:
COST
Capitalized
Development Costs
Bioreactor
(b)
Patents and Trademarks
Kinlytic®
(a)
QAPs
(c)
Total
Balance, as at September 30, 2018
Additions
$ 2,088,575
-
$
3,078,585
-
$
-
81,568
$
5,167160
81,568
Balance, as at September 30, 2019
Additions
Impairment (a)
2,088,575
-
-
3,078,585
-
(3,078,585)
81,568
1,200
-
5,248,728
1,200
(3,078,585)
Balance, as at September 30, 2020
2,088,575
-
82,768
2,171,343
ACCUMULATED AMORTIZATION
Balance, as at September 30, 2018
Amortization expense
Balance, as at September 30, 2019
Amortization expense
150,842
139,238
290,080
139,239
Balance, as at September 30, 2020
429,319
NET BOOK VALUE
-
-
-
-
-
-
-
-
-
-
150,842
139,238
290,080
139,239
429,319
Balance, as at September 30, 2019
Balance, as at September 30, 2020
1,798,495
1,659,256
$
3,078,585
-
$
$
81,568
82,768
4,958,648
1,742,024
$
The Bioreactor intangible asset is depreciated on a straight line basis at a rate of 7%. At each reporting date, the
Company is required to assess its long-lived assets for potential indicators of impairment. If any such indication
exists, the Company estimates the recoverable amount of the asset or CGU and compares it to the carrying value.
In addition, irrespective of whether there is any indication of impairment, the Company is required to test long-
lived assets with definite lives which are not yet available for use at least annually.
32
Canadian Funds
Notes to the Consolidated Financial Statements
As at and for the years ended September 30, 2020 and 2019
7. INTANGIBLE ASSETS (Continued)
a) Kinlytic®
The Company acquired the assets and rights pertaining to development, production, and licensing of Kinlytic® from
ImaRX Therapeutics, Inc. in 2008. The asset is not yet available for use as management has determined that it will
require an investment of approximately US$20 million to validate the new manufacturing needed pursuant to filing a
supplemental Biologics Licensing Application (sBLA) with the United States Food and Drug Administration in order to
return the product to that market.
The COVID-19 pandemic has increased the difficulty of partnering Kinlytic to obtain the required re-development
funding. This is for two reasons: (i) the pandemic has disrupted the business of the hospital-oriented product
companies that are the logical partners for this asset (due to fewer normal-course procedures being done) and
thereby constrained the new product budgets of such companies, and (ii) ongoing restrictions on physical travel
(i.e., closed borders, quarantines, etc.) are making it more difficult to advance negotiations, conclude partnerships,
and manage off-site manufacturing or clinical trial work.
Accordingly, Microbix cannot represent a precise timeline for securing a funding partner to advance the
re-development of Kinlytic to sBLA filing and renewed commercial sales. In accordance with IAS 36, Impairment of
Assets, the Company determined that the recoverable amount of the Kinlytic® asset does not support its continued
value and wrote-down the asset, which is presented as an impairment of long-lived assets of $3,078,586 in the
consolidated statement of income (loss) and comprehensive income (loss).
b) Bioreactor
The Company has internally developed an improved bioreactor production process (“Bioreactor”) to increase the
efficiency and output of manufacturing certain Antigen products.
c) Quality Assessment Products (“QAPs”)
To enhance its QAPs business of providing sample mimics for use in quality checks across various laboratory test
applications, Microbix has been developing intellectual property. Accordingly, it has capitalized various patent
application costs. When the resulting patent issues in key markets, those costs will begin to be amortized in accordance
with IFRS standards.
33
Canadian Funds Notes to the Consolidated Financial Statements
As at and for the years ended September 30, 2020 and 2019
8. DEBENTURES
The Company has convertible and non-convertible debentures issued and outstanding as at September 30, 2020. The
carrying values of the debt component of these debentures are as follows:
Non-convertible
debentures
(a)
(b)
Total non-convertible
debentures
Convertible debentures
(d)
(c)
(e)
Total convertible
debentures
Date of issue
Face value
Jan, 2014
$ 2,000,000
Apr, 2017
500,000
$
$ 2,500,000
Oct, 2016
$ 1,500,000
Oct, 2016
500,000 $
$
Oct, 2016
2,500,000
$ 4,500,000
Liability component at
the date of issue
928,373
268,955
-
461,550
223,050
780,750
-
Balance, September 30, 2018
Accretion
Repayments
879,140
79,323
(99,609)
Balance, September 30, 2019
Accretion
Repayments
Balance, September 30, 2020
858,854
82,483
(108,504)
832,833
Less: current portion
Non-current portion
Balance, September 30, 2020
118,980
713,853
832,883
$
304,875
35,890
-
340,765
48,019
-
388,784
388,784
-
$
388,784
1,184,015
115,213
(99,609)
1,199,619
130,502
(108,504)
1,221,617
483,330
17,045
-
500,375
22,991
-
523,366
280,475
44,434
-
324,909
59,452
-
384,361
821,630
31,900
-
853,530
42,938
-
896,468
1,585,435
93,379
-
1,678,814
125,381
-
1,804,195
507,764
713,853
$ 1,221,617
-
523,366
523,366
$
384,361
-
384,361
$
$
-
896,468
896,468
384,361
1,419,834
$ 1,804,195
Equity component at
September 30, 2020
Conversion price
per common share
-
-
-
-
574,435
631,222
1,698,132
2,903,789
$
-
$
-
$ 0.23
$
0.23
$
0.23
Effective interest rate charged
Payment frequency
Maturity of financial instrument
Stated interest rate
Terms of repayment
Blended quarterly repayment
25.69%
Quarterly
Jan, 2029
9%
Principal
and interest
61,071
$
30.20%
Quarterly
Apr, 2022
12%
Interest
only
N/A
31.07%
Quarterly
Jan, 2029
9%
Interest
only
N/A
30.20%
Quarterly
Feb, 2022
9%
Interest
only
N/A
30.85%
Quarterly
Sep, 2028
9%
Interest
only
N/A
The debentures denoted as (a), (c), and (e) above are secured against the real property and the personal property
of the Company including, without limiting the foregoing, a registered second mortgage on the property at 265 Watline
Avenue, Mississauga, Ontario, in favour of the holder, its successors and assigns subordinate only to indebtedness to a
Canadian chartered bank or similar financial institution on normal commercial terms up to their maximum principal.
The debentures denoted as (b) and (d) are secured by a subordinated security agreement covering all of the Company’s
property and assets.
Convertible debentures contain two components: liability and equity elements. The equity element is presented
in equity under the heading of “equity component of debentures”. Convertible debentures are initially accounted for
in accordance with their substance and are presented in the consolidated financial statements in their component
parts measured at the time of issue. The debt components were valued first with the residual to shareholders’ equity.
The convertible debentures are convertible at the option of the holder, at any time, into fully paid and non-assessable
common shares of the Company at the conversion price then in effect.
All of the debentures were issued to shareholders of the Company. A holder of a debenture has an economic interest
in future earnings of the Lumisort asset and will receive a distribution equal to 10% of any future earnings that are
derived from the Lumisort asset. Over the term of the convertible debentures, the debt components will be accreted
to the face value of the debentures by the recording of additional interest expense using the effective interest rate, as
detailed above.
34
Canadian Funds
Notes to the Consolidated Financial Statements
As at and for the years ended September 30, 2020 and 2019
9. LONG-TERM DEBT, BANK INDEBTEDNESS AND OTHER DEBT
a) The Company has term loans with the Business Development Bank (“BDC”) for a variety of purposes. The following
summarizes these loans as at September 30, 2020:
Term Loans with the Business
Development Bank (“BDC”)
(a)
(b)
(c)
(d)
(e)
(f)
Total
Effective date of loan
Initial Loan Amount
Jun, 2008
$ 3,000,000
Oct, 2014
615,000
$
Oct, 2015
$ 50,000
Oct, 2015
$ 200,000
Nov, 2015
$ 250,000
Jul, 2018
323,906
$
$ 4,438,906
Balance, September 30, 2018
Proceeds from loan
Loan repayments during the period
2,157,580
-
(111,120)
225,500
-
(123,000)
Balance, September 30, 2019
Proceeds from loan
Loan repayments during the period
2,046,460
-
(111,120)
102,500
-
(102,500)
15,600
-
(12,480)
3,120
-
(3,120)
89,910
-
(39,960)
49,950
-
(39,960)
112,320
-
(49,920)
298,336
-
(101,640)
2,899,246
-
(438,120)
62,400
-
(49,920)
196,696
286,094
(101,640)
2,461,126
286,094
(408,260)
Balance, September 30, 2020
$ 1,935,340
$
-
$
-
$
9,990
$
12,480
$
381,150 $ 2,338,960
Current Portion
Non-current portion
111,120
1,824,000
-
-
-
-
9,990
-
12,480
-
101,640
279,510
$
235,230
2,103,730
Payment frequency
Maturity of loan
Terms of repayment
Monthly
Feb, 2038
Principal
and interest and interest and interest and interest
Monthly
Dec, 2020
Principal
Monthly
Dec, 2019
Principal
Monthly
Jul, 2020
Principal
Monthly
Dec, 2020
Principal
and interest
Monthly
Jun, 2024
Principal
and interest
Notes:
(a) Loan for the purchase of manufacturing facility and building improvements.
(b) Loan for the purchase of equipment for our bioreactor project
(c) Loan for the purchase of building improvements.
(d) Loan for the purchase of manufacturing equipment
(e) Working Capital loan
(f) Loan for the purchase of manufacturing equipment
All BDC loans have a floating interest rate based on BDC’s floating base rate plus 0.5% - 1.8%. At September 30, 2020,
the rate was 5.05% (2019 – 6.55%). The loans are secured with the building and equipment.
On May 3, 2017, the Company signed an agreement with Business Development Corporation for a new equipment
credit facility in the amount of $610,000. On July 4, 2018 the Company received funds in the amount of $323,906,
drawn on this facility. During Q1 2020, the Company received the remaining funds of $286,094.
As at September 30, 2020, the commitments for the next five fiscal years and thereafter for the BDC loans is as follows:
2021
2022
2023
2024
2025
2026 and thereafter
35
$
Amount
235,230
212,760
212,760
187,350
111,120
$ 1,379,740
Canadian Funds
Notes to the Consolidated Financial Statements
As at and for the years ended September 30, 2020 and 2019
9. LONG-TERM DEBT, BANK INDEBTEDNESS AND OTHER DEBT (Continued)
b) On September 18, 2019, the Company received approval from its Chartered Bank to increase the borrowing limit on
its line of credit to $2.0 million. This line of credit bears interest at prime plus 2% (4.45% on September 30, 2020).
As at September 30, 2020 the Company had no funds drawn on the facility (September 30, 2019- $1,400,000). The
Company’s usage of this facility varies across its manufacturing, sales and AR collection cycles.
c) On July 29, 2019, the Company signed an agreement with Federal Economic Development Agency for Southern
Ontario to provide a repayable government contribution where the Federal Development Agency has agreed to
contribute funding for 30% of the Business Scale-up and Productivity Project expenditures made by the Company,
up to $2,752,500 over the next four years. The Company is required to submit eligible expenses on a quarterly basis
to receive the interest-free contributions. Repayment of the contribution does not begin until December 15, 2024.
As at September 30, 2020, the Company has received contributions totalling $455,991 (September 30, 2019 – nil).
The Company determined that the “Loan” consists of two components: an obligation to repay; and a government
grant in the form of exemption from interest. The Company fair valued the obligation to repay at $267,771, based
on a discount rate of 8%, which represents management’s best estimate of fair value. The residual amount of
$188,491 is allocated to the associated government grant and recognized as income over the period in which the
related costs they are intended to compensate are recognized. As at September 30, 2020, the carrying value of the
Loan is $267,770 (September 30, 2019 – nil) and $111,210 is recognized as a deferred grant within deferred revenue
on the statement of financial position (September 30, 2019 – nil).
The Company is in compliance with the covenants associated with this loan as at September 30, 2020.
The estimated repayments on the existing term facilities in future fiscal years are as follows:
Fiscal Years
2025
2026
2027
2028
2029
2030
$
Amount
75,998
91,198
91,198
91,198
91,198
15,200
36
Canadian Funds
Notes to the Consolidated Financial Statements
As at and for the years ended September 30, 2020 and 2019
10. SHARE CAPITAL
The Company is authorized to issue an unlimited number of common shares with no par value and an unlimited
number of preference shares with no par value.
On January 30, 2020, the Company completed a private placement offering of an aggregate of 11,800,000 units for total
gross proceeds of $2,360,000, net proceeds of $2,150,759 after share issuance costs of $209,242. Each unit consists of
one common share of Microbix and one common share purchase warrant. Each whole warrant entitles the holder to
purchase one additional common share at an exercise price of $0.36 for five years. Fair value of the common share
purchase warrants was determined to be $ 1,205,892. Gross proceeds were allocated to common shares and common
share purchase warrants in the amount of $ 1,611,450 and $748,550 respectively. The financing was non-brokered.
Cash commissions of $104,300 were paid and an aggregate of 521,500 Broker’s Warrants were issued in the private
placement offering. Fair value of the broker warrants was determined to be $42,476 using the Black-Scholes option
pricing model. The volatility of the stock for the Black-Scholes options pricing model was based on 5-year historic
volatility of the Company’s stock price (69%) and the risk free rate of interest of 1.38% is based upon the Government
of Canada benchmark bond yields - 3 to 5 year at the date of the award of the Broker’s warrants and a five year
term. Management believes that the historic stock volatility provides a fair and appropriate basis of estimate for the
expected future volatility of the stock. Each Broker’s Warrant entitles the holder to purchase one common share at a
price of $0.36 for a period of five years. All securities issued under the private placement will be subject to a holding
period, expiring four months and one day from the date of closing.
The number of issued and outstanding common shares and the stated capital of the Company are presented below:
Balance, as at September 30, 2019
Issued on private placement
Number
of Shares
Stated
Capital
96,972,705
11,800,000
$ 33,912,460
1,444,684
Balance, as at September 30, 2020
108,772,705
$ 35,357,144
37
Canadian Funds
Notes to the Consolidated Financial Statements
As at and for the years ended September 30, 2020 and 2019
11. COMMON SHARE PURCHASE WARRANTS
A continuity of the Company’s warrants outstanding as at September 30, 2020 is presented in the following table:
Balance, September 30, 2018
Issued
Expired
Balance, September 30, 2019
Issued (see note 10)
Expired
Balance, September 30, 2020
Weighted
average
exercise
price
Units
15,168,579
-
(3,449,763)
$ 0.40
-
0.55
11,718,816
12,321,500
(755,764)
23,284,552
0.36
0.36
0.34
$ 0.36
A summary of the Company’s warrants outstanding as at September 30, 2020 and 2019 is presented in the following table:
September 30, 2020
September 30, 2019
Weighted
average
exercise
price
Number
outstanding
Weighted
average
remaining
contractual
life
years
Weighted
average
exercise
price
Number
outstanding
Weighted
average
remaining
contractual
life
years
1,500,000
21,784,552
23,284,552
$
$
0.55
0.35
0.36
0.03
2.66
2.49
1,500,000
10,218,816
11,718,816
$ 0.55
0.33
$ 0.36
1.03
1.37
1.32
Range of exercise prices:
$0.47 to $0.55
$0.23 to $0.46
On September 28, 2020, the Company extended the term of an aggregate of 7,413,052 common share purchase
warrants (“Warrants”) by one year, which were issued in connection with Microbix’s October, 2015 and October, 2017
private placement financings.
The Warrants now entitle holders to purchase common shares of Microbix at prices from $0.36 to $0.55 until
October, 2021. All other Warrant terms remain unchanged.
38
Canadian Funds
Notes to the Consolidated Financial Statements
As at and for the years ended September 30, 2020 and 2019
12. STOCK OPTION PLAN
Under the Company’s stock option plan, the Company may grant options to purchase common shares up to a
maximum of 10% of the Company’s issued and outstanding common shares. Under the plan as at September 30,
2020, the Company has a total of 10,040,000 options (September 30, 2019 – 7,738,000) issued and pending and is
eligible to issue up to a total of 10,877,270 options.
The exercise price of each option equals no less than the market price at the date immediately preceding the date
of the grant. In general, the Company’s stock option plan vests options in equal amounts across a period following
their issue date. The options granted during this year and future options grants will generally be vested in a single
step on the third anniversary date following their issue. Management does not expect any remaining unvested stock
options at the year-end to be forfeited before they vest.
The activity under the Company’s stock option plan for year ended September 30, 2020 is as follows:
Balance, September 30, 2018
Stock options forfeited
Stock options issued
Balance, September 30, 2019
Stock options issued
Options Expired/Forfeited
Balance, September 30, 2020
Exercisable, September 30, 2020
Weighted average
exercise price
Units
5,590,000
$
0.39
(22,000)
2,170,000
0.54
0.23
7,738,000
$
0.35
2,350,000
(48,000)
10,040,000
5,600,000
0.22
0.54
0.32
0.39
$
$
The exercise price of each option equals the closing market price of the Company’s capital stock on the day preceding
the grant date. The following table reflects the number of options, their weighted average price and the weighted
average remaining contract life for the options grouped by price range as of September 30, 2020 and 2019:
September 30, 2020
September 30, 2019
Weighted
average
exercise
price
Number
outstanding
Weighted
average
remaining
contractual
life
years
Weighted
average
exercise
price
Number
outstanding
Weighted
average
remaining
contractual
life
years
2,400,000
7,640,000
10,040,000
$
$
$
0.54
0.25
0.32
0.04
3.09
2.36
2,418,000
5,320,000
7,738,000
$ 0.54
$ 0.26
$ 0.39
1.08
3.72
3.41
Range of exercise prices:
$0.54
$0.215 to $0.28
39
Canadian Funds
Notes to the Consolidated Financial Statements
As at and for the years ended September 30, 2020 and 2019
12. STOCK OPTION PLAN (Continued)
The fair value of options granted during fiscal 2020 was estimated at the grant date using the Black-Scholes
options pricing model, resulting in the following weighted-average assumptions:
Option Grant Dates
Share price on issue date
Dividend yield
Volatility
Risk-free interest rate
Expected option life (years)
Weighted average fair value of
each option ($/option)
2020
2019
Feb.2020
$0.215
0%
69%
1.4%
5
$0.12
Aug.2020
$0.28
0%
71%
0.3%
5
$0.16
Feb.2019
$0.23
0%
67%
0.5%
5
$0.13
Apr.2019
$0.25
0%
67%
0.5%
5
$0.14
Stock options are assumed to be exercised at the end of the option’s life, as management believes the probability of an early
exercise is remote. During the year, the fair value of the options vested in the year were expensed and credited to contributed
surplus. During the year, the Company recorded share-based compensation expense of $158,836 (2019 - $151,988).
13. INCOME (LOSS) PER SHARE
Basic income (loss) per share is calculated using the weighted average number of shares outstanding. Diluted income
per share reflects the dilutive effect of the exercise of stock options, warrants and convertible debt. The following
table reconciles the net income and the number of shares for the basic and diluted loss per share computations:
for the year ended September 30
2020
2019
Numerator for basic income (loss) per share:
Net loss available to common shareholders
Denominator for basic income (loss) per share:
Weighted average common shares outstanding
Effect of dilutive securities:
Warrants
Stock Options
Convertible debentures
$ (6,227,525)
$ 31,918
104,839,372
96,972,705
-
-
-
105,325
7,022
-
Denominator for diluted net loss per share
104,839,372
97,085,052
Net income (loss) per share:
Basic
Diluted
($0.059)
($0.059)
$0.000
$0.000
The following represents the warrants, stock options and convertible debentures not included in the calculation
of diluted EPS due to their anti-dilutive impact:
for the year ended September 30
Pursuant to warrants
Under stock options
Pursuant to convertible debentures
2020
23,284,552
10,040,000
19,565,217
52,889,769
2019
11,613,491
7,730,978
19,565,217
38,909,686
40
Canadian Funds
Notes to the Consolidated Financial Statements
As at and for the years ended September 30, 2020 and 2019
14. EXPENSES BY NATURE
The Company has chosen to present its consolidated statements of income (loss) and comprehensive income (loss)
based on the functions of the entity and include the following expenses by nature for the year ended September 30:
Depreciation and amortization
Included in:
Cost of goods sold
General and administrative expenses
Reasearch and development
Total depreciation and amortization
Employee costs
Short-term wages, bonuses and benefits
Share based payments
Total employee costs
Included in:
Cost of goods sold
Research and development
General and administrative expenses
Selling and business development
Total employee costs
2020
2019
$
$
598,003
79,566
12,518
690,087
$
$
553,346
4,841
10,635
568,822
2020
2019
$ 5,809,758
114,980
5,924,738
$
6,074,929
151,987
6,226,916
$ 2,972,026
978,086
1,489,355
485,271
5,924,738
$
$
3,135,253
960,924
1,656,456
474,283
6,226,916
$
During the year, the Company received $531,760 in assistance from the Canada Emergency Wage Subsidy program.
This subsidy has been recorded against the related employee costs.
15. INCOME TAXES AND INVESTMENT TAX CREDITS
Income taxes consist of the following, for the years ended September 30:
Provision based on combined federal and provincial
statutory rates of 25.00 % (2019 – 25.00%)
Increase (decrease) resulting from:
Non deductible expenses
Stock-based compensation
Change in deferred tax assets not recognized
Adjustment in respect of income taxes of prior year and other
Income tax expense
2020
2019
$ (1,164,822)
$
7,980
343
39,709
2,747,317
(54,310)
1,568,237
$
$
869
37,997
(274,083)
239,000
11,763
The Company has unclaimed research and development expenses and accumulated losses for income tax purposes.
Certain amounts have been recognized to the extent that it is probable that there will be sufficient taxable income
against which to utilize the benefits of the losses and expenses in the foreseeable future.
41
Canadian Funds
Notes to the Consolidated Financial Statements
As at and for the years ended September 30, 2020 and 2019
15. INCOME TAXES AND INVESTMENT TAX CREDITS (Continued)
The accumulated non-capital losses may be used to reduce taxable income in future years and must be claimed no
later than September 30:
2032
2037
2040
The significant components of deferred income tax assets are summarized as follows:
$
1,026,000
279,000
481,000
1,786,000
2020
2019
Deferred income tax assets:
Non-capital loss carry-forwards
Difference in net book value compared to undepreciated capital cost
Deferred financing fees and other reserves
Unclaimed research and development expenses
Lease liabilities
Deferred income tax liability related to debentures
Right of use assets
Tax assets not recognized
Deferred tax assets recognized
$
446,404
3,376,299
132,468
3,806,280
137,143
(848,936)
(90,290)
(6,959,369)
$
-
$
576,538
2,657,633
78,165
3,785,914
62,381
(913,213)
-
(4,679,181)
1,568,237
$
In fiscal 2020 the Company incurred $166,765 of share issuance costs which will be deducted from taxable income at
$33,353 over five years. The deferred tax assets for these transactions have not been recognized.
The unrecognized balance of federal research and development investment tax credits carried forward is
$3,156,533, reduced by a deferred tax liability of $789,133. The credits expire between 2026 and 2040. The unrecognized
portion of Ontario research and development tax credits carried forward is $247,685 and these credits expire between
2030 and 2040. As a result of the uncertainty related to the impact of COVID-19 on the Company’s business activities, the
deferred tax asset of $1,568,237 was fully written down as of September 30, 2020.
16. CHANGES IN NON-CASH WORKING CAPITAL
Accounts receivable
Inventory
Prepaid expenses and other assets
Investment tax credits receivable
Deferred Revenue
Accounts payable and accrued liabilities
2020
2019
$
$
(167,539)
187,528
(120,864)
57,441
486,784
18,086
461,436
$
$
(395,990)
(33,224)
70,764
24,373
(290,662)
(303,976)
(928,715)
42
Canadian Funds
Notes to the Consolidated Financial Statements
As at and for the years ended September 30, 2020 and 2019
17. FINANCIAL EXPENSES
Cash interest:
Interest on long-term debt
Interest on debentures
Interest other
Non-cash interest:
Accretion on debentures
Accretion interest expense
Financial expenses
18. CAPITAL MANAGEMENT
2020
2019
$
144,899
600,780
31,513
$
175,798
609,675
72,013
255,883
23,027
$ 1,056,102
208,592
-
$ 1,066,078
The Company’s capital management objective is to safeguard its ability to function as a going concern to maintain
and grow its operations and to fund its development activities. Microbix defines its capital to include the drawn
portion of the revolving line of credit, shareholders’ equity, long-term debt, and the debentures. The capital at
September 30, 2020 was $12,052,022 (September 30, 2019 - $17,276,967).
To date, the Company has used cash provided by operating activities, common equity issues, debentures, bank
mortgage and other financing to fund its activities. The equity is through private placements, the debentures are all
controlled by private individuals known to the Company and the mortgage and other financing are with the Business
Development Bank, FedDev and TD Bank. If possible, the Company tries to optimize its liquidity needs by non-
dilutive sources, including cash provided by operating activities, investment tax credits, grants and interest income.
The Company has a revolving line of credit of $2,000,000 with its Canadian chartered bank, Note 9.
The Company’s general policy is to not pay dividends and retain cash to keep funds available to finance the
Company’s growth. However, the Board of Directors may, from time to time, choose to declare a dividend in assets if
warranted by circumstances. There was no change during the year in how the Company defines its capital or how it
manages its capital.
19. FINANCIAL INSTRUMENTS
The Company categorizes its financial assets and liabilities measured at the fair value into one of three different levels
depending on the observation of the inputs used in the measurement.
For the year ended September 30, 2020 and 2019, the Company has carried at fair value financial instruments in Level
1. At September 30, 2020, the Company’s only financial instrument measured at fair value is cash, which is considered to
be a Level 1 instrument. There were no transfers between levels during the year.
The three levels are defined as follows:
a) Level 1: Fair value is based on unadjusted quoted prices for identical assets or liabilities in active markets.
b) Level 2: Fair value is based on inputs other than quoted prices included within Level 1 that are not observable for the
asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
c) Level 3: Fair value is based on valuation techniques that require one or more significant unobservable inputs.
43
Canadian Funds
Notes to the Consolidated Financial Statements
As at and for the years ended September 30, 2020 and 2019
19. FINANCIAL INSTRUMENTS (Continued)
Date of
valuation
Quoted prices
in active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Assets measured at fair value:
Cash
30-Sep-20
$
92,661
-
-
Liabilities for which fair values are disclosed:
Non-convertible debentures
Convertible debentures
Long-term-debt and other debt
30-Sep-20
30-Sep-20
30-Sep-20
-
-
-
-
-
$ 1,221,617
1,804,195
$ 2,606,733
-
Date of
valuation
Quoted prices
in active
markets
(Level 1)
Significant
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Assets measured at fair value:
Cash
30-Sep-19
$ 95,571
-
-
Liabilities for which fair values are disclosed:
Non-convertible debentures
Convertible debentures
Long-term-debt and other debt
30-Sep-19
30-Sep-19
30-Sep-19
-
-
-
-
-
3,861,126
$
$ 1,199,619
1,678,814
-
The fair value of a financial instrument is approximated by the consideration that would be agreed to in an arm’s
length transaction between willing parties and through appropriate valuation methods, but considerable judgment
is required for the Company to determine the value. The actual amount that could be realized in a current market
exchange could be different than the estimated value.
The fair values of financial instruments included in current assets and current liabilities approximate their carrying
values due to their short-term nature.
The fair value of the long-term debt is based on rates currently available for items with similar terms and maturities
and is repriced to floating market interest rates and as such, the carrying value of the long-term debt and other
debt approximates fair value. The convertible and non-convertible debenture fair values are estimated based on
rates for items with similar terms and maturity. The fair values of financial instruments in other long-term liabilities
approximate their carrying values as they are recorded at the net present values of their future cash flows, using an
appropriate discount rate.
44
Canadian Funds
Notes to the Consolidated Financial Statements
As at and for the years ended September 30, 2020 and 2019
20. FINANCIAL RISK MANAGEMENT
The primary risks that affect the Company are set out below and the risks have not changed during the reporting
periods. The list does not cover all risks to the Company, nor is there an assurance that the strategy of management
to mitigate the risks is sufficient to eliminate the risk.
Risks arising from financial instruments and risk management
The Company’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk),
credit risk and liquidity risk. The Company’s overall risk management program focuses on the unpredictability of
financial markets and seeks to minimize potential adverse effects on the Company’s financial performance.
Risk management is the responsibility of the corporate finance function. Material risks are monitored and are
regularly discussed with the Audit Committee of the Board of Directors.
Credit risk
The Company’s cash is held in accounts or short-term interest bearing accounts at one of the major Canadian
chartered banks. Management perceives the credit risk to be low. Typically the outstanding accounts receivable
balance is relatively concentrated with a few large customers representing the majority of the value. As at
September 30, 2020, five customers accounted for 74% (September 30, 2019 - five customers accounted for 78%)
of the outstanding balance. In addition, for the year ended September 30, 2020, five customers accounted for 61%
(September 30, 2019 - five customers accounted for 64%) of revenues. The Company has had minimal bad debts
over the past several years and accordingly management has recorded an allowance of $10,000 (September 30,
2019 - $25,625).
Trade accounts receivable are aged as follows:
Current
0 - 30 days past due
31 - 60 days past due
61 days and over past due
September 30, 2020 September 30, 2019
$ 1,872,928
1,431
732
1,918
$ 1,877,009
$
$
1,602,262
102,962
4,246
-
1,709,470
45
Canadian Funds
Notes to the Consolidated Financial Statements
As at and for the years ended September 30, 2020 and 2019
20. FINANCIAL RISK MANAGEMENT (Continued)
Market risk and foreign currency risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, will affect the Company’s
income or the value of its financial instruments. The Company’s activities that result in exposure to fluctuations
in foreign currency exchange rates consist of the sale of products and services to customers invoiced in foreign
currencies and the purchase of services invoiced in foreign currencies. The Company does not use financial
instruments to hedge these risks.
As at September 30 the significant balances, quoted in Canadian dollars, held in foreign currencies are:
U.S. dollars
Euros
2020
2019
2020
2019
Cash
Accounts receivable
Accounts payable and accrued liabilities
$ 15,397
1,186,876
150,600
$ 88,820
797,352
197,551
$
1,551 $ 5,223
591,454
273,858
-
-
The Company’s revenue and expenses by foreign currency for the years ended September 30, 2020 and 2019 are
as follows:
Revenue
Euros
U.S. dollars
Expenses
U.S. dollars
2020
34%
62%
5%
2019
45%
53%
7%
Based upon 2020 results, the impact of a 5% increase in the U.S. dollar against the Canadian dollar would result
in an increase in annual U.S. dollar based revenue of approximately $327,900 Cdn. The impact of a 5% increase in the
Euro against the Canadian dollar would result in an increase in annual Euro based revenue of approximately $180,200.
Correspondingly, the impact of a 5% decrease in the U.S. dollar against the Canadian dollar would result in a loss in
annual U.S. dollar based revenue of approximately $327,900 Cdn. The impact of a 5% decrease in the Euro against the
Canadian dollar would result in a loss in annual Euro-based revenue of approximately $180,200.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulties in meeting its financial liability obligations as they
become due. The Company has a planning and budgeting process in place to help determine the funds required to
support the normal operating requirements on an ongoing basis. The Company has financed its cash requirements
primarily through issuance of securities, short-term borrowings, long-term debt and debentures. The Company
controls liquidity risk through management of working capital, cash flows and the availability and sourcing of
financing. Based on current funds available and expected cash flow from operating activities, management believes
that the Company has sufficient funds available to meet its liquidity requirements for the foreseeable future. However,
if cash from operating activities is significantly lower than expected, if the Company incurs major unanticipated
expenses or the Company’s borrowings are called, it may be required to seek additional capital in the form of debt
or equity or a combination of both. Management’s current expectations with respect to future events are based on
currently available information and the actual outcomes may differ materially from those current expectations.
46
Canadian Funds
Notes to the Consolidated Financial Statements
As at and for the years ended September 30, 2020 and 2019
20. FINANCIAL RISK MANAGEMENT (Continued)
Interest rate risk
Financial instruments that potentially subject the Company to cash flow interest rate risk are those assets and liabilities
with a variable interest rate. Interest rate risk exposure is primarily on the BDC debt that has a variable rate that is
pegged to the bank rate. The rate can be fixed at the Company’s option, if the outlook for interest rates should move
higher. The only other variable debt the Company has is the $2,000,000 line of credit that bears interest at the bank’s
prime lending rate plus 2.0%. A 1% increase in the bank rate would cost the Company approximately $30,000 per year
for BDC and about $20,000 on the line of credit usage if it were fully used throughout the fiscal year.
21. SEGMENTED INFORMATION
The Company operates in two ways: (i) the development, manufacturing and sales of antigens as materials for the
medical diagnostic industry or as quality assessment products and, (ii) the development and commercialization of
novel and proprietary products or technologies such as Lumisort and Kinlytic. The following is an analysis of the
Company’s revenues and profits from continuing operations for the year ended September 30, segmented between
antigens and Other (including Lumisort and Kinlytic):
Segment revenue
2020
2019
Segment profit (loss)
2019
2020
Antigen and QAPs
Other (Includes Kinlytic ® and Lumisort ™)
Total for continuing operations
$ 10,514,847
10,057
$ 10,524,904
$ 13,412,341
-
$ 13,412,341
$ (1,433,098)
(3,226,191)
$ (4,659,288)
$ 315,698
(272,017)
$ 43,681
Segment revenue reported above represents revenue generated from external customers. There were no inter-
segment sales in the current period (2019 - $Nil).
Segment loss represents the profit (loss) before tax earned by each segment without allocation of central
administration costs, directors’ fees, and finance costs. These general costs are reflected in the Antigen Products and
Technologies segment. This is the measure reported to the chief operating decision maker for the purposes of resource
allocation and assessment of segment performance.
Segmented assets and liabilities as at September 30 are as follows:
Segment assets
2020
2019
Segment liabilities
2020
2019
Antigen and QAPs
Other (Includes Kinlytic ® and Lumisort ™)
Total for continuing operations
$ 15,598,010
-
$ 15,598,010
$ 14,982,751
3,078,585
$ 18,061,336
$ 8,978,534
-
$ 8,978,534
$ 7,692,165
-
$ 7,692,165
All assets are allocated to reportable segments other than interests in associates and current and deferred tax assets.
Assets used jointly by reportable segments are allocated on the basis of the revenues earned by individual reportable
segments. All liabilities are allocated to reportable segments other than borrowings and current and deferred tax
liabilities. Liabilities for which reportable segments are jointly liable are allocated in proportion to segment assets.
47
Canadian Funds
Notes to the Consolidated Financial Statements
As at and for the years ended September 30, 2020 and 2019
21. SEGMENTED INFORMATION (Continued)
Segmented depreciation and amortization, impairment of long-lived assets and additions to non-current assets
as at September 30 are as follows:
Depreciation and
amortization
2020
2019
Additions to
non-current assets
2019
2020
Impairment of
long-lived assets
2020
2019
Antigens and QAPs
Other (Includes Kinlytic ®
and Lumisort ™)
$ 690,087
-
$ 568,822
-
$ 813,908
-
$ 514,800
-
-
3,078,585
-
-
$ 690,087
$ 568,822
$ 813,908
$ 514,800
$3,078,585
-
22. REVENUES AND GEOGRAPHIC INFORMATION
The Company operates in three principal geographical areas – North America (where it is domiciled), Europe and in
other foreign countries. The Company’s revenue from external customers is tracked based on the bill-to location.
Information about its non-current assets by location of assets are also detailed below. It should be noted that our
distribution partner for Asia is based in the United States, so most sales destined to Asia are reflected in the North
American total.
For the quarter ended September 30,
2020
2019
2020
2019
Revenue from
external customers
Non-current
assets
North America
Europe
Other foreign countries (directly)
$ 5,590,760
4,854,353
79,791
$ 4,958,987
$ 9,105,179 $ 13,177,265
8,129,031
324,323
-
-
-
-
$10,524,904
$ 13,412,341
$ 9,105,179 $ 13,177,265
The following table reflects the movement in the Company’s deferred revenues:
For the period ended September 30,
2020
2019
Balance, beginning of the year
$ 640,463
$
931,125
Cash payments or advance payments on performance obligations
Revenue recognized during the year
Deferred government grants (see note 9)
2,382,730
(1,818,665)
111,210
2,777,273
(3,067,935)
-
Balance, September 30
$ 1,315,738
$
640,463
48
Canadian Funds
Notes to the Consolidated Financial Statements
As at and for the years ended September 30, 2020 and 2019
23. RELATED PARTY TRANSACTIONS
Key management compensation
Key management personnel are those persons having authority and responsibility for planning, directing and
controlling the activities of the Company. Key management includes directors and key management executive
officers. Compensation for the Company’s key management personnel was as follows:
For the year ended September 30,
2020
2019
Short-term wages, bonuses and benefits
Share-based payments
Total key management compensation
$
998,674
77,392
$ 1,076,066
$ 927,603
99,945
$ 1,027,548
24. COMMITMENTS AND CONTINGENCIES
Payments on convertible and non-convertible debentures (Note 8)
2021
2022
2023
2024
2025
2026 and thereafter
Contingencies
$
Amount
709,242
1,657,992
604,242
604,242
604,242
5,923,681
$ 10,103,641
The Company is not party to any legal proceedings arising out of the normal course of business.
25. COMPARATIVE CONSOLIDATED FINANCIAL STATEMENTS
The comparative consolidated financial statements have been reclassified from statements previously presented to
conform to the presentation of the 2020 consolidated financial statements.
49
Canadian Funds
Notes to the Consolidated Financial Statements
As at and for the years ended September 30, 2020 and 2019
26. COMPARATIVE CONSOLIDATED FINANCIAL STATEMENTS
On October 5, 2020, the Company signed a grant agreement with the Ontario Together Fund (“OTF”) of the Ministry
of Economic Development, Job Creation and Trade. The grant of $1.45 million will cover 50% of the cost to automate
production of the Company’s quality assessment products (QAPs™) that help ensure the accuracy of infectious disease
diagnostic testing, and enable local, secure, and cost-effective automated production of the quantities of viral transport
media (“Media”) needed for Ontario’s nucleic-acid testing for COVID-19.
At the request of the Province of Ontario, the Company will now create a secure and locally-based supply of Media,
any lack of which limits capacity for COVID-19 testing. It is the Company’s intention to begin production on a semi-
automated basis before calendar year-end, and move to fully-automated production as soon as possible in 2021.
OTF’s grant contribution will help fund automation at the Company’s 10,500 square foot production, packaging, and
administrative site – to provide secure and cost-effective domestic supply of high quality Media. The grant will also be
used toward funding automation of QAPs manufacturing, as needed to support growing unit volume requirements –
as projected by lab accreditation agencies, diagnostic test-makers, clinical labs, and distributors. Lastly, the grant will
assist Microbix in creating more highly-skilled jobs in science and manufacturing in Mississauga.
50
Canadian Funds CORPORATE INFORMATION
Corporate Counsel
Boyle & Co. LLP
Auditors
Transfer Agent
Ernst Young LLP
Chartered Accountants
AST Trust Company Inc.
as the Administrative Agent for
CIBC Mellon Trust Company
416-682-3860 1-800-387-0825
Bankers
The Toronto Dominion Bank
Head Office
Microbix Biosystems Inc.
265 Watline Avenue, Mississauga,
Ontario Canada L4Z 1P3
Tel: 905-361-8910
Fax: 905-361-8911
www.microbix.com
DIRECTORS
Peter M. Blecher
Ontario, Canada
Medical Director
CPM - Centres for Pain Management
Mark A. Cochran
Virginia, USA
Executive Director (Retired)
Johns Hopkins Healthcare
Vaughn C. Embro-Pantalony (1) (2)
Ontario, Canada
Pharmaceutical Executive
William J. Gastle (2)
Ontario, Canada
Executive Chairman
Microbix Biosystems Inc.
Cameron Groome (2)
Ontario, Canada
Chief Executive Officer and President
Microbix Biosystems Inc.
Martin A. Marino (1) (2)
Ontario, Canada
Pharmaceutical Executive
Joseph D. Renner (1) (2)
New Jersey, USA
Pharmaceutical Executive
(1)Member of Audit Committee.
(2)Member of the Human Resources,
Compensation and Governance Committee.
SENIOR MANAGEMENT
William J. Gastle
Executive Chairman
Cameron L. Groome
Chief Executive Officer and President
James S. Currie
Chief Financial Officer
Kenneth Hughes
Chief Operating Officer
Dr. Mark Luscher
Senior Vice-President, Scientific Affairs
Phillip Casselli
Senior Vice-President, Sales & Business Development
Kevin J. Cassidy
Vice-President, Biopharmaceuticals
Christopher B. Lobb
General Counsel & Secretary
51
Canadian Funds
265 Watline Avenue,
Mississauga, ON
Canada L4Z 1P3
Tel: 905-361-8910
Fax: 905-361-8911
1-800-794-6694
Web Site: www.microbix.com