Annual Report
2017
www.medmira.com
Contents
Vision, Mission & Core Values
Message from the Chairman
Message from the CEO
In Memoriam
p.1
p.2
p. 3
p. 5
Management Discussion & Analysis
p. 6
Financial Statements
Investor Information
Corporate Information
p. 27
p. 63
p. 63
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.
1
A Message from MedMira’s Chairman
Dear Shareholders,
In 2017, MedMira faced extraordinary fiscal challenges, however, the leadership team and the Board remain
committed to our vision of helping people know and improving the Company’s performance. Backed by the vast
potential of the patented Rapid Vertical Flow Technolog platform, the dedication and perserverance of our team
has never waivered in the face of these challenging times.
MedMira continued the pursuit of growth and advancement opportunities for the Company, as well as its
products and technology platform. MedMira continues to focus on market segments in the U.S., Europe, and
China that present the best prospects for our rapid testing solutions and technology platform.
This year in the U.S. the Company continued to serve its Reveal G4 customer base in hospitals and laboratories
while pursuing new segments for the product’s whole blood and point‐of‐care applications. These efforts were
supported by MedMira’s sales and distribution network. Additionally in the U.S. MedMira continued with
product advancements and expansion of the Miriad product range for the tissue and eye banking market.
In the European Union, MedMira achieved CE Mark on its Multiplo rapid test for the siumultaneous detection
of syphilis and HIV. The Company is now well positioned to promote this product within the European Union
and in international markets where CE Mark is required.
Rapid diagnostics continues to be a challenging business sector in China, but one ripe with opportunity for high
quality products like MedMira’s. Working closely with key local partners in China, MedMira continued the
promotion of its rapid HIV test while seeking new opportunities for collaborations on future products for this
market.
Thank you for your continued support of MedMira.
Marvyn Robar
Chairman
2
A Message from Our Co‐Founder & CEO
Dear Shareholders,
2017 has been a challenging year for MedMira. Financial hurdles held the Company back from making major
strides in achieving positive results and shareholder value this year. In 2018, the Company will continue to move
forward on a strategic and fiscally responsible path to capitalize on the growth opportunities ahead of us in the
short term, and in the long term reach key success milestones to deliver results for our steadfast shareholders.
We remain dedicated to “helping people know”. These, three simple, yet powerful, words are at the core of
MedMira. Treatment cannot happen without knowing what to treat, which remains true despite cutting edge
care and treatment practices. What has shifted is the delivery point of diagnostics, which sees diagnostics
moving from the traditional laboratory, where results take hours, days, and sometimes weeks to produce, to
point‐of‐care (POC) screening which produces real‐time results that are immediately delivered to patients and
treatments are started.
laboratory market due to
Since its original FDA approval in 2003, the
Reveal HIV test has been preferred choice in the
its
U.S. clinical
inherent features; speed; simplicity of testing
procedure, as well as its longevity and reliability
of test results. To date, the product is primarily
used in hospitals and laboratories. As we move
into 2018, MedMira is focused on advancing its
products in the U.S. market, and elsewhere, to achieve the potential we know exists in growing market segments
like physician office laboratories, retail health clinics and community based.
Here’s a brief snapshot of these market segments.
Today, there are approximately 120,000 physician office laboratories (POLs) in the U.S. Many of these
POLs support multi‐speciality practices, some of which run over one million rapid tests per year.
Convenience Care Clinics (CCC), spurred by the success of clinics in retail settings such as Walmart, now
number more than 2,000 and represent the fastest growing sector of healthcare in the U.S. Lean staffing
and a small physical footprint, mean that CCCs need diagnostics that are simple and rapid.
In public healthcare initiatives, the CDC is ramping up its HIV prevention, testing, and treatment,
committing USD $640 million in the 2018 budget to take on intiatives through community health centers
which provide healthcare to over 25 million people in the most at‐risk populations in the U.S.
In parallel with expanding our products to meet the demand of growing POC markets, MedMira is continuously
seeking avenues for ongoing platform exploration and innovation. The next generation of Rapid Vertical Flow
Technology must answer the demands created by big picture health trends and a shifting healthcare delivery
model revolving around money, technology, and consumer empowerment.
3
Empowered health consumers, driven by technology and access to information, are becoming more informed
about their own health. Diagnostics are now being pushed to deliver information faster than before but within
the scope of an easily accessible and interpreted electronic health record. Added to this is an aging global
increasing prevalence of chronic and
population, the
infectious diseases, and depleting resources, both financial
and human. The over 65s will number close to 580 million by
2018 and the chronic diseases and conditions – cancer,
dementia, obesity, heart conditions, and diabetes – that an
increasing aging population bring will
further stress
healthcare systems. According to the latest industry reports
on emerging healthcare trends chronic diseases are on the
rise worldwide and expected to increase 57% by 2020 and
advancements in precise detection and diagnoses of disease will go far to minimize the cost of treating chronic
conditions. Increasing shortages of skilled healthcare workers will drive the need for easy‐to‐use, intuitive tools
that can be operated by less skilled providers and patients. According to the World Health Organization, the
world will be short 12.9 million healthcare workers by 2035.
Healthcare systems around the world need new strategies to improve patient outcomes while holding the line
on costs and diagnostis solutions, like the next generation of Rapid Vertical Flow Technology, will play a major
role in controlling healthcare spending.
On behalf of management and the entire MedMira team, thank you for your continued support.
Hermes Chan
Co‐Founder & CEO
4
In Memoriam
Sing Chan
Former Chief Operating Officer
We honor the achievements and contributions of our colleague
and former Chief Operating Officer, Sing Chan, who passed away
this year.
In his 17 years with MedMira, Sing held progressively senior
management roles focusing on the day‐to‐day operations, in‐
country manufacturing and production as well as end‐to‐end
supply chain management with outsourced service providers.
Sing was a graduate of Computer Science at Acadia University.
Sing was a respected leader in the organization and his legacy will
endure in the divisions of MedMira and the people that he led.
We will miss him.
5
MedMira Inc.
Management’s Discussion & Analysis
For the year ended July 31, 2017
6
Management’s Discussion & Analysis
July 31, 2017
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 July 31, 2017 consolidated financial statements, affect its more significant
judgments and estimates used in the preparation of its consolidated financial statements.
Introduction
The MD&A was issued and approved by the Board of Directors on the 28th of November 2017. The following MD&A for the
three months and year ended July 31, 2017 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 consolidated financial statements for the year
ended July 31, 2017 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 (RVF) Technology platform is the basis for the Company’s line of rapid tests.
Diagnostic applications based on this 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 ability to
deliver 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 the need to provide immediate answers without increasing costs.
7
Management’s Discussion & Analysis
July 31, 2017
MedMira’s technology platform 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 for rapid diagnostic solutions in the United States (US
Food and Drug Administration (“FDA”)), Canada (Health Canada), the notified body in 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’s
quality system is ISO 9001 and ISO 13485 certified.
MedMira sells its rapid tests through a network of medical distributors and strategic business development partners to
customers in all sectors of the healthcare industry, including laboratories, hospitals, point‐of‐care facilities, governments,
and public health agencies.
In addition to clinical diagnostics, the Company offers the Miriad product line to create new opportunities in the high
value technology licensing sector. This business line 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’s
RVF 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 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 #
Title
Jurisdiction
9,164,087
Rapid Diagnostic Device, assay and multifunctional Buffer
United States
9,086,410
Downward or vertical flow diagnostic device and assay
United States
8,025,850
Rapid Diagnostic Device, Assay and Multifunctional Buffer
United States
8,287,817
Rapid Diagnostic Device, Assay and Multifunctional Buffer
United States
8,586,375
Rapid Diagnostic Device, Assay and Multifunctional Buffer
United States
7,531,362
Rapid Diagnostic Device, Assay and Multifunctional Buffer
United States
D706945
Diagnostic Device
D706466
Diagnostic Device
EP1417489
Rapid Diagnostic Device and Assay
EP1328811
HCV Mosaic Antigen Composition
ZL02819646.5
Rapid Diagnostic Device and Assay
United States
United States
Europe
Europe
China
2,493,616
Rapid Diagnostic Device, Assay and Multifunctional Buffer
Canada
8
Management’s Discussion & Analysis
July 31, 2017
The Company has other patents pending patents in the US as well as two design patents in force or pending in eight markets.
The Company’s corporate and product brand names are protected by trademarks in the US and Canada.
Corporate update
In FY2017, MedMira maintained its market presence in the US tissue and eye bank vertical as well as the rapid HIV testing
sector, expanded its product line in European Union, and continued to build on its development and commercialization
pipeline.
Miriad is now part of the routine tissue procurement donor suitability process in many tissue and eye banks across the US.
In the first quarter of the year, MedMira participated in the American Association of Tissue Banks Annual Meeting,
promoting the Miriad product range to over 700 attendees from the US and international markets. In conjunction with this
promotional campaign, MedMira rolled out product advancements to further refine the product for tissue and eye bank
users and their unique testing needs, positioning the Company as an industry partner.
Reveal G4 rapid HIV test continued to be a focus product in the US market during FY2017. The Company maintained and
supported its long‐time customer base in hospitals and laboratories while building new opportunities for the whole blood
applications of Reveal G4. MedMira’s sales and marketing efforts in the US were further bolstered by the activation of a
new sales and distribution channel, Medline Industries Inc., and the ongoing partnerships with Cardinal Health and VWR
International.
In the fourth quarter of FY2017, MedMira received CE Mark on the Multiplo TP/HIV rapid test for simultaneous detection
of syphilis and HIV, allowing the Company to promote the test throughout the European Union and in international markets
where CE Mark is accepted. Syphilis and HIV infection rates are on the rise in European Union and internationally. According
to the European Center for Disease Prevention and Control (ECDC) in its latest Annual Epidemiological report, syphilis rates
have been increasing across Europe since 2010 with many countries in Western Europe seeing a sharp rise in syphilis
infections, with some countries’ rates growing by over 50%. In 2014, Europe recorded the highest number of newly
diagnosed HIV infections since the start of reporting in the 1980s and rates of HIV diagnoses have more than doubled in
countries in Eastern Europe.
Over the course of the year, MedMira’s R&D team focused on forging solid product development pathway, expansion and
refinement of existing product lines, and continued advancement on the Rapid Vertical Flow Technology platform.
The Company’s Finance and Operations groups preserved fiscal constraints to support the sales, marketing, and product
development efforts of the Company, through a balanced mix of investment in short, medium, and long term projects and
initiatives.
9
Management’s Discussion & Analysis
July 31, 2017
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, 2017 consolidated financial statements.
Selected quarterly information (in thousands of dollars except per share amounts)
Income statement
Q4 2017 Q3 2017 Q2 2017 Q1 2017 Q4 2016 Q3 2016 Q2 2016 Q1 2016
Product sales
Product cost of sales
Gross margin on product
Operating expenses
Financing expense
Net loss before tax
Balance sheet
Current assets
Non‐current assets
Total assets
Current liabilities
Non‐current liabilities
Total liabilities
$
149
(40)
109
(480)
(186)
(557)
$
192
(76)
116
(742)
(126)
(752)
$
194
(60)
134
(563)
(121)
(550)
$
212
(92)
120
$
(957)
(991)
34
$
230
(66)
164
$
$
1,370
1,614
(1,134)
(1,028)
236
586
(827)
(1,946)
(1,205)
(1,051)
(1,296)
(94)
(378)
(173)
(801)
(2,290)
(1,214)
(167)
(982)
(190)
(900)
Q4 2017 Q3 2017 Q2 2017 Q1 2017 Q4 2016 Q3 2016 Q2 2016 Q1 2016
$
581
93
674
9,421
237
9,658
$
582
117
699
8,401
737
9,138
$
674
142
816
8,218
286
8,504
$
695
168
863
8,538
‐
8,538
$
678
191
869
8,277
255
8,532
$
1,930
217
2,147
5,746
2,201
7,947
$
3,648
242
3,890
4,723
3,753
8,476
$
4,465
256
4,721
3,939
4,412
8,351
Total shareholders’ deficiency
(8,984)
(8,439)
(7,688)
(7,675)
(7,662)
(5,800)
(4,586)
(3,630)
Total liabilities and equity
674
699
816
863
870
2,147
3,890
4,721
Net loss per share
(0.001)
(0.001)
(0.001)
(0.001)
(0.004)
(0.002)
(0.001)
(0.001)
10
Management’s Discussion & Analysis
July 31, 2017
Fourth quarter analysis
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, 2017 consolidated financial statements.
Product
Product sales
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 expense
Financing expense
Net loss
For the three months ended
31‐Jul‐16
$
31‐Jul‐17
$
Better(worse)
$
148,933
(40,271)
108,662
222,751
(72,685)
150,066
(73,818)
32,414
(41,404)
‐
‐
‐
(1,180,037)
1,063,632
(116,405)
1,180,037
(1,063,632)
116,405
(29,479)
(102,573)
(141,009)
(207,190)
(480,251)
(1,284,564)
(249,100)
(157,001)
(255,538)
(1,946,203)
1,255,085
146,527
15,992
48,348
1,465,952
(371,589)
(1,912,542)
1,540,953
(186,297)
(557,886)
(149,457)
(2,061,999)
(36,840)
1,504,113
Product revenue and gross margin
The Company recorded revenue from product sales in the quarter ended July 31, 2017 of $148,933 as compared to $222,751
for the same period last year. The decrease in revenue was due to a change in ordering patterns with of one of the
Company’s US distributors. This pattern changed from just‐in‐time ordering to semi‐annual bulk ordering.
Gross profit for the quarter was $108,662 (72.9%) compared to $150,066 (67.3%) in the same period in 2016. The cost of
product sales was $40,271 during the three months ended July 31, 2017 (July 31, 2016 – $72,685).
Service revenue and gross margin
The Company recorded revenue from service sales of $0 in the three months ended July 31, 2017 (July 31, 2016 – a negative
$1,180,037). The service sales revenue and the gross margin on services for the three months ended July 31, 2017 was in
line with management’s expectations as service sales revenue was driven by a product development contract with the US
military that ended in Q3 of FY2016. The decrease in service sales revenue during the fourth quarter of FY2016 was related
to the Company derecognizing service revenue recorded in the second quarter FY2016 for service sales revenue from the
contract with the US military. This derecognition was necessary due to continuing reimbursement activities associated with
the US military contract.
11
Management’s Discussion & Analysis
July 31, 2017
Operating expenses
Total operating expenses decreased by $1,465,952 to $480,251 in the quarter ended July 31, 2017, compared to $1,946,203
during the same period in 2016.
Research and development expenses for the quarter ended July 31, 2017 were $29,479, compared to $1,284,564 for
the same period last year. The significant decrease in expenses is due the completion of the US. military project in Q3
of FY2016
Sales and marketing expenses for the quarter ended July 31, 2017 were $102,573 compared to $249,100 for the same
period last year. During FY2016, the Company had additional sales and marketing costs for the launch of Reveal G4 in
the US market. This year, with no additional launch activities, the sales and marketing expenses decreased to levels
required to maintain ongoing sales and marketing activities for Reveal G4 as well as the Miriad product line.
Other direct costs for the three months ended July 31, 2017 were $141,009 compared to $157,001 for the same period
last year. This was due to the decrease in the Company’s overall sales.
Administrative expenses were $207,190 for the quarter ended July 31, 2017, compared with $255,538 for the same
period in 2016. The decrease was in line with management’s cost saving program in order to adjust the decrease of
gross profit from sales and with it the lower contribution amount to the Company’s operating result.
Non‐operating expenses
The Company had financing expenses of $186,297 in comparison to $149,457 in FY2016. The decrease in financing expenses
was due to the difference in the accretion expenses the Company had to recognise in FY2016 when its long‐term debts
were placed in default.
12
Management’s Discussion & Analysis
July 31, 2017
Year to date analysis
The following table compares the results of operations for the last three years of operations.
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 expenses
Financing expense
Net loss
For the year ended
31‐Jul‐17
$
747,344
‐
(269,047)
478,297
31‐Jul‐16
$
962,140
‐
(284,904)
677,236
31‐Jul‐15
$
1,130,419
753
(443,002)
688,170
‐
‐
‐
1,294,692
(952,633)
342,059
2,921,169
(2,428,973)
492,196
(292,299)
(500,841)
(615,400)
(1,202,927)
(2,611,467)
(2,518,546)
(792,456)
(714,515)
(1,472,640)
(5,498,157)
(874,143)
(503,535)
(623,742)
(1,920,421)
(3,921,841)
(2,133,170)
(4,478,862)
(2,741,475)
(527,897)
(2,661,067)
(679,539)
(5,158,401)
(758,090)
(3,499,565)
Product revenue and gross margin
The Company recorded revenue from product sales in the year ended July 31, 2017 of $747,344 as compared to $962,140
for the same period last year. The decrease in revenue was due to a change in ordering patterns with of one of the
Company’s US. distributors. This pattern changed from just‐in‐time ordering to semi‐annual bulk order which created a shift
in receiving orders and recognizing revenue.
Gross profit on product sales for the year was $478,297 compared to $677,236 in the same period last year. The profit
margin decreased slightly to 68.0% from 70.4% due to the weaker US dollar during this period.
Service revenue and gross margin
The Company recorded revenue from service sales in the year ended July 31, 2017 of $0 as compared to $1,294,692 for the
same period last year. During fiscal 2016, the Company earned revenue and gross margin on a research contract with the
US Military and private customers. The service sales revenue and the gross margin on services was in line with
management’s expectations. This contract concluded in Q3 FY2016.
Operating expenses
Total operating expenses decreased significantly by $2,886,690 from $5,498,157 for the year ended July 31, 2016 to
$2,611,467 for the year ended July 31, 2017.
13
Management’s Discussion & Analysis
July 31, 2017
Research and development expenses for the year ended July 31, 2017 were $292,299 compared to $2,518,546 for the
year ended July 31, 2016. The comparative decrease in research costs was directly attributable to the conclusion of the
US military contract in Q3 FY2016.
Sales and marketing expenses for the year ended July 31, 2017 were $500,841 compared to $792,456 for the same
period last year. The decrease in sales and marketing costs was due to completion of the launch activities for the
Company’s FDA approved Reveal G4 rapid test.
Other direct costs for the year ended July 31, 2017 were $615,400, compared to $714,515, for the same period last
year.
General and administrative expenses were $1,202,927 for the year ended July 31, 2017, compared to $1,472,640 for
the same period in 2016. The decrease of 18.3% in administrative expenses resulted from the continued cost saving
measures implemented by management.
Non‐operating expenses
Total financing expenses were $527,897 in the year ended July 31, 2017, compared to financing expenses of $679,539
during the same period in FY2016. The decrease in financing expenses was due to the difference in the accretion expenses
the Company had to recognise in FY2016 when its long‐term debts were placed in default. In addition, the Company had an
offset by the write‐off of the royalty agreement with MedMira Holding AG formerly known as OnSite Lab Holding AG of
$260,000.
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
Product and service revenue
North America
Latin America and the
Caribbean
Europe
Asia Pacific
Total revenue
124,135
9,402
15,397
‐
148,934
For the three months ended
31‐Jul‐17
$
31‐Jul‐16
$
131,684
59,398
2,161
29,509
222,752
For the year ended
31‐Jul‐17
$
495,248
138,741
56,603
56,752
747,344
31‐Jul‐16
$
1,974,349
187,523
33,765
61,195
2,256,832
14
Management’s Discussion & Analysis
July 31, 2017
Liquidity and capital resources
Cash and working capital
The Company had a cash reserve of $155,915 on July 31, 2017, as compared to $46,120 on July 31, 2016. The Company’s
net working capital position as of July 31, 2017 was a deficit of $8.7 million compared to the July 31, 2016 working capital
deficit of $7.6 million. The Company has incurred losses and negative cash flows on a cumulative basis since inception. For
the year ended July 31, 2017, the Company incurred a net loss from operating activities of approximately $2.1 million and
negative cash flow of $1.9 million, compared to a net loss from operations of $5.2 million and negative cash flow from
operations of $4.1 million for the same period in 2016. The following table is a list of commitments the Company has:
Total
$
Less than 1
year
$
1 to 3 years
$
4 to 5 years
$
After 5 years
$
Debt
6,939,164
6,701,668
237,496
Accounts payable and accrued liabilities
2,609,082
2,609,082
‐
‐
‐
‐
‐
‐
‐
523,764
761,260
536,874
290,807
536,874
290,807
Royalty provision
Operating leases
Total debt
Operating activities
110,000
110,000
1,607,780
256,335
11,266,026
9,677,085
MedMira generated negative cash flows from operations of $1.9 million for the year ended July 31, 2017, compared to
negative cash flows of $4.1 million for the year ended July 31, 2016. The reason for this variance was mainly due to an 88%
decrease in R&D expenses from $2.5 million in FY2016 to $0.3 million in FY2017.
Financing activities
Net cash inflow from financing activities was $2.0 million for the year ended July 31, 2017, compared to $3.9 million for the
same period in 2016. In FY2016, the Company raised $5 million through the issuance of new equity, whereas in FY2017 no
large fund raising activities were completed.
Investing activities
Cash outflow from investing activities was $0 during the year ended July 31, 2017, compared to $27,249 for the same period
in 2016.
Debt
As at July 31, 2017, the Company had loans payable with a carrying value of $6.9 million compared to $6.2 million at July
31, 2016. The increase in the carrying value of loans payable from July 31, 2016 to July 31, 2017 is due to an increase in
short term loans. The Company’s loans have an average payment term of two years. During FY2017, the Company was in
negotiations with all of its debt holders to ensure realistic debt repayment plans, which shall enable the Company to use its
working capital for its growth and ensure its future stability. As these negotiations are ongoing, the Company must record
these as in default until final agreements have been signed. The amount of loans in default was $6.7 million.
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, 2017 consolidated financial statements.
15
Management’s Discussion & Analysis
July 31, 2017
Equity/Shares
The Company is authorized to issue an unlimited number of common shares without nominal par value. During fiscal year
2017 the company issued no common shares. The number of issued and outstanding common shares on July 31, 2017 was
658,364,320. The number of issued and outstanding shares on November 28, 2017 was the same as recorded at July 31,
2017. 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, 2017.
The Company had 2,094,792 outstanding stock options on July 31, 2017. The outstanding stock options have a weighted
average exercise price of $0.10 per share and a weighted average remaining term of 1.9 years. The number of outstanding
warrants on July 31, 2017 was 266,100,000. The outstanding warrants have a weighted average exercise price of $0.11 per
share.
Off balance sheet arrangements
The Company was not party to any off balance sheet arrangements as of July 31, 2017.
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: Classified as loans and receivables and recorded at amortized cost using the effective interest method.
Trade and other receivables: Classified as loans and receivables and recorded at amortized cost using the effective
interest method.
Financial liabilities
Total 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.
Royalty agreements: The Company records its provision for royalty at fair value. Fair value is determined using the
discounted cash flow method using the Company’s best estimate for future cash flows discounted at a rate that
considers the credit risk of the Company.
Management believes the carrying value of cash, trade and other receivables, long term debt, and accounts payable
and accrued liabilities approximate fair value at 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.
16
Management’s Discussion & Analysis
July 31, 2017
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. Management monitors risk levels and reviews risk management activities as necessary.
Liquidity risk
The Company manages liquidity by forecasting and monitoring operating cash flows and 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, 2017, the Company realized a net loss of $2.7 million (July 31, 2016 ‐ $5.2 million), consisting of a net
loss from operations of $2.1 million (July 31, 2016 ‐ $4.5 million), and other non‐operating losses of $0.5 million (July 31,
2016 ‐ $0.7 million). Negative cash flows from operations were $1.9 million (July 31, 2016 ‐ $4.1 million). As at July 31, 2017,
the Company had an accumulated deficit of $86.1 million (July 31, 2016 ‐ $83.5 million) and a negative working capital
position of $8.8 million (July 31, 2016 ‐ $7.6 million). In addition, as at July 31, 2017, $6.0 million of debt was in default, and
$0.4 million of long‐term debt became in default subsequent to July 31, 2017 but prior to the issuance of these consolidated
financial statements. The Company currently has insufficient cash to fund its operations for the next 12 months. In addition
to its ongoing working capital requirements, the Company must secure sufficient funding for its research and development
programs for existing commitments, including its current portion of debt of approximately $6.7 million. These material
uncertainties may cast significant doubt about the Company’s ability to continue as a going concern.
The Company’s objectives in managing capital are to ensure it can meet its ongoing working capital requirements. The
Company must secure sufficient capital to support its capital requirements for research and development programs,
existing commitments, including its current portion of debt of approximately $6.7 million, as well as growth opportunities.
Management dedicates significant time to pursuing investment alternatives that will fund the Company’s operations and
growth opportunities so it can continue as a going concern. As of July 31, 2017, potential investors were identified and
negotiations were initiated to secure the necessary financing through the issuance of new equity. Debt arrangements were
also ongoing with the Company’s major shareholder and other debt holders. Subsequent to the close of fiscal year 2017,
management continues investor negotiations with the identified parties, nevertheless, there is no assurance that this
initiative will be successful.
Credit risk
The Company exposed to credit risk in relation to its trade accounts receivable. To mitigate such risk, the Company
continuously monitors the financial condition of its customers and reviews the credit history or worthiness of each new
customer. 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 establishes an allowance for doubtful accounts based on specific credit
risk of its customers by examining such factors as the number of overdue days of the customers’ balance outstanding as
well as the customers’ collection history. Since 56.1% of the Company’s sales are with two large international companies
there is no significant concentration of credit risk. The Company also has a receivable of $112,000 outstanding from the
Government of Canada and as a result, there is no significant credit risk on this amount.
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.
17
Management’s Discussion & Analysis
July 31, 2017
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.
Related party transactions
The following transactions occurred with related parties during the year ended July 31, 2017:
Short term loans totalling $78,946 were received from officers (2016 ‐ $0)
Two short terms loan totalling $645,300 were received from Ritec AG (2016 ‐ $276,100)
Director fees totalling $10,000 were incurred (2016 ‐ $14,166).
A short term loan totalling $31,978 was repaid to an officer (2016 ‐ $0)
A long term loan totalling $3,494 was repaid to an employee (2016 – $74,796)
Short term loans totalling $42,500 were received from employees (2016 ‐ $0)
A long term loan totalling $387,180 was received from Ritec AG (2016 ‐ $0)
Royalty payments of $21,475 were incurred and owed to MedMira Holding AG (2016 ‐ $33,991)
A cash payment of $1,310,000 was received from Ritec AG in regards to a royalty agreement (2016 ‐ $0)
A equity contribution of $12,500 was made by a shareholder to pay an operating expense of the Company
(2016 ‐ $0)
The following balances with related parties were outstanding at July 31, 2017:
Accounts payable totalling $10,000 was due to directors (2016 ‐ $10,000).
Accounts payable totalling $129,037 was due to officers (2016 ‐ $26,901).
A loan term loan totalling $237,496 was due to the Chief Financial Officer (2016 ‐ $241,565).
A royalty provision was owed to MedMira Holding AG of $50,775 (2016 ‐ $31,991).
A long term loan totalling $13,500 was owed to an employee (2016 ‐ $13,500)
Short term loans totalling $42,500 were owed to employees (2016 ‐ $0)
Two short term loans totalling $645,300 are owed to Ritec AG (2016 ‐ $0)
Short term loans totalling $46,968 were owed to officers (2016 ‐ $0)
18
Management’s Discussion & Analysis
July 31, 2017
Summary Compensation Table – Officers
Paid
Compensation
($)
Accrued
Compensation
Current year
($)
Share‐ and
Option‐
based
Awards*
($)
All other
compensation1
($)
Total
Compensation
for FY 2017
($)
Paid
Compensation
related to
previous fiscal
periods ($)
Accrued
Compensation
related to
previous fiscal
periods ($)
188,000
60,923
105,000
‐
‐
‐
33,538
116,172
‐
‐
‐
‐
‐
‐
‐
‐
188,000
60,923
‐
‐
105,000
10,000
149,710
17,333
‐
‐
‐
‐
Name
and
Principal
Position
Hermes
Chan
CEO
Sing
Chan
COO
Robyn
Cook
CCO
Markus
Meile
CFO
1 All other compensation includes pension fund contributions and/or bonuses paid out.
*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.
19
Management’s Discussion & Analysis
July 31, 2017
Summary Compensation Table – Directors
Name and
Principal Position
Paid
Compensation
($)
Accrued
Compensation
Current year
($)
Share‐
and
Option‐
based
Awards*
($)
Total
Compensation
current year
($)
Paid
Compensation
related to
previous fiscal
years ($)
Accrued
Compensation
related to
previous fiscal
years ($)
Hermes Chan
Member of the
Audit Committee
Romano Robusto1
Director/Audit
Committee Chair
Member of
Nomination &
Compensation
Committee
Philippe Dro1
Director
Marvyn Robar
Director/Chairman
of the Board/Audit
Committee
Chair2/Member of
Nomination &
Compensation
Committee
Dr. Shou‐Ching
Tang
Director/Member
of the Audit and
Nomination &
Compensation
Committee
‐
‐
‐
‐
‐
‐
3,422
3,422
‐
‐
5,000
4,791
9,791
‐
2,500
‐
1,711
1,711
5,000
6,160
11,160
‐
‐
‐
5,000
‐
‐
‐
‐
‐
1 Ceased to be a director and member of Board committees on January 30, 2017.
2 Effective January 30, 2017
*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 amount recorded for the issuance of stock options.
20
Management’s Discussion & Analysis
July 31, 2017
Subsequent events
During the first quarter of FY2018, the Company received a loan of $384,510 from Ritec AG, a related party, in order to
support the Company’s strategic goals. The loan is repayable on October 30, 2017 and carries an annual interest rate
of 5% that is due upon repayment of the loan.
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, 2017.
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 consolidated 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:
21
Management’s Discussion & Analysis
July 31, 2017
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
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 US 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.
22
Management’s Discussion & Analysis
July 31, 2017
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 US 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.
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.
23
Management’s Discussion & Analysis
July 31, 2017
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.
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 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.
24
Management’s Discussion & Analysis
July 31, 2017
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.
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.
25
Management’s Discussion & Analysis
July 31, 2017
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.
26
MedMira Inc.
Consolidated Financial Statements
July 31, 2017 and 2016
27
November 28, 2017
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
28
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. (the “Company”),
which comprise the consolidated statements of financial position as at July 31, 2017 and July 31, 2016, 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, 2017 and July 31, 2016, and its financial performance and its cash
flows for the years then ended in accordance with International Financial Reporting Standards.
Emphasis of Matter
Without qualifying our opinion, we draw attention to Note 2 to the consolidated financial statements, which
indicates that the Company incurred a net and comprehensive loss of $2,661,067 for the year ended July 31,
2017, and the Company had an accumulated deficit of $86,114,774 and its current liabilities exceeded its
current assets by $8,839,414 as of July 31, 2017. In addition, $5,953,400 of long-term debt was in
29
default as of July 31, 2017. The ability of the Company to continue as a going concern is dependent upon
the Company’s ability to maintain the continuing support of its creditors and lenders, raise additional
financing and achieve a profitable level of operations. These conditions, along with other matters as set forth
in Note 2, indicate the existence of material uncertainties that cast significant doubt about the Company’s
ability to continue as a going concern.
/s/ Deloitte LLP
Chartered Professional Accountants
November 28, 2017
Halifax, Nova Scotia
30
MedMira Inc.
Consolidated statements of financial position
As at July 31, 2017 and July 31, 2016
In Canadian dollars
Notes
31‐Jul‐17
$
31‐Jul‐16
$
A sset s
Current assets
Cash
Trade and other receivables
Prepaid expenses
Current tax receivable
Inventories
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Total non-current assets
T o t al asset s
Liab ilit ies
Current liabilities
Current portion of debt
Trade accounts payable and accrued liabilities
Salaries and benefits payable
Interest payable
Deferred rent
Deferred revenue
Provision for royalty
Total current liabilities
Non-current liabilities
Long term portion of debt
Total non-current liabilities
T o t al liab ilit ies
Eq uit y
Share capital
Warrant reserve
Stock based compensation reserve
Equity reserve
Accumulated deficit
T o t al shareho ld er s' d ef iciency
T o t al liab ilit ies and eq uit y
46,120
186,394
52,470
100,000
293,456
678,440
191,463
2
191,465
869,905
5,994,445
1,725,899
165,094
180,186
138,087
41,297
31,991
8,276,999
255,065
255,065
8,532,064
155,915
60,415
26,004
112,000
227,002
581,336
92,367
2
92,369
673,705
5
6
7
10
6,701,668
1,741,173
240,671
509,575
117,663
-
110,000
9,420,750
237,496
237,496
9,658,246
12
10
8
8
8
8
63,421,802
63,421,802
9,966,770
1,353,291
2,388,370
(86,114,774)
(8,984,541)
673,705
9,966,770
1,337,206
1,065,770
(83,453,707)
(7,662,159)
869,905
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) Marvyn Robar, Chairman and Director
31
MedMira Inc.
Consolidated statements of operations and comprehensive loss
For the years ended July 31, 2017 and July 31, 2016
In Canadian dollars
Product
Product sales
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 expense
Financing expense
Net and comprehensive loss
Basic loss per share
Diluted loss per share
Notes
31‐Jul‐17
$
31‐Jul‐16
$
4
5
4
14
14
19
9
9
747,344
(269,047)
478,297
962,140
(284,904)
677,236
‐
‐
‐
(292,299)
(500,841)
(615,400)
(1,202,927)
(2,611,467)
1,294,692
(952,633)
342,059
(2,518,546)
(792,456)
(714,515)
(1,472,640)
(5,498,157)
(2,133,170)
(4,478,862)
(527,897)
(2,661,067)
(679,539)
(5,158,401)
(0.004)
(0.004)
(0.008)
(0.008)
The accompanying notes are an integral part of these consolidated financial statements.
32
MedMira Inc.
Consolidated statements of changes in equity
For the years ended July 31, 2017 and July 31, 2016
In Canadian dollars
Share capital
Notes
Common shares Preferred shares Warrant reserve
Stock based
compensation
reserve
Equity reserve
Accumulated deficit
Shareholders'
deficiency
Balance at July 31, 2015
60,208,678
2,500
8,202,394
1,311,597
865,770
(78,295,306)
(7,704,367)
Net and comprehensive loss
Issuance of common shares for cash
Share issuance costs
Issuance of stock options
Funding under royalty agreement
Balance at July 31, 2016
Net and comprehensive loss
Issuance of common shares for cash
Share issuance costs
Issuance of stock options
Funding under royalty agreement
Equity contribution by shareholder
8
8
8
8
8
8
8
8
8
‐
3,235,624
(25,000)
‐
‐
‐
‐
‐
‐
‐
‐
1,764,376
‐
‐
‐
‐
‐
‐
25,609
‐
‐
‐
‐
‐
200,000
(5,158,401)
‐
‐
‐
‐
(5,158,401)
5,000,000
(25,000)
25,609
200,000
63,419,302
2,500
9,966,770
1,337,206
1,065,770
(83,453,707)
(7,662,159)
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
16,085
‐
‐
‐
‐
‐
‐
1,310,100
12,500
(2,661,067)
(2,661,067)
‐
‐
‐
‐
‐
‐
‐
16,085
1,310,100
12,500
Balance at July 31, 2017
63,419,302
2,500
9,966,770
1,353,291
2,388,370
(86,114,774)
(8,984,541)
The accompanying notes are an integral part of these consolidated financial statements.
33
MedMira Inc.
Consolidated statements of cash flows
For the years ended July 31, 2017 and July 31, 2016
In Canadian dollars
Cash from operating activities
Net loss
Adjustments for:
Depreciation
Provision for royalty
Share based payments reserve
Equity contribution by shareholder
Accretion expense
Movements in working capital:
(Increase)/decrease in trade and other receivables
(Increase)/decrease in inventories
(Increase)/decrease in prepaid expenses
(Increase)/decrease in current tax receivable
(Increase)/decrease in accounts payable and accrued liabilities
(Increase)/decrease in deferred revenue
Net cash used in operating activities
Cash flow from investing activities
Payments to acquire property, plant and equipment
Disposal of assets
Net cash used in investing activities
Cash flow from financing activities
Proceeds from the issuance of common shares and warrants
Payment for share issue costs
Funding under royalty agreements
Proceeds from borrowings
Repayment of borrowing
Net cash from financing activities
Net increase (decrease) in cash
Cash at the beginning of the year
Cash at the end of the year
The accompanying notes are an integral part of these consolidated financial statements.
Notes
31‐Jul‐17
$
31‐Jul‐16
$
(2,661,067)
(5,158,401)
6
8
8
12
98,788
78,009
16,085
12,500
‐
125,979
66,454
26,466
(12,000)
399,816
(41,297)
(1,890,267)
‐
307
307
‐
‐
1,310,100
762,677
(73,022)
1,999,755
109,795
46,120
155,915
99,791
(260,000)
25,609
‐
565,274
583,304
6,472
(13,843)
49,000
(23,748)
33,986
(4,092,556)
(27,249)
‐
(27,249)
5,000,000
(25,000)
200,000
963,414
(2,234,881)
3,903,533
(216,272)
262,392
46,120
34
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2017 and July 31, 2016
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. MedMira Holding AG
owns the majority of MedMira’s shares and is the controlling shareholder. The consolidated financial statements of the
Company for the years ended July 31, 2017 and 2016, 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, 2017.
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, 2017, the Company realized a net loss of $2.7 million (July 31, 2016 ‐ $5.2 million), consisting
of a net loss from operations of $2.1 million (July 31, 2016 ‐ $4.5 million), and other non‐operating losses of $0.5 million
(July 31, 2016 ‐ $0.7 million). Negative cash flows from operations were $1.9 million (July 31, 2016 ‐ $4.1 million). As at
July 31, 2017, the Company had an accumulated deficit of $86.1 million (July 31, 2016 ‐ $83.5 million) and a negative
working capital position of $8.8 million (July 31, 2016 ‐ $7.6 million). In addition, as at July 31, 2017, $6.0 million of debt
was in default, and $0.4 million of long‐term debt became in default subsequent to July 31, 2017 but prior to the
issuance of these consolidated financial statements. The Company currently has insufficient cash to fund its operations
for the next 12 months. 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 debt of
approximately $6.7 million. These material uncertainties may cast significant doubt about the Company’s ability to
continue as a going concern.
The Company’s objectives in managing capital are to ensure it can meet its ongoing working capital requirements. The
Company must secure sufficient capital to support its capital requirements for research and development programs,
existing commitments, including its current portion of debt of approximately $6.7 million, as well as growth
opportunities.
35
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2017 and July 31, 2016
In Canadian dollars
Management dedicates significant time to pursuing investment alternatives that will fund the Company’s operations
and growth opportunities so it can continue as a going concern. As of July 31, 2017, potential investors were identified
and negotiations were initiated to secure the necessary financing through the issuance of new equity. Debt
arrangements were also ongoing with the Company’s major shareholder and other debt holders. Subsequent to the
close of fiscal year 2017, management continues investor negotiations with the identified parties, nevertheless, there
is no assurance that this initiative will be successful.
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
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
and the continued support of its lenders and shareholders. 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, except for certain financial
instruments that are measured at fair value at the end of each reporting period as explained in the accounting policies
below.
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:
The provision for royalty is determined using certain assumptions including: the likelihood and timing of
completion of the research and development of the products associated with the royalty agreement, 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, estimates of discount rate and the cost of production
Amounts recorded for depreciation and impairment of property, plant and 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 tax receivable 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;
36
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2017 and July 31, 2016
In Canadian dollars
The allocation of proceeds between common shares and warrants, determined by valuation of warrants which
includes assumptions regarding volatility and risk free rate;
Determination of operating segments; and
Determination of the fair value of stock options granted. The Company uses an option pricing model, which
includes significant assumptions including estimate of expected volatility, expected life, expected dividend
rate and expected risk‐free rate of return.
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 years 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‐17
100
100
100
100
100
100
Canada
Canada
Canada
Switzerland
United States
Canada
%
31‐Jul‐16
100
100
100
100
100
100
MedMira Inc.
MedMira Laboratories Inc.
Maple Biosciences Inc.
MedMira International AG
MedMira (US) Inc.
Precious Life Savings Products
a. Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Company. Control is achieved when the Company has the power over the
investee, is exposed, or has rights, to variable returns from its involvement with the investee; and has the ability to use
its power to affect its returns. The Company reassesses whether or not it controls an investee if facts and circumstances
indicate that there changes to one or more of the three elements of control listed above. The financial statements of
subsidiaries are included in the consolidated financial statements from the date that control commences until the date
37
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2017 and July 31, 2016
In Canadian dollars
that control ceases. 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. Exchange
differences on monetary items are recognized in the statement of operations and net comprehensive loss in the period
in which they arise.
c.
Financial instruments
Financial assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions
of the instruments. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that
are directly attributable to the acquisition or issue of financial assets and financial liabilities, other than those at fair
value through profit or loss, are added to or deducted from the fair value of the financial instrument as appropriate on
initial recognition. Transaction costs that are directly attributable to the acquisition of financial assets and financial
liabilities at fair value through profit or loss, are recognized immediately in profit or loss.
Financial assets
The Company’s financial assets consist of cash and trade and other receivables which are classified as loans and
receivables. Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an
active market. Subsequent to initial recognition, loans and receivables are measured at amortized cost using the
effective interest method, less any impairment losses.
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’s financial liabilities consist of trade accounts payable and accrued liabilities, salaries and benefits
payable, interest payable, and long‐term debt which are classified as other financial liabilities. Subsequent to initial
recognition, these financial liabilities are measured at amortized cost using the effective interest method.
The Company’s provision for royalty is classified as fair value through profit or loss and stated at fair value with any
gains or losses arising from re‐measurement recognized in profit or loss.
Share capital
Common shares
Common shares are classified as equity. Incremental costs directly attributable to the issue of common shares and stock
options are recognized as a deduction from equity, net of any tax effects.
38
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2017 and July 31, 2016
In Canadian dollars
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.
Share purchase warrants
The Company bifurcates units consisting of common shares and share purchase warrants using the residual value
approach whereby it measures the common share component of the unit at fair value using market prices. The
difference between this value and the unit value is then allocated to the warrant with the value of the warrant
component being credited to the warrant reserve. When warrants are exercised, the corresponding residual value is
transferred from warrant reserve to share capital. All such warrants are classified in a warrant reserve within equity.
Equity reserve
The company has royalty agreements with related parties. When royalty agreements are entered into with the related
party the excess of the cash received over the fair value of the royalty agreement is classified as a contribution to equity
within equity reserve.
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 on a net basis within financing
expense 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 general and administrative expenses 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.
39
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2017 and July 31, 2016
In Canadian dollars
Depreciation is recognized in general and administrative expenses 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 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:
leasehold improvements
lower of 7 years and length of lease
laboratory equipment
manufacturing equipment
office equipment and furniture
5 years
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 as research and development expense within 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 within intangible assets on the consolidated statements of
financial position 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 was on or after August 1,
2010. Any other development expenditure is recognized as research and development expense within profit or loss as
incurred.
A capitalized development expenditure is measured at cost less accumulated amortization and accumulated
impairment losses.
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.
40
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2017 and July 31, 2016
In Canadian dollars
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.
Inventories
Raw materials inventory consists of chemicals, plastic components and packaging materials. Work in process inventory
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.
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.
g.
Impairment
Financial assets (including receivables)
Financial assets, other than those at fair value through profit or 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
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.
41
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2017 and July 31, 2016
In Canadian dollars
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.
h. 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 stock based compensation reserve within 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.
i.
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 financing expense within profit or loss.
j. Revenue
Product Sales
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.
42
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2017 and July 31, 2016
In Canadian dollars
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.
Service Sales
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 have occurred, it is
probable that the economic benefits associated with the transaction will flow to the Company and the cost incurred
for the transaction can be measured reliably.
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.
k. 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 probable that future taxable profit will be available against
which the unused tax losses can be utilized.
l. New and amended standards and interpretations
The following standards were amended and adopted by the Company during the current year, and had no significant
impact on the Company’s consolidated financial statements:
IFRS 10 (amended) Consolidated Financial Statements
IAS 1 (amended) Presentation of Financial Statements
IAS 16 (amended) Property, Plant and Equipment
IAS 38 (amended) Intangible Assets
The following new standards and amendment have been issued but are not effective for the fiscal year ended July 31,
2017, and, accordingly, have not been applied in preparing these consolidated financial statements.
IFRS 9 ‐ Financial Instruments. A finalized version of IFRS 9 which contains accounting requirements for financial
instruments, replacing IAS 39 ‐ Financial Instruments: Recognition and Measurement has been issued and is effective
for annual periods beginning on or after January 1, 2018 and therefore, will be effective August 1, 2018 for the
Company. The standard contains requirements in the following areas: classification and measurement, impairment,
hedge accounting and derecognition.
43
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2017 and July 31, 2016
In Canadian dollars
IFRS 15 ‐ Revenue from Contracts with Customers. This standard is effective for annual periods beginning on or after
January 1, 2018 and therefore, will be effective August 1, 2018 for the Company. IFRS 15 establishes principles for
reporting the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with
customers. It provides a single, five‐step model for an entity to recognize revenue in order 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 to exchange for these goods and services. IFRS 15 also provides guidance relating to the treatment of
contract acquisition and contract fulfillment costs, In addition, IFRS 15 requires additional disclosure in the
consolidated financial statements regarding the Company’s revenue. IFRS 15 replaces IAS 18 Revenue and IAS 11
Construction Contracts, as well as related interpretations.
IFRS 16 – Leases. This standard replaces IAS 17 Leases and introduces a single accounting model for lessees and for all
leases with more than 12 months, unless the underlying asset is of low value. A lessee will be required to recognize a
right‐of‐use‐asset, representing its right to use the underlying asset, and a corresponding lease liability, representing
its obligation to make lease payments. IFRS 16 is effective for annual periods beginning on or after January 1, 2019 and
therefore, will be effective August 1, 2019 for the Company. While early adoption is permitted if IFRS 15 has also been
applied, the Company has chosen not to early adopt this standard.
IFRS 2 – Share‐based payments. IFRS 2 was amended to clarify how to account for the effects of vesting and non‐
vesting conditions on the measurement of cash‐settled share‐based payments, share‐based payment transactions with
a net settlement feature and a modification to the terms and conditions that changes the classification of the
transactions. The amendment is effective for annual periods beginning on or after January 1, 2018 and therefore, will
be effective August 1, 2018 for the Company.
IFRIC 22‐ Foreign Currency Transactions and Advance Consideration. IFRIC 22 clarifies the accounting for transactions
that include the receipt or payment of advance consideration in a foreign currency. This interpretation is effective for
annual periods beginning on or after January 1, 2018 and therefore, will be effective August 1, 2018 for the Company.
IAS 7 ‐ Statement of Cash Flows. IAS 7 was amended to improve information provided to users of financial statements
about an entity's financing activities. The amendment is effective for annual periods beginning on or after January 1,
2017, and therefore, will be effective August 1, 2017 for the Company.
The Company is currently evaluating the potential impact, if any, of these standards and amendments.
4. Revenue
Product sales
Service revenue
Total revenue
31‐Jul‐17
$
747,344
‐
747,344
31‐Jul‐16
$
962,140
1,294,692
2,256,832
44
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2017 and July 31, 2016
In Canadian dollars
Service revenue is generated from research work on a contract with the US Military. The contract ended in fiscal 2016
and thus no service revenue was recognized in fiscal 2017. The costs associated with research conducted to earn this
revenue have been recognized as a service cost of sales (see note 14).
The Company derives approximately 56.1% (July 31, 2016 – 84%) of its revenue from two (July 31, 2016 — four) main
customers and, for these customers, assesses the recoverability of each account on a regular basis. During the year
ended July 31, 2017, customer 1 accounted for 31.2% of the Company’s revenue and customer 2 accounted for 24.9%
of the revenue.
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
Total revenue
$
495,248
138,741
56,603
56,742
747,334
$
1,974,349
187,523
33,765
61,195
2,256,832
For the year ended July 31, 2017, revenue in North America include sales made in Canada (the Company’s country of
domicile) of $14,292 (2016 – $16,067).
5.
Inventories
As at July 31, 2017, there were no valuation allowances against inventory (July 31, 2016 ‐ $nil).
During the year ended July 31, 2017, inventory valued at $200,844 was expensed as product cost of sales (July 31, 2016
‐ $225,425), which included write‐downs of inventory as a result of net realizable value being lower than cost of $20,052
(2016 – $15,757). No inventory write‐downs recognized in previous years were reversed during the current year.
Raw materials and consumables
Work in process
Finished goods
Total inventories
31‐Jul‐17
$
188,279
22,500
16,223
227,002
31‐Jul‐16
$
235,934
47,479
10,043
293,456
45
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2017 and July 31, 2016
In Canadian dollars
6. Property, plant and equipment
The table below summarizes changes in property, plant and equipment, which is all located in Canada, the Company’s
country of domicile.
Leasehold
improvements
$
Laboratory
equipment
$
Manufacturing
equipment
$
Office
equipment
and furniture
$
Cost
Balance at July 31, 2015
Additions
Disposals
Balance at July 31, 2016
Additions
Disposals
Balance at July 31, 2017
814,134
‐
‐
814,134
‐
‐
814,134
Accumulated depreciation and impairment losses
Balance at July 31, 2015
Depreciation expense for the year
Disposals
Balance at July 31, 2016
Depreciation expense for the year
Disposals
Balance at July 31, 2017
685,338
50,616
‐
735,954
50,616
‐
786,570
Carrying amounts
At July 31, 2015
At July 31, 2016
At July 31, 2017
128,796
78,180
27,564
50,961
‐
‐
50,961
‐
‐
50,961
34,643
5,406
‐
40,049
5,403
‐
45,452
16,318
10,912
5,509
208,579
12,598
‐
221,177
‐
‐
221,177
184,438
8,483
‐
192,921
9,358
‐
202,279
333,900
14,651
‐
348,551
‐
(1,500)
347,051
239,150
35,286
‐
274,436
33,412
(1,193)
306,655
Total
$
1,407,574
27,249
‐
1,434,823
‐
(1,500)
1,433,323
1,143,569
99,791
‐
1,243,360
98,789
(1,193)
1,340,956
24,141
28,256
18,898
94,750
74,115
40,396
264,005
191,463
92,367
46
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2017 and July 31, 2016
In Canadian dollars
7.
Intangible assets
Cost or deemed cost
Balance at July 31, 2015
Balance at July 31, 2016
Balance at July 31, 2017
Accumulated amortization and accumulated impairment losses
Balance at July 31, 2015
Balance at July 31, 2016
Balance at July 31, 2017
Carrying amounts
At July 31, 2015
At July 31, 2016
At July 31, 2017
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 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. 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, 2017 and July 31, 2016
In Canadian dollars
b. Share capital issued
Number of
Common
shares
Preferred
shares
Balance at July 31, 2015
558,364,320
5,000,000
Issued for cash
Share issuance costs
100,000,000
‐
‐
‐
Common
shares
$
60,208,678
3,235,624
(25,000)
Value of
Preferred
shares
$
2,500
‐
‐
Total share
capital
$
60,211,178
3,235,624
(25,000)
Balance at July 31, 2016
658,364,320
5,000,000
63,419,302
2,500
63,421,802
Issued for cash
Share issuance costs
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
Balance at July 31, 2017
658,364,320
5,000,000
63,419,302
2,500
63,421,802
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, 2017 (July 31, 2016 ‐ $2,500).
c. Warrants
Balance at July 31, 2015
Issued for cash
Expired warrants
Balance at July 31, 2016
Issued for cash
Expired warrants
Balance at July 31, 2017
Number of
warrants
306,100,000
100,000,000
(140,000,000)
Warrant
reserve
$
8,202,394
1,764,376
‐
266,100,000
9,966,770
‐
‐
‐
‐
266,100,000
9,966,770
48
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2017 and July 31, 2016
In Canadian dollars
The total warrants outstanding at July 31, 2017 are shown below.
Issued
Number
Exercise price
$
Expiry date
September 30, 2013
October 2, 2014
March 27, 2015
September 8, 2015
122,100,000
22,000,000
22,000,000
100,000,000
266,100,000
0.125
0.100
0.100
0.100
September 29, 2017
October 2, 2018
March 27, 2019
September 8, 2019
d. Stock based compensation
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 up to a maximum of 13,000,000 options upon approval by
shareholders. Options that have been issued and remain outstanding are exercisable into an equivalent of 2,594,792
common shares (July 31, 2016 – 2,094,792) at an exercise price of $0.10. The options expire between January 24, 2018
and January 29, 2020. During the year ended July 31, 2017, 1,175,000 options were issued (July 31, 2016 – 779,167).
All options outstanding at July 31, 2017 were exercisable.
The total options outstanding from July 31, 2015 to July 31, 2017 are shown below.
Options outstanding July 31, 2015
Options issued
Options expired/forfeited
Options outstanding July 31, 2016
Options issued
Options expired/forfeited
Weighted
average
exercise price
$
0.10
0.10
0.10
Share‐based
payment
reserve
$
1,311,597
25,609
‐
0.10
0.10
0.10
1,337,206
16,085
‐
Number
2,921,875
779,167
(1,606,250)
2,094,792
1,175,000
(675,000)
Options outstanding July 31, 2017
2,594,792
0.10
1,353,291
49
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2017 and July 31, 2016
In Canadian dollars
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) 131%
Option life
Dividend yield
Risk‐free interest rate
3 years
$0.00
2%
$0.025
$0.10
The weighted average exercise price of the options outstanding during the year ended July 31, 2017 was $0.10
(2016 ‐ $0.10) and the weighted average remaining contractual life is 1.25 years (2016 ‐ 1.62 years). The amount of
compensation cost that is recognized in general and administrative expenses in the consolidated statement of
operations and comprehensive loss was $16,085 (2016 ‐ $25,609).
The following share‐based payment arrangements were in existence during the current and prior years:
Option Series
Number
Grant Date
Expiry Date
Exercise Price
Fair Value at
Grant
(1) Granted on April 13, 2015
(2) Granted on January 8, 2016
(3) Granted on January 30, 2017
640,625
779,167
1,175,000
13‐Apr‐15
8‐Jan‐16
30‐Jan‐17
12‐Apr‐18
7‐Jan‐19
29‐Jan‐20
$0.10
$0.10
$0.10
$0.027
$0.033
$0.014
e. Equity Reserve
The change in equity reserve is outlined in the table below:
Balance at July 31, 2015
Cash received for royalty agreement (see note 12)
Balance at July 31, 2016
Cash received for royalty agreement (see note 12)
Equity contribution from shareholder (see note 13)
Balance at July 31, 2017
Equity Reserve
$
865,770
200,000
1,065,770
1,310,100
12,500
2,388,370
50
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2017 and July 31, 2016
In Canadian dollars
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‐17
$
(2,661,067)
(2,661,067)
31‐Jul‐16
$
(5,158,401)
(5,158,401)
658,364,320
658,364,320
658,364,320
658,364,320
‐
‐
‐
‐
658,364,320
658,364,320
(0.004)
(0.004)
(0.008)
(0.008)
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, 2017, as the exercise of warrants and options would
be anti‐dilutive.
10. Loans and borrowings
a. Loans
Short term loans
Loan 1
Loan 2
Loan 3
Loan 4
Loan 5
Loan 6
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‐17
31‐Jul‐16
Carrying value
$
734,768
1,054,167
1,300,000
Contract value
$
734,768
1,054,167
1,300,000
‐
‐
13,500
237,496
485,843
3,016,000
97,390
6,939,164
‐
‐
13,500
237,496
485,843
3,016,000
97,390
6,939,164
237,496
6,701,668
Carrying value
$
Contract value
$
‐
1,054,167
1,300,000
3,000
3,495
13,500
241,565
520,393
3,016,000
97,390
6,249,510
‐
1,054,167
1,300,000
3,000
3,495
13,500
241,565
520,393
3,016,000
97,390
6,249,510
255,065
5,994,445
51
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2017 and July 31, 2016
In Canadian dollars
The required annual principal repayments on loans and borrowings are as follows:
2018
2019
Carrying value
Short term loans
6,701,668
237,496
6,939,164
The Company has six short term loans with related parties. These loans are utilized by the Company for short term
working capital requirements. Loans are due on various dates ranging from August 10, 2017 to December 31, 2017
with an interest rate of 5%. The loans were not in default at July 31, 2017. Subsequent to July 31, 2017 but prior to
the issuance of these financial statements, $363,993 of the short term loans became in default.
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,
2017 and thus has been classified as a current liability.
Loan 2
Loan established July 31, 2012, bearing 5% interest with monthly interest payments were due until April 30, 2016,
followed by equal monthly principal payments and accrued interest for four additional years ending July 31, 2020. The
loan was in default due to nonpayment of interest and principal payments as of July 31, 2017 and thus has been
classified as a current liability.
Loan 3
Loan was repaid during the year ended July 31, 2017.
Loan 4
Loan was repaid during the year ended July 31, 2017.
Loan 5
Loan established June 10, 2016, bearing 5% interest. The loan is fully payable on or before August 10, 2017. The loan
was not in default at July 31, 2017. Subsequent to July 31, 2017 but prior to the issuance of these financial statements,
this loan went into default.
52
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2017 and July 31, 2016
In Canadian dollars
Loan 6
Loan was established on July 31, 2016, bearing 5% interest with the Company’s Chief Financial Officer. The loan was
renegotiated on January 21, 2017 and is now fully payable on or before October 1, 2018. The loan was not in default
at July 31, 2017.
Atlantic Canada Opportunities Agency (ACOA) loans
Loans established on October 31, 2012, bearing no interest with monthly principal payments of $3,747 until July 31,
2013, followed by 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 principal payments of $27,800 starting on February 1, 2015 and one monthly principal payment of $26,975
at the end of the loan. The loan is secured by all present and subsequently acquired personal property, excepting
consumer goods. The loan was in default due to nonpayment of interest and principal payments at July 31, 2017 and
thus has been classified as a current liability.
Nova Scotia government loan 1
The loan was established in August 2015, bearing interest based on the Province of Nova Scotia’s five year cost of funds,
plus five hundred basis points. Monthly interest payments are due until August 31, 2018. Starting on September 1,
2016, thirteen monthly principal payments of $120,000 are due followed by ten monthly principal payments of
$135,000 starting on October 1, 2017 and one monthly principal payment of $106,000 on August 1, 2018. The loan is
secured by first interest on intellectual property and on the Maple Bio sensor technology. The loan was in default due
to nonpayment of interest and principal payments at July 31, 2017 and thus has been classified as a current liability.
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 in default due to
nonpayment of interest and principal payments at July 31, 2017 and thus has been classified as a current liability.
11. Capital management and financial risks
a. Capital management
The Company’s objectives in managing capital are to ensure sufficient liquidity to support the capital requirements of
its various businesses, including growth opportunities. The Company manages its capital structure and makes
adjustments in light of general economic conditions, the risk characteristics of the underlying assets and the Company’s
working capital requirements. Management of the capital structure involves the issuance of new debt, the repayment
of existing debt using cash generated by operations and issuance of additional financial structures such as product
financing and royalty agreements. The capital structure of the Company is composed of shareholders’ deficiency, cash,
long‐term and short‐term debts. The provisions of certain financing agreements provide for restrictions on the activities
of the Company in terms of their use of funds. Such restrictions are mainly applied in specific product development
financing projects. The Company’s objectives when managing capital are to provide competitive cost structures,
safeguard its assets and daily cash flow management in order to maximize the Company’s cash holding.
53
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2017 and July 31, 2016
In Canadian dollars
The Company’s capital is summarized in the table below.
Total debt
Less: Cash
Net debt
Shareholders’ deficiency
Total capital
31‐Jul‐17
$
6,939,164
(155,915)
6,783,249
31‐Jul‐16
$
6,249,510
(46,120)
6,203,390
(8,984,541)
(2,201,292)
(7,662,159)
(1,458,769)
Refer to the note 2b for information on how the Company manages its plan and its ability to continue as a going
concern.
b. Foreign currency risk
Most of the Company’s sales are denominated 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
Royalty provision
Debt
31‐Jul‐17
US$
34,190
58,725
‐
646,341
88,106
36,000
31‐Jul‐16
US$
24,148
128,424
5,949
973,411
‐
‐
A one percent change in the US dollar exchange rate would result in approximately a $8,634 (2016 ‐ $11,020) impact
on the statement of financial position and consolidated statement of operations.
c.
Interest rate risk
The Company is not exposed to interest rate risk as it borrows funds at fixed rates.
d. Credit risk
The Company exposed to credit risk in relation to its trade accounts receivable. To mitigate such risk, the Corporation
continuously monitors the financial condition of its customers and reviews the credit history or worthiness of each new
customer. 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 establishes an allowance for doubtful accounts based on
specific credit risk of its customers by examining such factors as the number of overdue days of the customers’ balance
outstanding as well as the customers’ collection history. Since 56.1% of the Company’s sales are with two large
54
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2017 and July 31, 2016
In Canadian dollars
international companies there is no significant concentration of credit risk. The Company also has a receivable of
$112,000 outstanding from the Government of Canada and as a result, there is no significant credit risk on this amount.
Age of receivable that are past due but not impaired
120 +
Total
$22,960
$22,960
Trade and other receivables include amounts that are past due as at July 31, 2017 for which the Company has not
recognized an allowance for doubtful accounts because there has not been a significant change in credit quality of the
customer and the amounts are still considered recoverable.
e. 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, 2017, the Company does not
have sufficient cash to meet all of its current 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.
The Company’s contractual maturities for its financial liabilities are outlined in the table below.
For the year ended July 31, 2017
Debt
Accounts payable and accrued liabilities
Royalty provision
Total debt
For the year ended July 31, 2016
Debt
Accounts payable and accrued liabilities
Royalty provision
Total debt
Total
$
6,939,164
2,609,082
110,000
9,658,246
Total
$
6,249,510
2,241,257
31,991
8,522,758
Less than 1 year
$
6,701,668
2,609,082
110,000
9,420,750
Less than 1 year
$
5,994,445
2,241,257
31,991
8,267,693
1 to 3 years
$
237,496
‐
‐
237,496
1 to 3 years
$
255,065
‐
‐
255,065
The payments noted above do not include interest payments.
4 to 5 years
$
After 5 years
$
‐
‐
‐
‐
‐
‐
‐
‐
4 to 5 years
$
After 5 years
$
‐
‐
‐
‐
‐
‐
‐
‐
55
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2017 and July 31, 2016
In Canadian dollars
f.
Fair value of financial instruments
Fair value is the price that would be received to sell an asset or paid to transfer a liability in orderly fashion between
market participants. The Company records its provision for royalty at fair value. Fair value is determined using the
discounted cash flow method using the Company’s best estimate for future cash flows discounted at a rate that
considers the credit risk of the Company. Management estimated the future cash flows for the each of the products
associated with the royalty agreements, taking into consideration the likelihood and timing of completion of the
research and development of the products associated with the royalty agreement, 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 production. Future cash flows were estimated at an average of $0 ‐ $24,000 per
month. A significant increase in future cash flows used would result in a significant increase in fair value, and vice versa.
Management estimated the discount rate, taking into account the credit risk of the Company and prevailing market
rates, at 20%. A significant increase in discount rate used would result in a significant decrease in fair value, and vice
versa.
Fair value measurements are categorized into Level 1, 2 or 3 based on the degree to which the inputs to the fair value
measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which
are described as follows:
Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the entity can access at the
measurement date.
Level 2 inputs, other than quoted prices included within Level 1, that are observable for the asset or liability either
directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability
The Company uses both level 2 and level 3 inputs to determine the fair value of the royalty provision and is therefore
classified as a level 3 measurement.
Management has determined that the carrying amounts of all other financial assets and financial liabilities recognized
in the consolidated financial statements not recorded at fair value approximate fair value. The fair value of trade and
other receivables, current debt, trade accounts payable and accrued liabilities, salaries and benefits payable, and
interest payable is classified as level 2 measurement and the fair value of long‐term debt is classified as a level 3
measurement. There has been no changed between the levels during the year.
12. Royalty provision
The Company entered into a promissory note with MedMira Holding AG 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. In 2016, MedMira Holding AG and
management agreed to terminate the agreement as no further development will continue. With the termination any
applicable provision was written down to zero. The change in the provision of $260,000 was recorded in financing
expense in profit or loss for the year ended July 31, 2016.
56
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2017 and July 31, 2016
In Canadian dollars
During March 2015, the Company entered into a royalty agreement with MedMira Holding AG whereby MedMira
Holding AG would receive a 10% royalty on all future US sales of the Reveal G4 product for a five year period
commencing on the day the first full payment and delivery of at least CAD $100,000 worth of product. In exchange,
MedMira Holding AG provided the Company with $270,000 to fund costs required to complete the product
development and obtain US Food and Drug Administration (FDA) pre‐market approval. At the inception of the
arrangement, the Company’s best estimate of the value of the provision was zero and as MedMira Holding AG is the
controller shareholder of the Company, the $270,000 was recorded in equity (Note 8). As at July 31, 2017, the
Company’s best estimate of the fair value of the provision was $110,000 (2016 ‐ $31,991), which is recorded in royalty
provision and the change in fair value of the provision recorded in financing expense in profit or loss.
During July 2016, the Company entered into a royalty agreement with MedMira Holding AG whereby MedMira Holding
AG would receive a 10% royalty on all future sales of the hepatitis C (HCV) portion of the approved Multiplo HIV/HCV
test commencing on the day of the first full delivery and payment of CAD $10,000 worth of product. In exchange,
MedMira Holding AG provided the Company with $200,000 to fund costs required to complete product development
and obtain FDA pre‐market approval. At the inception of the arrangement, the Company’s best estimate of the fair
value of the provision was zero and as MedMira Holding AG is the controlling shareholder of the Company, the
$200,000 was recorded in equity reserve. As at July 31, 2017, the Company’s best estimate of the fair value of the
provision was zero. Management’s fair value estimate was based on changes made during the FY2017 product
commercialization prioritization process which placed the Multiplo HIV/HCV project on hold until further notice.
During October 2016, the Company entered into a royalty agreement with Ritec AG whereby Ritec AG would receive a
12.5% royalty on all future sales of the approved Reveal G4 CLIA‐waived product commencing on the day of the first
full delivery and payment of CAD $10,000 worth of product. In exchange, Ritec AG provided the Company with
$1,310,100 to fund costs required to complete the product development, clinical trials and obtain FDA approval. At
the inception of the arrangement, the Company’s best estimate of the fair value of the provision was zero and as Ritec
AG is owned by a shareholder of MedMira Holding AG who is the controlling shareholder of the Company, the
$1,310,100 was recorded in equity reserve. At July 31, 2017, the Company’s best estimate of the fair value of the
provision was zero.
The change in royalty provision is outlined in the table below:
Balance at July 31, 2015
Fair value measurement of Reveal G4 royalty
Write off of royalty provision
Balance at July 31, 2016
Fair value measurement of Reveal G4 royalty
Balance at July 31, 2017
Provision for royalty
$
260,000
31,991
(260,000)
31,991
78,009
110,000
57
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2017 and July 31, 2016
In Canadian dollars
13. Related parties
The following transactions occurred with related parties during the year ended July 31, 2017:
Short term loans totalling $78,946 were received from officers (2016 ‐ $0)
Two short terms loan totalling $645,300 were received from Ritec AG (2016 ‐ $276,100)
Director fees totalling $10,000 were incurred (2016 ‐ $14,166).
A short term loan totalling $31,978 was repaid to an officer (2016 ‐ $0)
A long term loan totalling $3,494 was repaid to an employee (2016 – $74,796)
Short term loans totalling $42,500 were received from employees (2016 ‐ $0)
A long term loan totalling $387,180 was received from Ritec AG (2016 ‐ $0)
Royalty payments of $21,475 were incurred and owed to MedMira Holding AG (2016 ‐ $33,991)
A cash payment of $1,310,000 was received from Ritec AG in regards to a royalty agreement (2016 ‐ $0)
A equity contribution of $12,500 was made by a shareholder to pay an operating expense of the company
(2016 ‐ $0)
The following balances with related parties were outstanding at July 31, 2017:
Accounts payable totalling $10,000 was due to directors (2016 ‐ $10,000).
Accounts payable totalling $129,037 was due to officers (2016 ‐ $26,901).
A loan term loan totalling $237,496 was due to the Chief Financial Officer (2016 ‐ $241,565).
A royalty provision was owed to MedMira Holding AG of $50,775 (2016 ‐ $31,991).
A long term loan totalling $13,500 was owed to an employee (2016 ‐ $13,500)
Short term loans totalling $42,500 were owed to employees (2016 ‐ $0)
Two short term loans totalling $645,300 are owed to Ritec AG (2016 ‐ $0)
Short term loans totalling $46,968 were owed to officers (2016 ‐ $0)
The remuneration of directors and other members of key management personnel during the year is shown below.
Short‐term benefits including salary paid
Short‐term benefits including salary accrued
Share‐based payments
Total remuneration
31‐Jul‐17
$
387,461
131,172
9,582
528,215
31‐Jul‐16
$
358,280
‐
25,609
383,889
58
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2017 and July 31, 2016
In Canadian dollars
14. Research and development
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
Net research and development expense
31‐Jul‐17
$
(292,299)
‐
(292,299)
31‐Jul‐17
$
(3,471,179)
952,633
(2,518,546)
In 2016, the Company received revenue related to a contract with the US Military. 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,
2017, $0 of the research costs incurred were recognized in service cost of sales (July 31, 2016 ‐ $952,633) as the contract
was concluded in fiscal 2016.
59
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2017 and July 31, 2016
In Canadian dollars
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‐17
$
(2,661,067)
31.0%
31‐Jul‐16
$
(5,158,401)
31.0%
Income tax recovery at the combined statutory income tax rate
(824,931)
(1,599,104)
Non‐taxable portion of other losses
Non‐deduction expense accretion
Non‐deductible stock‐based compensation
Other permanent differences
Change in unecorded temporary differences
Financing fees recorded in equity
Book to tax differences
Other
Income tax recovery
‐
‐
4,986
31,667
522,886
‐
230,652
34,740
‐
429,807
175,235
7,938
‐
970,848
(7,750)
23,026
‐
b. Unrecognized 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
Share issuance costs
Foreign exchange
Cumulative eligible capital
Property and equipment
Total
31‐Jul‐17
$
31‐Jul‐16
$
32,807,122
6,895,371
20,000
19,239
261,750
2,249,572
42,253,054
31,494,248
6,612,637
27,500
281,465
2,150,473
40,566,323
60
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2017 and July 31, 2016
In Canadian dollars
The Company has available $32,807,122 in non‐capital losses that can be used to reduce taxable income and that expire
between the years ended July 31, 2026 and July 31, 2037. The Company also has available $2,005,145 in investment
tax credits that can be used to reduce federal taxes payable and that expire between the years ended July 31, 2019 and
July 31, 2037.
At July 31, 2017, the Company has $nil unrecognized deferred tax liability (July 31, 2016 ‐ $nil) for taxes that would be
payable on the unremitted earnings of certain of the Company’s subsidiaries.
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
Fair value change in royalty provision
Finance costs
31‐Jul‐17
$
‐
(201,054)
(1,949,666)
(98,788)
(71,980)
(368,699)
(201,877)
(84,295)
61,790
34,055
(78,009)
(449,888)
(3,408,411)
31‐Jul‐16
$
20
(226,459)
(2,286,176)
(99,791)
(85,991)
(415,534)
(2,667,295)
(378,847)
(622,356)
15,092
(31,991)
(615,907)
(7,415,235)
17. Operating segments
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 Executive Officer.
18. Lease commitment
The Company has a ten year lease commitment for its 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.
61
MedMira Inc.
Notes to the Consolidated Financial Statements
For the years ended July 31, 2017 and July 31, 2016
In Canadian dollars
For the year ending July 31, 2018
For the year ending July 31, 2019
For the year ending July 31, 2020
For the year ending July 31, 2021
For the year ending July 31, 2022
Thereafter
Lease commitment
$
256,335
256,335
267,429
268,437
268,437
290,807
19. Financing expense
A breakdown of the income (expenses) allocated to financing expense on the consolidated statements of operations
and comprehensive loss is provided in the table below.
Investment Income
Fair value change in provision for royalty
Finance costs
Total financing expense
20. Subsequent events
31‐Jul‐17
$
‐
(78,009)
(449,888)
(527,897)
31‐Jul‐16
$
20
260,000
(939,559)
(679,539)
During the first quarter of FY2018, the Company received a loan of $384,510 from Ritec AG, a related party, in order to
support the Company’s strategic goals. The loan was repayable on October 30, 2017 and carries an annual interest
rate of 5% that is due upon repayment of the loan. The loan is currently in default.
62
Investor Information
Transfer Agent
Computershare Trust Company of Canada
1500 Robert‐Bourassa Blvd., 7th Floor
Montreal, Quebec H3A 3S8
T: 902 864 4050
www.computershare.com
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.
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
Annual General Meeting
MedMira Global Headquarters
Suite 1, 155 Chain Lake Drive
Halifax, Nova Scotia, B3S 1B3
10 am, Wednesday, January 31, 2018
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
Senior Management
Mr. Hermes Chan, Chief Executive Officer
Mr. Markus Meile, Chief Financial Officer
Ms. Robyn Cook, Chief Corporate Officer
Board of Directors
Mr. Marvyn Robar, Chairman
Mr. Hermes Chan
Dr. Shou‐Chin Tang
63
MedMira Inc.
155 Chain Lake Drive, Suite 1
Halifax, NS CANADA B3S 1B3
www.medmira.com