Annual Report
2014
www.medmira.com
Contents
Vision, Mission & Core Values
Message from the Chairman
Message from the CEO
p.1
p.2
p. 3
Management Discussion & Analysis
p. 5
Consolidated Financial Statements
p. 25
Investor Information
Corporate Information
p. 61
p. 62
Our Rapid Test Product Lines
www.medmira.com
Our Vision
To transform the rapid diagnostics industry by becoming the leading
brand known for fast, accurate, value-add testing products that
enhance human health and wellness and continually generate long
term value for our stakeholders.
Our Mission
To employ our one-of-a-kind, patented technology platform to
develop, market and sell high quality, easy-to-use, time and cost-saving
products that improve global healthcare and save lives.
Our Core Values
Our Company is built on a set of core shared values that form a
consistent base for how we operate and interact with our customers,
employees, shareholders, and partners.
Innovation – It is the lifeblood of our Company and at the heart of
everything we do.
Excellence – We consistently embrace excellence in the disciplines of
quality science, business, and manufacturing.
Collaboration – We build relationships with like-minded partners,
alliances, and team members to foster new opportunities and
continued innovation.
Integrity – Doing the right thing is a standard principle by which our
entire team operates.
Passion – Our team has an intense passion for science, diagnostics, and
technology, which shines through in the quality healthcare solutions we
deliver.
Results-oriented – We are focused on delivering high quality on-time
results to drive growth and profitability.
“In the remote areas of Colombia where
healthcare services and laboratory testing is
scarce, pregnant women do not have access to
life saving tests that could easily prevent
mother-to-child transmission and neonatal
deaths,” said Dr. Liliana Lora Sierra, Public
Health Support Professional, Colombian
National Navy. “Working with MedMira, we are
able to offer these women high quality, rapid
tests that will help prevent vertical transmission
of TP/HIV that could not only save their lives but
the lives of their unborn children. The test is
very easy to perform and does not require any
special training allowing us to screen patients
at the point-of-care. Without MedMira’s
innovative technology, these women would not
have access to tests that those living in urban
areas benefit from.”
1
A Letter from Our Chairman
Dear Shareholders,
Earlier this year I joined the MedMira Board of Directors as the first non-executive Chairman, and for many years
previous to this watched the Company’s transition from a young start-up to the MedMira we have today. As
with any organization, growth is a continual process and at MedMira changes in 2014 have positioned the
Company for the future.
The team at MedMira made significant progress in 2014, ensuring that our clinical trials as well as a submission
to the World Health Organization remained on track for success. We also launched enhanced branding initiatives
and created new sales opportunities in key target markets and achieved new market penetration in India and
Latin America. As always, the Company’s commitment to innovation never wavered as the exploration of future
product development and commercialization possibilities continued in order to maintain a robust R&D pipeline.
Innovation is core to what MedMira is and does. From internal corporate and financial systems that give the
Company a solid base to grow on, to the new product concepts from our science visionaries, innovative thinking
is applied across the organization. Along with innovation, the Company operates with a disciplined focus on a
long-term strategic path for growth and results to increase shareholder value.
We look forward to 2015 to realize on the foundation we have established during the current year. Our key
investors, both existing and new, continue to demonstrate their belief in MedMira and the global opportunities
for our technology and products. We have created an organizational structure with the right resources, from
key senior leadership to a highly efficient manufacturing unit, which positions us to capitalize on opportunities
in 2015.
I’m confident that we are only beginning to see MedMira’s emergence as a well-known and respected brand in
the international diagnostics market. With the ongoing support of shareholders like you, MedMira will continue
to create new opportunities to deliver value.
Marvyn Robar
Chairman
MedMira’s Reveal and Multiplo rapid tests.
2
A Letter from Our Co-Founder & CEO
Dear Shareholders,
Fueled by key investments and with the right resources in place, in 2014 we focused on the necessary
groundwork, including our clinical trials and brand awareness building and market preparation activities in the
United States that collectively support MedMira’s new product launches planned for 2015. The clinical trials are
nearly complete for three new products and will be followed by final submissions to the U.S. Food and Drug
Administration.
2014 kicked-off with the roll-out of important branding and messaging changes that have resulted in increased
market awareness of our Company, technology, and products. Perhaps the most substantial change in our
message was about our technology platform as we positioned Rapid Vertical Flow
Technology as its own brand. Our technology has created a new industry standard in
rapid testing with unmatched speed and multiplexing capabilities. We launched this
messaging at the VWR Americas Sales Conference as we began our new distribution
relationship with VWR International, LLC. We continued to see awareness build at other
events through the year including the China Medical Equipment Fair, the 2014 STD
Prevention Conference, and the 2014 American Association for Clinical Chemistry
Annual Meeting & Clinical Lab Expo.
While many of our strategic activities were about building for the future, our sales
remained steady in the U.S. In our other strategic markets, Latin America and
China, we increased our sales and marketing initiatives, and established a new
sales and outsourced manufacturing channel in India. This combined effort across
all of our target markets resulted in a 26% increase in revenue and a 23% increase
in gross profit at the fiscal year end. In Latin America we capitalized on key
product approvals, new distribution agreements, and shipped orders. Our Reveal
HIV test was introduced as the first all-inclusive, point-of-care rapid HIV test to be
approved in and sold in Mexico. We also made good progress in Venezuela and
Costa Rica and we continue to pursue other territories with our partners.
Miriad RVF Toolkit for researchers
MedMira’s position in China continues to grow steadily, where tender business is a key vertical that we focus on
in cooperation with our partner Triplex International Biosciences Co., Ltd. Our rapid HIV test is consistently
ranked amongst the top performers and in 2014 we sold over 100,000 units. Our brand in China was further
strengthened with Hong Kong-Canada Business Achievement Award for Outstanding Business Innovation and a
nomination for the Canada China Business Council’s Excellence Awards.
Along with updated branding and messaging, we introduced our Miriad RVF Toolkit product at events in the U.S.
and China. This product enables us to reach a broader variety of market sectors with our Rapid Vertical Flow
Technology. In the hands of researchers and educators, the possibilities for our technology platform are truly
endless and in 2014 this product has already created new collaborations and consulting business for MedMira,
and the prospect of future licensing deals.
3
As word spreads about the successful clinical applications MedMira has produced on our technology platform
and researchers explore the possibilities with the Miriad RVF Toolkit, new opportunities are growing in human
medicine, veterinary, and environmental sectors. For MedMira this means engaging in contracts with partners,
collaborators, and other biotech companies, like Beacon Biomedical LLC who we are working with to develop a
rapid colon cancer test.
Our own product development and commercialization pipeline continues to grow, both organically and with
collaborative efforts. In 2014 we announced the expansion of our Multiplo product line with three new tests
that incorporate HIV, hepatitis C, and syphilis. More importantly these tests continue to advance our technology
platform, proving its comprehensive capabilities as a both a screening test and a confirmatory test for specific
diseases such as syphilis. For example, Multiplo TP/nTP detects both active and historic syphilis infections, saving
healthcare providers and patients valuable time and resources, enabling treatment to begin immediately.
In 2014, MedMira has generated positive momentum on the foundation we are laying for future success. This
energy we have created, both internally and externally, is propelling us forward to a healthy and prosperous
2015 in which we will see three new products launched, continued growth in key strategic markets, and new
frontiers for our technology platform.
On behalf of our entire team at MedMira, thank you for your continued support.
Hermes Chan
Co-Founder & CEO
4
MedMira Inc.
Management’s Discussion & Analysis
For the year ended July 31, 2014
5
Management’s Discussion & Analysis
July 31, 2014
Forward looking statements
This document contains forward looking statements, such as statements regarding future sales opportunities in various
global regions and financing initiatives that are based on current expectations of management. These statements involve
uncertainties and risks, including MedMira Inc.’s (MedMira or the Company) ability to obtain and/or access additional
financing with acceptable terms, and delays in anticipated product sales. Such forward-looking statements should be given
careful consideration and undue reliance should not be placed on these statements.
The preparation of Management’s Discussion and Analysis (MD&A) may require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the
reported amount of revenue and expenses during the reporting period. Management bases estimates and judgments on
historical experience and on various other factors that are believed to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying value of assets and liabilities. Actual results may differ
from these estimates under different assumptions or conditions. Management believes the accounting policies, outlined
in the Significant Accounting Policies section of its consolidated interim financial statements, affect its more significant
judgments and estimates used in the preparation of its consolidated financial statements.
Introduction
The following MD&A for the three months and year ended July 31, 2014 has been prepared to help investors understand
the financial performance of MedMira in the broader context of the Company’s strategic direction, the risk and
opportunities as understood by management, and the key metrics that are relevant to the Company’s performance. The
Audit Committee of the Board of Directors has reviewed this document and all other publicly reported financial information
for integrity, usefulness, reliability and consistency.
Annual references are to the Company’s fiscal years, which end on July 31. All amounts are expressed in Canadian dollars
(CAD) unless otherwise noted.
Additional information about MedMira, this document, and the related quarterly financial statements can be viewed on
the Company’s website at www.medmira.com and are available on SEDAR at www.sedar.com.
About MedMira
MedMira is a biotechnology company engaged in the development and commercialization of rapid diagnostics and
technology platforms. The Company is headquartered in Halifax, Nova Scotia, Canada and is listed on the TSX Venture
Exchange (TSX-V) under the symbol MIR.
The patented MedMira Rapid Vertical Flow Technology platform is the basis for the Company’s line of rapid tests.
Diagnostic applications based on this distinct technology are highly accurate, easy-to-use, and produce instant results – a
strong advantage over most other rapid diagnostics on the market today. These features are enhanced further with the
unique competitive advantage of enabling multiplex results on one test device with just one drop of specimen. The
Company has created a new generation of rapid tests that are based on its customers’ need to provide swift answers
without increasing costs.
MedMira’s technology and growing portfolio of diagnostic tools demonstrate excellence in performance and quality in the
highly competitive diagnostics industry. More than $30 million has been invested in perfecting MedMira’s core technology,
which has proven itself time and time again with its excellent clinical performance and its success in rigorous evaluations
and inspections, leading to regulatory approvals in the United States (FDA), Canada (Health Canada), the notified body in
6
Management’s Discussion & Analysis
July 31, 2014
the European Union (CE Mark), and China (CFDA – formerly known as SFDA) and in a number of countries in Latin America,
Africa, and Asia. The Company is also ISO 9001:2008 and ISO 13485:2003 certified.
MedMira sells its rapid tests through a worldwide network of medical distributors and strategic business development
partners with customers in all sectors of the healthcare industry, including laboratories, hospitals, point-of-care facilities,
governments, and public health agencies. The Company launched its Miriad product line in early 2014 to create new
opportunities in the high value technology licensing sector. This business allows the Company to monetize its award
winning technology and core capabilities, including R&D, product development, and regulatory proficiency. Miriad provides
access to MedMira Rapid Vertical Flow Technology for researchers, developers, and biotech companies on a license basis
to facilitate the creation of new rapid tests or the transition of existing tests to this unique platform. Infiltrating new and
different core sectors of the diagnostic industry, such as veterinary and environmental, with the Company’s technology,
enables MedMira to build a higher degree of global awareness, generate new revenue streams, and provide a superior
diagnostic platform to the market.
Intellectual property
The Company strives to protect its intellectual property in established and emerging markets around the world as warranted.
MedMira’s intellectual property portfolio for its Rapid Vertical Flow Technology and the methodology behind its rapid
diagnostics includes the following:
Patent #
8,025,850
8,287,817
8,586,375
7,531,362
EP1417489
EP1328811
Title
Jurisdiction
Rapid Diagnostic Device, Assay and Multifunctional Buffer
United States
Rapid Diagnostic Device, Assay and Multifunctional Buffer
United States
Rapid Diagnostic Device, Assay and Multifunctional Buffer
United States
Rapid Diagnostic Device, Assay and Multifunctional Buffer
United States
Rapid Diagnostic Device and Assay
HCV Mosaic Antigen Composition
ZL02819646.5
Rapid Diagnostic Device and Assay
2,493,616
Rapid Diagnostic Device, Assay and Multifunctional Buffer
The Company has four pending patents in eight markets.
Europe
Europe
China
Canada
The Company’s corporate and product brand names are protected by trademarks in the United States and Canada.
Corporate update
MedMira began Fiscal Year 2014 with a $6.105 million investment from OnSite Lab Holding AG (OnSite Lab), the Company’s
largest and controlling shareholder. This investment fueled increasing sales and marketing activities, including the addition
of key personnel, new distribution channels, and enhanced marketing initiatives aimed at key audiences in the United States
and the Company’s international strategic focus markets.
Kevin Jones, Ph.D. joined MedMira as Senior Director, Global Sales & Marketing, bringing over 20 years of significant
industry experience with demonstrated successes in sales and marketing in medical, diagnostics, and life sciences sectors
to the Company’s senior leadership team. Dr. Jones’ primary focus during Fiscal Year 2014 was the expansion of MedMira’s
7
Management’s Discussion & Analysis
July 31, 2014
sales and marketing initiatives in strategic focus markets and pre-launch preparation in the United States as the Company
readies for new product introductions in 2015.
MedMira participated in the Military Health System Research Symposium, a highly focused military healthcare event in the
United States, which has in the past, and will continue to in the future, play a key role in MedMira’s sales and marketing
efforts for the military sector. At this event, the MedMira team interfaced with key personnel from the United States
Department of Defense and members of the international military community, all future customers for the Multiplo
HBc/HIV/HCV and Reveal HBsAg tests currently being developed and commercialized by MedMira under contract with
the United States military. These development and commercialization projects with the United States military continue to
advance on track with all major milestones being met during Fiscal Year 2014. MedMira received an additional USD$1.917
million to conduct supplementary testing, in parallel with the clinical trials in progress. The new funding enabled MedMira
to collect clinical data required to obtain complementary label claims, intended uses, and expand the field applications for
the products being commercialized under this contract.
The Company continued to advance work on the FDA approval process for Reveal G4, the next generation of its popular HIV
test, with new whole blood applications. MedMira’s Reveal tests have consistently been a market leader in performance,
and Reveal G4, anticipated to be launched in 2015, will ensure MedMira customers can answer the increasing demand for
routine HIV screening of all people aged 15-65 and all pregnant women during the normal course of medical care as laid
out in the latest testing guidelines in the United States.
MedMira introduced its Miriad RVF Toolkit, a strategic expansion in the research and academic markets to augment its
clinical business as well as open new opportunities for licensing the Company’s patented technology platform. The Miriad
RVF Toolkit capitalizes on the power of Rapid Vertical Flow Technology and enables researchers from a wide variety of fields
to easily and quickly build rapid tests, transferring their findings to a proven platform, and speeding the path to
commercialization. During the year this product has created a number of new collaborations and consulting business for
MedMira.
Fiscal Year 2014 saw MedMira embark on a significant new distribution relationship in the United States with VWR
International, LLC, a global solutions provider of laboratory supplies and services with worldwide sales in excess of $4.1
billion in 2012. To kick-off this new relationship, MedMira launched its Reveal G3 Rapid HIV-1 Antibody Test and its Miriad
research product line to over 300 VWR sales representatives covering the research, education, and healthcare sectors at
the VWR Americas Sales Conference.
Sales, marketing and brand building initiatives in the United States progressively increased throughout the year culminating
in two major events for MedMira in June and July 2014 where the primary focus was the Multiplo product line. Multiplexing
is a key differentiator and a hallmark of the Company’s distinct Rapid Vertical Flow Technology and the Multiplo line.
MedMira showcased its Multiplo rapid tests for HIV, syphilis and hepatitis and presented study results to sexually
transmitted diseases and HIV experts at the 2014 STD Prevention Conference. Expanding further on the promotion of the
Multiplo product line, the Company announced three new tests in advance of the 2014 American Association for Clinical
Chemistry (AACC) Annual Meeting & Clinical Lab Expo. The new tests in the product range include Multiplo TP/nTP, which
detects both active and historic syphilis infections, Multiplo TP/HIV/nTP, and Multiplo TP/HIV/HCV, which simultaneously
detects syphilis, HIV and hepatitis C. These key sales and marketing events were supported by a mix of initiatives that built
the Company’s advertising profile with key customer segments in medical research, reference labs, teaching hospitals,
public health labs and physician offices; public relations outreach which gained coverage for MedMira technology and
products in key industry publications such as Clinical Lab Products, SelectScience, and Advance for Administrators of the
Laboratory; and social media channels including the www.MedMira.com/blog.
Sales and marketing initiatives also expanded in Latin America with key product approvals, new distribution agreements
signed, and product shipments. MedMira’s Reveal HIV became the first all-inclusive, point-of-care rapid HIV test to be
8
Management’s Discussion & Analysis
July 31, 2014
approved and sold in Mexico. Diagno Medical, MedMira’s distribution partner in Mexico received its first shipment of
Reveal HIV in April 2014 and began selling to physician offices, community clinics, and mobile outreach centers serving over
30 per cent of Mexico’s population that lives in suburban and rural areas. Elsewhere in Latin America, MedMira signed a
distribution deal in Venezuela and received approval to market and sell Reveal HIV in Costa Rica. The Company continued
to pursue registration and distribution partners in various other countries in Latin America in order to extend its market
share in the region.
MedMira continued to win new business in China, another of the Company’s strategic focus markets. Fiscal Year 2014 saw
the steady gain of market share for the Company’s consistently top-ranking rapid HIV test in the competitive and crowded
Chinese market. Together with strategic distribution partner, Triplex International Biosciences Co., Ltd., MedMira has sold
over 100,000 rapid HIV tests to various provinces in China. Additionally, the Company won follow-up tender business for
200,000 additional rapid HIV tests. Tenders, through which 80 per cent of the rapid HIV tests sold in China each year are
procured, has become a key market for MedMira and its partner. A restructured healthcare system, higher quality
standards, and demand for high performance products have also supported MedMira’s growth in China during 2014 and
set the stage for further brand expansion. MedMira launched its Miriad product line, including the Miriad RVF Toolkit, at
the China Medical Equipment Fair and is preparing to introduce its Multiplo product line as demand for multiplex testing
increases. Further strengthening MedMira’s brand profile in China, the Company took home the Hong Kong-Canada
Business Achievement Award for Outstanding Business Innovation in April 2014.
Two new members joined to the Company’s Board of Directors in May 2014 and one Director retired. Marvyn Robar and
Colin MacGillivray were appointed as Directors, with Mr. Robar being elected as MedMira’s first non-executive Chairman.
Dr. Shou-Ching Tang retired from the Board after 12 years of service. In July 2014, Markus Meile was appointed Chief
Financial Officer. Mr. Meile formerly served on the Company’s Board of Directors and Audit Committee and stepped down
from the Board as he assumed his new duties as MedMira’s Chief Financial Officer.
In 2014, MedMira made significant advancements supported by investment from key stakeholders, including the expansion
of its sales and marketing activities in strategic focus markets including the United States, China, and Latin America;
continuous product development and commercialization work capitalizing on the Company’s technology platform; addition
of key senior leadership team members to support further growth and development; and the implementation of key
corporate and financial systems to ensure the Company has solid base from which to continue to grow.
Financial results
Basis of preparation and significant accounting policies
The basis of financial statement preparation and the significant accounting policies of MedMira are described in Notes 2
and 3 of the Company’s July 31, 2014 consolidated financial statements.
9
Management’s Discussion & Analysis
July 31, 2014
Selected quarterly information (in thousands of dollars except per share amounts)
Income statement
Revenue
Cost of sales
Gross profit
Operating expenses
Other expenses (gains)
Net earnings (loss) before tax
Balance sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Total shareholders deficiency
Total liabilities and equity
Q4 2014
$
898
677
221
1,044
(462)
(361)
Q3 2014
Q2 2014
Q1 2014
Q4 2013
Q3 2013
$
639
428
211
1,213
216
(1,218)
$
519
316
203
1,358
261
(1,417)
$
472
332
140
727
252
(839)
$
595
343
252
659
353
(760)
$
327
277
50
781
128
(859)
Q4 2014
Q3 2014
Q2 2014
Q1 2014
Q4 2013
Q3 2013
$
1,484
358
1,842
4,286
4,246
8,532
(6,690)
1,842
$
1,411
373
1,784
3,456
4,842
8,298
(6,514)
1,784
$
3,216
378
3,594
3,792
5,097
8,890
(5,296)
3,594
$
5,392
336
5,728
4,354
5,253
9,607
(3,879)
5,728
$
822
345
1,167
4,854
5,423
10,277
(9,111)
1,167
$
597
262
858
3,694
5,516
9,210
(8,352)
858
Q2 2013
$
534
374
160
715
(1,629)
1,074
Q2 2013
$
1,172
102
1,273
3,040
5,726
8,765
(7,492)
1,273
Q1 2013
$
545
377
168
641
(616)
143
Q1 2013
$
2,169
30
2,199
2,967
7,798
10,765
(8,566)
2,199
Net earnings (loss) per share
(0.001)
(0.002)
(0.003)
(0.002)
(0.001)
(0.002)
0.003
0.001
10
Management’s Discussion & Analysis
July 31, 2014
Fourth quarter analysis
The following table compares the results of operations for the three months ended July 31, 2014 to the three months
ended July 31, 2013.
Product
Product sales
Royalties
Product cost of sales
Gross margin on product
Services
Service sales
Service cost of sales
Gross margin on services
Operating expenses
Research and development
Sales and marketing
Other direct costs
General and administrative
Total operating expenses
For the three months ended
31-Jul-14
$
31-Jul-13
$
Better (worse)
$
313,825
10,900
(147,553)
177,172
244,289
-
(59,439)
184,850
69,536
10,900
(88,114)
(7,678)
573,255
(529,115)
44,140
351,826
(289,237)
62,589
221,429
(239,878)
(18,449)
170,891
(226,449)
(188,239)
(800,801)
(1,044,598)
138,295
(88,257)
(96,345)
(621,068)
(667,375)
32,596
(138,192)
(91,894)
(179,733)
(377,223)
Operating (expense) income
(823,286)
(419,936)
(403,350)
Non-operating expenses
Financing (expense) income
Net Loss
Product revenue and gross margin
462,648
(360,638)
(338,770)
(758,706)
801,418
398,068
The Company recorded revenue from product sales in the quarter ended July 31, 2014 of $324,725 as compared to $244,289
for the same period last year. The increase in revenue was due to higher sales in Latin America and the United States. Gross
profit for the quarter was $177,172 compared to $184,850 in the same period in 2013. The decrease in gross profit was
due to an increase in product sales in Latin America where margins are typically lower than in the North American markets.
The Company’s product sales in North America have been steady and no decreases have been recorded. The cost of product
sales was $147,553 during the three months ended July 31, 2014 (July 31, 2013– $59,439).
Service revenue and gross margin
The Company recorded revenue from service sales of $573,255 in the three months ended July 31, 2014 (July 31, 2013 -
$351,826) with a related gross margin of $44,140 (July 31, 2013 - $ 62,589). The Company earned revenue and gross margin
on two research contracts with the United States military. The current year gross margin on services was in line with the
management’s expectations. The slight decrease in profit margin was due to increased cost on quality assurance from the
11
Management’s Discussion & Analysis
July 31, 2014
end phase of the research projects.
Operating expenses
Total operating expenses increased to $1,044,598 in the quarter ended July 31, 2014, compared to $667,375 during the
same period in 2013.
− Research and development recovery for the quarter ended July 31, 2014 were $170,891, compared to $138,295 for
the same period last year. The increase in recovery is due to a higher refund related to the scientific research and
experimental tax credits the company can claim.
−
Sales and marketing expenses for the quarter ended July 31, 2014 was $226,449 compared to $88,257 for the same
period last year.
− Other direct costs for the three months ended July 31, 2014 were $188,239 compared to $96,345 for the same period
last year. This increase was due to higher costs on the on-going preparation for the FDA and WHO registrations.
− Administrative expenses were $800,801 for the quarter ended July 31, 2014, compared with $621,068 for the same
period in 2013. The increase in administrative expense was attributed to mainly higher regulatory and professional fees
related to the ongoing FDA and WHO registrations.
Non-operating income and expenses
−
The gain in financing expenses was due to the re-measurement of the royalty provision and the long term debt. The
Company gained $462,648 in comparison to the loss of $338,770 in the same period last year.
12
Management’s Discussion & Analysis
July 31, 2014
Year to date analysis
The following table compares the results of operations for the year ended July 31, 2014 to the year ended July 31, 2013.
Product
Product sales
Royalties
Product cost of sales
Gross margin on product
Services
Service sales
Service cost of sales
Gross margin on services
Operating expenses
Research and development
Sales and marketing
Other direct costs
General and administrative
Total operating expenses
For the year ended
31-Jul-14
$
843,568
10,900
(436,406)
418,062
1,673,711
(1,316,978)
356,733
(294,425)
(1,086,328)
(609,513)
(2,353,152)
(4,343,418)
31-Jul-13
$
Better(worse)
$
829,438
35,360
(435,409)
429,389
1,136,666
(935,280)
201,386
(133,304)
(262,271)
(299,209)
(2,101,361)
(2,796,145)
14,130
(24,460)
(997)
(11,327)
537,045
(381,698)
155,347
(161,121)
(824,057)
(310,304)
(251,791)
(1,547,273)
Operating (expense) income
(3,568,623)
(2,165,370)
(1,403,253)
Non-operating expenses
Financing (expense) income
Net Loss
Product revenue and gross margin
(266,716)
(3,835,339)
1,763,069
(402,301)
(2,029,785)
(3,433,038)
The Company recorded revenue from product sales in the year ended July 31, 2014 of $854,468 as compared to $864,798
for the same period last year. Gross profit on product sales for the year was $418,062 compared to $429,389 in the same
period last year. The slight decrease in gross profit margin was due to higher sales in low margin markets whereas product
sales in higher margin markets have been stable and unchanged. Current year gross profit was in line with management
expectations.
Service revenue and gross margin
The Company recorded revenue from service sales in the year ended July 31, 2014 of $1,673,711 as compared to $1,136,666
for the same period last year. The Company earned revenue and gross margin on two research contracts with the United
States military. The current year margin on services was in line with management expectations.
13
Management’s Discussion & Analysis
July 31, 2014
Operating expenses
Total operating expenses increased by $1,547,272, from $2,796,145 for the year ended July 31, 2013 to $4,343,417 for the
year ended July 31, 2014.
− Research and development expenses for the year ended July 31, 2014 were $294,425 compared to $133,304 for the
year ended July 31, 2013. Actual research expenses in July 31, 2014 for the year were $1,910,445 (July 31, 2013 –
$1,211,546), which was offset by reimbursements of research costs of $299,042 (July 31, 2013 – $142,962) and
allocation of $1,316,978 to cost of sales (July 31, 2013 – $935,280). The comparative increase in research costs was
directly attributable to greater activity related to the United States military contracts and new product developments.
−
Sales and marketing expenses for the year ended July 31, 2014 were $1,086,328 compared to $262,271 for the same
period last year as the Company launched its Miriad product line (February 2014). In addition, preparations have been
undertaken for new product launches in 2015. The expansion of the Sales and Marketing department has been in line
with the management’s vision to re-focus its resources on its sales activities.
− Other direct costs for the year ended July 31, 2014 were $609,513, compared to $299,209 for the same period last
year. This increase was due to higher costs on the ongoing preparation for the FDA and WHO registrations.
− General and administrative expenses were $2,353,152 for the year ended July 31, 2014, compared to $2,101,361 for
the same period in 2013. The increase in administrative expense was attributed to increased regulatory and
professional fees related to the ongoing FDA and WHO registrations.
Non-operating income and expenses
Total other losses were $266,716 in the year ended July 31, 2014, compared to a gain of $1,763,069 during the same
period in 2013.
−
−
Financing expenses, including interest expense, were $266,716 for the year ended July 31, 2014 versus a gain of
$1,763,069 in the same period last year. The gain in the previous year was due to re-negotiation on lower interest
rates which created a book gain for the Company. The current finance expenses are in line with management’s
expectations.
The Company decreased its current liabilities by $568,045 from $4,853,960 for the year ended July 31, 2013 to
$4,285,915 for the year ended July 31, 2014.
− An additional decrease in non-current liabilities from $1,177,407 in the year ended July 31, 2013 to $4,246,078 in the
year ended July 31, 2014 has been achieved through debt repayments.
14
Management’s Discussion & Analysis
July 31, 2014
Geographic information
The Company organizes and records the sales and distribution of its products and services based on major geographical
territories around the world. The table below provides the three month and annual geographic breakdown of revenue.
Product and service revenue
For the three months ended
Product and service revenue
For the year ended
31-Jul-14
$
748,373
60,344
13,996
75,267
-
897,980
31-Jul-13
31-Jul-14
31-Jul-13
$
575,389
19,243
1,483
-
-
596,115
$
2,206,708
142,225
19,045
160,201
-
2,528,179
$
1,655,557
92,274
10,039
240,617
2,977
2,001,464
North America
Latin America and the Caribbean
Europe
Asia Pacific
Middle East
Total revenue
Liquidity and capital resources
Cash and working capital
The Company had a cash reserve of $162,458 on July 31, 2014, as compared to $20,942 on July 31, 2013. The Company’s
net working capital position as of July 31, 2014 was a deficit of $2.8 million compared to the July 31, 2013 working capital
deficit of $4.0 million. The Company has incurred losses and negative cash flows on a cumulative basis since inception. For
the year ended July 31, 2014, the Company incurred a net loss from operating activities of approximately $3.6 million and
negative cash flow of $4.5 million, compared to a net loss from operations of $2.2 million and negative cash flow from
operations of $2.1 million for the same period in 2013. In October 2014, subsequent to year-end, the Company successfully
raised an additional investment of $1.1 million to fund the required operating activities.
Operating activities
MedMira generated negative cash flows from operations of $4.5 million for the year ended July 31, 2014, compared to
negative cash flows of $2.1 million for the year ended July 31, 2013. The change in cash flow from operations was due to
greater payments made to suppliers in the current period compared to last year.
Financing activities
Net cash inflows from financing activities was $4,821,494 for the year ended July 31, 2014, compared to $58,493 for the
same period in 2013. The higher cash inflow in 2014 was the due to the $6.1 million investment from OnSite Lab.
Investing activities
Cash outflow from investments decreased to $96,288 during the year ended July 31, 2014, compared to $366,986 for the
same period in 2013. The decrease in investing cash outflow was the result of investments in facility upgrades completed
in 2013.
Debt
As at July 31, 2014, the Company had loans payable with a carrying value of $6.2 million compared to $6.9 million at July
31, 2013. The decrease in the carrying value of loans payable from July 31, 2013 to July 31, 2014 is due to a fair value
adjustment to the carrying amount of the loans and the repayment of principal. The Company’s loans have an average
payment term of 6 years.
15
Management’s Discussion & Analysis
July 31, 2014
Further discussions on liquidity and capital resources can be found in the Liquidity Risk section of this document, under
Need for Additional Capital in the Risk and Uncertainties section in this document and in Notes 2 and 11 of the Company’s
July 31, 2014 condensed interim consolidated financial statements.
Equity/Shares
The Company is authorized to issue an unlimited number of common shares without nominal par value. During fiscal year
2014 the company issued 122,100,000 common shares. The number of issued and outstanding common shares on July 31,
2014 was 514,364,320. The Company is also authorized to issue an unlimited number of Series A preferred shares
redeemable at $0.001 per share after March 31, 2010, convertible into an equal number of common shares upon the
Company meeting certain milestones. There were 5,000,000 Series A preferred shares issued and outstanding on July 31,
2014.
The Company had 5,990,000 outstanding stock options on July 31, 2014. The outstanding stock options have a weighted
average exercise price of $0.10 per share and a weighted average remaining term of 1 year. The number of outstanding
warrants on July 31, 2014 was 312,100,000. The outstanding warrants have a weighted average exercise price of $0.10 per
share.
Off balance sheet arrangements
The Company was not party to any off balance sheet arrangements as of July 31, 2014.
Financial instruments – fair value
The Company recognizes financial instruments based on classification. Depending on the financial instruments’
classification, changes in subsequent measurements are recognized in net loss or other comprehensive loss. The Company
has implemented the following classifications:
Financial assets
− Cash and bank balances: Classified as loans and receivables and recorded at amortized cost using the effective interest
method.
−
Trade and other receivables: After initial fair value measurement, trade and other receivables are measured at
amortized cost using the effective interest method.
Financial liabilities
−
Total bank indebtedness long-term debt, accounts payable and accrued liabilities: After initial fair value measurement,
these financial liabilities are measured at amortized cost using the effective interest method.
Management believes the carrying value of accounts receivable, bank indebtedness, and accounts payable and accrued
liabilities approximate fair value at the year-end due to their short-term nature.
Fair value estimates are made at a specific point in time based on relevant market information. These estimates involve
uncertainties and matters of significant judgement and cannot be determined with precision. Change in assumptions and
estimates could significantly affect fair values.
Financial instruments – risk factors
MedMira has exposure to the following risks from its financial instruments: liquidity risk, credit risk, currency risk, and
interest rate risk. Senior management monitors risk levels and reviews risk management activities as necessary.
16
Management’s Discussion & Analysis
July 31, 2014
Liquidity risk
The Company manages liquidity by forecasting and monitoring operating cash flows and through the use of revolving credit
facilities and share issuances.
The Company has incurred losses and negative cash flows from operations on a cumulative basis since inception. For the
year ended July 31, 2014, the Company realized a net loss of approximately $3.8 million (July 31, 2013 – net loss $0.4
million), consisting of a net loss from operations of $3.6 million (July 31, 2013 – $2.2 million), a valuation gain on re-
measurement of royalty provision of $0.5 million (July 31, 2013 – $nil) and other non-operating losses of $0.7 million (July
31, 2013 – gain of $1.8 million). Negative cash flows from operations were approximately $4.5 million (July 31, 2013 – $2.1
million). As at July 31, 2014, the Company had an accumulated deficit of approximately $74.8 million (July 31, 2013 – $71.0
million). In addition to its on-going working capital requirements, the Company must secure sufficient funding for its
research and development programs for existing commitments, including its current portion of loans of approximately $2.2
million. These circumstances lend significant doubt as to the ability of the Company to meet its obligations as they come
due and, accordingly, the appropriateness of the use of accounting principles applicable to a going-concern.
Management is pursuing other financing alternatives to fund the Company’s operations so it can continue as a going-
concern. Management plans to secure the necessary financing through new equity and debt arrangements. Nevertheless,
there is no assurance that this initiative will be successful.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
Company. The company mitigates this risk by requiring a 50% down payment on most orders at the time of purchase, and
the remaining 50% prior to shipment. The Company derives approximately 85% (July 31, 2013—62%) of its revenue from
two (July 31, 2013—two) main customers and, for these customers, assesses the recoverability of each account on a regular
basis. As of July 31, 2014, 92% of the accounts receivable balance is due from three customers (July 31, 2014—85% due
from two customers) and no other customers account for more than 10% of the accounts receivable balances as at July 31,
2014.
Currency risk
MedMira receives most of its revenues in foreign currencies and incurs expenses in US and Canadian currencies. As a result,
the Company is subject to uncertainty as foreign exchange rates fluctuate. The exchange fluctuations from year to year
have accounted for a significant portion of the company’s exchange gain and loss. Most sales are in USD, however, they are
recorded at the exchange rate prevailing on or near the transaction date and collected in a timely manner.
The Company also experiences currency exposure resulting from balance sheet fluctuations of US-denominated cash,
accounts receivable, accounts payable and US-denominated promissory notes.
MedMira mitigates this currency risk by maintaining a balance of USD currency which is used to pay down US-denominated
liabilities and replenishes the balance through US-denominated revenues.
Interest rate risk
The Company is not exposed to interest rate risk as it borrows funds at fixed rates.
17
Management’s Discussion & Analysis
July 31, 2014
Related party transactions
The following transactions occurred with related parties during the year ended July 31, 2014:
• A short-term loan totalling $478,920 bearing 5% interest was received from Onsite Lab. During the year, $1,998 in
interest was accrued against this loan (2013 - $523,000 and $3,460 in interest).
•
Short-term loans totalling $119,730 bearing 5% interest were received from a director. During the year, $5,892 in
interest was accrued against these loans (2013 - $106,973 and $805 in interest).
• Director fees totalling $24,367 were incurred (2013 - $16,250).
•
Consulting fees totalling $26,138 were incurred (2013 - $82,233).
The following balances with related parties were outstanding at July 31, 2014:
• Accounts payable totalling $8,292 was due to directors (2013 – $37,244).
• A short-term loan totalling $480,918 was due to OnSite Lab Holding AG (2013 – $526,460).
• A short-term loan totalling $125,622 was due to a director (2013 – $107,778).
• A royalty provision was owed to OnSite Lab Holding AG of $260,000 (2013 – $739,817).
Summary Compensation Table – Officers
Name and
Principal Position
Period
Paid
Compensation
($)
Accrued
Compensation
($)
Share- and
Option-based
Awards*
($)
All other
compensation
($)(2)
Total
Compensation
($)
Fiscal
2014
Fiscal
2014
Fiscal
2014
Fiscal
2014
Hermes Chan
CEO
Sing Chan
COO
Daniel Frid
Former CFO
Jelle Kuypers
Former CFO
Note:
188,000
132,000
124,200(3)
168,800
-
-
-
-
-
-
-
34,665
52,769(1)
240,769
36,501(2)
168,501
-
-
124,200
203,465
1) Hermes Chan, back pay of $52,769
2) Sing Chan, back pay of $36,501
3) Daniel Frid received $70,200 in severance compensation
*The Company makes certain estimates and assumptions when calculating the fair value of option-based awards. The
Company uses an option-pricing model which includes significant assumptions including estimates of the expected
volatility, expected life, expected dividend rate and expected risk-free rate of return. Changes in these assumptions may
result in a material change to the amounts recorded for the issuance of stock options.
18
Management’s Discussion & Analysis
July 31, 2014
Summary Compensation Table – Directors
Name
Designation
Position(s)
Hermes Chan
Director
Romano Robusto
Director/Audit
Committee Chair
Member of
Nomination and
Compensation
Committee
Markus Meile
Former Director
Director Business
Development
Michael Sidler
Director
Marvyn Robar
Director/Chairman of
the Board/Member of
Audit and Nomination
& Compensation
Committee
Colin MacGillivray
Director/Nomination
& Compensation
Committee
Chair/Member of
Audit Committee
Dr. Shou Ching-Tang
Former Director
Period
Fiscal
2014
Fiscal
2014
Fiscal
2014
Fiscal
2014
Fiscal
2014
Fiscal
2014
Fiscal
2014
Paid
Compensation
($)
Accrued
Compensation
($)
Share- and
Option-based
Awards
($)*
All other
compensation
($)
Total
Compensation
($)
-
-
40,838
-
40,838
3,750
5,276
33,038
42,064
31,618
43,507
30,052
-
105,1771
12,133
12,133
-
-
-
2,945
2,411
-
-
3,110
3,438
28,318
-
-
-
2,945
2,411
34,866
1 Updated subsequent to the Fiscal Year End 2014 filings to correct a typographical error.
*The Company makes certain estimates and assumptions when calculating the fair value of option-based awards. The
Company uses an option-pricing model which includes significant assumptions including estimates of the expected volatility,
expected life, expected dividend rate and expected risk-free rate of return. Changes in these assumptions may result in a
material change to the amounts recorded for the issuance of stock options.
Subsequent events
In October 2014, the Company completed a $1.1 million equity investment from a new, arm’s length investor from Asia.
Under the terms of the deal, the investor acquired 22,000,000 equity units at $0.05 per unit. Each equity unit consists of
one common share and one common share purchase warrant and is subject to a four month hold period which expires on
January 31, 2015. Each full warrant entitles the investor to purchase one common share of MedMira at $0.10 per share
exercisable over four years.
19
Management’s Discussion & Analysis
July 31, 2014
Internal control systems and disclosure controls
To ensure the integrity and objectivity of the data, management maintains a system of internal controls comprising of
written policies, procedures and a program of internal reviews which provides reasonable assurance that transactions are
recorded and executed in accordance with its authorization that assets are properly safeguarded and that reliable financial
records are maintained.
Management is currently updating existing standardized processes to improve internal controls and reduce compliance
costs. The updated controls will help improve timeliness and accuracy of financial records as well as continue to ensure that
the Company’s assets are properly safeguarded.
Disclosure controls and procedures within MedMira have been designed to provide reasonable assurance that all relevant
information is identified to the Disclosure Committee to ensure appropriate and timely decisions are made regarding public
disclosure.
Management, under the supervision of the Chief Executive Officer and Chief Financial Officer, has evaluated the
effectiveness of the Company’s internal control over financial reporting and based on this evaluation, has concluded that
internal control over financial reporting was effective as of July 31, 2014.
Due to inherent limitations, internal control over financial reporting and disclosure controls can provide only reasonable
assurances and may not prevent or detect misstatements. Furthermore, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
The Audit Committee of the Board of Directors of MedMira reviewed this MD&A, and the interim financial statements and
MedMira’s Board of Directors approved these documents prior to release.
Risk and uncertainties
The Company’s base of activity has expanded to manufacturing products for distribution in international markets, making
it difficult to accurately predict future operating results. Actual future results may differ significantly in any forward-looking
statements. Currently, the Company is not making sufficient sales to be self-sustaining. As a result, the Company’s financial
condition, business and operations, and intellectual property are exposed to a variety of risk factors. These risks include,
but are not limited to, the following:
Risks and uncertainties related to the Company’s financial condition
Need for additional capital
Cash generated from operations is insufficient to satisfy working capital and capital expenditure requirements, and the
Company is operating with a substantial working capital deficit. The Company will need to secure additional financing in the
near term in order to continue as a going concern which may include the sale of additional equity or debt securities or
obtaining additional credit facilities. In recent quarters, the Company has relied on temporary funding advanced from key
investors. There can be no assurance that this source of funding will continue to be available on acceptable terms, and
additional capital may not be available on satisfactory terms, or at all. Management is pursuing other financing alternatives
to fund the Company’s operations so it can continue as a going-concern.
The Company intends to continue to explore opportunities to enter into supply agreements, joint venture relationships,
and other special purpose vehicles with third parties from time to time in order to continue to commercialize its patent
pending technology and other intellectual property. Such arrangements may include the issuance of equity or debt
20
Management’s Discussion & Analysis
July 31, 2014
securities of the Company, subject to compliance with the applicable requirements of the Canadian securities regulatory
authorities and the TSX-V.
Any additional equity financing may result in the dilution of shareholders, and debt financing, if available, may include
restrictive covenants. MedMira’s future liquidity and capital funding requirements will depend on numerous factors
including:
−
−
−
−
the extent to which new products and products under development are successfully developed, gain market
acceptance and become and remain competitive;
the costs and timing of further expansion of sales, marketing and manufacturing activities and facility’s needs;
the timing and results of clinical studies and regulatory actions regarding potential products; and
the costs and timing associated with business development activities, including potential licensing of technologies
patented by others.
Continued operations will be contingent on generating sufficient revenues or raising additional capital or debt financing.
There is no assurance that these initiatives will be successful.
Fluctuations in revenue
The Company’s quarterly and annual revenues may fluctuate due to several factors, including seasonal variations in demand,
competitive pressure on average selling prices, customer order patterns, the rate of acceptance of the Company’s products,
product delays or production inefficiencies, regulatory uncertainties or delays, costs and timing associated with business
development activities, including potential licensing of technologies, international market conditions and variations in the
timing and volume of distributor purchases. The healthcare industry traditionally is not impacted by seasonal demand. The
impact of one or a combination of several of these factors could have a significant adverse effect on the operations of the
Company. In addition, changes in existing collaborative relationships, as well as the establishment of new relationships,
product licensing and other financing relationships, could materially impact the Company’s financial position and results
from operations.
Effects of inflation and foreign currency fluctuations
A significant portion of the Company’s revenue and expenses are in U.S. dollars, and therefore subject to fluctuations in
exchange rates. There is a risk that significant fluctuations in exchange rates may impact the Company’s ability to sell its
products and, thereby, have a material adverse impact on the Company’s results of operations.
Possible volatility of share price
The stock market has from time to time experienced significant price and volume fluctuations that may be unrelated to the
operating performance of the Company. In addition, the market price of the Company’s common shares, like the share
prices of many publicly traded biotechnology companies, has been highly volatile. Announcement of technology innovations
or new commercial products by the Company or its competitors, developments or disputes concerning patent or proprietary
rights, publicity regarding actual or potential medical results relating to products under development by the Company or
its competitors, regulatory developments in both the U.S. and foreign countries, public concern as to the safety of
biotechnology products and economic and other external factors, as well as period to period fluctuations in financial results
may have a significant impact on the market price of the Company’s common shares. It is likely that in some future quarter
the Company’s operating results will be below the expectations of the public market analysts and investors. In such event,
the price of the Company’s common shares would likely be materially adversely affected.
21
Management’s Discussion & Analysis
July 31, 2014
Risks and uncertainties related to the Company’s business and operations
Lack of market acceptance
MedMira’s ability to market its diagnostic products will, in part, depend on its or its partners’ ability to convince users that
these products represent viable and efficacious diagnostic tests. There can be no assurance that MedMira will be successful
in this regard.
Competition
The in vitro diagnostics market in which the Company participates is highly complex and competitive. It is comprised of both
large healthcare companies that have substantially greater financial, scientific, and other resources than MedMira and a
variety of international companies producing diagnostic products of varying quality. In the developed regions of the world
with strong healthcare infrastructures, the in vitro diagnostics market for serious and emerging infectious diseases such as
HIV and Hepatitis C has been focused on diagnostic tests using instrument based platforms designed for clinical laboratories.
Diagnostic products designed for use in non-laboratory settings at the point-of-care or for use in laboratories or public
health clinics using non-instrument based platforms for the screening and diagnosis of infectious diseases are becoming
more mainstream in both the developed and developing regions of the world. Competition in this sector of the market is
intense and is expected to increase. Many of the companies have substantially greater resources available for development,
marketing and distribution of these products than does MedMira.
Significant development effort required
Products currently under development by MedMira require additional development, testing and investment prior to any
final commercialization. There can be no assurance that these products or any future products will be successfully
developed, prove to be safe and effective in clinical trials, receive applicable regulatory approvals, be capable of being
produced in commercial quantities at reasonable costs or be successfully marketed. The long-term success of MedMira
must be considered in light of the expenses, difficulties and delays frequently encountered in connection with the
development of new technology and the competitive and highly regulated environment in which MedMira operates.
Uncertainties in sales cycles in target markets
MedMira markets and distributes its products to both developed and developing regions of the world. Sales cycles in
developed regions of the world are somewhat conventional, however, timing of registrations and other activities
surrounding the sale of product into a specific market are unpredictable and highly dependent on third party and
government organizations to complete certain processes before a sales transaction can take place. In developing regions of
the world where MedMira and its strategic partners are working to close deals, the sales cycle timing is highly uncertain
given a number of factors including political and economic turmoil, as well as bureaucratic processes necessary to do
business in these regions.
High degree of regulation
MedMira operates in a highly regulated industry and is subject to the authority and approvals of certain regulatory agencies,
including Health Canada, the FDA, the CFDA, CE Mark and applicable health authorities in other countries, with regard to
the development, testing, manufacture, marketing and sale of its products. The process of obtaining such approvals can be
costly and time consuming, and there can be no assurance that regulatory approvals will be obtained or maintained. Any
failure to obtain (or significant delay in obtaining) or maintain Health Canada, FDA, Notified Body or CFDA approvals (or, to
a lesser extent, approval of applicable health authorities in other countries) for MedMira’s new or existing products could
materially adversely affect MedMira’s ability to market its products successfully and could therefore have a material
adverse effect on the business of MedMira.
22
Management’s Discussion & Analysis
July 31, 2014
Ability to retain and attract key management and other experienced personnel
Since its inception, the Company has been, and continues to be, dependent in its ability to attract and maintain key scientific
and commercial personnel upon whom the Company relies for its product innovations and commercialization programs.
Loss of key personnel individually or as a group could have significant adverse impact on the Company’s immediate and
future achievement of operating results.
Limited sales and marketing resources and reliance on key distributors to market and sell the Company’s product
Any revenues received by the Company will be dependent on the efforts of third parties and there can be no assurance that
such efforts will be successful. Failure to establish sustainable and successful sales and marketing programs with effective
distributor support programs may have a material adverse effect on the Company.
Commercialization of the Company’s products is expensive and time consuming. In the United States, a relationship has
been established with My Care Solution to support the logistics and distribution of the Company’s products. The Company
will rely on the joint efforts of My Care Solution and distributors Cardinal Health, a Fortune 100 company, and VWR
International to distribute MedMira’s Reveal® G3 Rapid HIV-1 Antibody Test product line.
Outside the United States, the Company pursues collaborative arrangements with established pharmaceutical and
distribution companies for marketing, distribution, and sale of its products.
In China, MedMira has formed a strategic partnership with Triplex to market and distribute the Company’s rapid HIV test
within the assigned territory. This strategic partnership also encompasses the assembly and packaging of final product
components.
If any of the Company’s distribution agreements are terminated and the Company is unable to enter into alternative
agreements, or if the Company elects to distribute new products directly, additional investment in sales and marketing
resources would be required which would increase future selling, general and administrative expenses. The Company has
limited experience in direct sales, marketing and distribution of its products. A failure of the Company to successfully market
its products would have a material and adverse effect on the Company.
Manufacturing capabilities and scale-up
The Company must manufacture its products in compliance with regulatory requirements, in sufficient quantities and on a
timely basis, while maintaining product quality and acceptable manufacturing costs. If it is unable to manufacture or
contract for such capabilities on acceptable terms for its products under development, MedMira’s plans for
commercialization could be materially adversely affected.
MedMira’s manufacturing facilities are, or will be, subject to periodic regulatory inspections by the FDA, CE, CFDA and other
regulatory agencies and these facilities are subject to Quality System Regulations requirements of the FDA and other
standards organizations. MedMira may not satisfy such regulatory or standards requirements, and any failure to do so
would have a material adverse effect on the Company.
In addition, production and scale-up of manufacturing for new products may require the development and implementation
of new manufacturing technologies and expertise. Manufacturing and quality control problems may arise as the Company
attempts to scale-up manufacturing and such scale-up may not be achieved in a timely manner or at commercially
reasonable cost, or at all.
Rapidly changing technology
The in vitro diagnostic testing field as a whole is characterized by rapidly advancing technology that could render MedMira’s
products obsolete at any time and thereby adversely affect the financial condition and future prospects of the Company.
23
Management’s Discussion & Analysis
July 31, 2014
Uncertainties regarding healthcare reimbursement and reform
The future revenues and profitability of diagnostic companies as well as the availability of capital may be affected by the
continuing efforts of government and third party payers to contain or reduce costs of healthcare through various means.
For example, in certain foreign markets, pricing or profitability is subject to government control. In the US, there has been,
and the Company expects that there will continue to be, a number of federal and state proposals to implement similar
government controls. While the Company cannot predict whether any such legislative or regulatory proposals will be
adopted, the announcement or adoption of such proposals could have a material adverse effect on the Company’s results
of operations.
Product liability
MedMira may be subject to claims of personal injury and could become liable to clinical laboratories, hospitals and patients
for injuries resulting from the use of its products. MedMira could suffer financial loss due to defects in its products and such
financial loss together with litigation expenses could have a material adverse effect on its operations. MedMira has obtained
product liability insurance to protect against possible losses of this nature. However, no assurance can be given that such
insurance will be adequate to cover all claims or that MedMira will be able to maintain such insurance at a reasonable cost.
Risks and uncertainties related to the Company’s intellectual property
No assurance of patent protection
MedMira has filed patent applications in the United States, Canada, China, and other foreign countries relating to various
aspects of its rapid diagnostic platform, processes, reagents, and equipment. Although it is management’s belief that the
patents for which the Company applied may be issued, there can be no such assurance, nor can MedMira assure that
competitors will not develop functionally similar or superior diagnostic testing devices. Moreover, there is a question as to
the extent to which biotechnology discoveries and related products and processes can effectively be protected by patents.
The law regarding the breadth or scope of biotechnology patents is new and evolving. No assurance can be given that, if a
patent issued to MedMira is challenged, it will be held valid and enforceable or will be found to have a scope sufficiently
broad to cover competitors’ products or processes. The cost of enforcing MedMira’s patent right, if any, in lawsuits that it
may bring against infringers may be significant and could limit MedMira’s operations.
Possible patent infringement
The extent to which biotechnology discoveries and related products and processes can be effectively protected by patents
and be enforceable is uncertain and subject to interpretation by the courts. The technologies, products, and processes of
MedMira may be subject to claims of infringement on the patents of others and, if such claims are successful, could result
in the requirement to access such technology by license agreement. There can be no assurance that such licenses would be
available on commercially acceptable terms. If MedMira is required to acquire rights to valid and enforceable patents but
cannot do so at reasonable cost, MedMira’s ability to manufacture or market its products would be materially adversely
affected. The cost of MedMira’s defence against infringement charges by other patent holders may be significant and could
limit MedMira’s operations.
24
MedMira Inc.
Consolidated Financial Statements
July 31, 2014 and 2013
25
November 28, 2014
Management’s responsibility for financial reporting
The accompanying consolidated financial statements of MedMira Inc. (MedMira or the Company) are the responsibility of
management and have been approved by the Board of Directors. The consolidated financial statements have been prepared
by management in accordance with International Financial Reporting Standards (IFRS). The consolidated financial
statements includes amounts and assumptions based on management’s best estimates which have been derived with
careful judgement.
In fulfilling its responsibilities, management has developed and maintains a system of internal accounting controls. These
controls are designed to ensure that the financial records are reliable for preparation of the consolidated financial
statements.
The Board of Directors of the Company is responsible for ensuring that management fulfils its responsibilities for financial
reporting and is ultimately responsible for reviewing and approving the consolidated financial statements and the
accompanying management’s discussion and analysis. The Board of Directors carries out this responsibility principally
through its Audit Committee.
The Audit Committee is a subcommittee of the Board of Directors. It is responsible for oversight of the internal control and
financial matters assisting the Company’s management and independent auditors to ensure that the integrity of the
financial reporting process is maintained.
The Company’s independent auditors are appointed by the shareholders to conduct an audit in accordance with Canadian
generally accepted auditing standards and their report follows.
(signed) Hermes Chan
Chief Executive Officer
(signed) Markus Meile
Chief Financial Officer
26
Deloitte LLP
1969 Upper Water Street
Suite 1500
Purdy's Wharf Tower II
Halifax NS B3J 3R7
Canada
Tel: (902) 422-8541
Fax: (902) 423-5820
www.deloitte.ca
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of MedMira Inc.
We have audited the accompanying consolidated financial statements of MedMira Inc. (MedMira or the
Company), which comprise the consolidated statements of financial position as at July 31, 2014 and July 31,
2013, and the consolidated statements of operations and comprehensive loss, consolidated statements of changes
in equity and consolidated statements of cash flows for the years then ended, and a summary of significant
accounting policies and other explanatory information.
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in
accordance with International Financial Reporting Standards, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards
require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor's judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud
or error. In making those risk assessments, the auditor considers internal control relevant to the entity's
preparation and fair presentation of the consolidated financial statements in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation
of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis
for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position
of MedMira Inc. as at July 31, 2014 and July 31, 2013, and its financial performance and its cash flows for the
years then ended in accordance with International Financial Reporting Standards.
27
Emphasis of Matter
Without modifying our opinion, we draw attention to Note 2 in the consolidated financial statements which
indicates that the Company incurred a net loss of $3,835,339, during the year ended July 31, 2014, and as of that
date, the Company’s current liabilities exceeded its current assets by $2,802,073 with an accumulated deficit of
$74,795,741. These conditions, along with other matters as set forth in Note 2, indicate the existence of a
material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern.
Chartered Accountants
November 28, 2014
Halifax, Nova Scotia, Canada
28
MedMira Inc.
Consolidated statements of financial position
As at July 31, 2014 and July 31, 2013
In Canadian dollars
Assets
Current assets
Cash
Trade and other receivables
Prepaid expenses
Current tax assets
Inventories
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Current portion of debt
Accounts payable and accrued liabilities
Deferred revenue
Total current liabilities
Non-current liabilities
Provision for royalty
Long term portion of debt
Total non-current liabilities
Total liabilities
Equity
Share capital
Warrant reserve
Stock based compensation reserve
Equity reserve
Accumulated deficit
Total shareholders' deficiency
Total liabilities and equity
Notes
31-Jul-14
$
31-Jul-13
$
5
6
7
10
12
10
8
8
8
162,458
778,345
48,270
193,000
301,770
1,483,843
358,082
2
358,084
1,841,927
2,234,870
1,847,946
203,100
4,285,916
260,000
3,986,078
4,246,078
8,531,994
59,018,425
7,207,647
1,283,832
595,770
(74,795,741)
(6,690,067)
1,841,927
20,942
320,253
70,103
205,489
205,000
821,787
345,056
2
345,058
1,166,845
2,190,635
2,560,003
103,322
4,853,960
739,817
4,683,668
5,423,485
10,277,445
55,661,183
4,493,647
1,099,202
595,770
(70,960,402)
(9,110,600)
1,166,845
The accompanying notes are an integral part of these consolidated financial statements.
Approved on behalf of the Board of Directors
(signed) Hermes Chan, Director
(signed) Romano Robusto, Director
29
MedMira Inc.
Consolidated statements of operations and comprehensive loss
For the years ended July 31, 2014 and July 31, 2013
In Canadian dollars
Product
Product sales
Royalties
Product cost of sales
Gross margin on product
Services
Service sales
Service cost of sales
Gross margin on services
Operating expenses
Research and development
Sales and marketing
Other direct costs
General and administrative
Total operating expenses
Operating loss
Non-operating income (expenses)
Financing (expense) income
Net and comprehensive loss
Basic loss per share
Diluted loss per share
Notes
31-Jul-14
$
31-Jul-13
$
4
4
5
4
14
14
19
9
9
843,568
10,900
(436,406)
418,062
829,438
35,360
(435,409)
429,389
1,673,711
(1,316,978)
356,733
1,136,666
(935,280)
201,386
(294,425)
(1,086,328)
(609,513)
(2,353,152)
(4,343,418)
(133,304)
(262,271)
(299,209)
(2,101,361)
(2,796,145)
(3,568,623)
(2,165,370)
(266,716)
(3,835,339)
1,763,069
(402,301)
(0.007)
(0.007)
(0.001)
(0.001)
The accompanying notes are an integral part of these consolidated financial statements.
30
MedMira Inc.
Consolidated statements of changes in equity
In Canadian dollars
Share capital
Common shares Preferred shares Warrant reserve
Stock based
compensation
reserve
Equity reserve
Accumulated deficit
Shareholders'
deficiency
Balance at July 31, 2012
55,658,683
2,500
4,493,647
1,099,202
595,770
(70,558,101)
(8,708,299)
Net and comprehensive loss
-
-
-
-
-
(402,301)
(402,301)
Balance at July 31, 2013
55,658,683
2,500
4,493,647
1,099,202
595,770
(70,960,402)
(9,110,600)
Net and comprehensive loss
Issuance of common shares for cash
Issuance of common shares for debt
Share issuance costs
Issuance of stock options
-
3,097,536
293,464
(33,758)
-
-
-
-
-
-
-
2,479,113
234,887
-
-
-
-
-
-
184,630
-
-
-
-
-
(3,835,339)
-
-
-
-
(3,835,339)
5,576,649
528,351
(33,758)
184,630
Balance at July 31, 2014
59,015,925
2,500
7,207,647
1,283,832
595,770
(74,795,741)
(6,690,067)
The accompanying notes are an integral part of these consolidated financial statements.
31
MedMira Inc.
Consolidated statements of cash flows
For the years ended July 31, 2014 and July 31, 2013
In Canadian dollars
Cash from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Net cash from operating activities
Cash from investing activities
Payment to acquire property, plant and equipment
Net cash from investing activities
Cash from financing activities
Cash proceeds from share issuance
Cash proceeds from interest
Cash proceeds from new debt
Cash payment on existing debt
Cash payment of interest
Net cash from financing activities
Net increase (decrease) in cash
Cash at the beginning of the year
Effects of exchange on the foreign currency cash balances
Cash at the end of the year
Notes
31-Jul-14
$
2,169,862
(6,707,398)
(4,537,536)
31-Jul-13
$
1,876,677
(3,964,514)
(2,087,837)
6
(96,288)
(96,288)
(366,986)
(366,986)
5,542,891
14,175
878,467
(1,569,623)
(44,416)
4,821,494
187,671
20,942
(46,155)
162,458
-
4,991
1,182,330
(721,009)
(407,819)
58,493
(2,396,330)
2,416,809
463
20,942
The accompanying notes are an integral part of these consolidated financial statements.
32
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2013 and July 31, 2012
In Canadian dollars
1.
Reporting entity
Nature of operations
MedMira Inc. (MedMira or the Company) is a biotechnology company headquartered in Canada. The address of the
Company’s registered office is 155 Chain Lake Drive, Suite 1, Halifax, Nova Scotia, B3S 1B3. OnSite Lab Holdings AG
owns the majority of MedMira’s shares and is the controlling shareholder. The consolidated financial statements of the
Company as at and for the years ended July 31, 2014 and 2013, comprise the Company and its subsidiaries. MedMira,
through its subsidiaries, is engaged in the business of research, development and manufacturing of rapid diagnostics
and technologies. The Company invests in research in order to maintain and expand its position in the global
diagnostics market. MedMira’s research is focused on specific areas of the broader diagnostics market, namely the
rapid, point-of-care, and in vitro sectors.
2. Basis of preparation
a. Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS).
The consolidated financial statements were authorized for issue by the Board of Directors on November 28, 2014.
b. Going-concern
The accompanying consolidated financial statements have been prepared on the basis of IFRS applicable to a going-
concern, which contemplates the realization of assets and liquidation of liabilities during the normal course of
operations. However, certain adverse conditions and events cast significant doubt upon the validity of this assumption.
The Company has incurred losses and negative cash flows from operations on a cumulative basis since inception. For
the year ended July 31, 2014, the Company realized a net loss of approximately $3.8 million (July 31, 2013 – $0.4
million), consisting of a net loss from operations of approximately $3.6 million (July 31, 2013 – $2.2 million), and other
non-operating losses of approximately $0.3 million (July 31, 2013 – profit of approximately $1.8 million). Negative cash
flows from operations were approximately $4.5 million (July 31, 2013 – $2.1 million). As at July 31, 2014, the Company
had an accumulated deficit of approximately $75 million (July 31, 2013 – $71.0 million) and a negative working capital
position of $2.8 million (July 31, 2013 – $4.0 million). In addition to its on-going working capital requirements, the
Company must secure sufficient funding for its research and development programs for existing commitments,
including its current portion of loans of approximately $2.2 million. These circumstances cast significant doubt as to
the ability of the Company to meet its obligations as they come due and, accordingly, the appropriateness of the use
of accounting principles applicable to a going-concern.
Management is pursuing other financing alternatives to fund the Company’s operations so it can continue as a going-
concern. Management plans to secure the necessary financing through new equity and debt arrangements.
Nevertheless, there is no assurance that this initiative will be successful. Additional details on financing subsequent to
July 31, 2014 are provided in note 20.
The Company is subject to risks associated with early stage companies, including but not limited to, dependence on
key individuals, competition from substitute services and larger companies, and the requirement for the continued
33
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2013 and July 31, 2012
In Canadian dollars
successful development and marketing of its products and services. The Company’s ability to continue as a going-
concern is dependent upon its ability to generate positive cash flow from operations and secure additional financing.
These financial statements do not reflect the adjustments to carrying values of assets and liabilities and the reported
expenses and statement of financial position classifications that would be necessary were the going-concern
assumption not appropriate. These adjustments could be material.
c. Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis.
d. Functional and presentation currency
The consolidated financial statements are presented in Canadian dollars, which is the functional currency of the
Company and its subsidiaries. All financial information is presented in Canadian dollars unless explicitly stated.
e. Use of estimates and judgements
The preparation of the consolidated financial statements in conformity with IFRS requires management to make
judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of
assets, liabilities, income and expenses. Actual results may differ from these estimates. These include but are not
limited to:
− Amounts recorded for depreciation, impairment and reversals of impairment of property, equipment and
intangible assets which depend on estimates of net recoverable amounts based on expected economic lives
and future cash flows from related assets;
− Amounts recorded for investment tax credits recoverable which are calculated based on the expected
eligibility and tax treatment of qualifying scientific research and experimental development expenditures
recorded in the Company’s consolidated financial statements;
− Contingencies that are accrued when it is probable that a liability for past events exists and the liability can be
reasonably estimated. In determining whether a liability exists, the Company is required to make judgements
as to the probability of future events occurring;
−
−
−
-
The allocation of proceeds between common shares and warrants, determined by valuation of warrants which
includes assumptions regarding the volatility and risk free rate;
The fair value calculation of promissory notes, convertible debt, and long-term debt, which includes
assumptions of the market rate and expected cash flows;
The royalty provision, which includes judgements about the expectation and timing of future sales, and
estimates of discount rate, price and cost of production;
The fair value calculation of stock-based compensation, including assumptions regarding the volatility and risk
free rate;
− Determination of operating segments.
−
The Company makes certain estimates and assumptions when calculating the fair values of stock options and
warrants granted. The Company uses an option pricing model, which includes significant assumptions
34
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2013 and July 31, 2012
In Canadian dollars
including estimate of expected volatility, expected life, expected dividend rate and expected risk-free rate of
return. Changes in these assumptions may result in a material change to the expense recorded for the issuance
of stock options and warrants.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimates are revised and in any future periods affected.
3. Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these consolidated
financial statements and to the Company’s subsidiaries.
The Company and its significant subsidiaries are shown below.
Country of incorporation
Ownership interest
%
31-Jul-14
100
100
100
100
Canada
Canada
Canada
Switzerland
%
31-Jul-13
100
100
100
-
MedMira Inc.
MedMira Laboratories Inc.
Maple Biosciences Inc.
MedMira International AG
a. Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Company. The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control commences until the date that control ceases. The
accounting policies of subsidiaries have been changed when necessary to align with the policies adopted by the
Company.
Transactions eliminated on consolidation
Intra-company balances and transactions, and any unrealized income and expenses arising from intra-company
transactions, are eliminated in preparing the consolidated financial statements.
b. Foreign currency transactions
Transactions in foreign currencies are translated to Canadian dollars, the functional currency of the Company and its
subsidiaries, at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign
currencies at the reporting date are translated to the functional currency at the exchange rate at that date. The foreign
currency gain or loss on monetary items is the difference between the amortized cost in the functional currency at the
35
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2013 and July 31, 2012
In Canadian dollars
beginning of the period, adjusted for effective interest and payments during the period, and the amortized cost in the
foreign currency translated at the exchange rate at the end of the reporting period.
c. Financial instruments
Financial assets
The Company initially recognizes loans, receivables, and deposits on the date of origination. All other financial assets
are recognized initially on the trade date at which the Company becomes a party to the contractual provisions of the
instrument.
The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it
transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially
all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets
that is created or retained by the Company is recognized as a separate asset or liability.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position only when the
Company has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle
the liability simultaneously.
The Company classifies loans and receivables as non-derivative financial assets. Loans and receivables are financial
assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially
at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables
are measured at amortized cost using the effective interest method, less any impairment losses. Loans and receivables
comprise trade and other receivables.
Cash is comprised of cash balances and bank overdrafts that are repayable on demand and form an integral part of the
Company’s cash management for the purpose of the statement of cash flows.
Financial liabilities
The Company initially recognizes debt securities issued and subordinated liabilities on the date of origination. All other
financial liabilities are recognized initially on the trade date at which the Company becomes a party to the contractual
provisions of the instrument. The Company derecognizes a financial liability when its contractual obligations are
discharged, cancelled or expired.
Financial assets and liabilities are offset and the net amount presented in the statement of financial position only when the
Company has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle
the liability simultaneously.
The Company has the following other liabilities: long term debt, provision for royalty and accounts payable and accrued
liabilities. Such financial liabilities are recognized initially at fair value plus any directly attributable transaction costs.
Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest
method.
36
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2013 and July 31, 2012
In Canadian dollars
Share capital
Common shares
Common shares are classified as equity. Incremental costs directly attributable to the issue of common shares and share
options are recognized as a deduction from equity, net of any tax effects.
Preferred shares
Preferred share capital is classified as equity if it is non-redeemable, or redeemable only at the Company’s option, and
any dividends are discretionary. Dividends thereon are recognized as distributions within equity.
Preferred share capital is classified as a liability if it is redeemable on a specific date or at the option of the shareholders,
or if dividend payments are not discretionary. Dividends thereon are recognized as interest expense in profit or loss as
accrued.
Stock purchase warrants
The fair value of these warrants is determined at the time the services are received by the Company and the expense
is recognized in the statement of operations and comprehensive loss. The fair value of the warrants is the fair value of
the services received where this can be estimated reliably by comparable services by independent parties. In such
circumstances where the fair value of the services received cannot be estimated reliably, the fair value is measured
indirectly by reference to the fair value of the equity instrument granted, measured at the date the entity receives the
relevant services. For warrants issued for cash or to settle debt, the Company determines the fair value of the warrants
using the Black-Scholes option pricing model. All such warrants are classified in a warrant reserve within equity.
d. Property, plant and equipment
Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated
impairment losses. Cost includes any expenditure that is directly attributable to the acquisition of the asset. Gains and
losses on the disposal of an item of property, plant and equipment are determined by comparing the proceeds from
disposal with the carrying amount of property, plant and equipment, and are recognized net within other income in
profit or loss.
Subsequent costs
The cost of replacing a part of an item of property, plant and equipment is recognized in the carrying amount of the
item if it is probable that the future economic benefits embodied within the part will flow to the Company, and its cost
can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day
servicing of property, plant and equipment are recognized in profit or loss as incurred.
Depreciation
Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for
cost, less its residual value.
Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives of each component
of property, plant and equipment, since this most closely reflects the expected pattern of consumption of the future
37
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2013 and July 31, 2012
In Canadian dollars
economic benefits embodied in the asset. Leased assets are depreciated over the shorter of the lease term and their
useful lives unless it is reasonably certain that the Company will obtain ownership by the end of the lease term.
The estimated useful lives for the current and comparative periods are as follows:
−
−
−
−
office equipment and furniture
5 years
leasehold improvements
lower of 7 years and length of lease
manufacturing equipment
laboratory equipment
5 years
5 years
Depreciation methods, useful lives, and residual values are reviewed at each financial year end and adjusted if
appropriate.
e.
Intangible assets
Research and development
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and
understanding, is recognized in profit or loss as incurred.
Development activities involve a plan or design for the production of new or substantially improved products and
processes. A development expenditure is capitalized only if development costs can be measured reliably, the product
or process is technically and commercially feasible, future economic benefits are probable, and the Company intends
to, and has sufficient resources to, complete development and to use or sell the asset. The expenditure capitalized
includes the cost of materials, direct labour, overhead costs that are directly attributable to preparing the asset for its
intended use, and borrowing costs on qualifying assets for which the commencement date for capitalization is on or
after August 1, 2010. Any other development expenditure is recognized in profit or loss as incurred.
A capitalized development expenditure is measured at cost less accumulated amortization and accumulated
impairment losses.
38
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2013 and July 31, 2012
In Canadian dollars
Other intangible assets
Other intangible assets that are acquired by the Company and have finite useful lives are measured at cost less
accumulated amortization and accumulated impairment losses.
Subsequent expenditure
A subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific
asset to which it relates. Any other expenditure, including an expenditure on internally generated goodwill and brands,
is recognized in profit or loss as incurred.
Amortization
Amortization is calculated over the cost of the asset, or other amount substituted for cost, less its residual value.
Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets
from the date that they are available for use, since this most closely reflects the expected pattern of consumption of
the future economic benefits embodied in the asset. The estimated useful lives for the current and comparative periods
are as follows:
Intellectual properties/product technology
10 – 20 years
f.
Leased assets
Leases with terms in which the Company assumes substantially all the risks and rewards of ownership are classified as
finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value
and the present value of the future minimum lease payments. Subsequent to initial recognition, the asset is accounted
for in accordance with the accounting policy applicable to that asset.
Other leases are operating leases and the leased assets are not recognized in the Company’s statement of financial
position.
g.
Inventories
Raw materials inventory consists of chemicals, plastic components and packaging materials. Work in process inventory
(WIP) includes partially assembled tests, and any materials that have been modified, but not yet converted to finished
products. Finished product inventory includes completed diagnostics tests in a state ready for sale. The Company does
not carry inventory that would be considered long-term.
Inventories are measured at the lower of cost and net realizable value. Net realizable value is the estimated selling
price in the ordinary course of business, less the estimated costs of completion and selling expenses.
Inventory cost includes expenditures incurred in acquiring the inventories, production or conversion costs and other
costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and
work in process, cost includes an appropriate share of production overhead based on normal operating capacity.
h.
Impairment
Financial assets (including receivables)
Financial assets, other than those at fair value through profit and loss, are assessed for indicators of impairment at the
end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as
39
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2013 and July 31, 2012
In Canadian dollars
a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future
cash flows of the investment have been affected.
Long-lived assets
The carrying amounts of the Company’s long-lived assets are reviewed at each reporting date to determine whether
there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.
The recoverable amount of an asset or cash-generating unit (CGU) is the greater of its value in use and its fair value less
costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the
asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the
smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash
inflows of other assets or groups of assets (the CGU).
An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable
amount. Impairment losses are recognized in profit or loss.
Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has
decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to
determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount
does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no
impairment loss had been recognized.
i.
Employee benefits
Short-term employee benefits
Short-term employee benefit obligations such as vacation and healthcare benefits are measured on an undiscounted
basis and are expensed as the related service is provided.
A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the
Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the
employee, and the obligation can be estimated reliably.
Share-based payment transactions
The grant date fair value of share-based payment awards granted to employees is recognized as an employee expense, with
a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards.
Under the Company’s current option plan, options vest at the date of issuance; therefore, the full value of options is recorded
as an increase in equity at the date of issuance.
40
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2013 and July 31, 2012
In Canadian dollars
j.
Provisions
A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that
can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the
obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and the risks specific to the liability. The unwinding of the
discount is recognized as finance cost.
Onerous contracts
A provision for onerous contracts is recognized when the expected benefits to be derived by the Company from a contract
are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the
present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the
contract. Before a provision is established, the Company recognizes any impairment loss on the assets associated with that
contract.
k. Revenue
Goods sold
Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration
received or receivable, net of returns, trade discounts and volume rebates. Down payments are recognized as deferred
revenue until such time as the revenue associated with the sales order meets the criteria for revenue recognition.
Revenue is recognized when persuasive evidence exists, usually in the form of an executed sales agreement, that the
significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is
probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing
management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that
discounts will be granted and the amount can be measured reliably, then the discount is recognized as a reduction of
revenue as the sales are recognized.
The timing of the transfers of risks and rewards varies depending on the individual terms of the contract of sale. For
sales of rapid diagnostics, transfer typically occurs when the product is shipped from the Company’s warehouse;
however, for some international shipments, transfer may occur when goods are received.
When two or more revenue generating activities or deliverables are sold under a single arrangement, each deliverable
that is considered to be a separate unit of account is accounted for separately. The allocation of consideration from a
revenue arrangement to its separate units of account is based on the relative fair values of each unit. If the fair value
of the delivered item is not reliably measurable, then revenue is allocated based on the difference between the total
arrangement consideration and the fair value of the undelivered item.
Services
The Company’s service revenue consists primarily of research and development contracts with the US Military. Revenue
from services rendered is recognized in profit or loss as allowable costs eligible for reimbursement are incurred, as this
is the point at which revenue can be measured reliably, it is possible that the economic benefits associated with the
transaction will flow to the Company and the cost incurred for the transaction can be measured reliably.
Royalties and licence fees
41
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2013 and July 31, 2012
In Canadian dollars
Revenue from royalties and licences is recognized when the terms of the royalty or licence agreement are met, payment
is reasonably assured, and payment can be reliably measured. Licences subject to attaining milestones are recognized
as milestones are reached. Non-refundable up-front license fees are recognized when no uncertainty about collection
exists. It is recognized on a basis that reflects the timing, nature and value of the benefits provided.
Deferred revenue
All deferred revenue is classified as current and consists of customer advances for product that has not yet been
shipped or the conditions required to account for payments as revenue have not yet been met.
l. Government grants
Government grants are recognized initially as deferred revenue at fair value when there is reasonable assurance that
they will be received and the Company will comply with the conditions associated with the grant. Grants that
compensate the Company for expenses incurred are recognized in profit or loss as a reduction in expense on a
systematic basis in the same periods in which the expenses are recognized.
The Company also receives government loans with below market interest rates. These loans are classified as
government grants. The benefit from the grant is determined based on the difference between the amount received
and the fair value of the loan and is recognized in profit or loss as a reduction in expense on a systematic basis in the
same periods in which the expenses are recognized.
m. Finance income and finance costs
Finance costs comprise interest expense on borrowings. Borrowing costs that are not directly attributable to the
acquisition, construction or production of a qualifying asset are recognized in profit or loss using the effective interest
method.
n. Deferred income taxes
The Company uses the liability method of accounting for income taxes. Under this method, current income taxes are
recognized for the future income tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are
measured using the substantively enacted tax rates that will be in effect when the differences are expected to reverse
or when losses are expected to be utilized. The effect on deferred income tax assets and liabilities of a change in tax
rates is recognized in operations in the year in which the change occurs. Deferred tax assets are recognized for the
carry forward of unused tax losses to the extent that it is probably that future taxable profit will be available against
which the unused tax losses can be utilized
o. Application of new and revised standards
The following standards are effective for annual periods beginning on or after January 1, 2013, with earlier
adoption permitted. The Corporation has adopted these standards as of August 1, 2013 and has determined
that they do not have a material impact on the Company’s financial results.
IFRS 10, “Consolidated Financial Statements”: The IASB issued IFRS 10, “Consolidated Financial Statements”, effective
for annual periods beginning on or after January 1, 2013. IFRS 10 replaces portions of IAS 27, “Consolidated and
Separate Financial Statements”, that addresses consolidation, and supersedes Standing Interpretations Committee
(SIC) SIC-12 in its entirety. The objective of IFRS 10 is to define the principles of control and establish the basis of
42
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2013 and July 31, 2012
In Canadian dollars
determining when and how an entity should be included within a set of consolidated financial statements. IAS 27 has
been amended to reflect the issuance of IFRS 10 and retains guidance only for separate financial statements.
IFRS 11, “Joint Arrangements”, effective for annual periods beginning on or after January 1, 2013 with early adoption
permitted, requires a venturer to classify its interest in a joint arrangement as a joint venture or joint operation. Joint
ventures will be accounted for using the equity method of accounting whereas for a joint operation the venturer will
recognize its share of the assets, liabilities, revenue and expenses of the joint operation. Under existing IFRS, entities
have the choice to proportionately consolidate or equity account for interests in joint ventures. IFRS 11 supersedes IAS
31, Interest in Joint Ventures and SIC-13, Jointly Controlled Entities - Non-monetary Contributions by Venturers.
IFRS 12, “Disclosure of Interests in Other Entities”: The IASB issued IFRS 12, “Disclosure of Interests in Other Entities”,
effective for annual periods beginning on or after January 1, 2013. IFRS 12 requires extensive disclosures relating to a
company’s interests in subsidiaries, joint arrangements, associates, and unconsolidated structured entities. IFRS 12
enables users of the financial statements to evaluate the nature and risks associated with its interests in other entities
and the effects of those interests on its financial position and performance.
IFRS 13, “Fair Value Measurement”, effective for annual periods beginning on or after January 1, 2013 with early
adoption permitted, defines fair value, set out in a single IFRS framework for measuring fair value and requires
disclosures about fair value measurements. IFRS 13 does not determine when an asset, a liability or an entity’s own
equity instrument is measured at fair value. Rather the measurement and disclosure requirements of IFRS 13 apply
when another IFRS requires or permits the item to be measured at fair value.
IAS 19, “Employee Benefits”, has been amended effective for annual periods beginning on or after January 1, 2013.
The revised standard requires immediate recognition of actuarial gains and losses in other comprehensive income,
eliminating the previous options that were available. A number of other amendments have been made to recognition,
measurement and classification.
IAS 1, “Presentation of Financial Statements”, has been amended effective for annual period beginning on or after July
1, 2012. The revised standards requires an entity to group items presented in the Statement of Comprehensive Income
on the basis of whether they may be reclassified to earnings subsequent to initial recognition. For those items
presented before taxes, the amendments to IAS 1 also require that the taxes related to the two separate groups be
presented separately.
p. New standards and interpretations not yet adopted
A number of new standards, and amendments to standards and interpretations, were not yet effective for the year
ended July 31, 2014, and have not been applied in preparing these consolidated financial statements. None of these
new standards or amendments is expected to have a significant effect on the financial results of the Company.
Accounting standards issued but not yet applied:
IFRS 9, “Financial Instruments”: IFRS 9 requires all recognized financial assets that are within the scope of IAS 39
Financial Instruments: Recognition and Measurement to be subsequently measured at amortized cost or fair value. The
IASB has issued an amendment to IFRS 9 Financial Instruments (“IFRS 9”), which changes the effective date of IFRS 9
(2009) and IFRS 9 (2011), so that IFRS 9 is required to be applied for annual periods beginning on or after January 1,
2018, with early application permitted. This amendment was released in connection with IFRS 7 Financial Instruments:
43
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2013 and July 31, 2012
In Canadian dollars
Disclosures – Transition Disclosures (“IFRS 7”) which outlines that, with the amendments to IFRS 9, entities applying
IFRS 9 do not need to restate prior periods but are required to apply modified disclosures. The Company continues to
assess the impact of IFRS 9 on its consolidated financial statements.
In July 2014, the IASB issued a complete and final version of IFRS 9, which replaces the current standard on financial
instruments. IFRS 9 sets out requirements for the classification and measurement of financial assets and financial
liabilities, for the impairment of financial assets, and for general hedge accounting. IFRS 9 also introduces a new
impairment model for financial assets not measured at fair value through profit or loss that requires recognition of
expected credit losses rather than incurred losses as applied under the current standard. The effective date for this
standard is for annual periods beginning on or after January 1, 2018. The Company has not yet assessed the impact of
IFRS 9 on its consolidated financial statements.
In May 2014, the IASB issued a new standard, IFRS 15, which replaces the current revenue recognition standards and
interpretations. IFRS 15 provides a single comprehensive model to use when accounting for revenue arising from
contracts with customers. The core principle of IFRS 15 is that an entity should recognize revenue to depict the transfer
of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to
be entitled in exchange for those goods or services. IFRS 15 will also result in enhanced disclosures about revenue,
provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue
and contract modifications) and improve guidance for multiple-element arrangements. The new model applies to all
contracts with customers except those that are within the scope of other IFRS standards such as leases, insurance
contracts and financial instruments. IFRS 15 is effective for annual periods beginning on or after January 1, 2017, with
earlier adoption permitted. The Company has not yet assessed the impact of the adoption of this standard on its
consolidated financial statements
IFRIC 21 was issued by the IASB in May 2013 and provides guidance on accounting for levies in accordance with IAS 37,
Provisions, Contingent Liabilities and Contingent Assets. IFRIC 21 defines a levy as an outflow from an entity imposed
by a government in accordance with legislation and confirms that an entity recognizes a liability for a levy only when
the triggering event specified in the legislation occurs. IFRIC 21 is effective for annual periods beginning on or after
January 1, 2014.The Company has not yet evaluated the impact of adoption of this standard on its consolidated financial
statements.
4. Revenue
Product sales
Royalties
Service revenue
Total revenue
31-Jul-14
$
843,568
10,900
1,673,711
2,528,179
31-Jul-13
$
829,438
35,360
1,136,666
2,001,464
Service revenue is generated from research work on a contract with the US Army. The costs associated with research
conducted to earn this revenue have been recognized as a service cost of sales (see note 14).
44
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2013 and July 31, 2012
In Canadian dollars
The Company organizes and records revenue based on major geographical territories around the world. The table
below provides the geographic breakdown of revenue.
North America
Latin America and the Caribbean
Europe
Asia Pacific
Middle East
Total revenue
5.
Inventories
31-Jul-14
$
2,206,708
142,225
19,045
160,201
-
2,528,179
31-Jul-13
$
1,655,557
92,274
10,039
240,617
2,977
2,001,464
As at July 31, 2014, there were no valuation allowances against inventory (July 31, 2013 – $nil).
During the year ended July 31, 2014, inventory valued at $328,003 was expensed as a cost of goods sold
(July 31, 2013 – $338,594).
Raw materials and consumables
Work in process
Finished goods
Total inventories
31-Jul-14
$
248,584
45,908
7,278
301,770
31-Jul-13
$
133,034
65,975
5,991
205,000
45
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2013 and July 31, 2012
In Canadian dollars
6. Property, plant and equipment
During the years ended July 31, 2014 and 2013, the Company did not identify any indicators of impairment. The
Company did not make any commitment to acquire property, plant and equipment during the year ended July 31,
2014 (July 31, 2013 – $nil).
The table below summarizes changes in property, plant and equipment.
Leasehold
improvements
$
Laboratory
equipment
$
Manufacturing
equipment
$
Office equipment
and furniture
$
Cost
Balance at July 31, 2012
Additions
Balance at July 31, 2013
Additions
Disposals
Balance at July 31, 2014
Accumulated depreciation and impairment losses
Balance at July 31, 2012
Depreciation expense for the year
Balance at July 31, 2013
Depreciation expense for the year
Disposals
Balance at July 31, 2014
Carrying amounts
At July 31, 2012
At July 31, 2013
At July 31, 2014
561,076
259,195
820,271
-
(6,137)
814,134
558,275
26,862
585,137
52,657
(3,069)
634,724
2,801
235,134
179,409
23,931
15,755
39,686
11,275
-
50,961
23,931
1,572
25,503
3,735
-
29,238
-
14,182
21,722
174,394
-
174,394
34,185
-
208,579
170,529
1,651
172,180
4,859
-
177,039
186,402
92,040
278,442
63,673
(8,215)
333,900
174,190
10,727
184,917
25,078
(1,506)
208,489
Total
$
945,803
366,990
1,312,793
109,133
(14,352)
1,407,574
926,925
40,812
967,737
86,329
(4,575)
1,049,491
3,865
2,214
31,540
12,212
93,525
125,411
18,878
345,056
358,083
46
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2013 and July 31, 2012
In Canadian dollars
7.
Intangible assets
Cost or deemed cost
Balance at July 31, 2012
Balance at July 31, 2013
Balance at July 31, 2014
Accumulated amortization and accumulated impairment losses
Balance at July 31, 2012
Balance at July 31, 2013
Balance at July 31, 2014
Carrying amounts
At July 31, 2012
At July 31, 2013
At July 31, 2014
Intellectual
properties
$
Product
technology
$
Total
$
2,584,899
2,584,899
2,584,899
258,137
258,137
258,137
2,843,036
2,843,036
2,843,036
2,584,898
2,584,898
2,584,898
258,136
258,136
258,136
2,843,034
2,843,034
2,843,034
1
1
1
1
1
1
2
2
2
The Company acquired product technology and intellectual properties in 2000 through the acquisition of Precious Life
Savings Products Inc. and MedMira Laboratories Inc. In 2001, the Company recorded an impairment charge to write-
down these assets to a nominal value. There is no indication that this impairment has reversed.
During 2006, the Company acquired intellectual properties, in the form of patents and technology with a value of
$2,102,569 related to the acquisition of Maple Biosciences Inc. and the BAG-1 technology. During 2008, management
reduced its research and development efforts related to these intangible assets and recorded an impairment charge to
write-down these assets to a nominal value. Accumulated impairment charges at July 31, 2014 total $1,693,046
(July 31, 2013 – $1,693,046). There is no indication that this impairment has reversed.
8. Capital and other components of equity
a. Authorized
The Company is authorized to issue an unlimited number of Series A preferred shares, non-voting, non-participating,
redeemable at the Company’s option at $0.001 per share after March 31, 2010, convertible into an equal number of
common shares upon the Company meeting certain milestones. The preferred shares earn no dividends.
The Company is authorized to issue an unlimited number of voting common shares without nominal or par value.
47
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2013 and July 31, 2012
In Canadian dollars
b. Share capital issued
Number of
Common
shares
Preferred
shares
Balance at July 31, 2012
392,264,320
5,000,000
Common
shares
$
55,658,683
Value of
Preferred
shares
$
2,500
Total share
capital
$
55,661,183
Balance at July 31, 2013
392,264,320
5,000,000
55,658,683
2,500
55,661,183
Issued for cash
Issue to repay debt
Share issuance costs
111,532,973
10,567,027
-
-
-
-
3,097,536
293,464
(33,758)
-
-
-
3,097,536
293,464
(33,758)
Balance at July 31, 2014
514,364,320
5,000,000
59,015,925
2,500
59,018,425
The total common shares issued and outstanding includes 4,064,464 common shares held in escrow scheduled to be
released when the Company obtains positive operating cash flow.
The Series A preferred shares had a stated capital of $2,500 at July 31, 2014 (July 31, 2013 – $2,500).
48
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2013 and July 31, 2012
In Canadian dollars
c. Warrants
Balance at July 31, 2012
Expired warrants
Balance at July 31, 2013
Issued for cash
Issued to repay debt
Expired warrants
Balance at July 31, 2014
The total warrants outstanding at July 31, 2014 are shown below.
Issued
Number
Exercise price
$
Expiry date
December 8, 2010
July 18, 2011
January 31, 2012
June 11, 2012
September 30, 2013
20,000,000
30,000,000
20,000,000
120,000,000
122,100,000
312,100,000
d. Stock based compensation
0.10
0.10
0.10
0.10
0.10
December 8, 2014
July 18, 2015
January 31, 2016
June 11, 2016
September 30, 2017
Number of
warrants
236,119,500
(40,000,000)
196,119,500
111,532,973
10,567,027
(6,119,500)
Warrant
reserve
$
4,493,647
-
4,493,647
2,479,113
234,887
-
312,100,000
7,207,647
The Company has established a stock option plan for its employees, officers, and directors. All options vest immediately
upon issue and the Company is authorized to issue a maximum of 13,000,000 options annually upon approval by
shareholders. Options that have been issued and remain outstanding are exercisable into an equivalent of 5,990,000
common shares (July 31, 2013 – 4,530,000) at an exercise price of $0.10. The options expire between October 13, 2014
and March 2, 2017. During the year ended July 31, 2014, 2,850,000 options were issued (July 31, 2013 – nil). All options
outstanding at July 31, 2014 were exercisable.
The total options outstanding from July 31, 2012 to July 31, 2014 are shown below.
Options outstanding July 31, 2012
Options expired/forfeited
Options outstanding July 31, 2013
Options issued
Options expired/forfeited
Weighted
average
exercise price
$
0.12
0.34
Equity reserve
$
1,099,202
-
0.100
0.100
0.100
1,099,202
184,630
-
Number
5,840,000
(1,310,000)
4,530,000
2,850,000
(1,390,000)
Options outstanding July 31, 2014
5,990,000
0.100
1,283,832
49
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2013 and July 31, 2012
In Canadian dollars
Fair value of share options granted in the year
Options were priced using the Black Scholes option pricing model using the following assumptions:
Grant date share price
Exercise price
Expected volatility (based on
historical volatility over the past
three years)
Option life
Dividend yield
Risk-free interest rate
Series 1
$0.095
$0.10
127%
2 years
$0.00
2%
Series 2
$0.095
$0.10
127%
3 years
$0.00
2%
The weighted average fair value of the options granted during the year ended July 31, 2014 was $0.07 (2013 – nil). The
amount of compensation cost recognized in the statement of operations and comprehensive loss was $35,982.
The following table summarizes information about options outstanding and exercisable at July 31, 2014.
Range of exercise prices
0.10
Number outstanding and
exercisable
5,990,000
Weighted average exercise
price per share
0.10
Weighted average remaining
contractual life (years)
0.99
9. Loss per share
Net loss attributable to common shareholders
Diluted loss
Issued common shares
Weighted average number of common shares
Weighted average number of warrants
Weighted average number of options
Weighted average number of diluted shares
Basic loss per share
Diluted loss per share
31-Jul-14
$
(3,835,339)
(3,835,339)
31-Jul-13
$
(402,301)
(402,301)
514,364,320
392,264,320
514,364,320
392,264,320
-
-
-
-
514,364,320
392,264,320
(0.007)
(0.007)
(0.001)
(0.001)
The diluted weighted average number of common shares outstanding is the same as the basic weighted average
number of common shares outstanding for the year ended July 31, 2014, as the Company had a net loss and the exercise
of potentially dilutive instruments would be anti-dilutive.
50
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2013 and July 31, 2012
In Canadian dollars
10. Loans and borrowings
a. Loans
Short term loans
Loan 1
Loan 2
Loan 3
Loan 4
ACOA loans
Nova Scotia government loan 1
Nova Scotia government loan 2
Total loan principal
Long term portion of principal
Current portion payable of principal
31-Jul-14
31-Jul-13
Contract value
$
605,470
1,054,167
1,300,000
26,000
-
1,163,191
3,016,000
97,390
7,262,218
Carrying value
$
605,469
1,054,167
1,110,034
23,660
-
924,712
2,441,946
60,960
6,220,948
3,986,078
2,234,870
Contract value
$
714,191
1,150,000
1,500,000
39,000
5,136
1,453,999
3,480,000
97,390
8,439,716
Carrying value
$
714,191
919,380
1,223,342
33,201
5,758
1,081,163
2,843,099
54,169
6,874,303
4,683,668
2,190,635
The required annual principal repayments on loans and borrowings are as follows:
2015
2016
2017
2018
Less: unamortized imputed interest
Carrying value
Short term loans
$2,234,870
1,621,600
1,655,600
1,750,147
(1,041,269)
$6,220,948
The Company has a two short terms loans with related parties. These loans are utilised by the Company for short term
working capital requirements. Loans are payable on demand with interest rates ranging from 3% to 5%. The loans were
not in default at July 31, 2014.
Loan 1
Loan established October 31, 2012, bearing 5% interest with monthly interest only payments until November 30, 2013,
followed by monthly principal payments and accrued interest for five additional years ending November 30, 2018. The
loan is secured by interest on intellectual property and on the step-up technology. The loan was in default as of July
31, 2014 and thus has been classified as a current liability.
51
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2013 and July 31, 2012
In Canadian dollars
Loan 2
Loan established July 31, 2012, bearing 5% interest with monthly interest only payments until July 31, 2013, followed
by equal monthly principal payments for five additional years ending July 31, 2018. The loan was not in default at July
31, 2014.
Loan 3
Loan established July 31, 2012, bearing 5% interest with monthly principal payments of $1,000, in addition to accrued
monthly interest ending September 30, 2016. The loan was not in default at July 31, 2014.
Loan 4
Loan established August 24, 2011, bearing no interest payable in equal monthly payments of US$5,000. The loan was
fully repaid in 2014.
Atlantic Canada Opportunities Agency (ACOA) loans
Loans were renegotiated October 30, 2012, bearing no interest with monthly principal payments of $3,747 until July
31, 2013, followed by equal monthly principal payments of $24,234 for five additional years ending July 31, 2018. The
loan was renegotiated in July 2014, bearing no interest with a monthly principal payment of $24,234 in August 2014
followed by 40 monthly payments of $27,800 starting on February 1, 2015 and one monthly payment of $26,975 at the
end of the loan. The loan is secured by all present and after acquired personal property, excepting consumer goods.
The loan was not in default at July 31, 2014.
Nova Scotia government loan 1
The loan was renegotiated September 14, 2012, bearing 3% interest with monthly interest only payments until July 31,
2013, followed by equal monthly principal payments for five additional years ending July 31, 2018. The loan was
renegotiated in July 2014 to be repaid in 1 monthly payment of $41,000 on September 1, 2015 and 25 monthly
payments of $85,000 commencing on October 1, 2015. The loan is secured by first interest on intellectual property
and on the Maple Bio sensor technology. The loan was not in default at July 31, 2014.
Nova Scotia government loan 2
Loan established September 14, 2012, bearing no interest with the balance due by August 31, 2018. The loan is secured
by first interest on intellectual property and on the Maple Bio sensor technology. The loan was not in default at July
31, 2014.
b. Renegotiation of debt
During the year ended July 31, 2013, management renegotiated some of the outstanding loans which resulted in
substantially different terms from the original agreements. These were treated as an extinguishment of the original
liability and the recognition of a new liability. These debt arrangements were valued using a rate of approximately
11.8%, representing a reasonable exit price for the liabilities. This resulted in a gain on renegotiated debt of $2,027,442.
52
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2013 and July 31, 2012
In Canadian dollars
11. Capital management and financial risks
a. Capital management
The Company’s objectives when managing capital are to provide an adequate return to shareholders, safeguard its
assets, maintain a competitive cost structure and continue as a going-concern in order to pursue the development and
sale of its products. To maximize ongoing development and growth effort, the Company did not pay out dividends during
the year ended July 31, 2014 (July 31, 2013 – $nil). The Company is not anticipating paying out dividends during the year
ended July 31, 2015.
The Company’s capital is summarized in the table below.
Total debt
Less: Cash
Net debt
Shareholders' deficiency
Total capital
31-Jul-14
$
6,220,948
(162,458)
6,058,490
31-Jul-13
$
6,874,303
(20,942)
6,853,361
(6,690,067)
(631,577)
(9,110,600)
(2,257,239)
To facilitate the management of its capital structure, the Company prepares annual expenditure operating budgets
that are updated as the input parameters change. Cash flow is monitored and updated daily.
b. Categories of financial instruments and fair value
Financial assets
Amortized cost
Cash
Trade and other receivables
Financial liabilities
Amortized cost
31-Jul-14
31-Jul-13
Carrying value
$
Fair value
$
Carrying value
$
Fair value
$
162,458
778,345
162,458
778,345
20,942
320,253
20,942
320,253
Accounts payable and accrued liabilities
Current portion of debt
Long term portion of debt
1,847,946
2,234,870
3,986,078
1,847,946
2,234,870
3,986,078
2,560,003
2,190,635
4,683,668
2,560,003
2,190,635
4,683,668
53
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2013 and July 31, 2012
In Canadian dollars
c. Foreign currency risk
Most of the Company’s sales are made in foreign currencies. The Company’s US dollar foreign currency denominated
monetary assets and monetary liabilities at the end of the reporting period are shown in the table below.
Cash
Trade and other receivables
Prepaid expense
Accounts payable and accrued liabilities
Debt
31-Jul-14
US$
20,840
462,009
3,450
584,333
-
31-Jul-13
US$
1,239
315,347
22,257
161,066
5,000
A one cent change in the US dollar exchange rate would result in approximately a $2,900 (2013 – $1,000) impact on
the statement of financial position and consolidated statement of operations.
d.
Interest rate risk
The Company is not exposed to interest rate risk as it borrows funds at fixed rates.
e. Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to
the Company. The Company mitigates this risk by requiring a 50% down payment on most orders at the time of
purchase, and the remaining 50% prior to shipment. The receivables balance of $778,345 consists of trade receivables
from sale of the Company’s products and receivables on research initiatives. Historically, there have been few collection
issues and the Company does not believe it is subject to any significant concentration of credit risk.
f.
Liquidity risk
Liquidity risk represents the possibility that the Company may not be able to gather sufficient cash resources, when
required and under reasonable conditions, to meet its financial obligations. As at July 31, 2014, the Company does not
have sufficient cash to meet all of its continuing liabilities.
The Company also continues to have an ongoing need for substantial capital resources to research and develop,
commercialize and manufacture its products and technologies. The Company is not yet receiving a significant ongoing
revenue stream, nor can it be certain that it will receive significant revenue before additional cash is required. As a
result, there can be no assurance that the Company will have sufficient capital to fund its ongoing operations, develop
or commercialize its products without future financing.
54
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2013 and July 31, 2012
In Canadian dollars
The Company’s contractual maturities for its financial liabilities are outlined in the table below.
For the year ended July 31, 2014
Loans
Accounts payable and accrued liabilities
Total debt
For the year ended July 31, 2013
Loans
Accounts payable and accrued liabilities
Total debt
Total
$
7,262,218
1,847,946
9,110,164
Less than 1 year
$
2,234,870
1,847,946
4,082,816
Total
$
8,439,716
2,560,003
10,999,719
Less than 1 year
$
2,190,635
2,560,003
4,750,638
The payments noted above do not include interest payments.
g. Fair value of financial instruments
1 to 3 years
$
5,027,348
-
5,027,348
1 to 3 years
$
3,057,616
-
4 to 5 years
$
After 5 years
$
-
-
4 to 5 years
$
3,133,966
-
-
-
-
After 5 years
$
57,499
-
57,499
3,057,616
3,133,966
Management has determined that the carrying amounts of financial assets and financial liabilities recognized in the
consolidated financial statements approximate fair value.
12. Royalty provision
The Company entered into a promissory note with a significant shareholder on January 10, 2011 in the amount of
$260,000, which stipulated that if the debt was not repaid by January 31, 2011, that the Company would be obligated
to pay a 15% royalty on all future US sales of the Hepatitis B- Anti-Core test product (the “Royalty Provision”).
Management’s best estimate of the Royalty Provision was determined using certain assumptions including: the
likelihood and timing of completion of the research and development of the product, the likelihood of obtaining
regulatory approval, the demand for the product at the time of completion, the price the Company will be able to sell
the product for, and the cost of manufacturing the product.
In 2013, Management estimated its Royalty Provision to be $739,817 based on a five year projected cash flow of future
sales for the period 2014 to 2018 which assumed that there would be a viable working product in late 2013. Due to
delays in the registration and trial processes experienced in fiscal 2014 the sales did not materialize as expected,
impacting the Company’s investment in the project and timeline. Given the uncertainties surrounding the future cash
flows associated with Hepatitis B- Anti-Core test, Management has adjusted their best estimate of the Royalty Provision
to the original contractual value of the promissory note of $260,000.
55
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2013 and July 31, 2012
In Canadian dollars
Balance at July 31, 2012
Fair value remeasurment
Accretion
Balance at July 31, 2013
Adjustment
Balance at July 31, 2014
13. Related parties
Provision for Royalty
$
401,443
245,458
92,916
739,817
(479,817)
260,000
The following transactions occurred with related parties during the year ended July 31, 2014:
• A short term loan totalling $478,920 bearing 5% interest was received from Onsite Lab Holding AG. During the
•
year $1,998 in interest was accrued against this loan (2013 - $523,000 and $3,460 in interest).
Short term loans totalling $119,730 bearing 5% interest were received from a director. During the year, $5,892
in interest was accrued against these loans (2013 - $106,973 and $805 in interest).
• Director fees totalling $24,367 were incurred (2013 - $16,250).
•
Consulting fees totalling $26,138 were incurred (2013 - $82,233).
The following balances with related parties were outstanding at July 31, 2014:
• Accounts payable totalling $8,292 was due to directors (2013 – $37,244).
• A short term loan totalling $480,918 was due to OnSite Lab Holding AG (2013 – $526,460).
• A short term loan totalling $125,622 was due to a director (2013 – $107,778).
• A royalty provision was owed to OnSite Lab Holding AG of $260,000 (2013 – $739,817).
The remuneration of directors and other members of key management personnel during the year is shown below.
Short-term benefits including salary
Share-based payments
Total remuneration
14. Research and development
31-Jul-14
$
234,475
36,892
271,367
31-Jul-13
$
331,838
-
331,838
The Company receives government grants to offset the cost of developing certain products. These grants are
recognized as a credit against the research expense in the period the expense is incurred. There are no unfulfilled
conditions regarding the grants.
In addition to grants, the Company receives revenue related to a contract with the US Army. Research expenses related
to the US Army contract are recognized in service cost of sales when the revenue is earned. During the year ended July
31, 2014, $1,316,978 of the research costs incurred were recognized in service cost of sales (July 31, 2013 – $935,280).
56
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2013 and July 31, 2012
In Canadian dollars
The following table provides a summary of aggregate research costs and reimbursements.
Research and development expenses
Less: research and development expenses allocated to cost of sales
Less: reimbursed research and development expenses
Net research and development expense
31-Jul-14
$
1,910,445
1,316,978
299,042
294,425
31-Jul-13
$
1,211,546
935,280
142,962
133,304
15. Income taxes
a. Reconciliation of total tax expense
The effective rate on the Company’s loss before income tax differs from the expected amount that would arise using
the combined statutory income tax rates. A reconciliation of the difference is shown below.
Loss before income tax
Income tax rate
31-Jul-14
$
(3,835,339)
31.0%
31-Jul-13
$
(402,301)
31.0%
Income tax recovery at the combined statutory income tax rate
(1,188,955)
(124,713)
Non-taxable portion of other (gains) and losses
Non-deduction expense accretion
Non-deductible stock-based compensation
Non-deductible interest
Non-recognition of deferred tax assets due to unused tax losses
and deductible temporary differences
Excess amortization over capital cost allowance
Scientific research and development expenditures
Other
Income tax recovery
-
97,789
11,154
14,196
635,900
26,762
310,835
42,739
(49,580)
(855,170)
-
13,132
302,518
351,806
12,651
266,224
33,552
-
57
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2013 and July 31, 2012
In Canadian dollars
b. Unrecognized deductible temporary differences, unused tax losses and unused tax credits
Deductible temporary differences, unused tax losses and unused tax credits for which no deferred tax assets have
been recognized are listed below.
Non-capital losses
Scientific research and development costs
Investment tax credits
Share issuance costs
Variable liability
Unrealized foreign exchange
Cumulative eligible capital
Property and equipment
Total
31-Jul-14
$
31-Jul-13
$
30,564,742
5,477,784
1,687,524
26,400
260,000
18,925
281,645
1,988,015
40,305,034
27,021,708
4,737,969
1,496,588
48,455
479,817
-
281,645
1,901,686
35,967,868
The Company has available $30,564,742 in non-capital losses that can be used to reduce taxable income and that expire
between the years ended July 31, 2015 and July 31, 2034. The Company also has available $1,687,524 in investment
tax credits that can be used to reduce taxes payable and that expire between the years ended July 31, 2019 and July
31, 2034.
At July 31, 2014, the Company has no unrecognized deferred tax liability (July 31, 2013 – $nil) for taxes that would be
payable on the unremitted earnings of certain of the Company’s subsidiaries.
58
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2013 and July 31, 2012
In Canadian dollars
16. Expenses by nature
The following table provides the Company’s expenses listed by the nature of the expense.
Investment income
Change in inventory
Employee benefits
Depreciation
Distribution
Facility
Professional services
Lab supplies
Other expenses
Exchange gains (losses)
Finance costs
Gain on settlement of debt
Gain on fair value of debt
Gain/loss of royalty provision
17. Operating segments
31-Jul-14
$
14,175
(211,054)
(2,530,415)
(83,262)
(98,688)
(464,893)
(845,862)
(250,391)
(1,529,546)
(82,691)
(760,708)
-
-
479,817
(6,363,518)
31-Jul-13
$
4,991
(285,376)
(1,802,091)
(40,809)
(59,090)
(430,298)
(327,930)
(431,272)
(617,449)
47,832
(959,945)
715,689
2,027,442
(245,458)
(2,403,764)
Management has determined that the Company has one reportable operating segment, rapid diagnostic products and
services. This segment accounts for all of the Company’s revenue, cost of sales and operating expenses. Determination
of the operating segment was based on the level of financial reporting to the Company’s chief decision maker.
18. Lease commitment
The Company has a ten year lease commitment for it office location at 155 Chain Lake Drive in Halifax, Nova Scotia.
The commitment for the next five years, including an estimate of operational costs based on current operational costs
is provided in the table below.
For the year ending July 31, 2015
For the year ending July 31, 2016
For the year ending July 31, 2017
For the year ending July 31, 2018
For the year ending July 31, 2019
Thereafter
Lease commitment
$
236,422
236,422
247,516
248,524
248,524
1,063,216
59
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2013 and July 31, 2012
In Canadian dollars
19. Financing
A breakdown of the income (expenses) allocated to the financing line on the consolidated statements of operations
and comprehensive income is provided in the table below.
Investment Income
Finance costs
Gain on settlement of debt
Gain/(loss) on fair value remeasurement of debt
Gain/(loss) on remeasurement of royalty provision
Total financing income (expense)
20. Subsequent events
31-Jul-14
$
14,175
(760,708)
-
-
479,817
(266,716)
31-Jul-13
$
4,991
(739,595)
715,689
2,027,442
(245,458)
1,763,069
In September 2014, the Company completed a $1.1 million equity investment with a new arm’s length investor. Under
the terms of the deal, the new investor acquired 22,000,000 equity units at $0.05 per unit. Each equity unit consists of
one common share and one common share purchase warrant. Each full warrant entitles the investor to purchase one
common share of MedMira at $0.10 per share for a four year period. The common shares and the warrants are subject
to a four month hold period that expires four months from the day of share issuance.
60
Investor Information
Transfer Agent
Computershare Trust Company of Canada
1969 Upper Water Street
Purdy’s Wharf Tower II
Halifax, Nova Scotia B3J 3R7
T: 902 420 3553
Shares of MedMira Inc. trade on the TSX Venture Exchange
Stock Symbol: MIR
On NASDAQ, MedMira Inc. information can be found under the symbol:
MMIRF in the “Other OTC” category.
Annual General Meeting
MedMira Global Headquarters
Suite 1, 155 Chain Lake Drive
Halifax, Nova Scotia, B3S 1B3
10 am, Friday, January 30, 2015
61
Senior Management
Mr. Hermes Chan, Chief Executive Officer
Mr. Markus Meile, Chief Financial Officer
Mr. Sing Chan, Chief Operating Officer
Ms. Robyn Cook, Chief Corporate Officer
Board of Directors
Mr. Marvyn Robar, Chairman
Mr. Hermes Chan
Mr. Colin MacGillivray
Mr. Romano Robusto
Dr. Michael Sidler
Corporate Information
Auditors
Deloitte LLP
Suite 1500
1969 Upper Water Street, Purdy's Wharf Tower II
Halifax, Nova Scotia B3J 3R7
T: 902 422 8541
Legal Counsel
Stewart McKelvey
Suite 900
1959 Upper Water Street
Halifax, Nova Scotia B3J 3N2
T: 902 420 3200
Global Headquarters
MedMira Inc.
Suite 1, 155 Chain Lake Drive
Halifax, Nova Scotia, B3S 1B3
T: 902 450 1588
www.medmira.com
E: info@medmira.com
Investor Relations
Markus Meile, Chief Financial Officer
MedMira Inc.
Suite 1, 155 Chain Lake Drive
Halifax, Nova Scotia, B3S 1B3
T: 902 450 1588
www.medmira.com
E: ir@medmira.com
62
MedMira Inc.
155 Chain Lake Drive, Suite 1
Halifax, NS CANADA B3S 1B3
www.medmira.com