UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C.
20549
FORM 20-F
(Mark
One)
[
]
REGISTRATION
STATEMENT
PURSUANT
TO
SECTION
12(b)
OR
(g)
OF
THE
SECURITIES
EXCHANGE
ACT
OF
1934
[X]
ANNUAL
REPORT
PURSUANT
TO
SECTION
13
OR
15(d)
OF
THE
SECURITIES
EXCHANGE
ACT
OF
1934
For
the
fiscal
year
ended
December 31, 2016
OR
[
]
TRANSITION
REPORT
PURSUANT
TO
SECTION
13
OR
15(d)
OF
THE
SECURITIES
EXCHANGE
ACT
OF
1934
For
the
transition
period
from
______
to
______
OR
[
]
SHELL
COMPANY
REPORT
PURSUANT
TO
SECTION
13
OR
15(d)
OF
THE
SECURITIES
EXCHANGE
ACT
OF
1934
Date
of
event
requiring
this
shell
company
report
OR
Commission
file
number
TRILLIUM THERAPEUTICS INC.
(Exact
Name
of
Registrant
as
Specified
in
Its
Charter)
Not Applicable
(Translation
of
Registrant’s
Name
into
English)
Province of Ontario, Canada
(Jurisdiction
of
Incorporation
or
Organization)
2488 Dunwin Drive, Mississauga, Ontario L5L 1J9, Canada
(Address
of
Principal
Executive
Offices)
James Parsons
Chief Financial Officer
2488 Dunwin Drive
Mississauga, Ontario, Canada L5L 1J9
Telephone: (416) 595-0627
Email: james@trilliumtherapeutics.com
(Name,
Telephone,
E-mail
and/or
Facsimile
number
and
Address
of
Company
Contact
Person)
Securities
registered
or
to
be
registered
pursuant
to
Section
12(b)
of
the
Act:
Title
of
each
class
Common Shares, no par value
Name
of
each
exchange
on
which
registered
NASDAQ Stock Market LLC
Securities
registered
or
to
be
registered
pursuant
to
section
12(g)
of
the
Act:
None.
Securities
for
which
there
is
a
reporting
obligation
pursuant
to
Section
15(d)
of
the
Act:
None .
Indicate
the
number
of
outstanding
shares
of
each
of
the
issuer’s
classes
of
capital
or
common
shares
as
of
the
close
of
the
period
covered
by
the
annual
report.
7,845,184 Common Shares.
Indicate
by
check
mark
if
the
registrant
is
a
well-known
seasoned
issuer,
as
defined
in
Rule
405
of
the
Securities
Act.
Yes
[
]
No
[X]
If
this
report
is
an
annual
or
transition
report,
indicate
by
check
mark
if
the
registrant
is
not
required
to
file
reports
pursuant
to
Section
13
or
15(d)
of
the
Securities
Exchange
Act
of
1934.
Yes
[X]
No
[
]
Indicate
by
check
mark
whether
the
registrant
(1)
has
filed
all
reports
required
to
be
filed
by
Section
13
or
15(d)
of
the
Securities
Exchange
Act
of
1934
during
the
preceding
12
months
(or
for
such
shorter
period
that
the
registrant
was
required
to
file
such
reports),
and
(2)
has
been
subject
to
such
filing
requirements
for
the
past
90
days.
Yes
[X]
No
[
]
Indicate
by
check
mark
whether
the
registrant
has
submitted
electronically
and
posted
on
its
corporate
Web
site,
if
any,
every
Interactive
Data
File
required
to
be
submitted
and
posted
pursuant
to
Rule
405
of
Regulation
S-T
(§232.405
of
this
chapter)
during
the
preceding
12
months
(or
for
such
shorter
period
that
the
registrant
was
required
to
submit
and
post
such
files).
Yes
[
]
No
[
]
Indicate
by
check
mark
whether
the
registrant
is
a
large
accelerated
filer,
an
accelerated
filer,
or
a
non-accelerated
filer.
See
definition
of
“accelerated
filer
and
large
accelerated
filer”
in
Rule
12b-2
of
the
Exchange
Act.
(Check
one):
Large
accelerated
filer
[
]
Accelerated
filer
[
]
Non-accelerated
filer
[X]
Indicate
by
check
mark
which
basis
of
accounting
the
registrant
has
used
to
prepare
the
financial
statements
included
in
this
filing:
U.S.
GAAP
[
]
International
Financial
Reporting
Standards
as
issued
by
the
International
Accounting
Standards
Board
[X]
Other
[
]
If
“Other”
has
been
checked
in
response
to
previous
question,
indicate
by
check
mark
which
financial
statement
item
the
registrant
has
elected
to
follow.
Item
17
[
]
Item
18
[
]
If
this
is
an
annual
report,
indicate
by
check
mark
whether
the
registrant
is
a
shell
company
(as
defined
in
Rule
12b-2
of
the
Exchange
Act).
Yes
[
]
No
[X]
TABLE OF CONTENTS
Introduction
Currency
Translation
Forward-Looking
Statements
Item
1.
Item
2.
Item
3.
Item
4.
Item
4A.
Item
5.
Item
6.
Item
7.
Item
8.
Item
9.
Item
10.
Item
11.
Item
12.
PART
II
Item
13.
Item
14.
Item
15.
Item
16A.
Item
16B.
Item
16C.
Item
16D.
Item
16E.
Item
16F.
Item
16G.
Item
16H.
PART
III
Item
17.
Item
18.
Item
19.
Financial
Statements
Financial
Statements
Exhibits
Identity
of
Directors,
Senior
Management
and
Advisers
Offer
Statistics
and
Expected
Timetable
Key
Information
Information
on
the
Company
Unresolved
Staff
Comments
Operating
and
Financial
Review
and
Prospects
Directors,
Senior
Management
&
Employees
Major
Shareholders
and
Related
Party
Transactions
Financial
Information
The
Offer
and
Listing
Additional
Information
Quantitative
&
Qualitative
Disclosures
About
Market
Risk
Description
of
Securities
Other
Than
Equity
Securities
Defaults,
Dividend
Arrearages
and
Delinquencies
Material
Modifications
to
the
Rights
of
Security
Holders
and
Use
of
Proceeds.
Control
and
Procedures
Audit
Committee
Financial
Expert
Code
of
Ethics
Principal
Accountant
Fees
and
Services
Exemptions
from
the
Listing
Standards
for
Audit
Committees
Purchases
of
Equity
Securities
by
the
Issuer
and
Affiliated
Purchasers
Change
in
Registrant’s
Certifying
Accountant
Corporate
Governance
Mine
Safety
Disclosure
1
1
2
3
4
4
20
32
32
41
61
62
63
65
86
87
87
87
87
88
88
89
89
90
90
90
90
96
91
91
91
92
INTRODUCTION
All
references
in
this
Form
20-F
to
“the
Company”,
“Trillium”,
“we”,
“us”,
or
“our”
refer
to
Trillium
Therapeutics
Inc.
and
the
subsidiaries
through
which
it
conducts
its
business,
unless
otherwise
indicated
or
the
context
requires
otherwise.
Emerging Growth Company Status
We
are
an
“emerging
growth
company”
under
the
U.S.
Jumpstart
Our
Business
Startups
Act,
enacted
on
April
5,
2012,
or
the
JOBS
Act,
and
applicable
U.S.
Securities
and
Exchange
Commission,
or
SEC
rules
and
will
be
eligible
for
reduced
public
company
disclosure
requirements.
See
“Item
4.
Information
on
the
Company.”
CURRENCY TRANSLATION
Unless
otherwise
indicated,
all
references
to
“dollars”
or
the
use
of
the
symbol
“$”
are
to
Canadian
dollars,
and
all
references
to
“U.S.
dollars”
or
“US$”
are
to
United
States
dollars.
See
“Exchange
Rate
Data”
under
Item
1
for
relevant
information
about
the
rates
of
exchange
between
Canadian
dollars
and
United
States
dollars.
EMERGING GROWTH COMPANY STATUS
We
are
an
“emerging
growth
company”
under
the
U.S.
Jumpstart
Our
Business
Startups
Act
of
2012,
or
the
JOBS
Act,
and
will
continue
to
qualify
as
an
“emerging
growth
company”
until
the
earliest
to
occur
of:
(a)
the
last
day
of
the
fiscal
year
during
which
we
have
total
annual
gross
revenues
of
$1,000,000,000
(as
such
amount
is
indexed
for
inflation
every
5
years
by
the
SEC)
or
more;
(b)
the
last
day
of
our
fiscal
year
following
the
fifth
anniversary
of
the
date
of
the
first
sale
of
our
common
shares
pursuant
to
an
effective
registration
statement
under
the
Securities
Act;
(c)
the
date
on
which
we
have,
during
the
previous
3-year
period,
issued
more
than
$1,000,000,000
in
non-convertible
debt;
or
(d)
the
date
on
which
we
are
deemed
to
be
a
“large
accelerated
filer”,
as
defined
in
Rule
12b–2
of
the
Securities
Exchange
Act
of
1934,
or
the
Exchange
Act.
Generally,
a
company
that
registers
any
class
of
its
securities
under
Section
12
of
the
Exchange
Act
is
required
to
include
in
the
second
and
all
subsequent
annual
reports
filed
by
it
under
the
Exchange
Act,
a
management
report
on
internal
control
over
financial
reporting
and,
subject
to
an
exemption
available
to
companies
that
meet
the
definition
of
a
“smaller
reporting
company”
in
Rule
12b-2
under
the
Exchange
Act,
an
auditor
attestation
report
on
management’s
assessment
of
the
company’s
internal
control
over
financial
reporting.
However,
for
so
long
as
we
continue
to
qualify
as
an
emerging
growth
company,
we
will
be
exempt
from
the
requirement
to
include
an
auditor
attestation
report
in
our
annual
reports
filed
under
the
Exchange
Act,
even
if
we
do
not
qualify
as
a
“smaller
reporting
company”.
In
addition,
Section
103(a)(3)
of
the
Sarbanes-Oxley
Act
of
2002,
or
the
Sarbanes-Oxley
Act,
has
been
amended
by
the
JOBS
Act
to
provide
that,
among
other
things,
auditors
of
an
emerging
growth
company
are
exempt
from
any
rules
of
the
Public
Company
Accounting
Oversight
Board
requiring
mandatory
audit
firm
rotation
or
a
supplement
to
the
auditor’s
report
in
which
the
auditor
would
be
required
to
provide
additional
information
about
the
audit
and
the
financial
statements
of
the
company.
Any
U.S.
domestic
issuer
that
is
an
emerging
growth
company
is
able
to
avail
itself
of
the
reduced
disclosure
obligations
regarding
executive
compensation
in
periodic
reports
and
proxy
statements,
and
to
not
present
to
its
shareholders
a
non-binding
advisory
vote
on
executive
compensation,
obtain
approval
of
any
golden
parachute
payments
not
previously
approved,
or
present
the
relationship
between
executive
compensation
actually
paid
and
our
financial
performance.
So
long
as
we
are
a
foreign
private
issuer,
we
are
not
subject
to
such
requirements,
and
will
not
become
subject
to
such
requirements
even
if
we
were
to
cease
to
be
an
emerging
growth
company.
As
a
reporting
issuer
under
the
securities
legislation
of
the
Canadian
provinces
of
Ontario,
British
Columbia,
Manitoba,
Nova
Scotia
and
Alberta,
we
are
required
to
comply
with
all
new
or
revised
accounting
standards
that
apply
to
Canadian
public
companies.
Pursuant
to
Section
107(b)
of
the
JOBS
Act,
an
emerging
growth
company
may
elect
to
utilize
an
extended
transition
period
for
complying
with
new
or
revised
accounting
standards
for
public
companies
until
such
standards
apply
to
private
companies.
We
have
elected
not
to
utilize
this
extended
transition
period.
1
FORWARD-LOOKING STATEMENTS
This
annual
report
contains
forward-looking
statements
within
the
meaning
of
applicable
securities
laws.
All
statements
contained
herein
that
are
not
clearly
historical
in
nature
are
forward-looking,
and
the
words
“anticipate”,
“believe”,
“expect”,
“estimate”,
“may”,
“will”,
“could”,
“leading”,
“intend”,
“contemplate”,
“shall”
and
similar
expressions
are
generally
intended
to
identify
forward-looking
statements.
Forward-looking
statements
in
this
annual
report
include,
but
are
not
limited
to,
statements
with
respect
to:
our
expected
future
loss
and
accumulated
deficit
levels;
our
projected
financial
position
and
estimated
cash
burn
rate;
our
expectations
about
the
timing
of
achieving
milestones
and
the
cost
of
our
development
programs;
our
observations
and
expectations
regarding
the
relative
low
binding
of
SIRPαFc
to
red
blood
cells
compared
to
anti-CD47
monoclonal
antibodies
and
proprietary
CD47-blocking
agents
and
the
potential
benefits
to
patients;
our
requirements
for,
and
the
ability
to
obtain,
future
funding
on
favorable
terms
or
at
all;
our
projections
for
the
SIRPαFc
development
plans
and
progress
of
each
of
our
products
and
technologies,
particularly
with
respect
to
the
timely
and
successful
completion
of
studies
and
trials
and
availability
of
results
from
such
studies
and
trials;
our
ability
to
intensify
the
dose
of
TTI-621
with
the
goal
of
achieving
increased
blockade
of
CD47;
our
expectations
about
the
differentiated
nature
and
potential
for
best-in-class
product
development
programs
and
discovery
research
capabilities
of
Fluorinov
Pharma
Inc.,
or
Fluorinov;
our
ability
to
generate
future
product
development
programs
with
improved
pharmacological
properties
and
acceptable
safety
profiles
using
Fluorinov
technology;
our
expectations
about
whether
various
clinical
and
regulatory
milestones
with
an
existing
Fluorinov
compound
will
be
achieved;
our
expectations
of
the
final
quantum
and
form
of
any
future
contingent
milestone
payments
related
to
the
Fluorinov
acquisition;
our
expectations
of
the
ability
to
secure
the
requisite
approvals
(including
approvals
from
the
Toronto
Stock
Exchange,
or
TSX,
and
the
NASDAQ
Stock
Market,
or
NASDAQ)
with
respect
to
the
issuance
of
any
common
shares
in
satisfaction
of
future
milestone
payments;
our
expectations
about
our
products’
safety
and
efficacy;
our
expectations
regarding
our
ability
to
arrange
for
and
scale
up
the
manufacturing
of
our
products
and
technologies;
our
expectations
regarding
the
progress,
and
the
successful
and
timely
completion,
of
the
various
stages
of
the
regulatory
approval
process;
our
ability
to
secure
strategic
partnerships
with
larger
pharmaceutical
and
biotechnology
companies;
our
strategy
to
acquire
and
develop
new
products
and
technologies
and
to
enhance
the
safety
and
efficacy
of
existing
products
and
technologies;
our
plans
to
market,
sell
and
distribute
our
products
and
technologies;
our
expectations
regarding
the
acceptance
of
our
products
and
technologies
by
the
market;
our
ability
to
retain
and
access
appropriate
staff,
management,
and
expert
advisers;
our
expectations
with
respect
to
existing
and
future
corporate
alliances
and
licensing
transactions
with
third
parties,
and
the
receipt
and
timing
of
any
payments
to
be
made
by
us
or
to
us
in
respect
of
such
arrangements;
and
our
strategy
with
respect
to
the
protection
of
our
intellectual
property.
All
forward-looking
statements
reflect
our
beliefs
and
assumptions
based
on
information
available
at
the
time
the
assumption
was
made.
These
forward-looking
statements
are
not
based
on
historical
facts
but
rather
on
management’s
expectations
regarding
future
activities,
results
of
operations,
performance,
future
capital
and
other
expenditures
(including
the
amount,
nature
and
sources
of
funding
thereof),
competitive
advantages,
business
prospects
and
opportunities.
By
its
nature,
forward-looking
information
involves
numerous
assumptions,
inherent
risks
and
uncertainties,
both
general
and
specific,
known
and
unknown,
that
contribute
to
the
possibility
that
the
predictions,
forecasts,
projections
or
other
forward-looking
statements
will
not
occur.
In
evaluating
forward-looking
statements,
readers
should
specifically
consider
various
factors,
including
the
risks
outlined
under
the
heading
“Item
3.D.
Risk
Factors”
in
this
annual
report.
Some
of
these
risks
and
assumptions
include,
among
others:
2
substantial
fluctuation
of
losses
from
quarter
to
quarter
and
year
to
year
due
to
numerous
external
risk
factors,
and
anticipation
that
we
will
continue
to
incur
significant
losses
in
the
future;
uncertainty
as
to
our
ability
to
raise
additional
funding
to
support
operations;
our
ability
to
generate
product
revenue
to
maintain
our
operations
without
additional
funding;
the
risks
associated
with
the
development
of
our
product
candidates
which
are
at
early
stages
of
development;
reliance
on
third
parties
to
plan,
conduct
and
monitor
our
preclinical
studies
and
clinical
trials;
our
product
candidates
may
fail
to
demonstrate
safety
and
efficacy
to
the
satisfaction
of
regulatory
authorities
or
may
not
otherwise
produce
positive
results;
risks
related
to
filing
Investigational
New
Drug
applications,
or
INDs,
to
commence
clinical
trials
and
to
continue
clinical
trials
if
approved;
the
risks
of
delays
and
inability
to
complete
clinical
trials
due
to
difficulties
enrolling
patients;
competition
from
other
biotechnology
and
pharmaceutical
companies;
our
reliance
on
the
capabilities
and
experience
of
our
key
executives
and
scientists
and
the
resulting
loss
of
any
of
these
individuals;
our
ability
to
fully
realize
the
benefits
of
acquisitions;
our
ability
to
adequately
protect
our
intellectual
property
and
trade
secrets;
our
ability
to
source
and
maintain
licenses
from
third-party
owners;
the
risk
of
patent-related
litigation;
and
our
expectations
regarding
our
status
as
a
passive
foreign
investment
company,
all
as
further
and
more
fully
described
under
the
heading
“Item
3.D.
Risk
Factors”.
Although
the
forward-looking
statements
contained
in
this
annual
report
are
based
upon
what
our
management
believes
to
be
reasonable
assumptions,
we
cannot
assure
readers
that
actual
results
will
be
consistent
with
these
forward
looking
statements.
Any
forward-looking
statements
represent
our
estimates
only
as
of
the
date
of
this
annual
report
and
should
not
be
relied
upon
as
representing
our
estimates
as
of
any
subsequent
date.
We
undertake
no
obligation
to
update
any
forward-looking
statement
or
statements
to
reflect
events
or
circumstances
after
the
date
on
which
such
statement
is
made
or
to
reflect
the
occurrence
of
unanticipated
events,
except
as
may
be
required
by
securities
legislation.
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
A. Directors and Senior Management.
PART I
Not
Applicable.
B. Advisers.
Not
Applicable.
C. Auditors.
Not
Applicable.
3
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not
Applicable
ITEM 3. KEY INFORMATION
A. Selected Financial Data
The
following
tables
summarize
selected
financial
data
as
at
and
for
the
fiscal
years
ended
December
31,
2016,
2015,
2014,
2013
and
2012
prepared
in
accordance
with
International
Financial
Reporting
Standards,
or
IFRS
as
issued
by
the
International
Accounting
Standards
Board,
or
IASB.
The
financial
information
in
the
tables
below
as
at
December
31,
2016,
2015
and
2014
and
for
the
years
then
ended
has
been
derived
from
our
audited
consolidated
financial
statements
and
related
notes
included
in
this
Form
20-F.
The
financial
information
in
the
tables
below
as
at
December
31,
2013
and
2012
and
for
the
years
then
ended
has
been
derived
from
our
audited
consolidated
financial
statements
and
related
notes
for
that
year.
The
selected
financial
data
below
should
be
read
in
conjunction
with
the
financial
statements
included
in
this
annual
report
beginning
on
page
F-1
and
with
the
information
appearing
in
“Item
5.
Operating
and
Financial
Review
and
Prospects”.
Our
historical
results
do
not
necessarily
indicate
results
expected
for
any
future
period.
Consolidated statement of loss and
comprehensive loss data
Net
sales
Year
ended
December
31, 2016
-
Year
ended
December
31, 2015
-
Year
ended
December
31, 2014
-
Year
ended
December
31, 2013
-
Year
ended
December
31, 2012
-
Net
loss
and
comprehensive
loss
$31,733,085
$14,733,699
$12,881,820
$4,289,308
$1,061,502
Loss
from
continuing
operations
per
share(1)
Net
loss
per
common
share(1)
Fully
diluted
net
loss
per
common
share(1)
$4.06
$4.06
$4.06
$2.22
$2.22
$2.22
$3.06
$3.06
$3.06
$3.16
$3.16
$3.16
Consolidated statement of
financial position data
Total
assets
Net
assets
As at
December
31, 2016
As at
December
31, 2015
As at
December
31, 2014
As at
December
31, 2013
$66,622,691
$90,039,468
$28,186,032
$35,087,386
$58,119,519
$85,803,868
$24,304,294
$33,908,447
$1.71
$1.71
$1.71
As at
December
31, 2012
$1,567,728
$1,382,470
Capital
stock
-
common
$103,819,203
$103,340,072
$49,505,792
$47,191,303
$31,388,959
Number
of
common
shares
outstanding(2)
7,845,184
7,796,137
4,427,244
4,058,413
622,065
Capital
stock
-
preferred
$32,085,627
$32,167,157
$10,076,151
$11,292,525
Number
of
preferred
shares
outstanding(3)
2,851,811
2,870,558
2,316,822
2,596,505
Dividends
declared
per
share
-
-
-
-
-
-
-
Notes:
(1)
(2)
(3)
The
per
share
figures
have
been
restated
to
reflect
a
share
consolidation
ratio
of
1
post-consolidated
common
share
for
each
30
pre-consolidation
common
shares
on
November
14,
2014.
The
number
of
common
shares
has
been
restated
to
reflect
a
share
consolidation
ratio
of
1
post-consolidated
common
share
for
each
30
pre-
consolidation
common
shares
on
November
14,
2014.
Number
represents
common
share
equivalent
post
conversion
of
preferred
shares.
Each
Series
I
preferred
share
is
convertible
into
one-thirtieth
(1/30th)
of
a
common
share
and
each
Series
II
preferred
share
is
convertible
into
one
common
share.
4
Exchange Rate Data
The
following
table
sets
forth,
for
each
period
indicated,
the
high,
low
and
average
exchange
rates
for
Canadian
dollars
expressed
in
United
States
dollars,
provided
by
the
Bank
of
Canada.
The
exchange
rates
set
forth
below
demonstrate
trends
in
exchange
rates,
but
the
actual
exchange
rates
used
throughout
this
annual
report
may
vary.
The
average
exchange
rate
is
calculated
by
using
the
average
of
the
closing
prices
on
the
last
day
of
each
month
during
the
relevant
period.
On
March
8,
2017,
the
noon
exchange
rate
for
1
Canadian
dollar
expressed
in
United
States
dollars
as
reported
by
the
Bank
of
Canada,
was
Cdn$1.00
=
US$0.7421.
$1 Canadian dollar equivalent in U.S. dollars
Year
ended
December
31,
2012
Year
ended
December
31,
2013
Year
ended
December
31,
2014
Year
ended
December
31,
2015
Year
ended
December
31,
2016
September
2016
October
2016
November
2016
December
2016
January
2017
February
2017
Notes:
Average
1.0010
0.9662
0.9021
0.7756
0.7564
High (1)
1.0371
1.0188
0.9444
0.8562
0.8002
0.7798
0.7689
0.7520
0.7645
0.7711
0.7704
Low (1)
0.9576
0.9314
0.8568
0.7141
0.6821
0.7530
0.7444
0.
7359
0.7354
0.7431
0.7520
(1)
The
high
and
low
exchange
rates
are
intra-day
values
rather
than
noon
or
closing
rates.
B. Capitalization and Indebtedness
Not
Applicable.
C. Reasons for the Offer and Use of Proceeds
Not
Applicable.
5
D. Risk Factors
The following information sets forth material risks and uncertainties that may affect our business, including our future financing and operating results and could
cause our actual results to differ materially from those contained in forward-looking statements we have made in this annual report. The risks and uncertainties
below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we believe to be immaterial may also adversely affect our
business. Further, if we fail to meet the expectations of the public market in any given period, the market price of our common shares could decline. We operate in
a highly competitive environment that involves significant risks and uncertainties, some of which are outside of our control.
Risks Related to Our Financial Position and Need for Additional Capital
We expect to incur future losses and we may never become profitable.
We
have
incurred
losses
of
$31.7
million,
$14.7
million
and
$12.9
million
for
the
years
ended
December
31,
2016,
2015
and
2014,
respectively,
and
expect
to
incur
an
operating
loss
for
the
year
ending
December
31,
2017.
We
have
an
accumulated
deficit
since
inception
through
December
31,
2016
of
$97.0
million.
We
believe
that
operating
losses
will
continue
as
we
are
planning
to
incur
significant
costs
associated
with
the
clinical
development
of
SIRPαFc.
Our
net
losses
have
had
and
will
continue
to
have
an
adverse
effect
on,
among
other
things,
our
shareholders’
equity,
total
assets
and
working
capital.
We
expect
that
losses
will
fluctuate
from
quarter
to
quarter
and
year
to
year,
and
that
such
fluctuations
may
be
substantial.
We
cannot
predict
when
we
will
become
profitable,
if
at
all.
We will require additional capital to finance our operations, which may not be available to us on acceptable terms, or at all. As a result, we may not complete
the development and commercialization of our product candidates or develop new product candidates.
As
a
research
and
development
company,
our
operations
have
consumed
substantial
amounts
of
cash
since
inception.
We
expect
to
spend
substantial
funds
to
continue
the
research,
development
and
testing
of
our
product
candidates
and
to
prepare
to
commercialize
products
subject
to
approval
of
the
U.S.
Food
and
Drug
Administration,
or
FDA,
in
the
U.S.
and
similar
approvals
in
other
jurisdictions.
We
will
also
require
significant
additional
funds
if
we
expand
the
scope
of
our
current
clinical
plans
or
if
we
were
to
acquire
any
new
assets
and
advance
their
development.
Therefore,
for
the
foreseeable
future,
we
will
have
to
fund
all
of
our
operations
and
development
expenditures
from
cash
on
hand,
equity
or
debt
financings,
through
collaborations
with
other
biotechnology
or
pharmaceutical
companies
or
through
financings
from
other
sources.
We
expect
that
our
existing
cash
and
cash
equivalents
at
December
31,
2016
of
$50,472,971
will
enable
us
to
fund
our
current
operating
plan
requirements
for
at
least
the
next
twelve
months.
Additional
financing
will
be
required
to
meet
our
long
term
liquidity
needs.
If
we
do
not
succeed
in
raising
additional
funds
on
acceptable
terms,
we
might
not
be
able
to
complete
planned
preclinical
studies
and
clinical
trials
or
pursue
and
obtain
approval
of
any
product
candidates
from
the
FDA
and
other
regulatory
authorities.
It
is
possible
that
future
financing
will
not
be
available
or,
if
available,
may
not
be
on
favorable
terms.
The
availability
of
financing
will
be
affected
by
the
achievement
of
our
corporate
goals,
the
results
of
scientific
and
clinical
research,
the
ability
to
obtain
regulatory
approvals,
the
state
of
the
capital
markets
generally
and
with
particular
reference
to
drug
development
companies,
the
status
of
strategic
alliance
agreements
and
other
relevant
commercial
considerations.
If
adequate
funding
is
not
available,
we
may
be
required
to
delay,
reduce
or
eliminate
one
or
more
of
our
product
development
programs,
or
obtain
funds
through
corporate
partners
or
others
who
may
require
us
to
relinquish
significant
rights
to
product
candidates
or
obtain
funds
on
less
favorable
terms
than
we
would
otherwise
accept.
To
the
extent
that
external
sources
of
capital
become
limited
or
unavailable
or
available
on
onerous
terms,
our
intangible
assets
and
our
ability
to
continue
our
clinical
development
plans
may
become
impaired,
and
our
assets,
liabilities,
business,
financial
condition
and
results
of
operations
may
be
materially
or
adversely
affected.
We currently have no product revenue and will not be able to maintain our operations and research and development without additional funding.
To
date,
we
have
generated
no
product
revenue
and
cannot
predict
when
and
if
we
will
generate
product
revenue.
Our
ability
to
generate
product
revenue
and
ultimately
become
profitable
depends
upon
our
ability,
alone
or
with
partners,
to
successfully
develop
our
product
candidates,
obtain
regulatory
approval,
and
commercialize
products,
including
any
of
our
current
product
candidates,
or
other
product
candidates
that
we
may
develop,
in-license
or
acquire
in
the
future.
We
do
not
anticipate
generating
revenue
from
the
sale
of
products
for
the
foreseeable
future.
We
expect
our
research
and
development
expenses
to
increase
in
connection
with
our
ongoing
activities,
particularly
as
we
advance
our
product
candidates
through
clinical
trials.
6
We are exposed to the financial risk related to the fluctuation of foreign exchange rates and the degrees of volatility of those rates.
We
may
be
adversely
affected
by
foreign
currency
fluctuations.
To
date,
we
have
been
primarily
funded
through
issuances
of
equity,
proceeds
from
the
exercise
of
warrants
and
stock
options
and
from
interest
income
on
funds
available
for
investment,
which
are
all
denominated
both
in
Canadian
and
U.S.
dollars.
Also,
a
significant
portion
of
our
expenditures
are
in
U.S.
dollars,
and
we
are
therefore
subject
to
foreign
currency
fluctuations
which
may,
from
time
to
time,
impact
our
financial
position
and
results
of
operations.
Risks Related to Our Business and Our Industry
Our prospects depend on the success of our product candidates which are at early stages of development, and we may not generate revenue for several years, if
at all, from these products.
Given
the
early
stage
of
our
product
development,
we
can
make
no
assurance
that
our
research
and
development
programs
will
result
in
regulatory
approval
or
commercially
viable
products.
To
achieve
profitable
operations,
we,
alone
or
with
others,
must
successfully
develop,
gain
regulatory
approval,
and
market
our
future
products.
We
currently
have
no
products
that
have
been
approved
by
the
FDA,
Health
Canada,
or
HC,
or
any
similar
regulatory
authority.
To
obtain
regulatory
approvals
for
our
product
candidates
being
developed
and
to
achieve
commercial
success,
clinical
trials
must
demonstrate
that
the
product
candidates
are
safe
for
human
use
and
that
they
demonstrate
efficacy.
While
we
have
commenced
Phase
I
trials
for
SIRPαFc,
we
have
not
yet
completed
a
Phase
I
clinical
trial
or
subsequent
required
clinical
trials
for
any
of
our
product
candidates.
Many
product
candidates
never
reach
the
stage
of
clinical
testing
and
even
those
that
do
have
only
a
small
chance
of
successfully
completing
clinical
development
and
gaining
regulatory
approval.
Product
candidates
may
fail
for
a
number
of
reasons,
including,
but
not
limited
to,
being
unsafe
for
human
use
or
due
to
the
failure
to
provide
therapeutic
benefits
equal
to
or
better
than
the
standard
of
treatment
at
the
time
of
testing.
Unsatisfactory
results
obtained
from
a
particular
study
relating
to
a
research
and
development
program
may
cause
us
or
our
collaborators
to
abandon
commitments
to
that
program.
Positive
results
of
early
preclinical
research
may
not
be
indicative
of
the
results
that
will
be
obtained
in
later
stages
of
preclinical
or
clinical
research.
Similarly,
positive
results
from
early-stage
clinical
trials
may
not
be
indicative
of
favorable
outcomes
in
later-stage
clinical
trials.
We
can
make
no
assurance
that
any
future
studies,
if
undertaken,
will
yield
favorable
results.
We
acquired
several
preclinical
and
discovery
research
programs
in
our
acquisition
of
Fluorinov,
including
certain
assets
relating
to
the
treatment
of
central
nervous
system
disorders.
While
we
conducted
extensive
due
diligence
before
making
this
acquisition,
our
assessment
of
the
Fluorinov
technologies
may
not
be
accurate.
Therefore,
our
expectations
about
whether
various
clinical
and
regulatory
milestones
with
an
existing
Fluorinov
compound
or
development
of
a
future
program
on
the
Fluorinov
development
platform
will
be
achieved
may
not
be
borne
out
fully
or
at
all.
We
have
made
a
commitment
to
use
commercially
reasonable
efforts
to
monetize
the
Fluorinov
central
nervous
system
assets
and,
if
successful,
to
share
the
net
proceeds
with
the
Fluorinov
vendors.
As
this
is
not
a
core
competency
of
the
Company,
our
efforts
to
monetize
these
assets
or
any
other
Fluorinov
assets
may
not
be
successful.
We
can
make
no
assurances
that
toxicology,
or
other
preclinical,
studies
will
yield
results
that
will
allow
us
to
proceed
with
clinical
trials
in
humans.
The
early
stage
of
our
product
development
makes
it
particularly
uncertain
whether
any
of
our
product
development
efforts
will
prove
to
be
successful
and
meet
applicable
regulatory
requirements,
and
whether
any
of
our
product
candidates
will
receive
the
requisite
regulatory
approvals,
be
capable
of
being
manufactured
at
a
reasonable
cost
or
be
successfully
marketed.
If
we
are
successful
in
developing
our
current
and
future
product
candidates
into
approved
products,
we
will
still
experience
many
potential
obstacles
such
as
the
need
to
develop
or
obtain
manufacturing,
marketing
and
distribution
capabilities.
If
we
are
unable
to
successfully
commercialize
any
of
our
products,
our
financial
condition
and
results
of
operations
may
be
materially
and
adversely
affected.
7
We rely and will continue to rely on third parties to plan, conduct and monitor our preclinical studies and clinical trials, and their failure to perform as
required could cause substantial harm to our business.
We
rely
and
will
continue
to
rely
on
third
parties
to
conduct
a
significant
portion
of
our
preclinical
and
clinical
development
activities.
Preclinical
activities
include
in
vivo
studies
providing
access
to
specific
disease
models,
pharmacology
and
toxicology
studies,
and
assay
development.
Clinical
development
activities
include
trial
design,
regulatory
submissions,
clinical
patient
recruitment,
clinical
trial
monitoring,
clinical
data
management
and
analysis,
safety
monitoring
and
project
management.
If
there
is
any
dispute
or
disruption
in
our
relationship
with
third
parties,
or
if
they
are
unable
to
provide
quality
services
in
a
timely
manner
and
at
a
feasible
cost,
our
active
development
programs
will
face
delays.
Further,
if
any
of
these
third
parties
fails
to
perform
as
we
expect
or
if
their
work
fails
to
meet
regulatory
requirements,
our
testing
could
be
delayed,
cancelled
or
rendered
ineffective.
We rely on contract manufacturers over whom we have limited control. If we are subject to quality, cost or delivery issues with the preclinical and clinical
grade materials supplied by contract manufacturers, our business operations could suffer significant harm.
We
have
limited
manufacturing
experience
and
rely
on
contract
manufacturing
organizations,
or
CMOs
to
manufacture
our
product
candidates
for
larger
preclinical
studies
and
clinical
trials.
We
produce
small
quantities
of
our
product
candidates
at
bench
scale
in
our
laboratory
facilities
for
use
in
smaller
preclinical
studies.
We
rely
on
CMOs
for
manufacturing,
filling,
packaging,
storing
and
shipping
of
drug
product
in
compliance
with
current
Good
Manufacturing
Practice,
or
cGMP,
regulations
applicable
to
our
products.
The
FDA
ensures
the
quality
of
drug
products
by
carefully
monitoring
drug
manufacturers’
compliance
with
cGMP
regulations.
The
cGMP
regulations
for
drugs
contain
minimum
requirements
for
the
methods,
facilities
and
controls
used
in
manufacturing,
processing
and
packing
of
a
drug
product.
We
contracted
with
Catalent
for
the
manufacture
of
the
SIRPαFc
protein
to
supply
drug
substance
for
our
Phase
I
clinical
trial.
The
manufacture
of
recombinant
proteins
uses
well
established
processes
including
a
protein
expression
system.
Catalent
is
producing
SIRPαFc
using
their
proprietary
GPEx®
expression
system.
We
believe
that
Catalent
has
the
capacity,
the
systems,
and
the
experience
to
supply
SIRPαFc
for
our
Phase
I
clinical
trial
and
we
may
consider
using
Catalent
for
manufacturing
for
later
clinical
trials.
However,
since
the
Catalent
manufacturing
facility
where
SIRPαFc
is
being
produced
was
only
recently
established
and
does
not
support
commercial
manufacturing,
it
has
not
yet
been
inspected
by
the
FDA.
Any
manufacturing
failures
or
delays
or
compliance
issues
could
cause
delays
in
the
conduct
of
SIRPαFc
preclinical
studies
and
clinical
trials.
There
can
be
no
assurances
that
CMOs
will
be
able
to
meet
our
timetable
and
requirements.
We
have
not
contracted
with
alternate
suppliers
for
SIRPαFc
drug
substance
production
in
the
event
Catalent
is
unable
to
scale
up
production,
or
if
Catalent
otherwise
experiences
any
other
significant
problems.
If
we
are
unable
to
arrange
for
alternative
third-party
manufacturing
sources
on
commercially
reasonable
terms
or
in
a
timely
manner,
we
may
be
delayed
in
the
development
of
our
product
candidates.
Further,
contract
manufacturers
must
operate
in
compliance
with
cGMP
and
failure
to
do
so
could
result
in,
among
other
things,
the
disruption
of
product
supplies.
Our
dependence
upon
third
parties
for
the
manufacture
of
our
products
may
adversely
affect
our
profit
margins
and
our
ability
to
develop
and
deliver
products
on
a
timely
and
competitive
basis.
If clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of regulatory authorities or do not otherwise produce
positive results, we would incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and
commercialization of our product candidates.
Before
obtaining
marketing
approval
from
regulatory
authorities
for
the
sale
of
our
product
candidates,
we
must
conduct
preclinical
studies
in
animals
and
extensive
clinical
trials
in
humans
to
demonstrate
the
safety
and
efficacy
of
the
product
candidates.
Clinical
testing
is
expensive
and
difficult
to
design
and
implement,
can
take
many
years
to
complete
and
has
uncertain
outcomes.
The
outcome
of
preclinical
studies
and
early
clinical
trials
may
not
predict
the
success
of
later
clinical
trials,
and
interim
results
of
a
clinical
trial
do
not
necessarily
predict
final
results.
A
number
of
companies
in
the
pharmaceutical
and
biotechnology
industries
have
suffered
significant
setbacks
in
advanced
clinical
trials
due
to
lack
of
efficacy
or
unacceptable
safety
profiles,
notwithstanding
promising
results
in
earlier
trials.
We
do
not
know
whether
the
clinical
trials
we
may
conduct
will
demonstrate
adequate
efficacy
and
safety
to
result
in
regulatory
approval
to
market
any
of
our
product
candidates
in
any
jurisdiction.
A
product
candidate
may
fail
for
safety
or
efficacy
reasons
at
any
stage
of
the
testing
process.
A
major
risk
we
face
is
the
possibility
that
none
of
our
product
candidates
under
development
will
successfully
gain
market
approval
from
the
FDA
or
other
regulatory
authorities,
resulting
in
us
being
unable
to
derive
any
commercial
revenue
from
them
after
investing
significant
amounts
of
capital
in
multiple
stages
of
preclinical
and
clinical
testing.
8
If we experience delays in clinical testing, we will be delayed in commercializing our product candidates, and our business may be substantially harmed.
We
cannot
predict
whether
any
clinical
trials
will
begin
as
planned,
will
need
to
be
restructured,
or
will
be
completed
on
schedule,
or
at
all.
Our
product
development
costs
will
increase
if
we
experience
delays
in
clinical
testing.
Significant
clinical
trial
delays
could
shorten
any
periods
during
which
we
may
have
the
exclusive
right
to
commercialize
our
product
candidates
or
allow
our
competitors
to
bring
products
to
market
before
us,
which
would
impair
our
ability
to
successfully
commercialize
our
product
candidates
and
may
harm
our
financial
condition,
results
of
operations
and
prospects.
The
commencement
and
completion
of
clinical
trials
for
our
products
may
be
delayed
for
a
number
of
reasons,
including
delays
related,
but
not
limited,
to:
failure
by
regulatory
authorities
to
grant
permission
to
proceed
or
placing
the
clinical
trial
on
hold;
patients
failing
to
enroll
or
remain
in
our
trials
at
the
rate
we
expect;
suspension
or
termination
of
clinical
trials
by
regulators
for
many
reasons,
including
concerns
about
patient
safety
or
failure
of
our
contract
manufacturers
to
comply
with
cGMP
requirements;
any
changes
to
our
manufacturing
process
that
may
be
necessary
or
desired;
delays
or
failure
to
obtain
clinical
supply
from
contract
manufacturers
of
our
products
necessary
to
conduct
clinical
trials;
product
candidates
demonstrating
a
lack
of
safety
or
efficacy
during
clinical
trials;
patients
choosing
an
alternative
treatment
for
the
indications
for
which
we
are
developing
any
of
our
product
candidates
or
participating
in
competing
clinical
trials;
patients
failing
to
complete
clinical
trials
due
to
dissatisfaction
with
the
treatment,
side
effects
or
other
reasons;
reports
of
clinical
testing
on
similar
technologies
and
products
raising
safety
and/or
efficacy
concerns;
competing
clinical
trials
and
scheduling
conflicts
with
participating
clinicians;
clinical
investigators
not
performing
our
clinical
trials
on
their
anticipated
schedule,
dropping
out
of
a
trial,
or
employing
methods
not
consistent
with
the
clinical
trial
protocol,
regulatory
requirements
or
other
third
parties
not
performing
data
collection
and
analysis
in
a
timely
or
accurate
manner;
failure
of
our
contract
research
organizations,
or
CROs,
to
satisfy
their
contractual
duties
or
meet
expected
deadlines;
inspections
of
clinical
trial
sites
by
regulatory
authorities
or
Institutional
Review
Boards,
or
IRBs,
or
ethics
committees
finding
regulatory
violations
that
require
us
to
undertake
corrective
action,
resulting
in
suspension
or
termination
of
one
or
more
sites
or
the
imposition
of
a
clinical
hold
on
the
entire
study;
one
or
more
IRBs
or
ethics
committees
rejecting,
suspending
or
terminating
the
study
at
an
investigational
site,
precluding
enrollment
of
additional
subjects,
or
withdrawing
its
approval
of
the
trial;
or
failure
to
reach
agreement
on
acceptable
terms
with
prospective
clinical
trial
sites.
Our
product
development
costs
will
increase
if
we
experience
delays
in
testing
or
approval
or
if
we
need
to
perform
more
or
larger
clinical
trials
than
planned.
Additionally,
changes
in
regulatory
requirements
and
policies
may
occur,
and
we
may
need
to
amend
study
protocols
to
reflect
these
changes.
Amendments
may
require
us
to
resubmit
our
study
protocols
to
regulatory
authorities
or
IRBs
or
ethics
committees
for
re-examination,
which
may
impact
the
cost,
timing
or
successful
completion
of
that
trial.
Delays
or
increased
product
development
costs
may
have
a
material
adverse
effect
on
our
business,
financial
condition
and
prospects.
We may not be able to file INDs to commence additional clinical trials on the timelines we expect, and even if we are able to, the FDA may not permit us to
proceed in a timely manner, or at all.
Prior
to
commencing
clinical
trials
in
the
United
States
for
any
of
our
product
candidates,
we
may
be
required
to
have
an
allowed
IND
for
each
product
candidate
and
to
file
additional
INDs
prior
to
initiating
any
additional
clinical
trials
for
SIRPαFc.
We
believe
that
the
data
from
previous
preclinical
studies
will
support
the
filing
of
additional
INDs,
to
enable
us
to
undertake
additional
clinical
studies
as
we
have
planned.
However,
submission
of
an
IND
may
not
result
in
the
FDA
allowing
further
clinical
trials
to
begin
and,
once
begun,
issues
may
arise
that
will
require
us
to
suspend
or
terminate
such
clinical
trials.
Additionally,
even
if
relevant
regulatory
authorities
agree
with
the
design
and
implementation
of
the
clinical
trials
set
forth
in
an
IND,
these
regulatory
authorities
may
change
their
requirements
in
the
future.
Failure
to
submit
or
have
effective
INDs
and
commence
clinical
programs
will
significantly
limit
our
opportunity
to
generate
revenue.
9
If we have difficulty enrolling patients in clinical trials, the completion of the trials may be delayed or cancelled.
As
our
product
candidates
advance
from
preclinical
testing
to
clinical
testing,
and
then
through
progressively
larger
and
more
complex
clinical
trials,
we
will
need
to
enroll
an
increasing
number
of
patients
that
meet
our
eligibility
criteria.
There
is
significant
competition
for
recruiting
cancer
patients
in
clinical
trials,
and
we
may
be
unable
to
enroll
the
patients
we
need
to
complete
clinical
trials
on
a
timely
basis
or
at
all.
The
factors
that
affect
our
ability
to
enroll
patients
are
largely
uncontrollable
and
include,
but
are
not
limited
to,
the
following:
size
and
nature
of
the
patient
population;
eligibility
and
exclusion
criteria
for
the
trial;
design
of
the
study
protocol;
competition
with
other
companies
for
clinical
sites
or
patients;
the
perceived
risks
and
benefits
of
the
product
candidate
under
study;
the
patient
referral
practices
of
physicians;
and
the
number,
availability,
location
and
accessibility
of
clinical
trial
sites.
If we are unable to successfully develop companion diagnostics for our therapeutic product candidates, or experience significant delays in doing so, we may not
achieve marketing approval or realize the full commercial potential of our therapeutic product candidates.
We
may
develop
companion
diagnostics
for
our
therapeutic
product
candidates.
We
expect
that,
at
least
in
some
cases,
regulatory
authorities
may
require
the
development
and
regulatory
approval
of
a
companion
diagnostic
as
a
condition
to
approving
our
therapeutic
product
candidates.
We
have
limited
experience
and
capabilities
in
developing
or
commercializing
diagnostics
and
plan
to
rely
in
large
part
on
third
parties
to
perform
these
functions.
We
have
not
begun
to
develop
companion
diagnostics
for
any
of
our
therapeutic
product
candidates.
Companion
diagnostics
are
subject
to
regulation
by
the
FDA,
HC,
and
comparable
foreign
regulatory
authorities
as
medical
devices
and
may
require
separate
regulatory
approval
or
clearance
prior
to
commercialization.
If
we,
or
any
third
parties
that
we
engage
to
assist
us,
are
unable
to
successfully
develop
companion
diagnostics
for
our
therapeutic
product
candidates,
or
experience
delays
in
doing
so,
our
business
may
be
substantially
harmed.
Regulatory approval processes are lengthy, expensive and inherently unpredictable. Our inability to obtain regulatory approval for our product candidates
would substantially harm our business.
Our
development
and
commercialization
activities
and
product
candidates
are
significantly
regulated
by
a
number
of
governmental
entities,
including
the
FDA,
HC,
and
comparable
authorities
in
other
countries.
Regulatory
approvals
are
required
prior
to
each
clinical
trial
and
we
may
fail
to
obtain
the
necessary
approvals
to
commence
or
continue
clinical
testing.
We
must
comply
with
regulations
concerning
the
manufacture,
testing,
safety,
effectiveness,
labeling,
documentation,
advertising,
and
sale
of
products
and
product
candidates
and
ultimately
must
obtain
regulatory
approval
before
we
can
commercialize
a
product
candidate.
The
time
required
to
obtain
approval
by
such
regulatory
authorities
is
unpredictable
but
typically
takes
many
years
following
the
commencement
of
preclinical
studies
and
clinical
trials.
Any
analysis
of
data
from
clinical
activities
we
perform
is
subject
to
confirmation
and
interpretation
by
regulatory
authorities,
which
could
delay,
limit
or
prevent
regulatory
approval.
Even
if
we
believe
results
from
our
clinical
trials
are
favorable
to
support
the
marketing
of
our
product
candidates,
the
FDA
or
other
regulatory
authorities
may
disagree.
In
addition,
approval
policies,
regulations,
or
the
type
and
amount
of
clinical
data
necessary
to
gain
approval
may
change
during
the
course
of
a
product
candidate’s
clinical
development
and
may
vary
among
jurisdictions.
We
have
not
obtained
regulatory
approval
for
any
product
candidate
and
it
is
possible
that
none
of
our
existing
product
candidates
or
any
future
product
candidates
will
ever
obtain
regulatory
approval.
10
We
could
fail
to
receive
regulatory
approval
for
our
product
candidates
for
many
reasons,
including,
but
not
limited
to:
disagreement
with
the
design
or
implementation
of
our
clinical
trials;
failure
to
demonstrate
that
a
product
candidate
is
safe
and
effective
for
its
proposed
indication;
failure
of
clinical
trials
to
meet
the
level
of
statistical
significance
required
for
approval;
failure
to
demonstrate
that
a
product
candidate’s
clinical
and
other
benefits
outweigh
its
safety
risks;
disagreement
with
our
interpretation
of
data
from
preclinical
studies
or
clinical
trials;
the
insufficiency
of
data
collected
from
clinical
trials
of
our
product
candidates
to
support
the
submission
and
filing
of
a
biologic
license
application,
or
BLA,
or
other
submission
to
obtain
regulatory
approval;
deficiencies
in
the
manufacturing
processes
or
the
failure
of
facilities
of
CMOs
with
whom
we
contract
for
clinical
and
commercial
supplies
to
pass
a
pre-
approval
inspection;
or
changes
in
the
approval
policies
or
regulations
that
render
our
preclinical
and
clinical
data
insufficient
for
approval.
A
regulatory
authority
may
require
more
information,
including
additional
preclinical
or
clinical
data
to
support
approval,
which
may
delay
or
prevent
approval
and
our
commercialization
plans,
or
we
may
decide
to
abandon
the
development
program.
If
we
were
to
obtain
approval,
regulatory
authorities
may
approve
any
of
our
product
candidates
for
fewer
or
more
limited
indications
than
we
request,
may
grant
approval
contingent
on
the
performance
of
costly
post-marketing
clinical
trials,
or
may
approve
a
product
candidate
with
a
label
that
does
not
include
the
labeling
claims
necessary
or
desirable
for
the
successful
commercialization
of
that
product
candidate.
Moreover,
depending
on
any
safety
issues
associated
with
our
product
candidates
that
garner
approval,
the
FDA
may
impose
a
risk
evaluation
and
mitigation
strategy,
thereby
imposing
certain
restrictions
on
the
sale
and
marketability
of
such
products.
We may not achieve our publicly announced milestones according to schedule, or at all.
From
time
to
time,
we
may
announce
the
timing
of
certain
events
we
expect
to
occur,
such
as
the
anticipated
timing
of
results
from
our
clinical
trials.
These
statements
are
forward-looking
and
are
based
on
the
best
estimates
of
management
at
the
time
relating
to
the
occurrence
of
such
events.
However,
the
actual
timing
of
such
events
may
differ
from
what
has
been
publicly
disclosed.
The
timing
of
events
such
as
initiation
or
completion
of
a
clinical
trial,
filing
of
an
application
to
obtain
regulatory
approval,
or
announcement
of
additional
clinical
trials
for
a
product
candidate
may
ultimately
vary
from
what
is
publicly
disclosed.
These
variations
in
timing
may
occur
as
a
result
of
different
events,
including
the
nature
of
the
results
obtained
during
a
clinical
trial
or
during
a
research
phase,
problems
with
a
CMO
or
a
CRO
or
any
other
event
having
the
effect
of
delaying
the
publicly
announced
timeline.
We
undertake
no
obligation
to
update
or
revise
any
forward-looking
information,
whether
as
a
result
of
new
information,
future
events
or
otherwise,
except
as
otherwise
required
by
law.
Any
variation
in
the
timing
of
previously
announced
milestones
could
have
a
material
adverse
effect
on
our
business
plan,
financial
condition
or
operating
results
and
the
trading
price
of
common
shares.
We face competition from other biotechnology and pharmaceutical companies and our financial condition and operations will suffer if we fail to effectively
compete.
The
biotechnology
and
pharmaceutical
industries
are
intensely
competitive
and
subject
to
rapid
and
significant
technological
change.
Our
competitors
include
large,
well-established
pharmaceutical
companies,
biotechnology
companies,
and
academic
and
research
institutions
developing
cancer
therapeutics
for
the
same
indications
we
are
targeting
and
competitors
with
existing
marketed
therapies.
Many
other
companies
are
developing
or
commercializing
therapies
to
treat
the
same
diseases
or
indications
for
which
our
product
candidates
may
be
useful.
Although
there
are
no
approved
therapies
that
specifically
target
the
CD47
pathway,
some
competitors
use
therapeutic
approaches
that
may
compete
directly
with
our
product
candidates.
For
example,
SIRPαFc
is
in
direct
competition
with
CD47
blocking
antibodies
from
Forty
Seven
Inc.,
Celgene
Corporation,
Novimmune
SA
and
others.
Many
of
our
competitors
have
substantially
greater
financial,
technical
and
human
resources
than
we
do
and
have
significantly
greater
experience
than
us
in
conducting
preclinical
testing
and
human
clinical
trials
of
product
candidates,
scaling
up
manufacturing
operations
and
obtaining
regulatory
approvals
of
products.
Accordingly,
our
competitors
may
succeed
in
obtaining
regulatory
approval
for
products
more
rapidly
than
we
do.
Our
ability
to
compete
successfully
will
largely
depend
on:
11
the
efficacy
and
safety
profile
of
our
product
candidates
relative
to
marketed
products
and
other
product
candidates
in
development;
our
ability
to
develop
and
maintain
a
competitive
position
in
the
product
categories
and
technologies
on
which
we
focus;
the
time
it
takes
for
our
product
candidates
to
complete
clinical
development
and
receive
marketing
approval;
our
ability
to
obtain
required
regulatory
approvals;
our
ability
to
commercialize
any
of
our
product
candidates
that
receive
regulatory
approval;
our
ability
to
establish,
maintain
and
protect
intellectual
property
rights
related
to
our
product
candidates;
and
acceptance
of
any
of
our
product
candidates
that
receive
regulatory
approval
by
physicians
and
other
healthcare
providers
and
payers.
Competitors
have
developed
and
may
develop
technologies
that
could
be
the
basis
for
products
that
challenge
the
differentiated
nature
and
potential
for
best-in-
class
product
development
programs
and
discovery
research
capabilities
of
Fluorinov.
Some
of
those
products
may
have
an
entirely
different
approach
or
means
of
accomplishing
the
desired
therapeutic
effect
than
our
product
candidates
and
may
be
more
effective
or
less
costly
than
our
product
candidates.
The
success
of
our
competitors
and
their
products
and
technologies
relative
to
our
technological
capabilities
and
competitiveness
could
have
a
material
adverse
effect
on
the
future
preclinical
studies
and
clinical
trials
of
our
product
candidates,
including
our
ability
to
obtain
the
necessary
regulatory
approvals
for
the
conduct
of
such
clinical
trials.
This
may
further
negatively
impact
our
ability
to
generate
future
product
development
programs
with
improved
pharmacological
properties
using
Fluorinov
technology.
If
we
are
not
able
to
compete
effectively
against
our
current
and
future
competitors,
our
business
will
not
grow
and
our
financial
condition
and
operations
will
substantially
suffer.
We heavily rely on the capabilities and experience of our key executives and scientists and the loss of any of them could affect our ability to develop our
products.
The
loss
of
Dr.
Niclas
Stiernholm,
our
President
and
Chief
Executive
Officer,
or
other
key
members
of
our
staff,
including
Dr.
Robert
Uger,
our
Chief
Scientific
Officer,
Dr.
Eric
Sievers,
our
Chief
Medical
Officer,
James
Parsons,
our
Chief
Financial
Officer,
Dr.
Penka
Petrova,
our
Chief
Development
Officer,
or
Dr.
Malik
Slassi,
our
Senior
Vice
President,
Discovery
Research
could
harm
us.
We
have
employment
agreements
with
Drs.
Stiernholm,
Uger,
Sievers,
Petrova
and
Slassi
and
Mr.
Parsons,
although
such
employment
agreements
do
not
guarantee
their
retention.
We
also
depend
on
our
scientific
and
clinical
collaborators
and
advisors,
all
of
whom
have
outside
commitments
that
may
limit
their
availability
to
us.
In
addition,
we
believe
that
our
future
success
will
depend
in
large
part
upon
our
ability
to
attract
and
retain
highly
skilled
scientific,
managerial,
medical,
clinical
and
regulatory
personnel,
particularly
as
we
expand
our
activities
and
seek
regulatory
approvals
for
clinical
trials.
We
enter
into
agreements
with
our
scientific
and
clinical
collaborators
and
advisors,
key
opinion
leaders
and
academic
partners
in
the
ordinary
course
of
our
business.
We
also
enter
into
agreements
with
physicians
and
institutions
who
will
recruit
patients
into
our
clinical
trials
on
our
behalf
in
the
ordinary
course
of
our
business.
Notwithstanding
these
arrangements,
we
face
significant
competition
for
these
types
of
personnel
from
other
companies,
research
and
academic
institutions,
government
entities
and
other
organizations.
We
cannot
predict
our
success
in
hiring
or
retaining
the
personnel
we
require
for
continued
growth.
The
loss
of
the
services
of
any
of
our
executive
officers
or
other
key
personnel
could
potentially
harm
our
business,
operating
results
or
financial
condition.
Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could
have a material adverse effect on our business.
We
are
exposed
to
the
risk
of
employee
fraud
or
other
misconduct.
Misconduct
by
employees
could
include
failures
to
comply
with
FDA
regulations,
provide
accurate
information
to
the
FDA,
comply
with
manufacturing
standards
we
have
established,
comply
with
federal
and
state
health-care
fraud
and
abuse
laws
and
regulations,
report
financial
information
or
data
accurately
or
disclose
unauthorized
activities
to
us.
In
particular,
sales,
marketing
and
business
arrangements
in
the
healthcare
industry
are
subject
to
extensive
laws
and
regulations
intended
to
prevent
fraud,
kickbacks,
self-dealing,
and
other
abusive
practices.
These
laws
and
regulations
may
restrict
or
prohibit
a
wide
range
of
pricing,
discounting,
marketing
and
promotion,
sales
commission,
customer
incentive
programs
and
other
business
arrangements.
Employee
misconduct
could
also
involve
the
improper
use
of
information
obtained
in
the
course
of
clinical
trials,
which
could
result
in
regulatory
sanctions
and
serious
harm
to
our
reputation.
If
any
such
actions
are
instituted
against
us,
and
we
are
not
successful
in
defending
ourselves
or
asserting
our
rights,
those
actions
could
have
a
substantial
impact
on
our
business
and
results
of
operations,
including
the
imposition
of
substantial
fines
or
other
sanctions.
12
The failure to fully realize the benefits of our acquisition of Fluorinov may adversely affect our future results.
In
January
2016,
we
acquired
all
of
the
outstanding
capital
stock
of
Fluorinov,
a
small
molecule
medicinal
chemistry
company
with
preclinical
oncology
assets
and
a
potential
discovery
platform.
The
success
of
our
acquisition
of
Fluorinov
will
depend,
in
part,
on
our
ability
to
fully
realize
the
anticipated
benefits
from
combining
our
business
with
Fluorinov’s
business.
However,
to
realize
these
anticipated
benefits,
we
must
continue
the
research
and
development
activities
previously
undertaken
by
Fluorinov
as
a
stand-alone
company.
If
we
are
unable
to
achieve
these
objectives,
the
anticipated
benefits
of
our
acquisition
of
Fluorinov
may
not
be
realized
fully
or
at
all
or
may
take
longer
to
realize
than
expected.
We may expand our business through the acquisition of companies or businesses or by entering into collaborations or by in-licensing product candidates, each
of which could disrupt our business and harm our financial condition.
We
have
in
the
past
and
may
in
the
future
seek
to
expand
our
pipeline
and
capabilities
by
acquiring
one
or
more
companies
or
businesses,
entering
into
collaborations,
or
in-licensing
one
or
more
product
candidates.
Acquisitions,
collaborations
and
in-licenses
involve
numerous
risks,
including,
but
not
limited
to:
substantial
cash
expenditures;
technology
development
risks;
potentially
dilutive
issuances
of
equity
securities;
incurrence
of
debt
and
contingent
liabilities,
some
of
which
may
be
difficult
or
impossible
to
identify
at
the
time
of
acquisition;
difficulties
in
assimilating
the
operations
of
the
acquired
companies;
potential
disputes
regarding
contingent
consideration;
diverting
our
management’s
attention
away
from
other
business
concerns;
entering
markets
in
which
we
have
limited
or
no
direct
experience;
and
potential
loss
of
our
key
employees
or
key
employees
of
the
acquired
companies
or
businesses.
We
have
experience
in
making
acquisitions,
entering
collaborations,
and
in-licensing
product
candidates,
however,
we
cannot
provide
assurance
that
any
acquisition,
collaboration
or
in-license
will
result
in
short-term
or
long-term
benefits
to
us.
We
may
incorrectly
judge
the
value
or
worth
of
an
acquired
company
or
business
or
in-licensed
product
candidate.
In
addition,
our
future
success
would
depend
in
part
on
our
ability
to
manage
the
rapid
growth
associated
with
some
of
these
acquisitions,
collaborations
and
in-licenses.
We
cannot
provide
assurance
that
we
would
be
able
to
successfully
combine
our
business
with
that
of
acquired
businesses,
manage
a
collaboration
or
integrate
in-licensed
product
candidates.
Furthermore,
the
development
or
expansion
of
our
business
may
require
a
substantial
capital
investment
by
us.
Negative results from clinical trials or studies of others and adverse safety events involving the targets of our products may have an adverse impact on our
future commercialization efforts .
From
time
to
time,
studies
or
clinical
trials
on
various
aspects
of
biopharmaceutical
products
are
conducted
by
academic
researchers,
competitors
or
others.
The
results
of
these
studies
or
trials,
when
published,
may
have
a
significant
effect
on
the
market
for
the
biopharmaceutical
product
that
is
the
subject
of
the
study.
The
publication
of
negative
results
of
studies
or
clinical
trials
or
adverse
safety
events
related
to
our
product
candidates,
or
the
therapeutic
areas
in
which
our
product
candidates
compete,
could
adversely
affect
our
share
price
and
our
ability
to
finance
future
development
of
our
product
candidates,
and
our
business
and
financial
results
could
be
materially
and
adversely
affected.
13
We face the risk of product liability claims, which could exceed our insurance coverage and produce recalls, each of which could deplete our cash resources.
We
are
exposed
to
the
risk
of
product
liability
claims
alleging
that
use
of
our
product
candidates
caused
an
injury
or
harm.
These
claims
can
arise
at
any
point
in
the
development,
testing,
manufacture,
marketing
or
sale
of
our
product
candidates
and
may
be
made
directly
by
patients
involved
in
clinical
trials
of
our
product
candidates,
by
consumers
or
healthcare
providers
or
by
individuals,
organizations
or
companies
selling
our
products.
Product
liability
claims
can
be
expensive
to
defend,
even
if
the
product
or
product
candidate
did
not
actually
cause
the
alleged
injury
or
harm.
Insurance
covering
product
liability
claims
becomes
increasingly
expensive
as
a
product
candidate
moves
through
the
development
pipeline
to
commercialization.
We
currently
maintain
clinical
trial
liability
insurance
coverage
of
$10
million.
However,
there
can
be
no
assurance
that
such
insurance
coverage
is
or
will
continue
to
be
adequate
or
available
to
us
at
a
cost
acceptable
to
us
or
at
all.
We
may
choose
or
find
it
necessary
under
our
collaborative
agreements
to
increase
our
insurance
coverage
in
the
future.
We
may
not
be
able
to
secure
greater
or
broader
product
liability
insurance
coverage
on
acceptable
terms
or
at
reasonable
costs
when
needed.
Any
liability
for
damages
resulting
from
a
product
liability
claim
could
exceed
the
amount
of
our
coverage,
require
us
to
pay
a
substantial
monetary
award
from
our
own
cash
resources
and
have
a
material
adverse
effect
on
our
business,
financial
condition
and
results
of
operations.
Moreover,
a
product
recall,
if
required,
could
generate
substantial
negative
publicity
about
our
products
and
business,
inhibit
or
prevent
commercialization
of
other
products
and
product
candidates
or
negatively
impact
existing
or
future
collaborations.
If we are unable to maintain product liability insurance required by our third parties, the corresponding agreements would be subject to termination, which
could have a material adverse impact on our operations.
Some
of
our
licensing
and
other
agreements
with
third
parties
require
or
might
require
us
to
maintain
product
liability
insurance.
If
we
cannot
maintain
acceptable
amounts
of
coverage
on
commercially
reasonable
terms
in
accordance
with
the
terms
set
forth
in
these
agreements,
the
corresponding
agreements
would
be
subject
to
termination,
which
could
have
a
material
adverse
impact
on
our
operations.
Risks Related to Intellectual Property
If we are unable to adequately protect and enforce our intellectual property, our competitors may take advantage of our development efforts or acquired
technology and compromise our prospects of marketing and selling our key products.
We
control
two
patent
families
relating
to
SIRPα.
One
family
relates
to
the
use
of
SIRPα
to
treat
cancer.
The
other
family
relates
to
our
drug
as
a
composition
of
matter,
SIRPαFc.
We
have
also
recently
filed
for
patent
protection
covering
eight
additional
inventions
relating
to
SIRPα,
including
anti-cancer
drug
combination
therapies
that
utilize
SIRPαFc.
More
recently,
we
acquired
the
patent
portfolio
of
Fluorinov,
which
embraces
patent
filings
that
cover
twelve
different
inventions.
With
the
exception
of
one
process
scheme,
these
patent
filings
each
claim
a
family
of
small
molecule
drugs
as
compositions
of
matter,
together
with
claims
for
their
production
and
their
medical
uses.
These
drugs
target
cancer
for
the
most
part,
and
some
related
medical
end-uses.
Our
success
will
depend
in
part
upon
our
ability
to
protect
our
intellectual
property
and
proprietary
technologies
and
upon
the
nature
and
scope
of
the
intellectual
property
protection
we
receive.
For
example,
some
of
our
patent
portfolio
covers
primarily
methods
of
medical
use
but
not
compositions
of
matter.
The
ability
to
compete
effectively
and
to
achieve
partnerships
will
depend
on
our
ability
to
develop
and
maintain
proprietary
aspects
of
our
technology
and
to
operate
without
infringing
on
the
proprietary
rights
of
others.
The
presence
of
such
proprietary
rights
of
others
could
severely
limit
our
ability
to
develop
and
commercialize
our
products,
to
conduct
our
existing
research
and
could
require
financial
resources
to
defend
litigation,
which
may
be
in
excess
of
our
ability
to
raise
such
funds.
There
is
no
assurance
that
our
pending
patent
applications
or
those
that
we
intend
to
acquire
will
be
approved
in
a
form
that
will
be
sufficient
to
protect
our
proprietary
technology
and
gain
or
keep
any
competitive
advantage
that
we
may
have
or,
once
approved,
will
be
upheld
in
any
post-grant
proceedings
brought
by
any
third
parties.
The
European
patent
granted
to
the
University
Health
Network,
or
UHN,
and
licensed
exclusively
to
us
has
been
opposed
by
two
groups.
Our
rights
are
enforceable
during
these
proceedings.
A
negative
outcome
could
have
an
impact
on
our
patent
position
in
Europe.
14
The
patent
positions
of
pharmaceutical
companies
can
be
highly
uncertain
and
involve
complex
legal,
scientific
and
factual
questions
for
which
important
legal
principles
remain
unresolved.
Patents
issued
to
us
or
our
respective
licensors
may
be
challenged,
invalidated
or
circumvented.
To
the
extent
our
intellectual
property,
including
licensed
intellectual
property,
offers
inadequate
protection,
or
is
found
to
be
invalid
or
unenforceable,
we
are
exposed
to
a
greater
risk
of
direct
competition.
If
our
intellectual
property
does
not
provide
adequate
protection
against
our
competitors’
products,
our
competitive
position
could
be
adversely
affected,
as
could
our
business,
financial
condition
and
results
of
operations.
Both
the
patent
application
process
and
the
process
of
managing
patent
disputes
can
be
time
consuming
and
expensive,
and
the
laws
of
some
foreign
countries
may
not
protect
our
intellectual
property
rights
to
the
same
extent
as
do
the
laws
of
Canada
and
the
United
States.
We
will
be
able
to
protect
our
intellectual
property
from
unauthorized
use
by
third
parties
only
to
the
extent
that
our
proprietary
technologies,
key
products,
and
any
future
products
are
covered
by
valid
and
enforceable
intellectual
property
rights
including
patents
or
are
effectively
maintained
as
trade
secrets,
and
provided
we
have
the
funds
to
enforce
our
rights,
if
necessary.
If we lose our licenses from third-party owners we may be unable to continue a substantial part of our business.
We
are
party
to
licenses
that
give
us
rights
to
intellectual
property
that
is
necessary
or
useful
for
a
substantial
part
of
our
business.
Pursuant
to
our
exclusive
license
agreement
with
UHN
and
the
Hospital
for
Sick
Children,
or
HSC,
under
which
we
license
certain
patent
rights
for
our
key
products
and
their
uses,
we
are
required
to
use
commercially
reasonable
efforts
to
commercialize
products
based
on
the
licensed
rights
and
pay
certain
royalties
and
sublicensing
revenue
to
UHN
and
HSC.
These
licenses
require
that
we
pay
development
milestone
payments,
regulatory
milestone
payments,
royalties
on
net
sales,
and
sublicensing
revenues,
as
well
as
annual
maintenance
fees.
We
have
also
entered
into
agreements
allowing
us
to
manufacture
SIRPαFc
using
Catalent’s
proprietary
GPEx®
expression
system.
The
consideration
includes
payments
at
the
time
we
successfully
reach
a
series
of
development
and
sales
milestones.
We
may
also
enter
into
licenses
in
the
future
to
access
additional
third-
party
intellectual
property.
If
we
fail
to
pay
annual
maintenance
fees,
development
and
sales
milestones,
or
it
is
determined
that
we
did
not
use
commercially
reasonable
efforts
to
commercialize
licensed
products,
we
could
lose
our
licenses
which
could
have
a
material
adverse
effect
on
our
business
and
financial
condition.
We may require additional third-party licenses to effectively develop and manufacture our key products and are currently unable to predict the availability or
cost of such licenses.
A
substantial
number
of
patents
have
already
been
issued
to
other
biotechnology
and
pharmaceutical
companies.
To
the
extent
that
valid
third-party
patent
rights
cover
our
products
or
services,
we
or
our
strategic
collaborators
would
be
required
to
seek
licenses
from
the
holders
of
these
patents
in
order
to
manufacture,
use
or
sell
these
products
and
services,
and
payments
under
them
would
reduce
our
profits
from
these
products
and
services.
We
are
currently
unable
to
predict
the
extent
to
which
we
may
wish
or
be
required
to
acquire
rights
under
such
patents,
the
availability
and
cost
of
acquiring
such
rights,
and
whether
a
license
to
such
patents
will
be
available
on
acceptable
terms
or
at
all.
There
may
be
patents
in
the
U.S.
or
in
foreign
countries
or
patents
issued
in
the
future
that
are
unavailable
to
license
on
acceptable
terms.
Our
inability
to
obtain
such
licenses
may
hinder
or
eliminate
our
ability
to
manufacture
and
market
our
products.
15
Changes in patent law and its interpretation could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.
As
is
the
case
with
other
biotechnology
and
pharmaceutical
companies,
our
success
is
heavily
dependent
on
intellectual
property
rights,
particularly
patents.
Obtaining
and
enforcing
patents
in
the
biopharmaceutical
industry
involves
technological
and
legal
complexity,
and
obtaining
and
enforcing
biopharmaceutical
patents
is
costly,
time-consuming
and
inherently
uncertain.
The
U.S.
Supreme
Court
has
ruled
on
several
patent
cases
in
recent
years,
either
narrowing
the
scope
of
patent
protection
available
in
certain
circumstances
or
weakening
the
rights
of
patent
owners
in
certain
situations.
In
addition
to
increasing
uncertainty
with
regard
to
our
and
our
licensors’
or
collaborators’
ability
to
obtain
patents
in
the
future,
this
combination
of
events
has
created
uncertainty
with
respect
to
the
value
of
patents,
once
obtained.
Depending
on
decisions
by
the
U.S.
Congress,
the
federal
courts,
and
the
U.S.
Patent
and
Trademark
Office,
or
USPTO,
the
laws
and
regulations
governing
patents
could
change
in
unpredictable
ways
that
would
weaken
our
and
our
licensors’
or
collaborators’
ability
to
obtain
new
patents
or
to
enforce
existing
patents
and
patents
we
and
our
licensors
or
collaborators
may
obtain
in
the
future.
Recent
patent
reform
legislation
could
increase
the
uncertainties
and
costs
surrounding
the
prosecution
of
our
and
our
licensors’
or
collaborators’
patent
applications
and
the
enforcement
or
defense
of
our
or
our
licensors’
or
collaborators’
issued
patents.
On
September
16,
2011,
the
Leahy-Smith
America
Invents
Act,
or
the
Leahy-Smith
Act,
was
signed
into
law.
The
Leahy-Smith
Act
includes
a
number
of
significant
changes
to
U.S.
patent
law.
These
include
provisions
that
affect
the
way
patent
applications
are
prosecuted
and
may
also
affect
patent
litigation.
The
USPTO
recently
developed
new
regulations
and
procedures
to
govern
administration
of
the
Leahy-Smith
Act,
and
many
of
the
substantive
changes
to
patent
law
associated
with
the
Leahy-Smith
Act,
and
in
particular,
the
first
to
file
provisions,
only
became
effective
on
March
16,
2013.
Accordingly,
it
is
not
clear
what,
if
any,
impact
the
Leahy-Smith
Act
will
have
on
the
operation
of
our
business.
However,
the
Leahy-Smith
Act
and
its
implementation
could
increase
the
uncertainties
and
costs
surrounding
the
prosecution
of
our
or
our
licensors’
or
collaborators’
patent
applications
and
the
enforcement
or
defense
of
our
or
our
licensors’
or
collaborators’
issued
patents,
all
of
which
could
have
a
material
adverse
effect
on
our
business
and
financial
condition.
Litigation regarding patents, patent applications, and other proprietary rights may be expensive, time consuming and cause delays in the development and
manufacturing of our key products.
Our
success
will
depend
in
part
on
our
ability
to
operate
without
infringing
the
proprietary
rights
of
third
parties.
The
pharmaceutical
industry
is
characterized
by
extensive
patent
litigation.
Other
parties
may
have,
or
obtain
in
the
future,
patents
and
allege
that
the
use
of
our
technologies
infringes
these
patent
claims
or
that
we
are
employing
their
proprietary
technology
without
authorization.
In
addition,
third
parties
may
challenge
or
infringe
upon
our
existing
or
future
patents.
Proceedings
involving
our
patents
or
patent
applications
or
those
of
others
could
result
in
adverse
decisions
regarding:
the
patentability
of
our
inventions
relating
to
our
key
products;
and/or
the
enforceability,
validity,
or
scope
of
protection
offered
by
our
patents
relating
to
our
key
products.
If
we
are
unable
to
avoid
infringing
the
patent
rights
of
others,
we
may
be
required
to
seek
a
license,
defend
an
infringement
action,
or
challenge
the
validity
of
the
patents
in
court.
Regardless
of
the
outcome,
patent
litigation
is
costly
and
time
consuming.
In
some
cases,
we
may
not
have
sufficient
resources
to
bring
these
actions
to
a
successful
conclusion.
In
addition,
if
we
do
not
obtain
a
license,
develop
or
obtain
non-infringing
technology,
fail
to
defend
an
infringement
action
successfully
or
have
infringed
patents
declared
invalid,
we
may:
incur
substantial
monetary
damages;
encounter
significant
delays
in
bringing
our
key
products
to
market;
and/or
be
precluded
from
participating
in
the
manufacture,
use
or
sale
of
our
key
products
or
methods
of
treatment
requiring
licenses.
Even
if
we
are
successful
in
these
proceedings,
we
may
incur
substantial
costs
and
divert
management
time
and
attention
in
pursuing
these
proceedings,
which
could
have
a
material
adverse
effect
on
us.
16
Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them.
Because
we
rely
on
third
parties
to
develop
our
products,
we
must
share
trade
secrets
with
them.
We
seek
to
protect
our
proprietary
technology
in
part
by
entering
into
confidentiality
agreements
and,
if
applicable,
material
transfer
agreements,
collaborative
research
agreements,
consulting
agreements
or
other
similar
agreements
with
our
collaborators,
advisors,
employees
and
consultants
prior
to
beginning
research
or
disclosing
proprietary
information.
These
agreements
typically
restrict
the
ability
of
our
collaborators,
advisors,
employees
and
consultants
to
publish
data
potentially
relating
to
our
trade
secrets.
Our
academic
collaborators
typically
have
rights
to
publish
data,
provided
that
we
are
notified
in
advance
and
may
delay
publication
for
a
specified
time
in
order
to
secure
our
intellectual
property
rights
arising
from
the
collaboration.
In
other
cases,
publication
rights
are
controlled
exclusively
by
us,
although
in
some
cases
we
may
share
these
rights
with
other
parties.
We
also
conduct
joint
research
and
development
programs
which
may
require
us
to
share
trade
secrets
under
the
terms
of
research
and
development
collaboration
or
similar
agreements.
Despite
our
efforts
to
protect
our
trade
secrets,
our
competitors
may
discover
our
trade
secrets,
either
through
breach
of
these
agreements,
independent
development
or
publication
of
information
including
our
trade
secrets
in
cases
where
we
do
not
have
proprietary
or
otherwise
protected
rights
at
the
time
of
publication.
A
competitor’s
discovery
of
our
trade
secrets
may
impair
our
competitive
position
and
could
have
a
material
adverse
effect
on
our
business
and
financial
condition.
Risks Related to Our Common Shares
Our common share price has been volatile in recent years, and may continue to be volatile.
The
market
prices
for
securities
of
biopharmaceutical
companies,
including
ours,
have
historically
been
volatile.
In
the
year
ended
December
31,
2016,
our
common
shares
traded
on
the
TSX
at
a
high
of
$23.48
and
a
low
of
$7.12
per
share.
In
the
year
ended
December
31,
2015,
our
common
shares
traded
on
the
TSX
at
a
high
of
$37.27
and
a
low
of
$10.50
per
share.
A
number
of
factors
could
influence
the
volatility
in
the
trading
price
of
our
common
shares,
including
changes
in
the
economy
or
in
the
financial
markets,
industry
related
developments,
the
results
of
product
development
and
commercialization,
changes
in
government
regulations,
and
developments
concerning
proprietary
rights,
litigation
and
cash
flow.
Our
quarterly
losses
may
vary
because
of
the
timing
of
costs
for
manufacturing,
preclinical
studies
and
clinical
trials.
Also,
the
reporting
of
adverse
safety
events
involving
our
products
and
public
rumors
about
such
events
could
cause
our
share
price
to
decline
or
experience
periods
of
volatility.
Each
of
these
factors
could
lead
to
increased
volatility
in
the
market
price
of
our
common
shares.
In
addition,
changes
in
the
market
prices
of
the
securities
of
our
competitors
may
also
lead
to
fluctuations
in
the
trading
price
of
our
common
shares.
We have never paid dividends and do not expect to do so in the foreseeable future.
We
have
not
declared
or
paid
any
cash
dividends
on
our
common
or
preferred
shares
to
date.
The
payment
of
dividends
in
the
future
will
be
dependent
on
our
earnings
and
financial
condition
in
addition
to
such
other
factors
as
our
board
of
directors
considers
appropriate.
Unless
and
until
we
pay
dividends,
shareholders
may
not
receive
a
return
on
their
shares.
There
is
no
present
intention
by
our
board
of
directors
to
pay
dividends
on
our
shares.
We may issue additional common shares to the former shareholders of Fluorinov as a result of our satisfaction of certain milestones, resulting in share
ownership dilution.
Under
the
terms
of
our
agreements
with
Fluorinov
and
its
former
shareholders,
at
our
discretion
up
to
50%
of
any
future
contingent
payments
can
be
satisfied
through
the
issuance
of
our
common
shares,
provided
that
the
aggregate
number
of
common
shares
issuable
under
such
payments
will
not
exceed
1,558,447
common
shares,
which
amount
represented
19.99%
of
the
outstanding
common
shares
at
the
time
of
execution
of
the
acquisition,
unless
shareholder
approval
has
first
been
obtained.
Issuing
additional
common
shares
to
the
former
shareholders
of
Fluorinov
in
satisfaction
of
contingent
consideration
dilutes
the
ownership
interests
of
holders
of
our
common
shares
on
the
dates
of
such
issuances.
If
we
are
unable
to
realize
the
strategic,
operational
and
financial
benefits
anticipated
from
our
acquisition
of
Fluorinov,
our
shareholders
may
experience
dilution
of
their
ownership
interests
in
our
company
upon
any
such
future
issuances
of
our
common
shares
without
receiving
any
commensurate
benefit.
17
Future sales or issuances of equity securities and the conversion of outstanding securities to common shares could decrease the value of the common shares,
dilute investors’ voting power, and reduce our earnings per share.
We
may
sell
additional
equity
securities
in
future
offerings,
including
through
the
sale
of
securities
convertible
into
equity
securities,
to
finance
operations,
acquisitions
or
projects,
and
issue
additional
common
shares
if
outstanding
warrants
or
stock
options
are
exercised,
or
preferred
shares
are
converted
to
common
shares,
which
may
result
in
dilution.
See
the
information
in
the
section
of
this
annual
report
under
the
heading
“Item
5.B.
Liquidity
and
Capital
Resources”
for
details
of
our
outstanding
securities
convertible
into
common
shares.
We
filed
a
base
shelf
prospectus
with
securities
commissions
in
Canada
and
a
Form
F-10
registration
statement
with
the
SEC
on
May
29,
2015
that
provides
that
we
may
sell
under
the
prospectus
from
time
to
time
over
the
following
25
months
up
to
U.S.
$100
million,
in
one
or
more
offerings,
of
common
shares,
First
Preferred
shares,
warrants
to
purchase
common
shares,
or
units
comprising
a
combination
of
common
shares,
First
Preferred
shares
and/or
warrants.
Subject
to
receipt
of
any
required
regulatory
approvals,
subscribers
of
the
December
2013
private
placement
who
purchased
a
minimum
of
10%
of
the
securities
sold
under
the
offering
received
rights
to
purchase
our
securities
in
future
financings
to
enable
each
such
shareholder
to
maintain
their
percentage
holding
in
our
common
shares
for
so
long
as
the
subscriber
holds
at
least
10%
of
the
outstanding
common
shares
on
a
fully-diluted
basis.
Shareholders
who
do
not
have
this
future
financing
participation
right
may
be
disadvantaged
in
participating
in
such
financings.
Our
board
of
directors
has
the
authority
to
authorize
certain
offers
and
sales
of
additional
securities
without
the
vote
of,
or
prior
notice
to,
shareholders.
Based
on
the
need
for
additional
capital
to
fund
expected
expenditures
and
growth,
it
is
likely
that
we
will
issue
additional
securities
to
provide
such
capital.
Such
additional
issuances
may
involve
the
issuance
of
a
significant
number
of
common
shares
at
prices
less
than
the
current
market
price
for
our
common
shares.
Sales
of
substantial
amounts
of
our
securities,
or
the
availability
of
such
securities
for
sale,
as
well
as
the
issuance
of
substantial
amounts
of
our
common
shares
upon
conversion
of
outstanding
convertible
equity
securities,
could
adversely
affect
the
prevailing
market
prices
for
our
securities
and
dilute
investors’
earnings
per
share.
A
decline
in
the
market
prices
of
our
securities
could
impair
our
ability
to
raise
additional
capital
through
the
sale
of
securities
should
we
desire
to
do
so.
We are likely a “passive foreign investment company,” which may have adverse U.S. federal income tax consequences for U.S. shareholders .
U.S.
investors
should
be
aware
that
we
believe
we
were
classified
as
a
passive
foreign
investment
company,
or
PFIC,
during
the
tax
years
ended
December
31,
2016
and
2015,
and
based
on
current
business
plans
and
financial
expectations,
we
expect
that
we
will
be
a
PFIC
for
the
current
tax
year
and
may
be
a
PFIC
in
future
tax
years.
If
we
are
a
PFIC
for
any
year
during
a
U.S.
shareholder’s
holding
period
of
our
common
shares,
then
such
U.S.
shareholder
generally
will
be
required
to
treat
any
gain
realized
upon
a
disposition
of
our
common
shares,
or
any
so-called
“excess
distribution”
received
on
our
common
shares,
as
ordinary
income,
and
to
pay
an
interest
charge
on
a
portion
of
such
gain
or
distributions,
unless
the
shareholder
makes
a
timely
and
effective
“qualified
electing
fund”
election,
or
QEF
Election,
or
a
“mark-to-market”
election
with
respect
to
our
shares.
A
U.S.
shareholder
who
makes
a
QEF
Election
generally
must
report
on
a
current
basis
its
share
of
our
net
capital
gain
and
ordinary
earnings
for
any
year
in
which
we
are
a
PFIC,
whether
or
not
we
distribute
any
amounts
to
our
shareholders.
A
U.S.
shareholder
who
makes
the
mark-to-market
election
generally
must
include
as
ordinary
income
each
year
the
excess
of
the
fair
market
value
of
the
common
shares
over
the
shareholder’s
adjusted
tax
basis
therein.
Each
U.S.
shareholder
should
consult
its
own
tax
advisors
regarding
the
PFIC
rules
and
the
U.S.
federal
income
tax
consequences
of
the
acquisition,
ownership
and
disposition
of
our
common
shares.
It may be difficult for non-Canadian investors to obtain and enforce judgments against us because of our Canadian incorporation and presence.
We
are
a
corporation
existing
under
the
laws
of
the
Province
of
Ontario,
Canada.
Several
of
our
directors
and
officers,
and
several
of
the
experts
are
residents
of
Canada,
and
all
or
a
substantial
portion
of
their
assets,
and
a
substantial
portion
of
our
assets,
are
located
outside
the
United
States.
Consequently,
although
we
have
appointed
an
agent
for
service
of
process
in
the
United
States,
it
may
be
difficult
for
holders
of
our
securities
who
reside
in
the
United
States
to
effect
service
within
the
United
States
upon
those
directors
and
officers,
and
the
experts
who
are
not
residents
of
the
United
States.
It
may
also
be
difficult
for
holders
of
our
securities
who
reside
in
the
United
States
to
realize
in
the
United
States
upon
judgments
of
courts
of
the
United
States
predicated
upon
our
civil
liability
and
the
civil
liability
of
our
directors,
officers
and
experts
under
the
United
States
federal
securities
laws.
Investors
should
not
assume
that
Canadian
courts
(i)
would
enforce
judgments
of
United
States
courts
obtained
in
actions
against
us
or
such
directors,
officers
or
experts
predicated
upon
the
civil
liability
provisions
of
the
United
States
federal
securities
laws
or
the
securities
or
“blue
sky”
laws
of
any
state
or
jurisdiction
of
the
United
States
or
(ii)
would
enforce,
in
original
actions,
liabilities
against
us
or
such
directors,
officers
or
experts
predicated
upon
the
United
States
federal
securities
laws
or
any
securities
or
“blue
sky”
laws
of
any
state
or
jurisdiction
of
the
United
States.
In
addition,
the
protections
afforded
by
Canadian
securities
laws
may
not
be
available
to
investors
in
the
United
States.
18
If there are substantial sales of our common shares, the market price of our common shares could decline.
Sales
of
substantial
numbers
of
our
common
shares
could
cause
a
decline
in
the
market
price
of
our
common
shares.
Any
sales
by
existing
shareholders
or
holders
who
exercise
their
warrants
or
stock
options
may
have
an
adverse
effect
on
our
ability
to
raise
capital
and
may
adversely
affect
the
market
price
of
our
common
shares.
We are an “emerging growth company,” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make
our common shares less attractive to investors.
We
are
an
“emerging
growth
company,”
as
defined
in
the
JOBS
Act.
For
as
long
as
we
continue
to
be
an
emerging
growth
company,
we
may
take
advantage
of
exemptions
from
various
reporting
requirements
that
are
applicable
to
other
public
companies
that
are
not
emerging
growth
companies,
including
not
being
required
to
comply
with
the
auditor
attestation
requirements
of
Section
404
of
the
Sarbanes-Oxley
Act,
reduced
disclosure
obligations
regarding
executive
compensation
in
our
periodic
reports
and
exemptions
from
the
requirements
of
holding
a
nonbinding
advisory
vote
on
executive
compensation
and
shareholder
approval
of
any
golden
parachute
payments
not
previously
approved.
We
could
be
an
emerging
growth
company
for
up
to
five
years,
although
circumstances
could
cause
us
to
lose
that
status
earlier.
We
cannot
predict
if
investors
will
find
our
common
shares
less
attractive
because
we
may
rely
on
these
exemptions.
If
some
investors
find
our
common
shares
less
attractive
as
a
result,
there
may
be
a
less
active
trading
market
for
our
common
shares
and
our
share
price
may
be
more
volatile.
Any failure to maintain an effective system of internal controls may result in material misstatements of our consolidated financial statements or cause us to fail
to meet our reporting obligations or fail to prevent fraud; and in that case, our shareholders could lose confidence in our financial reporting, which would
harm our business and could negatively impact the price of our common shares.
Effective
internal
controls
are
necessary
for
us
to
provide
reliable
financial
reports
and
prevent
fraud.
If
we
fail
to
maintain
an
effective
system
of
internal
controls,
we
might
not
be
able
to
report
our
financial
results
accurately
or
prevent
fraud;
and
in
that
case,
our
shareholders
could
lose
confidence
in
our
financial
reporting,
which
would
harm
our
business
and
could
negatively
impact
the
price
of
our
common
shares.
While
we
believe
that
we
have
sufficient
personnel
and
review
procedures
to
allow
us
to
maintain
an
effective
system
of
internal
controls,
we
cannot
provide
assurance
that
we
will
not
experience
potential
material
weaknesses
in
our
internal
control.
Even
if
we
conclude
that
our
internal
control
over
financial
reporting
provides
reasonable
assurance
regarding
the
reliability
of
financial
reporting
and
the
preparation
of
consolidated
financial
statements
for
external
purposes
in
accordance
with
IFRS
as
issued
by
the
IASB,
because
of
its
inherent
limitations,
internal
control
over
financial
reporting
may
not
prevent
or
detect
fraud
or
misstatements.
Failure
to
implement
required
new
or
improved
controls,
or
difficulties
encountered
in
their
implementation,
could
harm
our
results
of
operations
or
cause
us
to
fail
to
meet
our
future
reporting
obligations.
If
we
fail
to
timely
achieve
and
maintain
the
adequacy
of
our
internal
control
over
financial
reporting,
we
may
not
be
able
to
produce
reliable
financial
reports
or
help
prevent
fraud.
Our
failure
to
achieve
and
maintain
effective
internal
control
over
financial
reporting
could
prevent
us
from
complying
with
our
reporting
obligations
on
a
timely
basis,
which
could
result
in
the
loss
of
investor
confidence
in
the
reliability
of
our
consolidated
financial
statements,
harm
our
business
and
negatively
impact
the
trading
price
of
our
common
shares.
19
As a foreign private issuer, we are not subject to certain United States securities law disclosure requirements that apply to a domestic United States issuer,
which may limit the information which would be publicly available to our shareholders.
As
a
foreign
private
issuer,
we
are
not
required
to
comply
with
all
the
periodic
disclosure
requirements
of
the
Exchange
Act,
and
therefore,
there
may
be
less
publicly
available
information
about
us
than
if
we
were
a
United
States
domestic
issuer.
For
example,
we
are
not
subject
to
the
proxy
rules
in
the
United
States
and
disclosure
with
respect
to
our
annual
meetings
will
be
governed
by
Canadian
requirements.
Our charter documents and certain Canadian legislation could delay or deter a change of control, limit attempts by our shareholders to replace or remove our
current management and limit the market price of our common shares.
Our
authorized
preferred
shares
are
available
for
issuance
from
time
to
time
at
the
discretion
of
our
board
of
directors,
without
shareholder
approval.
Our
articles
grant
our
board
of
directors
the
authority
to
determine
the
special
rights
and
restrictions
granted
to
or
imposed
on
any
unissued
series
of
preferred
shares,
and
those
rights
may
be
superior
to
those
of
our
common
shares.
Further,
the
Investment
Canada
Act
subjects
any
acquisition
of
control
of
a
company
by
a
non-Canadian
to
government
review
if
the
value
of
the
assets
as
calculated
pursuant
to
the
legislation
exceeds
a
threshold
amount
or
in
other
circumstances
determined
at
the
discretion
of
the
Canadian
government.
A
reviewable
acquisition
may
not
proceed
unless
the
relevant
minister
is
satisfied
that
the
investment
is
likely
to
be
of
net
benefit
to
Canada
and
the
Canadian
government
is
satisfied
that
no
other
important
concerns
arise
from
the
acquisition
of
control.
Any
of
the
foregoing
could
prevent
or
delay
a
change
of
control
and
may
deprive
or
limit
strategic
opportunities
to
our
shareholders
to
sell
their
shares.
ITEM 4. INFORMATION ON THE COMPANY
A . History and Development of the Company
Name, Address and Incorporation
We
were
incorporated
under
the
Business Corporations Act (Alberta)
on
March
31,
2004
as
Neurogenesis
Biotech
Corp.
On
October
19,
2004,
we
amended
our
articles
of
incorporation
to
change
our
name
from
Neurogenesis
Biotech
Corp.
to
Stem
Cell
Therapeutics
Corp.,
or
SCT.
On
November
7,
2013
SCT
was
continued
under
the
Business Corporations Act (Ontario),
or
OBCA.
On
June
1,
2014
we
filed
articles
of
amalgamation
to
amalgamate
SCT
with
our
wholly-owned
subsidiary,
which
was
named
Trillium
Therapeutics
Inc.,
and
renamed
the
combined
company
Trillium
Therapeutics
Inc.
On
January
1,
2017
we
filed
articles
of
amalgamation
to
amalgamate
with
our
wholly-owned
subsidiary
Fluorinov
Pharma
Inc.,
or
Fluorinov.
We
are
a
company
domiciled
in
Ontario,
Canada.
Our
head
office
and
registered
office
is
located
at
2488
Dunwin
Drive,
Mississauga,
Ontario,
Canada,
L5L
1J9.
Our
telephone
number
is
(416)
595-0627.
Intercorporate Relationships
As
of
December
31,
2016
we
had
two
wholly-owned
subsidiaries,
Trillium
Therapeutics
USA
Inc.,
which
was
incorporated
March
26,
2015
in
the
State
of
Delaware
and
Fluorinov
which
was
acquired
on
January
26,
2016.
On
January
1,
2017
we
filed
articles
of
amalgamation
to
amalgamate
with
our
wholly-owned
subsidiary
Fluorinov.
General Development of the Business
Acquisition of Fluorinov
On
January
26,
2016,
we
acquired
all
the
outstanding
shares
of
Fluorinov,
a
privately-held
oncology
company
that
has
developed
a
proprietary
medicinal
chemistry
platform
using
unique
fluorine
chemistry,
which
permits
the
creation
of
new
chemical
entities
from
validated
drugs
and
drug
candidates
with
improved
pharmacological
properties,
potentially
leading
to
increased
safety
and
efficacy.
We
expect
Fluorinov’s
fluorine-based
chemistry
platform
will
provide
us
with
an
internal
drug
discovery
engine.
Fluorinov
also
has
a
preclinical
pipeline
of
oncology
assets
including
potent,
orally-available,
bromodomain
and
proteasome
inhibitors,
as
well
as
epidermal
growth
factor
receptor
antagonists
with
increased
uptake
in
the
brain,
all
of
which
have
potential
for
best-in-class
status.
We
anticipate
that
future
cancer
treatments
will
be
dominated
by
combination
therapies
that
may
often
involve
combining
biologics
and
small
molecules.
The
acquisition
of
our
own
small
molecule
platform
with
opportunity
for
oral
drug
delivery
may
provide
us
with
new
drug
candidates
that
we
may
either
develop
in-
house
or
out-license.
According
to
Wang
et
al.
Chem
Rev.
2014,
114
(4),
approximately
25%
of
all
marketed
drugs
contain
fluorine.
The
benefits
of
fluorine
include
blocking
sites
of
metabolism
to
increase
drug
half-life
and
reduce
toxicity,
lipophilicity
that
improves
oral
absorption
and
blood
brain
barrier
penetration,
and
electronegativity
that
alters
chemical
properties
to
improve
binding
and
potency.
We
believe
that
the
Fluorinov
acquisition
reduces
the
risks
to
which
we
are
subject
and
diversifies
us
for
the
longer
term.
20
The
acquisition
date
fair
value
of
consideration
transferred
and
the
fair
value
of
identifiable
assets
acquired
and
liabilities
assumed
are
as
follows:
Fair
value
of
consideration
paid:
Cash
Working
capital
deficiency
Contingent
consideration
Assets
acquired:
Cash
Amount
due
from
Fluorinov
shareholders
Acquired
technology
Liabilities
assumed:
Accounts
payable
and
accrued
liabilities
Deferred
tax
liabilities
Net
identifiable
assets
acquired
$
10,000,000
(134,089)
1,750,000
11,615,911
291,078
36,886
15,439,759
15,767,723
462,138
3,689,674
4,151,812
11,615,911
The
upfront
consideration
for
Fluorinov
was
$10,000,000
less
the
working
capital
deficiency
of
$134,089.
We
may
also
incur
up
to
$35
million
of
future
payments
contingent
on
us
achieving
certain
clinical
and
regulatory
milestones
with
an
existing
Fluorinov
compound.
The
amount
of
contingent
consideration
recognized
by
us
as
of
the
acquisition
date
was
$1,750,000
and
has
been
classified
as
other
liabilities
on
the
consolidated
statement
of
financial
position.
The
fair
value
of
the
contingent
consideration
was
calculated
using
a
discounted
cash
flow
approach,
where
a
risk-adjusted
discount
rate
was
applied
to
future
cash
flows.
We
also
have
an
obligation
to
pay
royalty
payments
on
future
sales
of
such
compounds.
At
our
discretion,
up
to
50%
of
the
future
contingent
payments
can
be
satisfied
through
the
issuance
of
our
common
shares,
provided
that
the
aggregate
number
of
common
shares
issuable
under
such
payments
will
not
exceed
1,558,447
common
shares
unless
shareholder
approval
has
first
been
obtained.
In
addition,
any
such
future
share
issuance
remains
subject
to
final
approval
from
our
board
of
directors
and
receipt
of
any
requisite
approvals
under
the
applicable
rules
of
the
TSX
and
NASDAQ.
We
have
also
committed
to
use
commercially
reasonable
efforts
to
monetize
Fluorinov’s
central
nervous
system
assets
and
share
50%
of
the
net
proceeds
with
Fluorinov
shareholders.
21
Cash
used
in
the
acquisition
was
determined
as
follows:
Cash
consideration
Less
cash
acquired
$
9,865,911
291,078
9,574,833
Acquisition
costs
incurred
by
us
and
included
in
general
and
administrative
expenses
for
the
years
ended
December
31,
2016
and
2015,
were
$106,887
and
$174,671,
respectively.
From
the
date
of
the
acquisition
to
December
31,
2016,
Fluorinov
contributed
revenue
of
nil
and
a
loss
of
$7,334,368.
If
the
acquisition
had
occurred
on
January
1,
2016,
our
combined
loss
for
the
year
ended
December
31,
2016,
would
be
$31,789,540.
In
connection
with
the
acquisition,
we
established
deferred
tax
liabilities
related
to
the
acquired
identifiable
intangible
assets
and
determined
that
these
deferred
tax
liabilities
exceeded
the
acquired
deferred
tax
assets.
This
allowed
us
to
realize
a
deferred
tax
benefit
of
$3,689,674
by
releasing
the
valuation
allowance
associated
with
our
overall
deferred
tax
assets.
The
acquisition
of
Fluorinov
was
considered
a
related
party
transaction
as
two
of
our
directors
were
determined
to
be
related
parties
of
Fluorinov.
One
director
was
a
director
of
Fluorinov
and
had
an
ownership
position
in
Fluorinov
at
the
time
of
acquisition
of
less
than
2%,
and
the
second
director
was
a
director
of
an
entity
that
was
a
beneficiary
of
a
trust
that
was
a
shareholder
and
debenture
holder
of
Fluorinov.
The
two
directors
declared
their
conflict
of
interest
and
abstained
from
all
discussions
and
decisions
concerning
the
Fluorinov
acquisition.
Accordingly,
we
determined
that
the
consideration
paid
on
the
acquisition
was
made
on
terms
equivalent
to
those
that
prevail
in
arm’s
length
transactions.
Capital Expenditures
Capital
expenditures
for
the
last
three
fiscal
years
are
set
out
in
the
following
table.
Capital
expenditures
$2,966,317
$780,382
$173,603
Year ended
December 31, 2016
Year ended
December 31, 2015
Year ended
December 31, 2014
Capital
expenditures
for
2015
and
2014
were
mainly
for
new
laboratory
equipment.
In
2015
we
entered
into
a
lease
for
new
laboratory
and
office
space
also
incurring
some
leasehold
improvements.
In
2016,
the
majority
of
the
capital
expenditures
related
to
leasehold
improvements,
laboratory
equipment,
office
furniture
and
computer
equipment.
B. Business Overview
Overview
We
are
a
clinical
stage
immuno-oncology
company
developing
innovative
therapies
for
the
treatment
of
cancer.
Our
lead
program,
TTI-621,
is
a
SIRPαFc
fusion
protein
that
consists
of
the
extracellular
CD47-binding
domain
of
human
SIRPα
linked
to
the
Fc
region
of
a
human
immunoglobulin
G1
(IgG1).
It
is
designed
to
act
as
a
soluble
decoy
receptor,
preventing
CD47
from
delivering
its
inhibitory
(“do
not
eat”)
signal.
Neutralization
of
the
inhibitory
CD47
signal
enables
the
activation
of
macrophage
anti-tumor
effects
by
pro-phagocytic
(“eat”)
signals.
The
IgG1
Fc
region
of
TTI-621
may
also
assist
in
the
activation
of
macrophages
by
engaging
Fc
receptors.
Two
Phase
I
clinical
trials
evaluating
TTI-621
are
ongoing.
A
second
SIRPαFc
fusion
protein,
TTI-622,
is
also
in
preclinical
development.
TTI-622
consists
of
the
extracellular
CD47-binding
domain
of
human
SIRPα
linked
to
an
IgG4
Fc
region,
which
has
a
decreased
ability
to
engage
Fc
receptors
than
an
IgG1
Fc.
We
plan
to
submit
an
IND
for
TTI-622
in
the
second
half
of
2017
and
begin
recruiting
patients
into
a
Phase
I
clinical
trial
in
early
2018.
Both
SIRPαFc
fusion
proteins
enable
CD47
blockade
with
different
levels
of
Fc
receptor
engagement
on
macrophages
and
thus
may
find
unique
applications.
We
also
have
a
proprietary
medicinal
chemistry
platform,
using
unique
fluorine
chemistry,
which
permits
the
creation
of
new
chemical
entities
with
improved
pharmacological
properties
from
validated
drugs
and
drug
candidates.
Stemming
from
this
platform,
our
most
advanced
preclinical
program
is
an
orally-available
bromodomain
inhibitor,
followed
by
an
epidermal
growth
factor
receptor
antagonist.
In
addition,
a
number
of
compounds
directed
at
undisclosed
immuno-
oncology
targets
are
currently
in
the
discovery
phase.
22
Our Strategy
Our
goal
is
to
become
a
leading
innovator
in
the
field
of
oncology
by
targeting
immune-regulatory
pathways
that
tumor
cells
exploit
to
evade
the
host
immune
system.
Rapidly advance the clinical development of TTI-621 .
We
completed
the
Phase
Ia
dose
escalation
phase
of
our
first-in-
human
clinical
trial
of
TTI-621
in
patients
with
relapsed
or
refractory
lymphoma.
We
are
now
enrolling
patients
with
advanced
hematologic
malignancies
in
a
Phase
Ib
expansion
phase
of
the
trial
with
10
cohorts,
including
a
rituximab
combination
cohort.
We
have
initiated
a
second
Phase
I
clinical
trial
with
intratumoral
injection
of
TTI-621
in
percutaneously
accessible
solid
tumors
and
mycosis
fungoides.
Expand our TTI-621 clinical program to include additional cancer indications .
Because
CD47
is
highly
expressed
by
multiple
liquid
and
solid
tumors,
and
high
expression
is
correlated
with
worse
clinical
outcomes,
we
believe
SIRPαFc
has
potential
to
be
effective
in
a
wide
variety
of
cancers.
Our
clinical
development
plans
include
a
broad
approach
for
the
treatment
of
hematological
malignancies,
a
more
targeted
approach
with
solid
tumors,
and
includes
strategies
to
expand
our
trials
to
include
combination
treatment
cohorts.
We
continue
our
preclinical
work
to
select
additional,
high
potential
cancer
indications
and
identify
promising
combinations.
Maximize value of SIRP α Fc through advancement of TTI-622 .
We
plan
to
file
an
IND
in
the
second
half
of
2017
to
advance
our
second
SIRPαFc
protein
into
clinical
studies.
TTI-622
will
be
developed
for
combination
therapy
treatment
and
is
expected
to
have
an
advantage
over
competitive
IgG4-
based
antibodies
due
to
its
expected
lack
of
erythrocyte
binding.
Build a pipeline of novel oncology products using our proprietary medicinal chemistry platform. We
have
several
preclinical
and
discovery
stage
assets
developed
using
our
proprietary
fluorine
chemistry
platform.
We
plan
to
advance
these
novel
oncology
products
for
internal
development
or
out-license.
23
Our Product Candidates
SIRP α Fc
Blocking the CD47 “do not eat” signal using a SIRP α Fc decoy receptor
The
immune
system
is
the
body’s
mechanism
to
identify
and
eliminate
pathogens,
and
can
be
divided
into
the
innate
immune
system
and
the
adaptive
immune
system.
The
innate
immune
system
is
the
body’s
first
line
of
defense
to
identify
and
eliminate
pathogens
and
consists
of
proteins
and
cells,
such
as
macrophages,
that
identify
and
provide
an
immediate
response
to
pathogens.
The
adaptive
immune
system
is
activated
by,
and
adapts
to,
pathogens,
creating
a
targeted
and
durable
response.
Cancer
cells
often
have
the
ability
to
reduce
the
immune
system’s
ability
to
recognize
and
destroy
them.
Macrophages
are
a
type
of
white
blood
cell
that
can
ingest
and
destroy
(phagocytose)
other
cells.
Macrophage
activity
is
controlled
by
both
positive
“eat”
and
negative
“do
not
eat”
signals.
Recently,
a
role
for
macrophages
in
the
control
of
tumors
has
been
described.
Tumor
cells
may
express
“eat”
signals
(e.g.,
calreticulin)
that
make
themselves
visible
to
macrophages.
To
counterbalance
this
increased
visibility
the
tumor
cells
often
express
high
levels
of
CD47,
which
transmits
a
“do
not
eat”
signal
by
binding
signal
regulatory
protein
alpha,
or
SIRPα,
on
the
surface
of
macrophages.
We
believe
that
the
higher
expression
of
CD47
on
the
tumor
cell
helps
it
evade
destruction
by
the
macrophage
by
overwhelming
any
activating
“eat”
signals.
Our
lead
program,
TTI-621,
is
a
novel
SIRPαFc
fusion
protein
that
harnesses
the
innate
immune
system
by
blocking
the
activity
of
CD47.
TTI-621
is
a
protein
that
consists
of
the
CD47-binding
domain
of
human
SIRPα
linked
to
the
Fc
region
of
human
immunoglobulin
G1
(IgG1).
It
is
designed
to
act
as
a
soluble
decoy
receptor,
preventing
CD47
from
delivering
its
inhibitory
signal.
Neutralization
of
the
inhibitory
CD47
signal
enables
the
activation
of
macrophage
anti-tumor
effects
by
the
pro-phagocytic
“eat”
signals.
The
IgG1
Fc
region
of
TTI-621
may
also
assist
in
the
activation
of
macrophages
by
engaging
Fc
receptors.
A
second
SIRPαFc
fusion
protein,
TTI-622,
is
also
in
preclinical
development.
TTI-622
consists
of
the
same
CD47-binding
domain
of
human
SIRPα
and
is
linked
to
the
Fc
region
of
human
immunoglobulin
G4
(IgG4).
The
IgG4
Fc
region
of
TTI-622
is
expected
to
have
a
decreased
ability
to
engage
activating
Fc
receptors
compared
to
an
IgG1
Fc.
24
In
addition
to
their
direct
anti-tumor
activity,
macrophages
can
also
function
as
antigen-presenting
cells
and
stimulate
antigen-specific
T
cells.
Thus
it
is
possible
that
increasing
tumor
cell
phagocytosis
after
SIRPαFc
exposure
may
result
in
enhanced
adaptive
immunity.
In
support
of
this,
CD47
antibody
blockade
has
been
recently
shown
to
augment
antigen
presentation
and
prime
an
anti-tumor
cytotoxic
T
cell
response
in
immune-competent
mice.
In
2016,
we
presented
data
demonstrating
that
TTI-621
can
augment
antigen-specific
T
cell
responses
in
vitro.
CD47
blockade
has
also
been
reported
to
promote
tumor-specific
T
cell
responses
through
a
dendritic
cell-based
mechanism,
although
the
effect
of
SIRPαFc
on
dendritic
cells
is
currently
unknown.
The
figure
below
illustrates
how
SIRPαFc
blocks
the
CD47
“do
not
eat”
signal
and
engages
activating
Fc
receptors
on
macrophages,
leading
to
tumor
cell
phagocytosis,
increased
antigen
presentation
and
enhanced
T
cell
responses.
By
inhibiting
the
CD47
“do
not
eat”
signal,
we
believe
SIRPαFc
has
the
ability
to
promote
the
macrophage-mediated
killing
of
tumor
cells
in
a
broad
variety
of
cancers
both
as
a
monotherapy
and
in
combination
with
other
immune
therapies.
Both
SIRPαFc
fusion
proteins
enable
CD47
blockade
with
different
levels
of
Fc
receptor
engagement
on
macrophages
and
thus
may
find
unique
applications.
We
believe
that
SIRPαFc
has
broad
clinical
potential
in
both
hematological
and
solid
tumors.
High
expression
of
the
CD47
“do
not
eat”
signal
on
tumor
cells
has
been
observed
in
AML,
MDS,
chronic
myeloid
leukemia,
or
CML,
acute
lymphoblastic
leukemia,
or
ALL,
diffuse
large
B
cell
lymphoma,
or
DLBCL,
chronic
lymphocytic
leukemia,
or
CLL,
follicular
lymphoma,
mantle
cell
lymphoma,
marginal
zone
lymphoma,
multiple
myeloma
and
in
solid
tumors
including:
bladder,
brain,
breast,
colon,
leiomyosarcoma,
liver,
melanoma,
ovarian
and
prostate.
In
a
number
of
these
cancers
high
CD47
expression
was
shown
to
have
negative
clinical
consequences,
correlating
with
more
aggressive
disease
and
poor
survival.
In
normal
karyotype
AML
patients,
for
example,
high
CD47
expression
was
correlated
with
worse
event-free
survival
(6.8
vs.
17.1
months)
and
worse
overall
survival
(9.1
vs.
22.1
months)
compared
to
low
CD47
expression.
These
data
are
consistent
with
CD47
providing
a
survival
advantage
to
tumor
cells.
25
In
vitro
studies
with
primary
tumor
samples
obtained
from
AML,
MDS,
multiple
myeloma,
B
cell-ALL
and
T-cell
ALL
demonstrated
that
SIRPαFc
frequently
triggered
significantly
macrophage-mediated
tumor
cell
phagocytosis
compared
to
control
treatment.
Similar
results
were
observed
with
tumor
cell
lines
established
from
patients
with
B
lymphoma
and
CML.
In
vivo
studies
have
demonstrated
that
TTI-621
exhibits
anti-tumor
activity
in
xenograft
models
of
AML,
Burkitt
lymphoma
and
DLBCL.
These
results
are
supported
by
numerous
studies
demonstrating
that
antibody
blockade
of
CD47
has
activity
against
a
range
of
tumor
xenografts.
SIRP α Fc Key Attributes
Potential efficacy in a broad range of cancers. SIRPαFc
blocks
the
tumor’s
ability
to
transmit
a
“do
not
eat”
signal
allowing
macrophages
to
destroy
tumor
cells;
a
mechanism
that
we
believe
could
have
broad
applicability.
Potential for use as monotherapy and in combination with other therapies. We
intend
to
develop
our
products
as
monotherapies
as
well
as
potentially
for
use
in
combination
with
other
cancer
immuno-therapies.
May enhance both innate and adaptive immune response. SIRPαFc
may
enhance
stimulation
of
tumor
attacking
T
cells
since
macrophages,
in
addition
to
their
role
in
phagocytosis,
can
also
prime
T
cells
through
antigen
presentation.
26
SIRP α Fc Clinical Development – TTI-621
We
are
enrolling
patients
with
advanced
hematologic
malignancies
in
a
Phase
Ib
clinical
trial.
This
two-part
clinical
trial
was
designed
as
a
multi-center,
open-label
Phase
Ia/Ib
trial,
evaluating
TTI-621
as
a
single-agent
in
patients
with
relapsed
or
refractory
hematologic
malignancies.
During
the
dose
escalation
phase
the
safety,
tolerability,
pharmacokinetics
and
pharmacodynamics
were
characterized
to
determine
the
optimal
dose
for
subsequent
enrollment
in
the
expansion
phase.
To
characterize
potential
changes
in
hematologic
parameters
that
might
occur
with
blockade
of
CD47,
the
dose-escalation
portion
of
the
Phase
I
trial
included
lymphoma
patients
with
relatively
normal
hematologic
parameters
and
acceptable
marrow
function.
In
November
2016,
a
reasonably
well-tolerated
dose
and
schedule
of
SIRPαFc
was
established
in
the
dose
escalation
phase,
and
now,
safety
and
antitumor
activity
is
being
examined
in
expansion
cohorts
with
advanced
hematologic
malignancies
including
indolent
B-cell
lymphoma,
aggressive
B-cell
lymphoma,
T-cell
lymphoma,
Hodgkin
lymphoma,
chronic
lymphocytic
leukemia,
multiple
myeloma,
acute
myeloid
leukemia,
myelodysplastic
syndrome
and
myeloproliferative
neoplasms.
In
a
separate
expansion
cohort,
patients
with
CD20-positive
lymphomas
are
being
treated
with
TTI-621
in
combination
with
rituximab.
In
the
dose-escalation
phase
of
the
trial,
we
observed
preliminary
evidence
of
anti-tumor
activity
and
achieved
a
well-tolerated
dose
of
0.2
mg/kg/week
that
was
associated
with
predictable,
transient
thrombocytopenia
-
consistent
with
augmented
systemic
phagocytosis.
At
this
dose
level,
we
believe
we
obtained
both
CD47
receptor
occupancy
in
circulating
leukocytes
and
elevations
in
macrophage-associated
cytokines
that
are
both
associated
with
high
phagocytosis
of
tumor
targets
in
vitro.
We
also
observed
decreasing
tumor
volume
and/or
reduced
metabolic
activity
over
extended
intervals
of
continued
dosing
in
several
patients
and
one
patient
achieved
a
partial
response.
Recent
pharmacokinetic
and
pharmacodynamic
data
from
patients
having
received
multiple
weekly
infusions
of
TTI-621
suggest
that
repeat
dosing
of
TTI-621
is
able
to
overcome
the
CD47
antigen
sink
and
achieve
circulating
drug
concentrations
that
are
associated
with
biological
activity
in
preclinical
studies.
After
6
weeks
of
treatment,
the
terminal
serum
half-life
of
TTI-621
is
significantly
increased
compared
to
the
first
infusion
and
is
accompanied
by
an
increase
in
circulating
drug
levels
and
target
receptor
occupancy,
including
occupancy
of
CD47
on
circulating
leukemic
blast
cells.
The
transient
decrease
in
platelets
observed
immediately
following
TTI-621
exposure
was
attenuated
in
most
patients
receiving
multiple
infusions.
Overall,
these
latest
results
suggest
that
we
overcome
the
platelet
antigen
sink
and
achieve
meaningful
TTI-621
exposure
while
maintaining
acceptable
platelet
counts.
In
our
second
multi-center,
open-label
Phase
I
trial,
TTI-621
is
being
delivered
by
intratumoral
injection
in
patients
with
relapsed
and
refractory,
percutaneously-
accessible
cancers.
Patients
will
be
enrolled
in
sequential
dose
cohorts
to
receive
intratumoral
injections
of
TTI-621
that
increase
in
dose
and
dosing
frequency
to
characterize
safety,
pharmacokinetics,
pharmacodynamics
and
preliminary
evidence
of
antitumor
activity.
In
addition,
detailed
evaluation
of
serial,
on-treatment
tumor
biopsies
of
both
injected
and
non-injected
cancer
lesions
will
help
characterize
tumor
microenvironment
changes
anticipated
with
CD47
blockade.
We
believe
the
study
of
TTI-621
delivered
by
intratumoral
injections
could
lead
to
a
more
thorough
understanding
of
its
mechanism
of
action
and
could
provide
insight
into
the
tumor
micro-environment
before,
during
and
after
treatment
with
TTI-621.
SIRP α Fc Clinical Development – TTI-622
A
second
SIRPαFc
fusion
protein,
TTI-622,
is
also
in
preclinical
development.
TTI-622
consists
of
the
same
extracellular
CD47-binding
domain
of
human
SIRPα
as
TTI-621
but
a
different
Fc
region
(IgG4
Fc
instead
of
IgG1
Fc).
The
IgG4
Fc
region
of
TTI-622
is
expected
to
have
a
lower
level
of
macrophage
activation
and
therefore
may
allow
for
greater
drug
exposure
in
patients
and
for
unique
combination
opportunities.
We
plan
to
submit
an
IND
for
TTI-622
in
the
second
half
of
2017
and
begin
recruiting
patients
into
a
Phase
I
clinical
trial
in
early
2018.
SIRP α Fc Competition
There
are
a
number
of
companies
developing
blocking
agents
to
the
CD47-SIRPa
axis,
which
can
be
broadly
classified
into
four
groups:
CD47-specific antibodies :
Forty-Seven
Inc.
(Phase
I),
Celgene
Corporation
(Phase
I),
Surface
Oncology
(preclinical)
and
Tioma
Therapeutics
(preclinical)
CD47 bispecific antibodies :
Novimmune
SA
(CD47/CD19
bispecific
antibody,
preclinical)
27
Mutated high affinity SIRPα :
Alexo
Therapeutics
(Phase
I)
SIRP α -specific antibody :
OSE
Immunotherapeutics
(preclinical)
We
believe
that
our
SIRPαFc
fusion
proteins
have
several
advantages
over
competitor
products,
which
are
summarized
in
the
table
below.
Competitor Class
Potential SIRP α Fc Advantages
CD47-specific
antibody
SIRPαFc
does
not
bind
red
blood
cells
(RBCs).
IgG1
isotype
of
TTI-621
may
confer
greater
potency
than
IgG4-based
antibodies.
CD47
bispecific
antibody
Bispecific
is
limited
to
tumors
that
express
both
target
antigens.
SIRPαFc
may
have
more
broad
applicability.
Mutated
high
affinity
SIRPα
SIRPαFc
does
not
bind
red
blood
cells
(RBCs).
SIRPα-specific
antibody
SIRPαFc
fusion
proteins,
which
are
based
on
wild
type
sequences,
are
less
likely
to
be
immunogenic
than
mutated
SIRPα.
SIRPα-specific
antibodies
bind
macrophages
and
generally
do
not
bind
tumors.
We
believe
that
targeting
the
tumor
cell
directly
using
SIRPαFc
is
more
likely
to
generate
effective
anti-tumor
responses.
We
have
demonstrated
that
our
SIRPαFc
fusion
proteins
exhibit
minimal
binding
to
human
red
blood
cells,
or
RBCs,
in
contrast
to
CD47-specific
antibodies
and
a
mutated
high
affinity
SIRPα.
We
believe
that
this
property
confers
several
possible
advantages
including
avoidance
of
drug-induced
anemia,
avoidance
of
the
“antigen
sink
effect”
(i.e.,
removal
of
drug
from
circulation
by
RBCs)
and
non-interference
with
laboratory
blood
typing
tests.
It
should
be
noted
that
TTI-622
shares
the
same
CD47-binding
domain
as
TTI-621
and
preclinical
studies
have
shown
that
it
also
exhibits
minimal
binding
to
human
RBCs.
Thus,
we
anticipate
that
TTI-622,
like
TTI-621,
will
not
induce
anemia
in
patients.
Combination Therapy
We
believe
that
SIRPαFc
enhancement
of
macrophage
activity,
and
possibly
T
cell
responses,
could
be
synergistic
with
other
immune-mediated
therapies.
Published
studies
conducted
by
third
parties
provide
evidence
that
SIRPαFc
may
be
useful
in
combination
with
approved
anti-cancer
antibodies
(e.g.
Rituxan®,
Herceptin®,
Campath®,
and
Erbitux®).
Since
many
cancer
antibodies
work
at
least
in
part
by
activating
cells
of
the
innate
immune
system,
it
may
be
possible
to
enhance
the
potency
of
these
agents
by
blocking
the
negative
“do
not
eat”
CD47
signal
that
tumor
cells
deliver
to
macrophages.
We
hypothesize
that
SIRPαFc
may
act
synergistically
with
other
immunological
agents,
including
T
cell
checkpoint
inhibitors
(e.g.
pembrolizumab
and
nivolumab),
cancer
vaccines,
oncolytic
viruses
or
chimeric
antigen
receptor,
or
CAR
T
cells.
Fluorine Chemistry Platform
Our
medicinal
chemistry
platform
uses
proprietary
fluorine-based
chemistry
to
modify
specific
properties
of
validated
drug
candidates
to
yield
new
chemical
entities.
We
believe
the
potency
and/or
safety
of
both
existing
pharmacophores
and
historically
inaccessible
chemical
structures
may
be
enhanced
using
our
technology.
This
chemistry
platform
has
been
utilized
to
establish
two
preclinical
programs,
a
BET
bromodomain
inhibitor
and
an
EGFR
inhibitor,
and
a
number
of
compounds
directed
at
undisclosed
immuno-oncology
targets
are
currently
in
the
discovery
phase.
28
BET Bromodomain Inhibitor (TTI-281)
Bromodomains
recognize
and
bind
to
DNA-associated
proteins
that
have
been
epigenetically
modified.
These
“epigenetic
readers”
act
as
scaffolds
for
the
recruitment
of
proteins
involved
in
the
initiation
of
gene
expression.
Bromodomain-containing
proteins
regulate
genes
that
play
roles
in
proliferation,
cell
cycle
progression
and
apoptosis.
Members
of
the
BET
(bromodomain
and
extra-terminal)
subfamily
have
been
implicated
in
controlling
the
transcription
of
c-Myc,
a
proto-oncogene
that
contributes
to
the
pathogenesis
of
many
cancers
but
has
proven
to
be
difficult
to
target
pharmacologically.
TTI-281
selectively
binds
the
BET
proteins
BRD2,
BRD3
and
BRD4
and
is
2-6
fold
more
potent
than
a
leading
bromodomain
inhibitor.
It
is
strongly
cytotoxic
to
AML
cells
but
not
to
normal
hematopoietic
cells,
and
reversibly
suppresses
the
expression
of
c-Myc.
TTI-281
has
demonstrated
oral
efficacy
in
xenograft
models
of
human
leukemia
and
myeloma.
TTI-281
is
in
preclinical
development.
EGFR Inhibitor
The
epidermal
growth
factor
receptor,
or
EGFR,
is
a
validated
drug
target
in
oncology
but
the
use
of
EGFR
inhibitors
has
been
limited
by
two
factors.
First,
toxicities
can
arise
from
indiscriminate
reactivity
with
off-target
proteins.
Second,
the
low
central
nervous
system,
or
CNS,
penetration
of
existing
EGFR
inhibitors
limits
their
use
for
CNS
indications
such
as
glioblastoma
multiforme
and
brain
metastasis
from
lung
cancer.
The
incorporation
of
fluorine
into
small
molecules
is
known
to
minimize
the
formation
of
highly
reactive
metabolites
and
improve
blood
brain
barrier
penetration
and
thus
this
strategy
has
the
potential
to
overcome
the
major
limitations
of
existing
EGFR
inhibitors.
We
have
a
novel
class
of
highly
selective
and
potent
orally
available
small
molecule
EGFR
inhibitors
that
exhibit
potent
in
vitro
activity
comparable
to
approved
EGFR
inhibitors
and
improved
brain
penetration
in
multiple
animal
species.
Screening
of
second-
and
third-generation
brain
penetrant
EGFR
inhibitors
is
currently
in
progress
as
part
of
our
preclinical
development
program
for
this
product
candidate.
Intellectual Property
In
connection
specifically
with
patent
applications
relating
to
SIRPaFc,
we
control
two
patent
families
that
comprise
nineteen
individual
filings.
One
family
has
claims
that
embrace
species
of
SIRPaFc
found
to
have
certain
therapeutic
properties
and
their
use
for
the
treatment
of
cancer.
These
patent
rights
are
owned
outright
by
us
and
patent
filings
have
been
arranged
in
the
major
pharmaceutical
markets.
Patents
emerging
from
this
family
begin
to
expire
in
2033.
A
second
SIRPa
patent
family
was
in-licensed
on
an
exclusive
basis
from
co-owners
UHN
and
HSC.
This
family
has
been
filed
in
the
major
markets,
including
US,
Europe,
Japan,
Canada,
Australia,
China,
and
India.
The
claims
cover
the
use
of
various
forms
of
SIRPa
to
treat
CD47-positive
cancers.
Patents
in
this
family
have
so
far
been
granted
in
Europe
and
Australia.
Patents
in
this
family
begin
to
expire
in
the
year
2029.
Our
small
molecule
patent
portfolio
embraces
patent
filings
that
cover
twelve
different
inventions.
With
the
exception
of
one
process
scheme,
these
patent
filings
each
claim
a
family
of
small
molecule
drugs
as
compositions
of
matter,
together
with
claims
for
their
production
and
their
medical
uses.
These
drugs
target
cancer
for
the
most
part,
and
some
related
medical
end-uses.
We
intend
to
protect
additional
intellectual
property
developed
by
us
through
the
filing
of
patent
applications
within
the
appropriate
jurisdictions
throughout
the
world.
Regulatory Process
Securing
final
regulatory
approval
for
the
manufacture
and
sale
of
human
therapeutic
products
in
the
U.S.,
Europe,
Canada
and
other
commercial
territories,
is
a
long
and
costly
process
that
is
controlled
by
that
particular
territory’s
national
regulatory
agency.
The
national
regulatory
agency
in
the
United
States
is
the
FDA,
in
Canada
it
is
HC,
and
in
Europe
it
is
the
European
Medicines
Agency,
or
EMA.
Other
national
regulatory
agencies
have
similar
regulatory
approval
processes,
but
each
national
regulatory
agency
has
its
own
approval
processes.
Approval
in
U.S.,
Canada
or
Europe
does
not
assure
approval
by
other
national
regulatory
agencies,
although
often
test
results
from
one
country
may
be
used
in
applications
for
regulatory
approval
in
another
country.
29
None
of
our
products
have
been
completely
developed
or
tested
and,
therefore,
we
are
not
yet
in
a
position
to
seek
final
regulatory
approval
to
market
any
of
our
products.
U.S. Approval Process
In
the
U.S.,
the
FDA,
a
federal
government
agency,
is
responsible
for
the
drug
approval
process.
The
FDA’s
mission
is
to
protect
human
health
by
ensuring
that
all
medications
on
the
market
are
safe
and
effective.
The
FDA’s
approval
process
examines
potential
drugs
and
only
those
that
meet
strict
requirements
are
approved.
The
U.S.
food
and
drug
regulations
require
licensing
of
manufacturing
facilities,
carefully
controlled
research
and
testing
of
products,
governmental
review
and
approval
of
test
results
prior
to
marketing
of
therapeutic
products,
and
adherence
to
cGMP.
The
drug
approval
process
begins
with
the
discovery
of
a
potential
drug.
Pharmaceutical
companies
then
test
the
drug
extensively.
A
description
of
the
different
stages
in
the
drug
approval
process
in
the
U.S.
follows.
Stage 1: Preclinical Research. After
an
experimental
drug
is
discovered,
research
is
conducted
to
help
determine
its
potential
for
treating
or
curing
an
illness.
This
is
called
preclinical
research.
Animal
studies
are
conducted
to
determine
if
there
are
any
harmful
effects
of
the
drug
and
to
help
understand
how
the
drug
works.
Information
from
these
experiments
is
submitted
in
an
IND
application
to
the
FDA
for
review,
to
decide
if
the
drug
is
safe
to
proceed
for
study
in
humans.
Stage 2: Clinical Research. In
Stage
2,
the
experimental
drug
is
studied
in
humans
in
clinical
trials.
Clinical
trials
are
carefully
designed
and
controlled
experiments
in
which
the
experimental
drug
is
administered
to
patients
to
test
its
safety
and
to
determine
the
effectiveness
of
an
experimental
drug.
The
four
general
phases
of
clinical
research
are
described
below.
Phase I .
Phase
I
includes
the
initial
introduction
of
an
investigational
new
drug
into
humans.
Phase
I
studies
are
typically
conducted
in
patients
or
healthy
volunteer
subjects.
These
studies
are
designed
to
determine
the
metabolism
and
pharmacologic
actions
of
the
drug
in
humans,
the
side
effects
associated
with
increasing
doses,
and,
if
possible,
to
gain
early
evidence
on
effectiveness.
During
phase
I,
sufficient
information
about
the
drug“s
pharmacokinetic
and
pharmacological
effects
is
obtained
to
permit
the
design
of
well-controlled,
scientifically
valid,
phase
II
studies.
Phase
I
studies
also
include
studies
of
drug
metabolism,
structure-activity
relationships,
and
mechanism
of
action
in
humans,
as
well
as
studies
in
which
investigational
drugs
are
used
as
research
tools
to
explore
biological
phenomena
or
disease
processes.
Phase II. Phase
II
includes
the
controlled
clinical
studies
to
evaluate
the
effectiveness
of
the
drug
for
a
particular
indication
or
indications
in
patients
with
the
disease
or
condition
under
study
and
to
determine
the
common
short-term
side
effects
and
risks
associated
with
the
drug.
Phase III .
Phase
III
studies
are
expanded
controlled
and
uncontrolled
trials.
They
are
performed
after
preliminary
evidence
suggesting
effectiveness
of
the
drug
has
been
obtained,
and
are
intended
to
gather
the
additional
information
about
effectiveness
and
safety
that
is
needed
to
evaluate
the
overall
benefit-risk
relationship
of
the
drug
and
to
provide
an
adequate
basis
for
physician
labeling.
Phase IV .
Phase
IV
studies
are
undertaken
after
the
drug
or
treatment
has
been
marketed
to
gather
information
on
the
drug“s
effect
in
various
populations
and
any
side
effects
associated
with
long-term
use.
30
Stage 3: FDA Review for Approval. Following
Phase
III,
the
pharmaceutical
company
prepares
reports
of
all
studies
conducted
on
the
drug
and
a
complete
dossier
on
the
manufacturing
of
the
product
and
submits
the
reports
to
the
FDA
in
a
New
Drug
Application,
or
NDA
or
BLA.
The
FDA
reviews
the
information
in
the
NDA/BLA
to
determine
if
the
drug
is
safe
and
effective
for
its
intended
use.
If
the
FDA
determines
that
the
drug
is
safe
and
effective,
the
drug
will
be
approved.
Stage 4: Marketing. After
the
FDA
has
approved
the
drug,
the
pharmaceutical
company
can
make
it
available
to
physicians
and
their
patients.
A
company
may
also
continue
to
conduct
research
to
discover
new
uses
for
the
drug.
Each
time
a
new
use
for
a
drug
is
discovered,
the
drug
is
once
again
subject
to
the
entire
FDA
approval
process
before
it
can
be
marketed
for
that
purpose.
Manufacturing and Supply
We
have
limited
experience
in
manufacturing
products
for
clinical
or
commercial
purposes.
We
produce
small
quantities
of
SIRPaFc
and
small
molecule
compounds
in
our
laboratories
for
internal
use.
We
have
established
a
contract
manufacturing
relationship
for
the
supply
of
SIRPaFc
and
our
bromodomain
inhibitor
that
we
believe
will
provide
sufficient
material
for
early
clinical
trials.
In
addition,
we
are
establishing
the
basis
for
long-term
commercial
production
capabilities.
However,
there
can
be
no
assurance
that
our
contract
manufacturer
will
be
successful
at
scaling
up
and
producing
our
product
with
the
required
quality
and
in
the
quantities
and
timelines
that
we
will
need
for
clinical
and/or
commercial
purposes.
We
expect
to
similarly
rely
on
contract
manufacturing
relationships
for
any
products
that
we
may
further
develop,
or
in-license
or
acquire
in
the
future.
However,
there
can
be
no
assurance
that
we
will
be
able
to
successfully
contract
with
such
manufacturers
on
terms
acceptable
to
us,
or
at
all.
Contract
manufacturers
are
subject
to
ongoing
periodic
and
unannounced
inspections
by
the
FDA,
the
U.S.
Drug
Enforcement
Administration
and
corresponding
state
agencies
to
ensure
strict
compliance
with
cGMP
and
other
state
and
federal
regulations.
We
do
not
have
control
over
third-party
manufacturers’
compliance
with
these
regulations
and
standards,
other
than
through
contractual
obligations
and
periodic
auditing.
If
they
are
deemed
out
of
compliance
with
and
such
regulations,
approvals
could
be
delayed,
product
recalls
could
result,
inventory
could
be
destroyed,
production
could
be
stopped
and
supplies
could
be
delayed
or
otherwise
disrupted.
If
we
need
to
change
manufacturers
after
commercialization,
the
FDA
and
corresponding
foreign
regulatory
agencies
must
approve
these
new
manufacturers
in
advance,
which
will
involve
testing
and
additional
inspections
to
ensure
compliance
with
FDA
regulations
and
standards
and
may
require
significant
lead
times
and
delay,
and
disruption
of
supply.
Furthermore,
switching
manufacturers
may
be
difficult
because
the
number
of
potential
manufacturers
is
limited.
It
may
be
difficult
or
impossible
for
us
to
find
a
replacement
manufacturer
quickly
or
on
terms
acceptable
to
us,
or
at
all.
Seasonality
We
have
not
had
revenue
in
the
previous
three
fiscal
years.
We
do
not
expect
our
business
to
be
affected
by
seasonality.
The
amount
and
timing
of
expenditures
and
therefore
liquidity
and
capital
resources
vary
substantially
from
period
to
period
depending
on
the
number
of
research
and
development
programs
being
undertaken
at
any
one
time,
the
stage
of
the
development
programs,
the
timing
of
significant
expenditures
for
manufacturing,
toxicology
and
pharmacology
studies
and
clinical
trials,
and
the
availability
of
funding
from
investors
and
prospective
commercial
partners.
Raw Materials
We
believe
that
sources
of
raw
materials
pertinent
to
our
laboratory
operations
and
for
manufacturing
of
our
SIRPaFc
product
by
our
CMO
are
generally
available.
31
Plan of Operations
Our
primary
focus
is
the
advancement
of
our
Phase
I
clinical
trial
of
SIRPαFc
in
patients
with
advanced
hematologic
malignancies
and
our
Phase
I
clinical
trial
in
patients
with
relapsed
and
refractory,
percutaneously-accessible
cancers.
We
have
incorporated
the
flexibility
to
add
combination
treatment
cohorts
within
these
trials
and
we
have
initiated
the
first
combination
treatment
cohort
with
rituximab.
We
are
also
considering
further
dose
intensification
with
the
goal
of
achieving
increased
blockade
of
CD47.
We
continue
to
advance
our
small
molecule
compounds
for
assessment
of
further
internal
development
or
out-license.
C. Organizational Structure
We
were
incorporated
under
the
Business Corporations Act (Alberta)
on
March
31,
2004
as
Neurogenesis
Biotech
Corp.
On
October
19,
2004,
we
amended
our
articles
of
incorporation
to
change
our
name
from
Neurogenesis
Biotech
Corp.
to
Stem
Cell
Therapeutics
Corp.,
or
SCT.
On
November
7,
2013
SCT
was
continued
under
the
Business Corporations Act (Ontario),
or
OBCA.
On
June
1,
2014
we
filed
articles
of
amalgamation
to
amalgamate
SCT
with
our
wholly-owned
subsidiary,
which
was
named
Trillium
Therapeutics
Inc.,
and
renamed
the
combined
company
Trillium
Therapeutics
Inc.
On
January
1,
2017
we
filed
articles
of
amalgamation
to
amalgamate
with
our
wholly-owned
subsidiary
Fluorinov.
We
are
a
company
domiciled
in
Ontario,
Canada.
Our
head
office
and
registered
office
is
located
at
2488
Dunwin
Drive,
Mississauga,
Ontario,
Canada,
L5L
1J9.
Our
telephone
number
is
(416)
595-0627.
D. Property, Plants and Equipment
We
operate
from
approximately
10,000
square
feet
of
leased
laboratory
and
office
space
at
2488
Dunwin
Drive,
Mississauga,
Ontario,
Canada,
L5L
1J9.
We
perform
research
and
development
in
our
facility
and
use
qualified
vendors
and
collaborators
to
conduct
research
and
development
and
manufacturing
on
our
behalf.
We
incur
capital
expenditures
mainly
for
laboratory
equipment,
office
equipment,
computer
equipment
and
leaseholds
in
the
operation
of
our
business.
ITEM 4A. UNRESOLVED STAFF COMMENTS
Not
Applicable.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The
following
discussion
and
analysis
of
our
financial
condition
and
results
of
operations
for
the
years
ended
December
31,
2016
and
2015,
the
years
ended
December
31,
2015
and
2014,
and
the
years
ended
December
31,
2014
and
2013,
should
be
read
in
conjunction
with
our
consolidated
financial
statements
and
related
notes
included
in
this
annual
report
in
accordance
with
“Item
8.
Financial
Information”.
Our
consolidated
financial
statements
were
prepared
in
accordance
with
IFRS
as
issued
by
the
IASB.
See
“Item
17.
Financial
Statements”
and
the
notes
to
the
financial
statements
included
as
part
of
this
annual
report
for
a
discussion
of
the
significant
accounting
policies
and
significant
estimates
and
judgments
required
to
be
made
by
management.
A. Operating Results
For the years ended December 31, 2016 and 2015
Net
loss
for
the
year
ended
December
31,
2016
of
$31,733,085
was
higher
than
the
loss
of
$14,733,699
for
the
year
ended
December
31,
2015.
The
net
loss
was
higher
due
mainly
to
higher
research
and
development
expenses
of
$11,738,704
which
included
a
higher
intangible
asset
amortization
amount
of
$3,344,400
related
mainly
to
the
acquisition
of
Fluorinov
intangible
assets,
and
a
net
foreign
currency
loss
in
2016
of
$2,026,791
from
holding
US
denominated
cash
with
a
weakening
US
dollar,
compared
to
a
foreign
currency
gain
in
the
comparable
2015
period
of
$6,106,703.
This
was
partially
offset
by
the
recognition
of
a
deferred
tax
recovery
in
relation
to
the
acquisition
of
Fluorinov
of
$3,689,674
where
we
released
a
portion
of
our
income
tax
valuation
adjustment
to
match
a
net
deferred
tax
liability
that
was
created
on
the
acquisition
of
Fluorinov.
32
Research and Development
Components
of
research
and
development
expenses
for
the
years
ended
December
31,
2016
and
2015
were
as
follows:
Research
and
development
programs
excluding
the
below
items
Salaries,
fees
and
short-term
benefits
Share-based
compensation
Amortization
of
intangible
assets
Fair
value
remeasurement
of
contingent
consideration
Depreciation
of
property
and
equipment
Investment
tax
credits
2016
$
16,084,144
6,256,371
3,192,338
3,683,748
209,260
603,694
(240,760)
29,788,795
2015
$
12,083,797
4,120,109
1,942,173
339,348
-
118,394
(553,730)
18,050,091
Our
research
and
development
expenses
consist
primarily
of
personnel-related
costs,
manufacturing
and
clinical
study
services
costs
for
external
service
providers,
patent
fees,
share-based
compensation
and
amortization
of
intangible
assets.
The
increase
in
research
and
development
program
expenses
for
the
year
ended
December
31,
2016
over
the
prior
year
was
due
mainly
to
higher
SIRPαFc
clinical
trial
and
regulatory
costs,
preclinical
work
on
the
bromodomain
inhibitor
and
EGFR
inhibitor
programs,
additional
SIRPαFc
preclinical
and
academic
collaborations,
and
higher
facility
costs,
partially
offset
by
lower
SIRPαFc
preclinical
toxicology
study
and
manufacturing
costs.
Salaries,
fees
and
short-term
benefits
increased
in
the
year
ended
December
31,
2016
due
to
higher
staffing
and
salaries
compared
to
the
same
period
in
2015.
Share-based
compensation
increased
due
mainly
to
a
higher
number
of
options
granted
in
the
year
ended
December
31,
2016
compared
to
the
same
period
of
2015.
Amortization
of
intangible
assets
increased
due
mainly
to
$3,590,164
of
expense
for
the
year
ended
December
31,
2016
related
to
the
acquired
Fluorinov
intellectual
property.
Depreciation
of
property
and
equipment
increased
due
mainly
to
higher
capital
purchases
for
leasehold
improvements
and
lab
equipment
for
our
new
leased
facility
in
2016.
$209,260
of
costs
were
recorded
relating
to
the
fair
value
measurement
of
contingent
consideration
relating
to
the
acquisition
of
Fluorinov.
Tax
credits
were
lower
for
the
year
ended
December
31,
2016
compared
to
the
same
period
of
2015
as
we
were
ineligible
for
certain
refundable
Ontario
tax
credits
in
2016.
General and Administrative
Components
of
general
and
administrative
expenses
for
the
years
ended
December
31,
2016
and
2015
were
as
follows:
General
and
administrative,
excluding
the
below
items
Salaries,
fees
and
short-term
benefits
Deferred
share
units
for
director
compensation
Share-based
compensation
33
2016
$
1,789,396
1,284,001
362,443
497,070
3,932,910
2015
$
1,521,639
898,381
540,000
224,327
3,184,347
General
and
administrative
expenses
consist
mainly
of
professional
fees,
personnel
costs
related
to
corporate
activities
including
directors’
fees,
costs
for
shareholder
related
activities
including
investor
relations,
stock
exchange
fees
and
share-based
compensation.
General
and
administrative
expenses
for
the
year
ended
December
31,
2016
of
$1,789,396
were
higher
than
the
prior
year
due
mainly
to
higher
investor
relations
fees,
and
professional
fees
including
expenses
related
to
the
acquisition
of
Fluorinov.
Salaries,
fees
and
short-term
benefits
increased
in
the
year
ended
December
31,
2016
compared
to
the
prior
year
due
to
higher
administrative
staffing.
The
expense
for
deferred
share
units,
or
DSUs,
for
the
year
ended
December
31,
2016
was
lower
than
the
prior
year
due
to
the
fair
value
measurement
of
cash-settled
deferred
share
units,
or
DSUs,
granted
during
2016.
Share-based
compensation
increased
due
mainly
to
a
higher
number
of
options
granted
in
the
year
ended
December
31,
2016
compared
to
2015.
Finance Income and Costs
Finance
costs
for
the
three
months
and
year
ended
December
31,
2016
were
comparable
to
the
prior
year
periods.
For
the
year
ended
December
31,
2016
a
net
foreign
currency
loss
of
$2,026,791
was
incurred
compared
to
a
net
foreign
currency
gain
of
$6,106,703
for
year
ended
December
31,
2015
due
to
the
weakening
of
the
US
dollar
exchange
rate
compared
to
the
Canadian
dollar.
For the years ended December 31, 2015 and 2014
Net
loss
for
the
year
ended
December
31,
2015
of
$14,733,699
exceeded
the
loss
of
$12,881,820
for
the
year
ended
December
31,
2014.
Research
and
development
costs
for
both
2015
periods
were
significantly
higher
than
2014
due
mainly
to
higher
costs
for
our
SIRPαFc
development
program
including
increased
personnel
costs.
The
loss
for
the
three
months
ended
December
31,
2015
was
lower
than
the
comparative
period
due
mainly
to
a
net
foreign
exchange
gain
of
$2,163,429.
Research and Development
Components
of
research
and
development
expenses
for
the
years
ended
December
31,
2015
and
2014
were
as
follows:
Research
and
development
programs
excluding
the
below
items
Salaries,
fees
and
short-term
benefits
Share-based
compensation
Amortization
of
intangible
assets
Impairment
of
intangible
assets
Depreciation
of
property
and
equipment
Tax
credits
2015
$
12,083,797
4,120,109
1,942,173
339,348
-
118,394
(553,730)
18,050,091
2014
$
5,893,030
2,311,755
1,626,824
610,776
429,763
47,208
(323,548)
10,595,808
The
increase
in
research
and
development
program
expenses
for
the
year
ended
December
31,
2015
compared
to
the
year
ended
December
31,
2014
was
due
mainly
to
completion
of
IND-enabling
toxicology
studies,
manufacturing
costs
to
supply
our
clinical
trial,
costs
to
prepare
and
submit
our
IND
and
initiation
of
the
Phase
I
trial
in
2015
for
SIRPαFc.
Salaries,
fees,
and
short-term
benefits
increased
for
the
year
ended
December
31,
2015
due
mainly
to
additional
research
and
development
personnel
hired
in
2015.
Amortization
and
impairment
of
intangible
assets
was
lower
in
the
year
ended
December
31,
2015
due
to
the
discontinuation
of
the
tigecycline
program
in
2014.
Depreciation
expense
was
higher
in
2015
due
to
higher
purchases
of
new
lab
equipment.
34
General and Administrative
Components
of
general
and
administrative
expenses
for
the
years
ended
December
31,
2015
and
2014
were
as
follows:
General
and
administrative
expenses
excluding
the
below
items
Salaries,
fees
and
short-term
benefits
DSU
units
issued
for
director
compensation
Share-based
compensation
2015
$
1,521,639
898,381
540,000
224,327
3,184,347
2014
$
1,198,181
694,849
240,000
444,430
2,577,460
General
and
administrative
expenses
for
the
year
ended
December
31,
2015
were
higher
than
the
comparable
prior
year
period
due
mainly
to
higher
insurance
costs
and
expenses
related
to
the
Fluorinov
acquisition,
partially
offset
by
lower
stock
exchange
filing
fees.
Salaries,
fees
and
short-term
benefits
increased
in
2015
over
2014
due
mainly
to
higher
administrative
staffing.
The
value
of
DSUs
issued
for
director
compensation
increased
in
2015,
and
share-based
compensation
expense
was
lower
in
2015
due
mainly
to
fewer
stock
options
issued
to
administrative
personnel
in
the
year.
Finance Income and Costs
Finance
income
for
the
year
ended
December
31,
2015
was
higher
than
the
prior
year
comparable
period
due
mainly
to
a
net
foreign
currency
gain
of
$6,106,703,
due
mainly
to
holding
U.S.
dollar
denominated
cash
with
a
strengthening
U.S.
dollar.
Interest
income
in
2015
was
also
higher
due
to
higher
average
cash
balances.
Finance
costs
for
the
year
ended
December
31,
2015
were
comparable
to
the
prior
year
periods.
B. Liquidity and Capital Resources
Since
inception,
we
have
financed
our
operations
primarily
from
sales
of
equity,
proceeds
from
the
exercise
of
warrants
and
stock
options,
and
from
interest
income
on
funds
available
for
investment.
Our
primary
capital
needs
are
for
funds
to
support
our
scientific
research
and
development
activities
including
staffing,
facilities,
manufacturing,
preclinical
studies
and
clinical
trials,
administrative
costs
and
for
working
capital.
We
have
experienced
operating
losses
and
cash
outflows
from
operations
since
incorporation,
will
require
ongoing
financing
in
order
to
continue
our
research
and
development
activities,
and
we
have
not
earned
significant
revenue
or
reached
successful
commercialization
of
our
products.
Our
future
operations
are
dependent
upon
our
ability
to
finance
our
cash
requirements
which
will
allow
us
to
continue
our
research
and
development
activities
and
the
commercialization
of
our
products.
There
can
be
no
assurance
that
we
will
be
successful
in
continuing
to
finance
our
operations.
On
April
7,
2015,
we
completed
an
underwritten
public
offering
of
common
shares
and
non-voting
convertible
preferred
shares
in
the
United
States.
In
the
offering,
we
sold
1,750,754
common
shares
and
1,077,605
Series
II
Non-Voting
Convertible
First
Preferred
shares
at
a
price
of
U.S.
$19.50
per
share.
The
gross
proceeds
from
this
offering
were
$68,875,067
(U.S.
$55,153,000)
before
deducting
offering
expenses
of
$4,913,443.
The
Series
II
Non-Voting
Convertible
First
Preferred
shares
sold
in
the
offering
are
non-voting
and
are
convertible
into
common
shares,
on
a
one-for-one
basis
(subject
to
adjustment),
at
any
time
at
the
option
of
the
holder,
subject
to
certain
restrictions
on
conversion.
Holders
may
not
convert
Series
II
Non-Voting
Convertible
First
Preferred
shares
into
common
shares
if,
after
giving
effect
to
the
exercise
of
conversion,
the
holder
and
its
joint
actors
would
have
beneficial
ownership
or
direction
or
control
over
common
shares
in
excess
of
4.99%
of
the
then
outstanding
common
shares.
This
limit
may
be
raised
at
the
option
of
the
holder
on
61
days’
prior
written
notice:
(i)
up
to
9.99%,
(ii)
up
to
19.99%,
subject
to
clearance
of
a
personal
information
form
submitted
by
the
holder
to
the
TSX,
and
(iii)
above
19.99%,
subject
to
approval
by
the
TSX
and
shareholder
approval.
35
On
May
29,
2015,
we
filed
a
base
shelf
prospectus
with
the
British
Columbia,
Alberta,
Manitoba,
Ontario
and
Nova
Scotia
securities
commissions
in
Canada
and
a
Form
F-10
registration
statement
with
the
United
States
Securities
and
Exchange
Commission,
or
SEC,
that
provides
that
we
may
sell
under
the
prospectus
from
time
to
time
over
the
following
25
months
up
to
U.S.
$100
million,
in
one
or
more
offerings,
of
common
shares,
First
Preferred
shares,
warrants
to
purchase
common
shares,
or
units
comprising
a
combination
of
common
shares,
First
Preferred
shares
and/or
warrants.
December 31, 2016 Compared to December 31, 2015
Our
cash
and
cash
equivalents
and
working
capital
at
December
31,
2016
were
$50.5
million
and
$45.5
million
respectively
compared
to
$86.8
million
and
$85.4
million,
respectively
at
December
31,
2015.
The
decrease
in
both
cash
and
working
capital
was
due
mainly
to
cash
used
in
operations
of
approximately
$22.9
million,
net
cash
paid
on
the
purchase
of
Fluorinov
of
approximately
$9.6
million,
$3.0
million
of
capital
purchases
mainly
related
to
leasehold
improvements,
laboratory
equipment,
and
furniture
for
our
new
office
and
laboratory
facility,
and
a
net
foreign
exchange
loss
on
cash
of
$1.2
million.
Accounts
payable
and
accrued
liabilities
as
at
December
31,
2016
of
$5.5
million
were
higher
than
the
balance
of
$3.2
million
at
December
31,
2015
due
mainly
to
increased
research
and
development
expenditures
and
slower
invoicing
for
clinical
trial
related
expenditures
and
preclinical
collaborations,
and
timing
of
payment
of
manufacturing
expenditures.
Amounts
receivable
as
at
December
31,
2016
of
$526,530
was
lower
than
the
amount
of
$974,822
at
December
31,
2015
due
to
the
receipt
of
federal
and
Ontario
refundable
tax
credits
for
the
2015
tax
year.
We
are
indebted
to
the
Federal
Economic
Development
Agency
for
Southern
Ontario,
or
FedDev
under
a
non-interest
bearing
contribution
agreement
and
is
making
monthly
repayments
of
$9,586
through
November
2019.
As
at
December
31,
2016
and
2015,
the
balance
repayable
was
$335,489
and
$440,935,
respectively.
The
loan
payable
was
discounted
using
an
estimated
market
interest
rate
of
15%.
Interest
expense
accretes
on
the
discounted
loan
amount
until
it
reaches
its
face
value
at
maturity.
As
at
December
31,
2016
and
2015,
we
had
a
deferred
lease
inducement
of
$437,711
and
$348,205,
respectively,
for
a
new
facility
lease.
The
inducement
benefit
will
be
recognized
over
the
expected
term
of
the
lease.
As
at
December
31,
2016
and
2015,
we
had
a
long-term
liability
of
$1,959,260
and
nil,
respectively,
related
to
contingent
consideration
on
the
acquisition
of
Fluorinov.
Cash flows from operating activities
Cash
used
in
operating
activities
increased
to
$22,850,941
for
the
year
ended
December
31,
2016,
compared
to
$18,298,112
for
the
year
ended
December
31,
2015,
due
mainly
to
higher
research
and
development
expenses
and
unrealized
foreign
exchange
losses
on
cash
in
the
current
year,
compared
to
foreign
exchange
gains
on
cash
in
the
prior
year.
Cash flows from investing activities
Cash
used
in
investing
activities
totaled
$12,541,150
for
the
year
ended
December
31,
2016,
compared
to
$750,382
for
the
year
ended
December
31,
2015.
The
increase
was
due
mainly
to
the
purchase
of
Fluorinov
and
capital
purchases
related
to
our
new
laboratory
and
office
facilities.
Cash flows from financing activities
Cash
used
by
financing
activities
totaled
$343,727
for
the
year
ended
December
31,
2016,
compared
to
cash
provided
of
$73,642,984
for
the
year
ended
December
31,
2015.
The
decrease
for
the
year
ended
December
31,
2016
was
due
mainly
to
the
issuance
of
share
capital
in
2015.
36
December 31, 2015 Compared to December 31, 2014
Our
cash
totaled
$86,770,542
at
December
31,
2015
compared
to
$26,165,056
at
December
31,
2014.
As
at
December
31,
2015,
our
working
capital
increased
to
$85,369,945
compared
to
$23,989,252
at
December
31,
2014
due
mainly
to
funds
received
in
the
April
7,
2015
offering,
warrant
exercises,
and
foreign
exchange
gains,
partially
offset
by
cash
used
in
operations.
Accounts
payable
and
accrued
liabilities
as
at
December
31,
2015
of
$3,233,749
were
comparable
to
the
balance
of
$3,248,984
at
December
31,
2014.
Amounts
receivable
as
at
December
31,
2015
were
$974,822
compared
to
$344,416
at
December
31,
2014.
The
increase
in
amounts
receivable
was
due
mainly
to
the
recording
of
expected
refundable
tax
credits
on
research
and
development
activities
and
refundable
withholding
taxes
in
the
year
ended
December
31,
2015.
We
are
indebted
to
FedDev
under
a
noninterest
bearing
contribution
agreement
and
are
making
monthly
repayments
of
$9,586
through
November
2019.
As
at
December
31,
2015,
the
balance
repayable
was
$440,935.
The
loan
payable
was
discounted
using
an
estimated
market
interest
rate
of
15%.
Interest
expense
accretes
on
the
discounted
loan
amount
until
it
reaches
its
face
value
at
maturity.
As
at
December
31,
2015,
we
had
a
deferred
lease
inducement
of
$348,205
for
a
new
facility
lease.
The
inducement
benefit
will
be
recognized
over
the
expected
term
of
the
lease.
We
had
a
long-term
liability
of
$60,109
related
to
certain
discontinued
technologies.
This
liability
was
discounted
using
an
estimated
market
interest
rate
of
15%
and
interest
expense
is
accreting.
Cash flows from operating activities
Cash
used
in
operating
activities
increased
to
$18,298,112
for
the
year
ended
December
31,
2015,
compared
to
$7,448,068
for
the
year
ended
December
31,
2014,
due
mainly
to
higher
research
and
development
expenses
in
the
current
year.
Cash flows from investing activities
Cash
used
in
investing
activities
totaled
$750,382
for
the
year
ended
December
31,
2015,
compared
to
cash
provided
by
investing
activities
of
$352,995
for
the
year
ended
December
31,
2014.
The
increase
was
due
to
higher
purchases
of
property
and
equipment
compared
to
the
prior
year.
Cash flows from financing activities
Cash
provided
by
financing
activities
totaled
$73,642,984
for
the
year
ended
December
31,
2015,
compared
to
$803,623
for
the
year
ended
December
31,
2014.
The
increase
was
due
mainly
to
the
completion
of
an
underwritten
public
offering
of
common
shares
and
non-voting
convertible
preferred
shares
in
April
2015.
37
C. Research and Development, Patents and Licenses, etc.
During
2016
and
2015,
most
of
our
resources
were
focused
on
the
development
of
our
SIRPαFc
program.
For
the
year
ended
December
31,
2016,
SIRPαFc
research
and
development
costs
were
higher
than
the
same
period
in
the
prior
year
due
mainly
to
costs
related
to
the
Phase
I
clinical
trials,
higher
staffing,
higher
facility
costs,
and
share-based
compensation
costs,
and
additional
funding
for
preclinical
collaborations
partially
offset
by
lower
preclinical
toxicology
study
and
manufacturing
costs.
As
Fluorinov
was
acquired
in
January
2016
there
are
no
comparable
amounts.
For
the
year
ended
December
31,
2016,
Fluorinov
research
and
development
expenses
included
$3,590,164
for
amortization
of
the
acquired
intangible
assets,
$1,274,007
for
personnel
related
costs
and
$2,470,197
for
program
and
other
related
costs.
Research
and
development
expenditures
for
the
preceding
three
years
were
as
follows:
Year ended
December 31, 2016
($)
$22,411,393
$7,334,368
-
$43,034
$29,788,795
Year ended
December 31, 2015
($)
$17,978,930
-
-
$71,161
$18,050,091
Year ended
December 31, 2014
($)
$9,372,467
-
$1,091,297
$132,044
$10,595,808
Program
SIRPaFc
Fluorinov
compounds
Tigecycline
Other
programs
Total
Notes:
(1)
Research
and
development
expenditures
in
the
above
table
include
all
direct
and
indirect
costs
for
the
programs,
personnel
costs,
intellectual
property
costs,
amortization,
share-based
compensation,
and
research
and
development
overhead,
and
is
net
of
government
assistance.
Research
and
development
overhead
costs
have
been
allocated
to
the
programs
based
mainly
on
personnel
time
spent
on
the
programs.
We
rely
on
patents
and
licenses
to
enable
the
commercialization
of
our
novel
technologies.
See
“Item
4.
Information
on
the
Company”
and
“Item
4.B.
Information
on
the
Company
–
Intellectual
Property”.
38
D. Trend Information
Historical
patterns
of
expenditures
cannot
be
taken
as
an
indication
of
future
expenditures.
The
amount
and
timing
of
expenditures
and
therefore
liquidity
and
capital
resources
vary
substantially
from
period
to
period
depending
on
the
number
of
research
and
development
programs
being
undertaken
at
any
one
time,
the
stage
of
the
development
programs,
the
timing
of
significant
expenditures
for
manufacturing,
toxicology
and
pharmacology
studies
and
clinical
trials,
and
the
availability
of
funding
from
investors
and
prospective
commercial
partners.
Research
and
development
expenses
for
2015
included
the
costs
for
IND-enabling
toxicology
studies,
preparing
the
IND
submission
and
initiating
the
Phase
I
clinical
trial
for
TTI-621.
Research
and
development
expenses
increased
in
2016
due
to
the
costs
of
initiating
two
Phase
I
trials
and
the
addition
of
Fluorinov
product
development.
General
and
administrative
costs
for
the
second
quarter
of
2015
were
higher
than
the
first
quarter
of
2015
due
mainly
to
the
issuance
of
DSUs
for
director
fees.
The
net
loss
for
the
third
and
fourth
quarters
of
2015
were
lower
due
mainly
to
net
foreign
exchange
gains
of
$4,019,251
and
$2,163,429,
respectively,
that
resulted
mainly
from
holding
U.S.
denominated
cash
with
a
strengthening
U.S.
dollar
exchange
rate.
The
net
loss
for
the
first
quarter
of
2016
was
higher
due
mainly
to
a
net
foreign
currency
loss
of
$3,554,296
from
holding
US
denominated
cash
with
a
weakening
US
dollar,
the
addition
of
intangible
asset
amortization
in
the
amount
of
$693,322
on
the
acquisition
of
Fluorinov
intangible
assets
and
higher
research
and
development
spending.
This
was
partially
offset
by
the
recognition
of
a
deferred
tax
recovery
in
relation
to
the
acquisition
of
Fluorinov
of
$3,689,674
where
we
released
a
portion
of
our
income
tax
valuation
adjustment
to
match
a
net
deferred
tax
liability
that
was
created
on
the
acquisition
of
Fluorinov.
The
net
losses
for
the
third
and
fourth
quarters
of
2016
were
higher
due
to
higher
personnel
costs,
SIRPαFc
clinical
trial
costs,
preclinical
work
on
the
bromodomain
inhibitor
and
EGFR
inhibitor
programs,
and
additional
SIRPαFc
preclinical
collaborations.
E. Off-Balance Sheet Arrangements
We
do
not
have
any
off-balance
sheet
arrangements
that
have,
or
are
reasonably
likely
to
have,
a
current
or
future
effect
on
our
financial
condition,
revenues
or
expenses,
results
of
operations,
liquidity,
capital
expenditures
or
capital
resources
that
are
material
to
investors.
F. Tabular Disclosure of Contractual Obligations
We
enter
into
research,
development
and
license
agreements
in
the
ordinary
course
of
business
where
we
receive
research
services
and
rights
to
proprietary
technologies.
Milestone
and
royalty
payments
that
may
become
due
under
various
agreements
are
dependent
on,
among
other
factors,
clinical
trials,
regulatory
approvals
and
ultimately
the
successful
development
of
a
new
drug,
the
outcome
and
timing
of
which
is
uncertain.
Under
the
license
agreement
for
SIRPαFc,
we
have
future
contingent
milestones
payable
of
$35,000
related
to
successful
patent
grants,
$200,000
and
$300,000
on
the
first
patient
dosed
in
Phase
II
and
III
clinical
trials
respectively,
and
regulatory
milestones
on
their
first
achievement
totalling
$5,000,000.We
are
also
required
to
pay
20%
of
any
sublicensing
revenues
to
the
licensors
on
the
first
$50
million
of
sublicensing
revenues,
and
pay
15%
of
any
sublicensing
revenues
to
the
licensors
after
the
first
$50
million
of
sublicensing
revenue
received.
Under
two
agreements
with
Catalent
pursuant
to
which
we
acquired
the
right
to
use
a
proprietary
expression
system
for
the
manufacture
of
two
SIRPαFc
constructs,
we
have
future
contingent
milestones
on
pre-marketing
approval
of
up
to
U.S.
$875,000
and
aggregate
sales
milestone
payments
of
up
to
U.S.
$28.8
million
for
each
agreement.
In
connection
with
our
acquisition
of
all
the
outstanding
shares
of
Fluorinov,
we
are
obligated
to
pay
up
to
$35
million
of
additional
future
payments
that
are
contingent
on
us
achieving
certain
clinical
and
regulatory
milestones
with
an
existing
Fluorinov
compound.
We
will
also
have
an
obligation
to
pay
royalty
payments
on
future
sales
of
such
compounds.
We
periodically
enter
into
research
and
license
agreements
with
third
parties
that
include
indemnification
provisions
customary
in
the
industry.
These
guarantees
generally
require
us
to
compensate
the
other
party
for
certain
damages
and
costs
incurred
as
a
result
of
claims
arising
from
research
and
development
activities
undertaken
by
or
on
our
behalf.
In
some
cases,
the
maximum
potential
amount
of
future
payments
that
could
be
required
under
these
indemnification
provisions
could
be
unlimited.
These
indemnification
provisions
generally
survive
termination
of
the
underlying
agreement.
The
nature
of
the
indemnification
obligations
prevents
us
from
making
a
reasonable
estimate
of
the
maximum
potential
amount
it
could
be
required
to
pay.
Historically,
we
have
not
made
any
indemnification
payments
under
such
agreements
and
no
amount
has
been
accrued
in
our
consolidated
financial
statements
with
respect
to
these
indemnification
obligations.
39
Other
than
as
disclosed
below,
we
did
not
have
any
contractual
obligations
relating
to
long-term
debt
obligations,
capital
(finance)
lease
obligations,
operating
lease
obligations,
purchase
obligations
or
other
long-term
liabilities
reflected
on
our
balance
sheet
as
at
December
31,
2016:
Contractual Obligations (1)(2)(7)(8)
Long-Term
Debt
Obligations
(3)
Capital
(Finance)
Lease
Obligations
Payments due by period ($)
Total
$335,489
-
Less than 1
Year
$115,032
-
1 to 3
Years
$220,457
-
Operating
Lease
Obligations
(4)
$2,075,144
$223,224
$485,900
Purchase
Obligations
(5)
$10,382,146
$5,602,146
$4,544,000
3 to 5
Years
-
-
$507,903
$236,000
More than
5 Years
-
-
$858,117
-
Other
Long-Term
Liabilities
Reflected
on
our
Balance
Sheet
(6)
$2,279,205
$319,945
-
$1,566,671
$392,589
Total
Notes:
$15,071,984
$6,260,347
$5,250,357
$2,310,574
$1,250,706
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
Contractual
obligations
in
the
above
table
do
not
include
amounts
in
accounts
payable
and
accrued
liabilities
on
our
balance
sheet
as
at
December
31,
2016.
Annual
technology
license
fees
currently
approximating
$50,000
are
not
included
in
the
above
table.
Contingent
milestones
under
the
UHN
license
agreement
and
the
Catalent
expression
system
agreements
are
not
included
in
the
above
table.
Amounts
due
to
FedDev
repayable
in
equal
monthly
installments
of
$9,586
through
November
2019.
Includes
operating
lease
obligations
for
laboratory
and
office
facilities.
Purchase
obligations
include
all
non-cancellable
contracts,
and
all
cancellable
contracts
with
$100,000
or
greater
remaining
committed
at
the
period
end
including
agreements
related
to
the
conduct
of
our
TTI-621
Phase
I
clinical
trials,
preclinical
collaborations
and
manufacturing
activities.
Includes
$1,959,260
of
contingent
consideration
related
to
potential
future
payments
of
up
to
$35
million
based
on
the
achievement
of
clinical
and
regulatory
milestones
with
an
existing
Fluorinov
compound.
We
are
party
to
a
license
agreement
for
our
SIRPaFc
technology
with
UHN
and
HSC
that
has
future
milestones
where
the
certainty
and
timing
of
reaching
the
milestones
are
unknown.
Aggregate
milestones
under
this
agreement,
related
to
major
markets
on
their
first
achievement,
are
$5,660,000
of
which
management
estimates
that
$360,000
may
occur
in
1
to
3
years,
$300,000
may
occur
in
3
to
5
years
and
the
balance
more
than
five
years,
if
the
milestones
are
reached
at
all.
We
are
party
to
two
agreements
dated
August
12,
2014
with
Catalent
Pharma
Solutions,
LLC
related
to
the
sale
of
their
GPEx®-Derived
Cell
Line
to
us.
Each
agreement
includes
potential
pre-marketing
approval
milestones
of
up
to
U.S.
$875,000
and
aggregate
sales
milestone
payments
of
up
to
U.S.
$28.8
million.
40
ITEM 6. DIRECTORS, SENIOR MANAGEMENT & EMPLOYEES
A. Directors and Senior Management
The
following
table
and
summary
of
business
experience
set
forth
the
name,
office
held,
and
functions
and
areas
of
experience
in
the
Company,
principal
business
activities
and
other
principal
directorships
of
each
of
our
Directors
and
senior
management:
Name
Present Office Held
Luke Beshar
Director (1)
Henry Friesen
Director (1)
(2)
Robert Kirkman
Director (1)
(3)
Michael Moore
Director (2)
(3)
Position
Held
Since
March
10,
2014
Principal Business Activities and
Other Principal Directorships
Mr.
Beshar
is
an
independent
biotechnology
consultant
and
financial
expert.
He
was
most
recently
the
Executive/Senior
Vice
President
and
Chief
Financial
Officer
of
NPS
Pharmaceuticals,
Inc.,
a
global
biopharmaceutical
company
from
November
2007
to
February
2015.
Mr.
Beshar
also
sits
on
the
boards
of
REGENXBIO
Inc.,
Entera
Bio
Ltd.
and
Sancilio
Pharmaceuticals
Company,
Inc.
June
28,
2011
Dr.
Friesen
is
a
Distinguished
University
Professor
Emeritus
at
University
of
Manitoba
since
October
2000.
December
17,
2013
Dr.
Kirkman
was
President
and
Chief
Executive
Officer
and
director
of
Cascadian
Therapeutics
(formerly
Oncothyreon
Inc.),
an
oncology-focused
biotechnology
company
from
September
2006
to
January
2016.
April
9,
2013
Dr.
Moore
was
the
Founder
Chair
of
MISSION
Therapeutics
Ltd.
(2012-2016)
and
of
PsiOxus
Therapeutics
Ltd.
(2011-2015)
and
continues
as
a
director
of
both
companies.
Dr.
Moore
is
also
a
director
of
Chronos
Therapeutics
Ltd.
from
2009
and
was
the
Chair
of
Trillium
Therapeutics
Inc.
(private)
from
2004-2013.
From
2003
to
2008,
Dr.
Moore
was
the
Chief
Executive
Officer
and
director
of
PIramed
Ltd,
a
UK-
based
oncology
company
acquired
by
Roche.
Dr.
Reynolds
is
an
independent
biotechnology
consultant
since
February
2013,
and
was
Chief
Medical
Officer
of
Seattle
Genetics,
Inc.,
a
biotechnology
company
focused
on
antibody-
based
therapies
for
the
treatment
of
cancer
from
March
2007
to
January
2013.
Dr.
Reynolds
also
sits
on
the
board
of
MEI
Pharma,
Inc.
Thomas Reynolds
Director (2)(3)
March
10,
2014
Calvin Stiller
Director, Chair of the
Board
July
18,
2011
Dr.
Stiller
is
the
Chair
Emeritus
of
the
Ontario
Institute
for
Cancer
Research
and
Professor
Emeritus
at
Western
University.
Dr.
Stiller
also
sits
on
the
board
of
Revera
Corporation
and
Smarter
Alloys
Inc.
Niclas Stiernholm
President and Chief Executive Officer,
Director
Director
since
July
18,
2011;
President
and
CEO
since
April
9,
2013
Dr.
Stiernholm
is
the
President
and
Chief
Executive
Officer
of
Trillium
since
April
9,
2013
and
was
the
President
and
Chief
Executive
Officer
of
Trillium
Therapeutics
Inc.
(private)
since
2002.
He
joined
Trillium
from
YM
BioSciences
Inc.
where
he
was
Executive
Vice
President
and
Chief
Scientific
Officer.
Mr.
Stiernholm
also
sits
on
the
board
of
Vasomune
Therapeutics
Inc.
Robert Uger
Chief Scientific Officer
April
9,
2013
As
President
and
Chief
Executive
Officer,
Dr.
Stiernholm
is
responsible
for
overseeing
our
strategic
direction,
executing
business
development
plans
and
ensuring
that
our
scientific
programs
remain
funded
and
advance
on
schedule.
As
a
director,
Dr.
Stiernholm
participates
in
management
oversight
and
helps
to
ensure
compliance
with
our
corporate
governance
policies
and
standards.
Dr.
Uger
is
the
Chief
Scientific
Officer
of
Trillium
since
April
9,
2013
and
was
the
Vice
President,
Research
of
Trillium
Therapeutics
Inc.
(private)
since
2003.
He
joined
Trillium
from
Aventis
Pasteur
where
he
was
a
Senior
Research
Scientist
involved
in
cancer
vaccine
research.
As
Chief
Scientific
Officer,
Dr.
Uger
is
responsible
for
developing
and
implementing
our
scientific
direction,
and
oversees
both
internal
product
development
and
external
research
and
development
programs.
41
James Parsons
Chief Financial Officer
August
25,
2011
Penka Petrova
Chief Development Officer
May
29,
2015
Eric Sievers
Chief Medical Officer
April
1,
2015
Mr.
Parsons
is
the
Chief
Financial
Officer
of
Trillium
since
August
25,
2011
and
was
also
the
Director,
Finance
of
Trillium
Therapeutics
Inc.
(private).
He
was
previously
the
Vice
President,
Finance
of
DiaMedica
Inc.
from
October
2010
to
May
2014,
and
Chief
Financial
Officer
of
Amorfix
Life
Sciences
Ltd.
from
2006
to
2010.
Mr.
Parsons
sits
on
the
board
of
Sernova
Corp
and
DiaMedica
Inc.
As
Chief
Financial
Officer,
Mr.
Parsons
is
responsible
for
financial
and
risk
management,
investor
relations,
corporate
governance
and
administration.
Dr.
Petrova
is
the
Chief
Development
Officer
of
Trillium
since
May
29,
2015
and
was
the
Vice
President,
Drug
Development
from
April
2013
to
May
2015.
Dr.
Petrova
joined
Trillium
Therapeutics
Inc.
(private)
from
Prescient
Neuropharma
in
2003.
As
Chief
Development
Officer,
Dr.
Petrova
is
responsible
for
managing
our
formal
drug
development
efforts,
including
all
outsourced
activities
to
contract
manufacturers
and
contract
research
organizations.
Dr.
Sievers
is
the
Chief
Medical
Officer
of
Trillium
since
April
1,
2015.
He
previously
held
several
senior
roles
at
Seattle
Genetics
including
the
Senior
Vice
President,
Clinical
Development
from
October
2013
to
March
2015,
the
Vice
President
and
Interim
Chief
Medical
Officer
from
2012
to
October
2013,
and
Vice
President,
Clinical
Affairs
from
2011
to
2012,
and
Executive
Medical
Director
from
2010
to
2011.
As
Chief
Medical
Officer,
Dr.
Sievers
is
responsible
for
the
design
and
execution
of
our
clinical
and
regulatory
strategy.
Notes:
(1)
(2)
(3)
Member
of
our
Audit
Committee.
Member
of
our
Corporate
Governance
and
Nominating
Committee.
Member
of
our
Compensation
Committee.
Summary of Business Experience and Functions within the Company
Luke Beshar, CPA -
Director, Chair of the Audit Committee
Mr.
Beshar
was
Executive
Vice
President
and
Chief
Financial
Officer
of
NPS
Pharmaceuticals
until
February
2015
when
the
company
was
sold
to
Shire
plc.
He
joined
NPS
Pharmaceuticals
in
2007
and
has
been
responsible
for
financial
management,
investor
relations,
information
technology,
technical
operations,
supply-
chain
management,
facilities,
project
management,
contracts
and
outsourcing
and
strategic
and
alliance
management.
Prior
to
joining
NPS,
Mr.
Beshar
served
as
Executive
Vice
President
and
Chief
Financial
Officer
of
Cambrex
Corporation,
a
global
life
sciences
company.
Mr.
Beshar
began
his
career
with
Arthur
Andersen
&
Co.
and
is
a
certified
public
accountant.
He
obtained
his
bachelor“s
degree
in
Accounting
and
Finance
from
Michigan
State
University
and
is
a
graduate
of
The
Executive
Program
at
the
Darden
Graduate
School
of
Business
at
the
University
of
Virginia.
42
Dr. Henry Friesen -
Director
Dr.
Friesen
was
the
President
of
the
Canadian
Government“s
Medical
Research
Council,
and
the
architect
and
lead
champion
for
the
creation
the
Canadian
Institutes
for
Health
Research,
President
of
the
National
Cancer
Institute
of
Canada
and
President
of
the
Canadian
Society
for
Clinical
Investigation.
He
is
the
Past
Founding
Chair
of
Genome
Canada.
A
Fellow
of
the
Royal
Society
of
Canada,
Dr.
Friesen
was
named
a
Companion
of
the
Order
of
Canada
and
was
inducted
into
the
Canadian
Medical
Hall
of
Fame
in
2001
and,
later
the
Order
of
Manitoba.
He
was
also
awarded
the
Gairdner
Foundation
Wightman
Award,
the
McLaughlin
Medal
of
the
Royal
Society
of
Canada,
and
the
Koch
Medal,
the
highest
award
of
the
Endocrine
Society.
He
was
presented
with
the
Frederic
Newton
Gisborne
Starr
Award
by
the
Canadian
Medical
Association,
the
association“s
highest
award,
in
2006.
Dr.
Friesen
also
holds
eight
Honorary
Doctorates
from
Canadian
universities.
Dr. Robert Kirkman -
Director
Dr.
Kirkman
served
as
Cascadian
Therapeutics’
(formerly
Oncothyreon)
President
and
Chief
Executive
Officer
from
September
2006
to
January
2016.
From
2005
to
2006,
he
was
acting
President
and
Chief
Executive
Officer
of
Xcyte
Therapies,
which
concluded
a
merger
with
Cyclacel
Pharmaceuticals,
both
development-
stage
biopharmaceutical
companies,
in
March
of
2006.
From
2004
to
2005,
Dr.
Kirkman
was
Chief
Business
Officer
and
Vice
President
of
Xcyte.
From
1998
to
2003,
Dr.
Kirkman
was
Vice
President,
Business
Development
and
Corporate
Communications
of
Protein
Design
Labs,
a
biopharmaceutical
company.
Dr.
Kirkman
holds
a
M.D.
degree
from
Harvard
Medical
School
and
a
B.A.
in
economics
from
Yale
University.
Dr. Michael Moore -
Director
Dr.
Moore
was
the
Founder
Chair
of
MISSION
Therapeutics
Limited,
a
UK
drug
discovery
company
targeting
deubiquitinating
enzymes
for
multiple
disease
indications.
He
also
holds
non-executive
positions
with
UK
biopharmaceutical
companies
including
PsiOxus
Therapeutics
Limited,
of
which
he
was
Founding
Chairman,
and
Chronos
Therapeutics
Limited.
From
2004-2013,
Dr.
Moore
was
non-executive
Chair
of
Trillium
Therapeutics
Inc.
(private)
and
from
2003-2008
Chief
Executive
Officer
of
Plramed
Limited,
a
UK-based
biotechnology
company
targeting
the
PI
3-kinase
superfamily,
which
was
acquired
by
Roche
in
2008.
Prior
to
Plramed,
Dr.
Moore
held
progressive
positions
at
Xenova
Group
plc
(1988-2003),
including
Research
Director
and
Chief
Scientific
Officer.
Dr.
Moore’s
academic
career
included
a
tenured
appointment
at
the
Paterson
Institute
for
Cancer
Research
(1980)
and
the
University
of
Manchester
Medical
School
where
he
was
Honorary
Reader
in
immunology
and
oncology
(1986).
Dr.
Moore
received
Ph.D.
and
D.Sc.
degrees
from
the
University
of
Nottingham
(a
member
of
the
Russell
Group).
Dr. Thomas Reynolds -
Director
Dr.
Reynolds
served
as
Chief
Medical
Officer
of
Seattle
Genetics
from
March
2007
until
his
retirement
in
February,
2013.
While
at
Seattle
Genetics,
he
was
responsible
for
building
and
leading
an
integrated
clinical
development,
regulatory
and
medical
affairs
organization,
highlighted
by
the
development
and
approval
of
ADCETRIS.
From
2002
to
2007,
Dr.
Reynolds
served
at
ZymoGenetics
(acquired
by
Bristol-Myers
Squibb
in
2010),
most
recently
as
Vice
President,
Medical
Affairs,
where
he
oversaw
the
clinical
development
and
regulatory
filing
of
RECOTHROM.
Previously,
he
was
Vice
President,
Clinical
Affairs
at
Targeted
Genetics,
and
before
that
he
was
at
Somatix
Therapy
(acquired
by
Cell
Genesys
in
1997).
Dr.
Reynolds
received
his
M.D.,
and
Ph.D.
in
Biophysics,
from
Stanford
University
and
a
B.A.
in
Chemistry
from
Dartmouth
College.
He
is
currently
a
director
and
member
of
the
compensation
committee
at
MEI
Pharma,
Inc.
Dr. Calvin Stiller -
Director, Chair of the Board of Directors
Dr.
Stiller
is
a
Member
of
the
Order
of
Canada
and
the
Order
of
Ontario,
was
the
recipient
of
the
Canada
Gairdner
Wightman
Award
in
2011
(awarded
to
a
Canadian
who
has
demonstrated
outstanding
leadership
in
medicine
and
medical
science)
and
was
inducted
into
the
Canadian
Medical
Hall
of
Fame
in
2010.
Dr.
Stiller
is
Chair
Emeritus
of
the
Ontario
Institute
for
Cancer
Research,
the
former
chair
of
Genome
Canada
and
is
Professor
Emeritus
in
the
Departments
of
Medicine,
and
Immunology
and
Bacteriology
at
the
University
of
Western
Ontario.
Dr.
Stiller
founded
the
J.
Allyn
Taylor
International
Prize
in
Medicine,
co-
founded
the
Medical
and
Related
Sciences
Research
District,
or
MaRS,
was
the
Chair
of
the
Ontario
Research
and
Development
Challenge
Fund
Board
and
was
the
co-founder
of
four
venture
capital
funds
of
over
$500
million.
He
serves
on
the
boards
of
a
number
of
private
and
public
companies,
was
founding
Chair
of
Trillium
Therapeutics
Inc.
(private)
and
was
chair
of
Verio
Therapeutics,
a
Canadian
stem
cell
company
that
was
acquired
in
2010
by
Fate
Corporation,
a
California-based
regeneration
company.
Together
with
Robert
Klein
(the
founder
of
the
California
Institute
of
Regenerative
Medicine,
a
state
agency
responsible
for
granting
approximately
$3
billion
in
stem
cell
research
funding),
he
co-founded
the
Cancer
Stem
Cell
Initiative,
a
Canada-California
consortium
that
has
been
productive
in
the
search
for
and
identification
of
cancer
stem
cells.
He
serves
on
the
board
of
Revera
Corporation,
one
of
the
nation’s
largest
seniors“
accommodation,
health
and
long-term
care
and
services
companies.
43
Dr. Niclas Stiernholm -
President and Chief Executive Officer, Director
Dr.
Stiernholm
became
the
President
and
Chief
Executive
Officer
on
our
merger
with
Trillium
Therapeutics
Inc.
(private)
in
April
2013.
Previously,
as
Chief
Executive
Officer
of
Trillium
Therapeutics
Inc.
(private)
since
2002,
Dr.
Stiernholm
spearheaded
the
in-licensing
of
our
development
technologies,
raised
over
$23
million
in
venture
capital
financing,
and
raised
non-dilutive
funding
from
several
out-licensing
transactions
with
pharmaceutical
partners.
Dr.
Stiernholm
joined
Trillium
Therapeutics
Inc.
(private)
from
YM
BioSciences
where
he
was
Executive
Vice
President
and
Chief
Scientific
Officer.
While
there,
he
played
a
significant
role
in
the
success
of
their
Initial
Public
Offering
in
2002.
Dr.
Stiernholm
began
his
industry
career
as
a
member
of
Allelix
Biopharmaceuticals“
business
development
office.
He
currently
serves
on
the
board
of
Vasomune
Therapeutics.
He
received
his
Ph.D.
in
Immunology
from
the
University
of
Toronto,
where
he
also
completed
his
postdoctoral
training.
Dr. Robert Uger -
Chief Scientific Officer
Dr.
Uger
became
the
Chief
Scientific
Officer
on
our
merger
with
Trillium
Therapeutics
Inc.
(private)
in
April
2013.
Dr.
Uger
is
responsible
for
developing
and
implementing
our
scientific
direction,
and
overseeing
both
internal
product
development
and
external
research
discovery
programs.
He
also
acts
as
our
scientific
liaison
with
respect
to
global
collaborations
with
academic
and
hospital
research
scientists.
Dr.
Uger
joined
Trillium
Therapeutics
Inc.
(private)in
2003
from
Aventis
Pasteur
where
he
was
a
Senior
Research
Scientist
involved
in
cancer
vaccine
research.
He
received
his
Ph.D.
in
Immunology
from
the
University
of
Toronto.
James Parsons, CPA-CA -
Chief Financial Officer
Mr.
Parsons
joined
us
in
August
2011
and
Trillium
Therapeutics
Inc.
(private)
in
2003
on
a
part-time
basis,
and
became
full-time
in
June
2014.
Mr.
Parsons
has
an
extensive
background
in
the
life
sciences
industry
and
over
25
years
of
financial
management
experience.
Mr.
Parsons
was
the
Vice-President,
Finance
for
DiaMedica
Inc.
from
October
2010
to
May
2014,
and
the
Chief
Financial
Officer
and
Corporate
Secretary
for
Amorfix
Life
Sciences
Ltd.
from
2006
to
2010
where
his
responsibilities
included
finance,
administration,
commercialization,
risk
management,
and
corporate
governance.
Mr.
Parsons
has
been
a
CFO
and
advisor
in
the
life
sciences
industry
since
2000
with
early-stage
to
late-clinical
stage
biotechnology
companies
across
many
therapeutic,
diagnostic
and
device
areas.
Mr.
Parsons
has
a
Master
of
Accounting
degree
from
the
University
of
Waterloo
and
is
a
Chartered
Professional
Accountant
and
Chartered
Accountant.
Dr. Penka Petrova –
Chief Development Officer
Dr.
Petrova
was
appointed
Chief
Development
Officer
on
May
29,
2015.
Previously,
Dr.
Petrova
became
the
Vice
President,
Drug
Development
on
our
merger
with
Trillium
Therapeutics
Inc.
(private)
in
April
2013.
Dr.
Petrova
is
responsible
for
managing
our
formal
drug
development
efforts,
including
all
outsourced
activities
to
contract
research
organizations.
Dr.
Petrova
joined
Trillium
Therapeutics
Inc.
(private)
in
2003
from
Prescient
Neuropharma
where
she
was
a
Research
Scientist
and
was
involved
in
identifying
and
characterizing
novel
proteins
involved
in
neuroprotection.
Dr.
Petrova
received
her
Ph.D.
in
Microbiology
from
Saarland
University
in
Saarbruecken,
Germany,
where
she
also
conducted
her
postdoctoral
studies.
44
Dr. Eric Sievers –
Chief Medical Officer
Dr.
Sievers
joined
Trillium
as
Chief
Medical
Officer
on
April
1,
2015.
Dr.
Sievers
is
responsible
for
the
design
and
execution
of
our
clinical
and
regulatory
strategy.
From
2006
to
2015,
he
served
in
several
senior
roles
at
Seattle
Genetics,
most
recently
as
Senior
Vice
President,
Clinical
Development.
At
Seattle
Genetics,
he
helped
write
and
supervise
pivotal
trials
that
ultimately
led
to
the
US
registration
of
ADCETRIS
for
Hodgkin
lymphoma
and
anaplastic
large
cell
lymphoma
in
2011,
now
approved
in
over
45
countries
worldwide.
From
2003
to
2006,
Dr.
Sievers
served
as
Medical
Director
at
Zymogenetics.
He
performed
his
training
in
pediatric
hematology
and
oncology
at
the
University
of
Washington
and
the
Fred
Hutchinson
Cancer
Research
Center,
and
served
on
the
faculty
of
both
institutions
for
more
than
a
decade.
Dr.
Sievers
received
both
a
B.A.
in
Biology
and
an
M.D.
from
Brown
University.
Family Relationships
There
are
no
family
relationships
among
our
directors
and
senior
management.
Other Arrangements
There
are
no
arrangements
or
understanding
with
major
shareholders,
customers,
suppliers
or
others,
pursuant
to
which
any
person
referred
to
above
was
selected
as
a
director
or
member
of
senior
management.
B. Compensation
For
the
year
ended
December
31,
2016,
our
directors
and
members
of
our
administrative,
supervisory
or
management
bodies
received
compensation
for
services,
as
follows:
Name and Principal Position
Niclas Stiernholm (5)
President & Chief Executive
Officer and Director
Robert Uger
Chief Scientific Officer
Eric Sievers (6)
Chief Medical Officer
James Parsons
Chief Financial Officer
Penka Petrova
Chief Development Officer
Luke Beshar
Director
Henry Friesen
Director
Salary/
Fees
earned (1)
($)
Share-
based
awards
($) (2)
Option-
based
awards (3)
($)
Non-equity
incentive plan
compensation (4)
($)
Total
($)
463,500
329,600
512,001
283,250
283,250
56,000
58,000
Nil
Nil
Nil
Nil
Nil
90,000
90,000
45
1,294,285
260,719
2,018,504
421,853
129,780
881,233
418,356
201,600
1,131,957
388,217
111,530
782,997
469,360
111,530
864,140
Nil
Nil
Nil
Nil
146,000
148,000
Robert Kirkman
Director
Michael Moore
Director
Thomas Reynolds
Director
Calvin Stiller
Director, Chair
Notes:
55,500
52,500
50,000
80,000
90,000
90,000
90,000
90,000
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
145,500
142,500
140,000
170,000
(1)
(2)
(3)
(4)
(5)
(6)
For
the
year
ended
December
31,
2016,
we
compensated
each
director
with
an
annual
cash
retainer
of
$40,000
and
the
chair
with
an
additional
annual
cash
retainer
of
$40,000.
Directors
also
received
fees
for
serving
as
a
chair
or
member
of
board
committees.
The
amounts
in
this
column
represent
the
grant
date
fair
value
of
the
DSUs
awarded
to
directors
during
fiscal
year
2016
pursuant
to
the
2016
Cash-
Settled
DSU
Plan
(as
defined
below).
The
grant
date
fair
value
is
the
volume
weighted
average
price
on
the
TSX
for
the
five
trading
days
immediately
preceding
the
grant
date.
This
methodology
represents
management’s
best
estimate
of
fair
value
at
the
grant
date.
The
option-based
awards
value
is
the
grant
date
fair
value
of
stock
options
granted
in
the
year
calculated
in
accordance
with
IFRS
using
the
Black-
Scholes
option
pricing
model
with
the
following
weighted
average
assumptions
for
2016:
expected
life
of
6
years;
risk
free
rate
of
0.7%;
dividend
yield
of
0;
and
expected
volatility
of
84%.
These
payments
reflect
cash
bonuses
on
the
achievement
of
the
annual
corporate
objectives.
Dr.
Stiernholm
was
not
compensated
as
a
director.
Dr.
Sievers’
compensation
was
paid
in
U.S.
dollars
and
has
been
converted
to
Canadian
dollars
using
an
average
exchange
rate
of
US$1
=
Cdn$1.3256
for
2016.
Employment Agreements
Niclas Stiernholm
Effective
February
11,
2016,
we
entered
into
a
new
employment
agreement
with
Niclas
Stiernholm
which
has
an
indefinite
term
and
provides
for
his
employment
as
Chief
Executive
Officer.
The
agreement
provides
for
an
annual
base
salary
of
$450,000
and
participation
in
our
short-term
incentive
plan
and
stock
option
plan.
Dr.
Stiernholm’s
agreement
provides
for
continuation
of
his
salary
and
average
monthly
bonus
for
the
period
equal
to
the
greater
of
18
months
or
one
month
per
year
of
completed
service
(capped
at
24
months)
for
termination
without
cause.
If
Dr.
Stiernholm
terminates
his
employment
within
one
year
of
a
change
of
control,
he
is
entitled
to
severance
of
20
months
of
base
salary,
plus
a
bonus
equal
to
the
average
annual
bonus
of
the
past
three
years.
In
the
event
of
a
change
in
control,
all
unvested
stock
options
granted
prior
to
November
20,
2015
will
immediately
vest.
If
Dr.
Stiernholm’s
employment
is
terminated
without
cause
or
Dr.
Stiernholm
resigns
in
circumstances
constituting
constructive
dismissal,
in
each
case
within
24
months
following
a
change
of
control,
any
stock
options
granted
after
November
19,
2015
will
vest
immediately
prior
to
the
date
of
such
termination
or
resignation,
as
applicable.
The
estimated
additional
payment
to
Dr.
Stiernholm
in
the
case
of
termination
without
cause,
assuming
that
a
termination
took
place
on
December
31,
2016
is
$1,051,735.
In
the
case
of
termination
without
cause
or
resignation
in
circumstances
constituting
constructive
dismissal
in
connection
with
a
change
in
control,
the
incremental
severance,
plus
in
the
money
value
of
accelerated
vesting
of
stock
options
granted
prior
to
November
19,
2015,
is
$117,638.
Dr.
Stiernholm’s
employment
agreement
contains
provisions
relating
to:
(i)
non-disclosure
or
use
of
the
Corporation’s
confidential
information,
(ii)
non-
competition
during,
and
12
months
after,
employment,
and
(iii)
non-solicitation
of
the
Corporation’s
clients
and
employees
during,
and
12
months
after,
employment.
46
Robert Uger
Effective
February
11,
2016,
we
entered
into
a
new
employment
agreement
with
Robert
Uger
which
has
an
indefinite
term
and
provides
for
his
employment
as
Chief
Scientific
Officer.
The
agreement
provides
for
an
annual
base
salary
of
$320,000
and
participation
in
our
short-term
incentive
plan
and
stock
option
plan.
Dr.
Uger’s
agreement
provides
for
continuation
of
his
salary
and
average
monthly
bonus
for
the
period
equal
to
the
greater
of
12
months
or
one
month
per
year
of
completed
service
(capped
at
24
months)
for
termination
without
cause.
In
the
event
of
a
change
in
control,
all
unvested
stock
options
granted
prior
to
November
20,
2015
will
immediately
vest.
If
Dr.
Uger’s
employment
is
terminated
without
cause
or
Dr.
Uger
resigns
in
circumstances
constituting
constructive
dismissal,
in
each
case
within
24
months
following
a
change
of
control,
any
stock
options
granted
after
November
19,
2015
will
vest
immediately
prior
to
the
date
of
such
termination
or
resignation,
as
applicable.
The
estimated
additional
payment
to
Dr.
Uger
in
the
case
of
termination
without
cause,
assuming
that
a
termination
took
place
on
December
31,
2016
is
$508,618.
In
the
case
of
termination
without
cause
or
resignation
in
circumstances
constituting
constructive
dismissal
in
connection
with
a
change
in
control,
the
incremental
in
the
money
value
of
accelerated
vesting
of
stock
options
granted
prior
to
November
19,
2015
is
$156.
Dr.
Uger’s
employment
agreement
contains
provisions
relating
to:
(i)
non-disclosure
or
use
of
the
Corporation’s
confidential
information,
(ii)
non-competition
during,
and
12
months
after,
employment,
and
(iii)
non-solicitation
of
the
Corporation’s
clients
and
employees
during,
and
12
months
after,
employment.
Eric Sievers
Effective
April
1,
2015,
we
entered
into
an
employment
agreement
with
Eric
Sievers
which
has
an
indefinite
term
and
provides
for
his
employment
as
Chief
Medical
Officer.
The
agreement
provides
for
an
annual
base
salary
of
U.S.$375,000
and
participation
in
our
short-term
incentive
plan
and
stock
option
plan.
Dr.
Siever’s
agreement
provides
for
continuation
of
his
salary
for
12
months
for
termination
without
cause.
The
estimated
additional
payment
to
Dr.
Sievers
in
the
case
of
termination
without
cause,
assuming
that
a
termination
took
place
on
December
31,
2016
is
U.S.$386,250.
Dr.
Sievers’
employment
agreement
contains
provisions
relating
to:
(i)
non-disclosure
or
use
of
the
Corporation’s
confidential
information,
(ii)
non-competition
during,
and
12
months
after,
employment,
and
(iii)
non-solicitation
of
the
Corporation’s
clients
and
employees
during,
and
12
months
after,
employment.
James Parsons
Effective
February
11,
2016,
we
entered
into
a
new
employment
agreement
with
James
Parsons
which
has
an
indefinite
term
and
provides
for
his
employment
as
Chief
Financial
Officer.
The
agreement
provides
for
an
annual
base
salary
of
$275,000
and
participation
in
our
short-term
incentive
plan
and
stock
option
plan.
Mr.
Parsons’
agreement
provides
for
continuation
of
his
salary
and
average
monthly
bonus
for
the
period
equal
to
the
greater
of
12
months
or
one
month
per
year
of
completed
service
(capped
at
24
months)
for
termination
without
cause.
In
the
event
of
a
change
in
control,
all
unvested
stock
options
granted
prior
to
November
20,
2015
will
immediately
vest.
If
Mr.
Parsons’
employment
is
terminated
without
cause
or
Mr.
Parsons
resigns
in
circumstances
constituting
constructive
dismissal,
in
each
case
within
24
months
following
a
change
of
control,
any
stock
options
granted
after
November
19,
2015
will
vest
immediately
prior
to
the
date
of
such
termination
or
resignation,
as
applicable.
The
estimated
additional
payment
to
Mr.
Parsons
in
the
case
of
termination
without
cause,
assuming
that
a
termination
took
place
on
December
31,
2016
is
$377,593.
In
the
case
of
termination
without
cause
or
resignation
in
circumstances
constituting
constructive
dismissal
in
connection
with
a
change
in
control,
the
incremental
in
the
money
value
of
accelerated
vesting
of
stock
options
granted
prior
to
November
19,
2015
is
$78.
Mr.
Parsons’
employment
agreement
contains
provisions
relating
to:
(i)
non-disclosure
or
use
of
the
Corporation’s
confidential
information,
(ii)
non-competition
during,
and
12
months
after,
employment,
and
(iii)
non-solicitation
of
the
Corporation’s
clients
and
employees
during,
and
12
months
after,
employment.
47
Penka Petrova
Effective
February
11,
2016,
we
entered
into
a
new
employment
agreement
with
Penka
Petrova
which
has
an
indefinite
term
and
provides
for
her
employment
as
Chief
Development
Officer.
The
agreement
provides
for
an
annual
base
salary
of
$275,000
and
participation
in
our
short
term
incentive
plan
and
stock
option
plan.
Dr.
Petrova’s
agreement
provides
for
continuation
of
her
salary
and
average
monthly
bonus
for
the
period
equal
to
the
greater
of
12
months
or
one
month
per
year
of
completed
service
(capped
at
24
months)
for
termination
without
cause.
In
the
event
of
a
change
in
control,
all
unvested
stock
options
granted
prior
to
November
20,
2015
will
immediately
vest.
If
Dr.
Petrova’s
employment
is
terminated
without
cause
or
Dr.
Petrova
resigns
in
circumstances
constituting
constructive
dismissal,
in
each
case
within
24
months
following
a
change
of
control,
any
stock
options
granted
after
November
19,
2015
will
vest
immediately
prior
to
the
date
of
such
termination
or
resignation,
as
applicable.
The
estimated
additional
payment
to
Dr.
Petrova
in
the
case
of
termination
without
cause,
assuming
that
a
termination
took
place
on
December
31,
2016
is
$414,135.
In
the
case
of
termination
without
cause
or
resignation
in
circumstances
constituting
constructive
dismissal
in
connection
with
a
change
in
control,
the
incremental
in
the
money
value
of
accelerated
vesting
of
stock
options
granted
prior
to
November
19,
2015
is
$78.
Dr.
Petrova’s
employment
agreement
contains
provisions
relating
to:
(i)
non-disclosure
or
use
of
the
Corporation’s
confidential
information,
(ii)
non-competition
during,
and
12
months
after,
employment,
and
(iii)
non-solicitation
of
the
Corporation’s
clients
and
employees
during,
and
12
months
after,
employment.
Entitlements under Stock Option Plan
Pursuant
to
the
2016
Stock
Option
Plan
(as
defined
below),
upon
retirement,
resignation
or
termination
without
cause,
the
optionholder
will
have
the
right,
until
the
earlier
of
(i)
120
days
(or
such
other
longer
period
as
may
be
determined
by
the
Board
in
its
sole
discretion
or,
if
longer,
the
period
specified
in
the
participant’s
employment
contract)
following
the
Termination
Date,
and
(ii)
the
normal
expiry
date
of
the
stock
option
rights
of
such
participant,
to
exercise
all
stock
options
to
the
extent
they
were
exercisable
on
the
Termination
Date.
In
addition,
the
2016
Stock
Option
Plan
provides
that
any
unvested
stock
options
granted
thereunder
will
be
subject
to
“double
trigger”
vesting
upon
a
Change
of
Control,
as
set
out
in
the
2016
Stock
Option
Plan.
Notwithstanding
the
foregoing,
the
Board
has
determined
that
the
“single
trigger”
vesting
provisions
of
the
2014
Stock
Option
Plan
(as
defined
below)
will
continue
to
apply
in
respect
of
927,834
stock
options
granted
by
us
prior
to
November
18,
2015.
See
“Item
6.D.
Stock
Option
Plan.”
Stock Option Plan
We
have
adopted
a
stock
option
plan,
or
the
2016
Stock
Option
Plan,
that
provides
for
the
granting
of
stock
options
to
officers,
directors,
employees
and
consultants
of
ours
and
our
affiliates.
The
purpose
of
the
2016
Stock
Option
Plan
is
to
advance
our
interests
by
encouraging
our
directors,
officers
and
key
employees
and
consultants
retained
to
acquire
Common
Shares,
thereby:
(a)
increasing
the
proprietary
interests
of
such
persons
in
us;
(b)
aligning
the
interests
of
such
persons
with
the
interests
of
our
shareholders
generally;
(c)
encouraging
such
persons
to
remain
associated
with
us;
and
(d)
furnishing
such
persons
with
an
additional
incentive
in
their
efforts
on
behalf
of
us.
As
at
December
31,
2016,
pursuant
to
the
2016
Stock
Option
Plan,
we
were
entitled
to
issue
1,894,501
options.
The
following
is
a
summary
only,
and
is
qualified
in
its
entirety
by
the
terms
and
conditions
of
the
2016
Stock
Option
Plan,
which
is
attached
as
an
exhibit
to
this
Form
20-F.
Capitalized
terms
used
in
this
summary
but
not
otherwise
defined
herein
shall
have
the
meanings
ascribed
thereto
in
the
2016
Stock
Option
Plan.
Administration by the Board of Directors
The
2016
Stock
Option
Plan
is
administered
by
our
Board,
which
has
final
authority
and
discretion,
subject
to
the
express
provisions
of
the
2016
Stock
Option
Plan,
to
interpret
the
2016
Stock
Option
Plan,
to
prescribe,
amend
and
rescind
rules
and
regulations
relating
to
it
and
to
make
all
other
determinations
deemed
necessary
or
advisable
for
the
administration
of
the
2016
Stock
Option
Plan,
subject
to
the
rules
and
policies
of
any
exchange
or
quotation
system
upon
which
our
Common
Shares
are
listed
or
quoted,
or
the
Exchange
Rules,
including
the
TSX
and
NASDAQ.
This
includes
the
discretion
of
our
Board
to
decide
who
will
participate
in
the
2016
Stock
Option
Plan,
including
directors,
officers,
employees
or
consultants,
each
a
Participant.
Our
Board
also
has
authority
to
delegate
its
duties
to
the
compensation
committee.
48
Expiry
Stock
options
granted
under
the
2016
Stock
Option
Plan
are
non-transferable,
expire
not
later
than
ten
years
from
the
date
of
issuance
and
are
exercisable
as
determined
by
our
Board.
In
addition,
notwithstanding
the
expiration
date
applicable
to
any
stock
option,
if
a
stock
option
would
otherwise
expire
during
or
immediately
after
a
Blackout
Period
(as
defined
in
the
2016
Stock
Option
Plan),
then
the
expiration
date
of
such
stock
option
shall
be
the
10th
business
day
following
the
expiration
of
the
Blackout
Period.
Exercise Price
The
exercise
price
payable
in
respect
of
each
stock
option
may
not
be
lower
than
the
closing
trading
price
of
the
Common
Shares
on
the
TSX
or
NASDAQ,
as
specified
by
the
committee
in
the
option
award
on
the
trading
day
immediately
preceding
the
date
of
grant.
Maximum Limit
The
2016
Stock
Option
Plan
is
a
fixed
stock
option
plan,
meaning
that
the
maximum
number
of
Common
Shares
reserved
for
issuance
upon
the
exercise
of
stock
options
granted
under
the
2016
Stock
Option
Plan
is
fixed
and
cannot
be
changed
without
shareholder
approval.
The
number
of
authorized
but
unissued
Common
Shares
that
may
be
issued
upon
the
exercise
of
Options
granted
under
the
2016
Stock
Option
Plan
at
any
time,
plus
the
number
of
Common
Shares
reserved
for
issuance
under
outstanding
options
otherwise
granted
by
us
shall
not
exceed
1,894,501
Common
Shares.
Any
exercise
of
stock
options
will
not
make
new
grants
available
under
the
2016
Stock
Option
Plan.
However,
if
stock
options
granted
to
an
individual
under
the
2016
Stock
Option
Plan
in
respect
of
certain
Common
Shares
expire
or
terminate
for
any
reason
with
or
without
having
been
exercised,
such
Common
Shares
may
be
made
available
for
other
stock
options
to
be
granted
under
the
2016
Stock
Option
Plan.
Insider Participation Limits
The
aggregate
number
of
Common
Shares
issued
to
“reporting
insiders”
(as
such
term
is
defined
in
National
Instrument
55-104
-
Insider
Reporting
Requirements
and
Exemptions)
under
the
2016
Stock
Option
Plan
or
any
other
security-based
compensation
arrangement
of
ours
and
our
affiliates
(including,
without
limitation,
our
2014
Deferred
Share
Unit
Plan,
or
the
2014
Equity
DSU
Plan)
within
a
one-year
period,
may
not
at
any
time
exceed
10%
of
the
combined
total
number
of
Common
Shares
issued
and
outstanding
(on
a
non-diluted
basis)
and
the
total
number
of
Common
Shares
into
which
the
outstanding
preferred
shares
may
be
converted.
In
no
event
shall
stock
options
be
granted
to
an
individual
to
purchase
in
excess
of
5%
of
the
total
of
the
number
of
then
issued
and
outstanding
Common
Shares
and
the
number
of
Common
Shares
issuable
upon
due
conversion
of
the
issued
and
outstanding
preferred
shares
in
any
12
month
period.
In
addition,
no
stock
options
shall
be
granted
to
any
Participant
that
is
a
non-employee
director
if
such
grant
could
result,
at
any
time,
in
(i)
the
aggregate
number
of
Common
Shares
issuable
to
non-employee
directors
under
the
2016
Stock
Option
Plan,
or
any
other
security-based
compensation
arrangement,
exceeding
1%
of
the
issued
and
outstanding
Common
Shares
and
the
number
of
Common
Shares
issuable
upon
due
conversion
of
the
issued
and
outstanding
preferred
shares;
or
(ii)
an
annual
grant
per
non-employee
director
exceeding
$100,000
worth
of
options.
Amendment Provisions
Our
Board
has
the
discretion
to
make
amendments
to
the
2016
Stock
Option
Plan
and
any
stock
options
granted
thereunder
which
it
may
deem
necessary,
without
having
to
obtain
shareholder
approval.
Such
changes
include,
without
limitation:
minor
changes
of
a
“housekeeping”
nature;
amending
stock
options
under
the
2016
Stock
Option
Plan,
including
with
respect
to
the
stock
option
period
(provided
that
the
period
during
which
a
stock
option
is
exercisable
does
not
exceed
ten
years
from
the
date
the
stock
option
is
granted
and
does
not
deal
with
an
extension
of
such
stock
option
period),
vesting
period,
exercise
method
and
frequency
and
method
of
determining
the
exercise
price,
assignability
and
effect
of
termination
of
a
Participant’s
employment
or
cessation
of
the
Participant’s
directorship;
changing
the
class
of
Participants
eligible
to
participate
under
the
2016
Stock
Option
Plan;
changing
the
terms
and
conditions
of
any
financial
assistance
which
may
be
provided
by
us
to
Participants
to
facilitate
the
purchase
of
Common
Shares
under
the
2016
Stock
Option
Plan;
and
adding
a
cashless
exercise
feature,
payable
in
cash
or
securities,
provided
that
a
cashless
exercise
will
result
in
a
full
deduction
of
the
number
of
underlying
Common
Shares
from
the
2016
Stock
Option
Plan
reserve.
49
Shareholder
approval
will
be
required
in
the
case
of:
(i)
any
amendment
to
the
amendment
provisions
of
the
2016
Stock
Option
Plan;
(ii)
any
increase
in
the
maximum
number
of
Common
Shares
issuable
under
the
2016
Stock
Option
Plan;
(iii)
amendments
that
may
permit
the
introduction
or
re-introduction
of
non-
employee
directors
on
a
discretionary
basis
or
amendments
that
increase
limits
previously
imposed
on
non-employee
director
participation;
and
(iv)
any
reduction
in
the
exercise
price
or
extension
of
the
stock
option
period
(other
than
as
a
result
of
a
Blackout
Period
extension),
in
addition
to
such
other
matters
that
may
require
shareholder
approval
under
the
Exchange
Rules.
Termination, Resignation, Death, etc.
Stock
options
granted
under
the
2016
Stock
Option
Plan
are,
and
will
be,
evidenced
by
an
option
agreement
entered
between
us
and
the
Participant.
Stock
options
granted
under
the
plan
terminate
immediately
if
a
Participant
is
dismissed
with
cause.
If
a
Participant
ceases
to
hold
any
position
as
a
Participant,
by
reason
of
retirement,
resignation
or
termination
without
cause,
such
Participant
shall
have
the
right
until
the
earlier
of:
(i)
120
days
(or
such
other
longer
period
as
may
be
determined
by
the
Board
in
its
sole
discretion
or,
if
longer,
the
period
specified
in
the
Participant’s
employment
contract)
following
the
Participant’s
last
day
of
active
employment,
or
the
Termination
Date,
which
shall
not
include
any
period
of
statutory
or
reasonable
notice
or
any
period
of
deemed
employment
or
salary
continuance;
and
(ii)
the
normal
expiry
date
of
the
stock
option
rights
of
such
Participant,
to
exercise
the
stock
options
under
the
2016
Stock
Option
Plan
with
respect
to
all
optioned
Common
Shares
of
such
Participant
to
the
extent
that
they
were
exercisable
on
the
Termination
Date.
If
a
Participant
dies,
his
options
may
be
exercised
by
his
legal
representatives
until
the
earlier
of
(i)
one
year
after
the
death
of
the
Participant;
and
(ii)
the
normal
expiry
date
of
the
options
of
such
Participant.
If
a
Participant
ceases
to
be
a
director,
officer
or
employee
of,
or
consultant
to,
the
Corporation
or
of
one
of
our
subsidiaries
as
a
result
of
disability
or
illness
preventing
the
Participant
from
performing
the
duties
routinely
performed
by
such
Participant,
such
Participant
shall
have
the
right
until
the
earlier
of:
(i)
180
days
following
the
Termination
Date;
and
(ii)
the
normal
expiry
date
of
the
option
rights
of
such
Participant,
to
exercise
such
Participant’s
options
under
the
2016
Stock
Option
Plan
with
respect
to
all
Common
Shares
of
such
Participant
to
the
extent
they
were
exercisable
on
the
Termination
Date.
Upon
expiry
of
the
prescribed
period
described
above,
all
unexercised
options
shall
immediately
terminate.
Change of Control
In
the
event
of
a
Change
of
Control
(as
such
term
is
defined
in
the
2016
Stock
Option
Plan),
any
surviving,
successor
or
acquiring
entity
will
assume
any
outstanding
stock
options
or
will
substitute
similar
awards
for
the
outstanding
stock
options.
If
the
surviving,
successor
or
acquiring
entity
does
not
assume
the
outstanding
stock
options
or
substitute
similar
awards
for
the
outstanding
stock
options,
or
if
the
Board
otherwise
determines
in
its
sole
discretion,
we
will
give
written
notice
to
all
Participants
advising
that
the
2016
Stock
Option
Plan
will
be
terminated
effective
immediately
prior
to
the
Change
of
Control
and
all
stock
options
will
be
deemed
to
be
vested
stock
options
and
may
make
provision
for
the
exercise
of
stock
options
and
tender
of
Common
Shares
in
connection
with
the
Change
of
Control
and
may
otherwise
make
provision
for
the
cash
out
or
termination
of
stock
options
that
are
not
exercised
within
a
specified
period
of
time.
50
Termination without Cause Following a Change of Control
The
2016
Stock
Option
Plan
provides
that,
notwithstanding
anything
in
the
2016
Stock
Option
Plan
to
the
contrary,
if
the
employment
of
a
Participant
is
terminated
by
us
(or
our
successor,
if
applicable)
without
cause
or
if
the
Participant
resigns
in
circumstances
constituting
constructive
dismissal,
in
each
case,
within
24
months
following
a
Change
of
Control
(as
such
term
is
defined
in
the
2016
Stock
Option
Plan),
all
of
the
Participant’s
stock
options
will
vest
immediately
prior
to
the
Termination
Date.
All
vested
options
may
be
exercised
until
the
earlier
of:
(i)
120
days
(or
such
other
longer
period
as
may
be
determined
by
the
Board
in
its
sole
discretion)
following
the
Termination
Date;
or
(ii)
the
normal
expiry
date
of
the
option
rights
of
such
Participant.
Upon
the
expiration
of
such
period,
all
unexercised
options
shall
immediately
terminate.
These
are
also
known
as
“double
trigger”
vesting
provisions.
Options Governed by 2014 Stock Option Plan
Notwithstanding
the
foregoing,
the
Board
has
previously
determined
that
the
“double
trigger”
vesting
provisions
of
the
2016
Stock
Option
Plan
will
not
apply
in
respect
of
an
aggregate
of
927,834
stock
options
granted
by
us
prior
to
November
18,
2015.
The
vesting
of
all
such
stock
options
upon
a
Change
of
Control
will
continue
to
be
governed
in
accordance
with
the
terms
and
conditions
of
the
previous
stock
option
plan
adopted
by
us
on
May
26,
2014,
or
the
2014
Stock
Option
Plan.
The
2014
Stock
Option
Plan
provided
that
any
stock
options
outstanding
immediately
prior
to
the
occurrence
of
a
Change
of
Control
(as
such
term
is
defined
in
the
2014
Stock
Option
Plan),
but
which
are
not
then
exercisable,
shall
immediately
vest
and
become
fully
exercisable
upon
the
occurrence
of
a
Change
of
Control.
These
are
also
known
as
“single
trigger”
provisions.
Other Terms
Any
consolidation
or
subdivision
of
Common
Shares
will
be
reflected
in
an
adjustment
to
the
stock
options.
Stock
options
granted
under
the
2016
Stock
Option
Plan
are
non-transferrable
and
non-assignable
(except
to
certain
permitted
assigns),
and
the
Corporation
does
not
provide
any
financial
assistance
in
connection
with
option
awards.
2014 Equity DSU Plan
Our
shareholders
approved
the
2014
Deferred
Share
Unit
Plan,
or
the
2014
Equity
DSU
Plan
on
May
27,
2014.
The
2014
Equity
DSU
Plan
was
intended
to
promote
a
greater
alignment
of
long
term
interests
between
non-executive
directors
and
executive
officers
and
our
shareholders
through
the
issuance
of
DSUs.
Since
the
value
of
a
DSU
increases
or
decreases
with
the
market
price
of
the
Common
Shares,
DSUs
reflect
a
philosophy
of
aligning
the
interests
of
directors
and
executive
officers
with
those
of
the
shareholders
by
tying
compensation
to
share
price
performance.
Our
Board
used
DSUs
issued
under
the
2014
Equity
DSU
Plan,
as
well
as
DSUs
issued
under
the
2016
Cash-Settled
DSU
Plan
and
stock
options
issued
under
the
2016
Stock
Option
Plan,
as
part
of
our
overall
director
and
executive
officer
compensation
program.
A
total
of
51,788
DSUs
were
issued
and
outstanding
as
at
December
31,
2016
under
the
2014
Equity
DSU
Plan.
The
2014
Equity
DSU
Plan
was
combined
with
the
2016
Cash-Settled
DSU
Plan
(as
defined
below)
and
ceased
to
exist
as
a
stand-alone
plan
effective
as
of
March
9,
2017.
Following
such
date,
all
outstanding
DSUs
under
the
2014
Equity
DSU
Plan
will
be
settled
in
cash
only
in
accordance
with
the
terms
and
conditions
of
the
2016
Cash-Settled
DSU
Plan
(as
defined
below).
Overview of the 2014 Equity DSU Plan
The
following
is
a
summary
only,
and
is
qualified
in
its
entirety
by
the
terms
and
conditions
of
the
2014
Equity
DSU
Plan.
Capitalized
terms
used
in
this
summary
but
not
otherwise
defined
herein
shall
have
the
meanings
ascribed
thereto
in
the
2014
Equity
DSU
Plan.
51
The
2014
Equity
DSU
Plan
provides
that,
subject
to
the
terms
of
the
2014
Equity
DSU
Plan
and
such
other
conditions
as
our
Board
(or
compensation
committee
of
our
Board
after
delegation
by
authority
from
our
Board)
may
impose,
an
executive
officer
or
director
of
ours,
each
an
Eligible
Person,
may
receive
his
or
her
Total
Compensation
in
the
form
of
DSUs.
The
term
“Total
Compensation”
includes
annual
and
special
bonuses
payable
to
directors
and
executive
officers
and,
in
the
case
of
directors,
directors
fees
(including
annual
Board
retainers,
fees
for
serving
as
chair
of
our
Board
and/or
as
a
chair
or
member
of
any
committee
of
our
Board,
for
attending
meetings
of
our
Board
or
any
committee
thereof,
and
any
other
fees
payable
to
directors)
in
the
form
of
DSUs.
Our
Board
may
use
DSUs
to
pay
bonuses
and
directors
fees
either
alone
or
in
conjunction
with
cash,
or
any
combination
of
DSUs
and
cash.
The
number
of
DSUs
(including
fractional
DSUs,
computed
to
three
digits)
to
be
credited
to
an
Eligible
Person
for
services
will
be
determined
by
dividing
the
awarded
amount
by
the
Fair
Market
Value.
“Fair
Market
Value”
of
the
Common
Shares
is
the
volume
weighted
average
trading
price
of
the
Common
Shares
on
the
TSX
for
the
five
days
immediately
preceding
the
date
the
awarded
amount
is
declared
by
our
Board.
An
Eligible
Person
who
has
ceased
to
be
a
director
or
executive
officer
(other
than
as
a
result
of
death)
may
elect
to
receive
one
Common
Share
in
respect
of
each
whole
DSU
credited
to
the
Eligible
Person’s
account
by
filing
with
us
a
notice
of
redemption
in
the
form
and
by
the
time
stipulated
in
the
2014
Equity
DSU
Plan.
If
the
Eligible
Person
does
not
make
the
election
on
a
timely
basis,
the
Eligible
Person
will
be
deemed
to
have
elected
to
redeem
all
of
his
or
her
DSUs.
The
issuance
of
the
Common
Shares
will
be
made
by
us
as
soon
as
reasonably
possible
following
the
election
to
redeem
the
DSUs,
or
being
deemed
to
have
been
made,
by
the
Eligible
Person.
Maximum Number of Shares issuable under the Plan
The
“Outstanding
Issue”
means
the
combined
total
of
the
number
of
Common
Shares
outstanding
and
the
number
of
Common
Shares
into
which
the
preferred
shares
outstanding
(on
a
non-diluted
basis)
may
be
converted
in
accordance
with
their
terms.
The
maximum
number
of
Common
Shares
reserved
for
issuance
under
the
2014
Equity
DSU
Plan
is
66,667,
which
is
approximately
0.6%
of
the
Outstanding
Issue
as
at
December
31,
2016,
subject
to
adjustment.
The
2014
Equity
DSU
Plan
provides
that
the
maximum
number
of
Common
Shares
that
may
be
reserved
for
issuance
to
Insiders
(as
that
term
is
defined
in
the
TSX
rules)
pursuant
to
the
2014
Equity
DSU
Plan,
together
with
any
Common
Shares
issuable
pursuant
to
any
other
securities-based
compensation
arrangement
of
ours
(including
the
2016
Stock
Option
Plan),
will
not
exceed
10%
of
the
Outstanding
Issue.
In
addition,
the
maximum
number
of
Common
Shares
that
may
be
issued
to
Insiders
under
the
2014
Equity
DSU
Plan,
together
with
any
Common
Shares
issued
to
Insiders
pursuant
to
any
other
securities-based
compensation
arrangement
of
ours
(including
the
2016
Stock
Option
Plan),
within
any
one
year
period,
will
not
exceed
10%
of
the
Outstanding
Issue.
Also,
in
no
event,
may
the
number
of
Common
Shares
reserved
for
issuance
to
any
one
person
pursuant
to
the
2014
Equity
DSU
Plan
and
the
2016
Stock
Option
Plan
exceed
5%
of
the
Outstanding
Issue.
Transferability
DSUs
and
any
other
rights,
benefits
or
interests
in
the
2014
Equity
DSU
Plan
are
non-transferable,
except
that
if
the
Eligible
Person
dies,
the
legal
representatives
of
the
Eligible
Person
will
be
entitled
to
receive
the
amount
of
any
payment
otherwise
payable
to
the
Eligible
Person
in
accordance
with
the
provisions
2014
Equity
DSU
Plan.
Amendments to the 2014 DSU Plan
Our
Board
has
the
discretion
to
make
amendments
to
the
2014
Equity
DSU
Plan
and
any
DSUs
granted
thereunder
which
it
may
deem
necessary,
without
having
to
obtain
shareholder
approval.
Such
changes
may
include,
without
limitation:
minor
changes
of
a
“housekeeping”
nature;
amending
the
terms
of
DSUs
under
the
2014
Equity
DSU
Plan
and
method
of
determining
the
awarded
amount
and
the
number
of
DSUs
that
may
be
issued
to
an
Eligible
Person,
and
the
assignability
and
effect
of
terminated
service
of
an
Eligible
Person;
changing
the
class
of
Eligible
Persons;
and
changing
the
method
and
procedures
to
be
followed
with
regard
to
the
issuance
of
DSUs
under
the
2014
Equity
DSU
Plan.
52
Shareholder
approval
will
be
required
in
the
case
of:
(i)
any
amendment
to
the
amendment
provisions
of
the
2014
Equity
DSU
Plan;
(ii)
any
increase
in
the
maximum
number
of
Common
Shares
issuable
under
the
2014
Equity
DSU
Plan;
and
(iii)
such
other
matters
that
may
require
shareholder
approval
under
the
rules
and
policies
of
the
TSX.
Termination of Service
An
Eligible
Person
who
has
terminated
service
may
elect
to
receive
one
Common
Share
in
respect
of
each
whole
DSU
credited
to
the
Eligible
Person’s
account,
by
filing
a
notice
of
redemption
in
the
form
prescribed
from
time
to
time
by
us
on
or
before
December
15
of
the
first
calendar
year
commencing
after
the
date
on
which
the
Eligible
Person
has
terminated
service.
If
the
Eligible
Person
fails
to
file
such
notice
on
or
before
that
December
15,
the
Eligible
Person
will
be
deemed
to
have
filed
a
notice
of
redemption
on
that
December
15
and
will
be
deemed
to
have
elected
to
redeem
all
of
his
or
her
DSUs.
The
date
on
which
a
notice
is
filed
or
deemed
to
be
filed
with
the
Secretary
of
the
Company
is
the
“Filing
Date”.
We
may
defer
the
Filing
Date
to
any
other
date
if
such
deferral
is,
in
the
sole
opinion
of
ours,
desirable
to
ensure
compliance
the
2014
Equity
DSU
Plan.
There
are
no
causes
of
cessation
of
entitlement
under
the
2014
Equity
DSU
Plan,
including
termination
for
or
without
cause.
In
the
event
of
the
death
of
an
Eligible
Person,
we
will,
within
two
months
of
the
Eligible
Person’s
death,
pay
cash
equal
to
the
Fair
Market
Value
of
the
shares
which
would
be
deliverable
to
the
Eligible
Person
if
the
Eligible
Person
had
terminated
service
in
respect
of
the
DSUs
credited
to
the
deceased
Eligible
Person’s
account
(net
of
any
applicable
withholding
tax)
to
or
for
the
benefit
of
the
legal
representative
of
the
Eligible
Person.
The
Fair
Market
Value
will
be
calculated
on
the
date
of
death
of
the
Eligible
Person.
The
foregoing
is
a
summary
only,
and
is
qualified
in
its
entirety
by
the
terms
and
conditions
of
the
2014
Equity
DSU
Plan
which
is
attached
as
an
exhibit
to
this
Form
20-F.
2016 Cash-Settled DSU Plan
On
November
9,
2016,
our
Board
adopted
a
cash-settled
DSU
plan,
or
the
2016
Cash-Settled
DSU
Plan.
The
2016
Cash-Settled
DSU
Plan
initially
supplemented
the
2014
Equity
DSU
Plan
and
is
intended
to
provide
the
Board
with
non-dilutive
compensation
tool
that
further
advances
our
philosophy
of
aligning
the
interests
of
directors
and
executive
officers
with
those
of
the
shareholders
by
tying
compensation
to
share
price
performance.
A
total
of
47,614
DSUs
were
issued
and
outstanding
as
at
December
31,
2016
under
the
2016
Cash-Settled
DSU
Plan.
Following
the
combination
of
the
2014
Equity
DSU
Plan
and
the
2016
Cash-Settled
DSU
Plan
effective
as
of
March
9,
2017,
the
2016
Cash-Settled
DSU
Plan
continues
unamended
as
our
only
DSU
plan.
All
DSUs
currently
issued
and
outstanding
(including
any
DSUs
formerly
granted
under
the
2014
Equity
DSU
Plan)
will
be
settled
in
cash
only
and
will
be
governed
by
the
terms
and
conditions
of
the
2016
Cash-Settled
DSU
Plan.
Overview of the 2016 Cash-Settled DSU Plan
The
following
is
a
summary
only,
and
is
qualified
in
its
entirety
by
the
terms
and
conditions
of
the
2016
Cash-Settled
DSU
Plan.
Capitalized
terms
used
in
this
summary
but
not
otherwise
defined
herein
shall
have
the
meanings
ascribed
thereto
in
the
2016
Cash-Settled
DSU
Plan.
The
2016
Cash-Settled
DSU
Plan
provides
that,
the
Board
will,
in
its
sole
and
absolute
discretion
and
subject
to
the
terms
and
conditions
of
the
2016
Cash-Settled
DSU
Plan,
decide
at
the
time
of
declaring
any
Total
Compensation
to
an
Eligible
Person,
the
amount,
or
the
Awarded
Amount,
of
the
Total
Compensation
that
will
be
satisfied
in
the
form
of
DSUs.
The
terms
Eligible
Person
and
Total
Compensation
have
the
same
meaning
as
under
the
2014
Equity
DSU
Plan.
The
number
of
DSUs
(including
fractional
DSUs,
computed
to
three
digits)
to
be
credited
to
an
Eligible
Person
for
services
will
be
determined
by
dividing
the
awarded
amount
by
the
Fair
Market
Value
as
at
the
last
trading
day
before
the
date
the
Awarded
Amount
is
declared
by
our
Board.
The
term
Fair
Market
Value
has
the
same
meaning
as
under
the
2014
Equity
DSU
Plan.
53
Redemption of DSUs
The
2016
Cash-Settled
DSU
Plan
provides
that
a
DSU
held
by
an
Eligible
Person
shall
be
redeemed
by
us
upon
such
Eligible
Person
ceasing
to
be
a
director
and/or
executive
officer,
including
through
the
termination,
voluntary
resignation,
retirement
or
death,
also
known
as
a
Terminated
Service
event.
An
Eligible
Person
who
has
Terminated
Service
may
elect
the
date
on
which
the
DSUs
held
by
that
Eligible
Person
shall
be
redeemed
by
us
by
filing
with
our
Chief
Financial
Officer
as
redemption
notice
on
or
before
December
15
of
the
first
calendar
year
commencing
after
the
date
on
which
the
Eligible
Person
has
Terminated
Service.
If
the
Eligible
Person
fails
to
file
such
Redemption
Notice
on
or
before
that
December
15,
the
Eligible
Person
shall
be
deemed
to
have
filed
the
Redemption
Notice
on
that
December
15.
The
date
on
which
a
redemption
notice
is
filed,
or
deemed
to
be
filed,
shall
hereinafter
be
referred
to
as
the
“Filing
Date”.
We
may
defer
the
Filing
Date
to
any
other
date
if
such
deferral
is,
in
the
sole
opinion
of
the
Company,
desirable
to
ensure
compliance
with
applicable
laws
and
our
insider
trading
and
“blackout”
policies.
The
cash
payment
to
which
an
Eligible
Person
is
entitled
on
settlement
of
DSUs
will
be
determined
with
reference
to
the
Fair
Market
Value
of
a
Common
Share
as
of
the
Filing
Date,
net
of
applicable
withholding
taxes.
Such
payment
will
be
made
as
soon
as
reasonably
possible
following
the
Filing
Date,
but
in
any
event
not
later
than
the
date
that
is
60
days
following
the
Filing
Date;
provided,
however,
that
in
no
event
will
such
payment
be
made
later
than
December
31
of
the
first
calendar
year
commencing
after
the
Eligible
Person
has
Terminated
Service.
Upon
payment
of
such
amount,
the
DSUs
shall
be
cancelled
and
such
Eligible
Person
shall
have
no
further
rights
under
the
2016
Cash-Settled
DSU
Plan.
Certain
additional
requirements
are
prescribed
under
the
2016
Cash-Settled
DSU
Plan
for
Eligible
Participants
who
are
United
States
taxpayers.
Death of an Eligible Participant
In
the
event
of
the
death
of
an
Eligible
Person
prior
to
the
settlement
of
the
DSUs
credited
to
his
her
own
account,
(i)
all
unvested
DSUs
shall
automatically
vest
in
full;
and
(ii)
we
will,
as
soon
as
reasonably
practicable
and
any
event
not
later
than
60
days
following
the
Eligible
Person“s
death,
cause
to
be
delivered
to
the
legal
representatives
of
the
Eligible
Person,
the
cash
payment
such
Eligible
Person
would
otherwise
have
been
entitled
to
if
the
Eligible
Person
had
Terminated
Service.
Change of Control
In
the
event
that
an
Eligible
Person
has
Terminated
Service
(other
than
as
a
result
of
termination
for
cause
or
death)
within
24
months
following
a
Change
of
Control
(as
such
term
is
defined
in
the
2016
Cash-Settled
DSU
Plan),
all
DSUs
credited
to
each
Eligible
Person’s
account
shall
immediately
vest
in
full.
Transferability
DSUs
and
any
other
rights,
benefits
or
interests
in
the
2016
Cash-Settled
DSU
Plan
are
non-transferable,
except
that
if
the
Eligible
Person
dies,
the
legal
representatives
of
the
Eligible
Person
will
be
entitled
to
receive
the
amount
of
any
payment
otherwise
payable
to
the
Eligible
Person
in
accordance
with
the
provisions
of
the
2016
Cash-Settled
DSU
Plan.
Adjustments and Reorganizations
In
the
event
of
any
dividend
paid
in
shares,
share
subdivision,
combination
or
exchange
of
shares,
merger,
consolidation,
spin-off
or
other
distribution
of
our
assets
to
shareholders,
or
any
other
change
in
our
capital
affecting
the
Common
Shares,
the
Board,
in
its
sole
and
absolute
discretion,
will
make,
with
respect
to
the
number
of
DSUs
outstanding
under
the
2016
Cash-Settled
DSU
Plan,
any
proportionate
adjustments
as
it
considers
appropriate
to
reflect
that
change.
54
Amendments to the 2016 Cash-Settled DSU Plan
Subject
to
applicable
law
and
certain
tax
driven
prescribed
limitations,
the
2016
Cash-Settled
DSU
Plan
may
be
amended
in
whole
or
in
part
at
any
time
by
our
Board
without
the
consent
of
the
Eligible
Persons
provided
that
such
amendment
shall
not
materially
adversely
impair
the
rights
of
any
Eligible
Person
with
respect
to
DSUs
to
which
the
Eligible
Person
is
then
entitled
under
this
2016
Cash-Settled
DSU
Plan.
Shareholder
approval
will
be
required
for
any
amendments
required
to
be
approved
by
shareholders
under
applicable
law
(including
any
applicable
Exchange
Rules).
Termination
The
Board
may
terminate
the
2016
Cash-Settled
DSU
Plan
at
any
time,
but
no
termination
will,
without
the
consent
of
the
Eligible
Person
or
unless
required
by
law,
adversely
affect
the
rights
of
an
Eligible
Person
with
respect
to
DSUs
to
which
the
Eligible
Person
is
then
entitled
under
the
2016
Cash-Settled
DSU
Plan.
In
no
event
will
a
termination
of
the
2016
Cash-Settled
DSU
Plan
accelerate
the
time
at
which
the
Eligible
Person
would
otherwise
be
entitled
to
receive
a
cash
payment
in
respect
of
any
DSUs.
Pension, Retirement or Similar Benefits
We
have
not
set
aside
or
accrued
any
amounts
to
provide
pension,
retirement
or
similar
benefit
for
our
directors
or
senior
management.
C. Board Practices Term of Office
The
term
of
office
of
directors
expires
annually
at
the
time
of
the
annual
meeting.
The
directors
were
elected
at
the
annual
meeting
of
shareholders
on
May
27,
2016.
The
term
of
office
of
the
officers
expires
at
the
discretion
of
the
directors.
Service Contracts
See
the
disclosure
under
the
heading
“Item
6.B.
Employment
Agreements”
for
particulars
of
Dr.
Stiernholm’s
service
contract.
Other
than
as
disclosed
herein,
we
do
not
have
any
service
contracts
with
directors
which
provide
for
benefits
upon
termination
of
employment.
Committees
We
have
an
Audit
Committee,
a
Corporate
Governance
and
Nominating
Committee
and
a
Compensation
Committee.
Each
of
our
committee
charters
is
available
on
our
website
at
www.trilliumtherapeutics.com.
A
copy
of
the
charter
of
the
Audit
Committee
is
appended
as
an
exhibit
to
this
Form
20-F.
Audit Committee
Our
Audit
Committee
is
comprised
of
a
minimum
of
three
members,
each
of
whom,
in
the
determination
of
the
Board
of
Directors,
satisfies
the
independence,
financial
literacy
and
experience
requirements
of
applicable
U.S.
and
Canadian
securities
laws,
rules
and
guidelines
(including,
without
limitation,
National
Instrument
52-110
-
Audit Committees ,
or
NI
52-110),
any
applicable
stock
exchange
requirements
or
guidelines
and
any
other
applicable
regulatory
rules.
55
In
particular:
each
member
shall
be
(a)
an
“Independent
Director,”
as
defined
in
NASDAQ
Marketplace
Rule
5605(a)(2),
and
(b)
“independent”
within
the
meaning
of
Rule
10A-3
under
the
Exchange
Act,
and
the
determination
of
independence
will
be
affirmatively
made
by
the
Board
annually,
provided
that
the
Board
may
elect
to
take
advantage
of
any
exemption
from
such
requirements
provided
in
the
rules
of
NASDAQ,
or
the
Exchange
Act;
each
member
shall
meet
the
independence
and
financial
literacy
requirements
set
forth
in
NI
52-
110;
each
member
shall
not
have
participated
in
the
preparation
of
the
financial
statements
of
ours
(or
any
then
current
subsidiary
of
ours)
at
any
time
during
the
past
three
years;
each
member
shall
be
able
to
read
and
understand
fundamental
financial
statements
in
accordance
with
the
audit
committee
requirements
for
companies
listed
on
NASDAQ
in
NASDAQ
Marketplace
Rule
5605(c)(2)(A)(iv);
and
at
least
one
(1)
member
shall,
in
the
judgment
of
the
Board,
be
an
“audit
committee
financial
expert”
within
the
meaning
of
such
term
in
Item
407(d)
of
Regulation
S-K
under
the
U.S.
Securities
Act
of
1933,
as
amended.
Our
Audit
Committee
members
are
Mr.
Luke
Beshar
(Chair),
Dr.
Henry
Friesen
and
Dr.
Robert
Kirkman
each
of
whom
is
a
non-executive
member
of
our
Board
of
Directors.
Our
Board
of
Directors
has
determined
that
each
of
the
members
of
the
Audit
Committee
is
financially
literate
and
has
sufficient
financial
expertise,
and
is
independent
within
the
meaning
of
such
term
in
the
rules
of
NASDAQ,
the
SEC
and
Canadian
provincial
securities
regulatory
authorities.
The
Board
of
Directors
has
determined
that
Mr.
Luke
Beshar
is
a
financial
expert
in
accordance
with
the
rules
and
regulations
of
the
SEC.
For
a
description
of
the
education
and
experience
of
each
audit
committee
member
that
is
relevant
in
the
performance
of
his
responsibilities
as
an
audit
committee
member,
see
Item
“6.A.
-
Summary
of
Business
Experience
and
Functions
within
the
Company”.
The
purpose
of
the
Audit
Committee
is
to
assist
the
Board
of
Directors
in:
overseeing
the
integrity
of
our
financial
statements
and
our
accounting
and
financial
reporting
processes
and
financial
statement
audits;
overseeing
our
compliance
with
legal
and
regulatory
requirements;
overseeing
the
qualifications
and
independence
of
our
registered
public
accounting
firm
(independent
auditor);
overseeing
the
performance
of
our
independent
auditor;
and
overseeing
the
design,
implementation
and
ongoing
effectiveness
of
our
systems
of
disclosure
controls
and
procedures,
risk
management
systems,
internal
control
over
financial
reporting
and
compliance
with
ethical
standards
adopted
by
us.
Since
the
commencement
of
our
most
recently
completed
fiscal
year
and
adoption
of
the
Audit
Committee
charter,
the
Board
has
not
failed
to
adopt
a
recommendation
of
the
Audit
Committee
to
nominate
or
compensate
an
external
auditor.
Corporate Governance and Nominating Committee
Our
Corporate
Governance
and
Nominating
Committee
shall
be
composed
of
at
least
two
members
of
our
Board,
all
of
whom
are
“independent
directors”
within
the
meaning
of
NASDAQ
Rule
5605(a)(2).
In
affirmatively
determining
the
independence
of
any
member
of
our
Corporate
Governance
and
Nominating
Committee,
our
Board
must
consider
all
factors
specifically
relevant
to
determining
whether
a
director
has
a
relationship
to
us
that
would
interfere
with
the
exercise
of
independent
judgment
in
carrying
out
the
responsibilities
of
a
director.
All
members
of
our
Corporate
Governance
and
Nominating
Committee
shall
be
"independent"
as
contemplated
in
National
Instrument
58-101
–
Disclosure
of
Corporate
Governance
Practices,
or
NI
58-101,
such
that
all
members
of
the
Corporate
Governance
and
Nominating
Committee
will
have
no
direct
or
indirect
relationship
with
us
that
could,
in
the
view
of
the
Board
of
Directors,
be
reasonably
expected
to
interfere
with
the
exercise
of
his
or
her
independent
judgment.
The
purpose
of
the
Corporate
Governance
and
Nominating
Committee
is
to:
Assist
our
Board
in
identifying
prospective
director
nominees
and
recommend
to
our
Board
the
director
nominees
for
each
annual
meeting
of
shareholders;
Recommend
members
for
each
Board
committee;
Ensure
that
our
Board
is
properly
constituted
to
meet
its
fiduciary
obligations
to
the
Corporation
and
its
shareholders
and
that
we
follow
appropriate
governance
standards;
Develop
and
recommend
to
our
Board
governance
principles
applicable
to
us;
Oversee
the
succession
planning
for
senior
management;
and
Oversee
the
evaluation
of
our
Board
and
management.
56
Our
Corporate
Governance
and
Nomination
Committee
members
are
Dr.
Henry
Friesen
(Chair),
Dr.
Michael
Moore
and
Dr.
Thomas
Reynolds.
Our
Board
has
determined
that
each
member
of
our
Corporate
Governance
and
Nomination
Committee
is
independent
within
the
meaning
of
such
term
in
the
rules
of
NASDAQ
and
Canadian
provincial
securities
regulatory
authorities.
Compensation Committee
Our
Compensation
Committee
shall
be
composed
of
at
least
two
members
of
the
Board,
all
of
whom
are
considered
“independent”
of
our
management
in
accordance
with
the
provisions
of
Rule
10C-1(b)(1)
under
the
Exchange
Act
and
NASDAQ
Rule
5605(a)(2)
and
5605(d)(2)(A).
In
affirmatively
determining
the
independence
of
any
member
of
our
Compensation
Committee,
our
Board
must
consider
all
factors
specifically
relevant
to
determining
whether
a
director
has
a
relationship
to
the
Corporation
that
is
material
to
that
director“s
ability
to
be
independent
from
management
in
connection
with
the
duties
of
a
Compensation
Committee
member,
including,
but
not
limited
to:
(i)
the
source
of
compensation
of
such
director,
including
any
consulting,
advisory
or
other
compensatory
fee
paid
by
the
Corporation
to
such
director;
and
(ii)
whether
such
director
is
affiliated
with
the
Corporation,
a
subsidiary
of
the
Corporation
or
an
affiliate
of
a
subsidiary
of
the
Corporation.
Our
Compensation
Committee
is
required
to
ensure
that
the
compensation
programs
and
values
transferred
to
management
through
cash
pay,
share
and
share-based
awards,
whether
immediate,
deferred,
or
contingent
are
fair
and
appropriate
to
attract,
retain
and
motivate
management
and
are
reasonable
in
view
of
company
economics
and
of
the
relevant
practices
of
other
similar
companies.
Our
Compensation
Committee
also
recommends
to
our
Board
compensation
arrangements
for
Board
members.
Our
Compensation
Committee
members
are
Dr.
Robert
Kirkman
(Chair),
Dr.
Michael
Moore
and
Dr.
Thomas
Reynolds.
Our
Board
has
determined
that
each
member
of
our
Compensation
Committee
is
independent
within
the
meaning
of
such
term
in
the
rules
of
NASDAQ,
the
SEC
and
Canadian
provincial
securities
regulatory
authorities.
D. Employees
As
at
December
31,
2016,
we
had
forty-seven
full-time
employees
including
five
senior
management,
thirty-six
research
and
development
staff
and
six
finance
and
administrative
staff.
Forty-six
employees
are
located
at
our
head
office
and
lab
facilities
in
Toronto,
Ontario,
Canada
and
one
employee
is
located
in
the
United
States.
We
also
use
consultants
and
outside
contractors
to
carry
on
many
of
our
activities,
including
preclinical
testing
and
validation,
formulation,
assay
development,
manufacturing,
clinical
and
regulatory
affairs,
toxicology
and
clinical
trials.
As
at
December
31,
2015,
we
had
twenty-eight
full-time
employees
including
five
senior
management,
twenty
research
and
development
staff
and
three
finance
and
administrative
staff.
Twenty-six
employees
were
located
at
our
head
office
and
lab
facilities
in
Toronto,
Ontario,
Canada
and
two
employees
were
located
in
the
United
States.
During
2014,
we
had
sixteen
full-time
employees
including
four
senior
management,
ten
research
and
development
staff
and
two
finance
and
administrative
staff.
57
E. Share Ownership
As
at
March
8,
2017,
our
directors
and
senior
management
beneficially
owned
the
following
common
shares
of
our
Company:
Name and Office Held
Niclas Stiernholm
President & Chief Executive Officer and Director
Robert Uger
Chief Scientific Officer
James Parsons
Chief Financial Officer
Penka Petrova
Chief Development Officer
Eric Sievers
Chief Medical Officer
Luke Beshar
Director
Henry Friesen
Director
Robert Kirkman
Director
Michael Moore
Director
Thomas Reynolds
Director
Calvin Stiller (2)
Director, Chair
Notes:
Number of
Common Shares
6,000
Nil
Nil
Nil
42,244
Nil
Nil
Nil
Nil
Nil
% of Class (1)
0.08
n/a
n/a
n/a
0.54
n/a
n/a
n/a
n/a
n/a
40,000
0.51
(1)
(2)
Based
on
7,845,184
common
shares
issued
and
outstanding
as
at
March
8,
2017.
Total
of
direct,
indirect
and
other
holdings
where
Dr.
Stiller
exercises
control
or
direction.
Effective
as
of
March
9,
2017,
the
2014
Equity
DSU
Plan
was
combined
with
the
2016
Cash-Settled
DSU
Plan.
Following
such
date,
all
outstanding
DSUs
under
the
2014
Equity
DSU
Plan
will
be
settled
in
cash
only
in
accordance
with
the
terms
and
conditions
of
the
2016
Cash-Settled
DSU
Plan.
58
The
following
table
sets
forth
the
outstanding
option-based
awards
outstanding
for
each
of
our
directors
and
officers
as
at
March
8,
2017:
Name and Office Held
Niclas Stiernholm
President & Chief Executive Officer
and Director
Robert Uger
Chief Scientific Officer
Eric Sievers
Chief Medical Officer
James Parsons
Chief Financial Officer
Penka Petrova
Chief Development Officer
Luke Beshar
Director
Henry Friesen
Director
Robert Kirkman
Director
Michael Moore
Director
Thomas Reynolds
Director
Calvin Stiller
Director, Chair
Number of
securities
underlying
unexercised
options
(#)
42,505
159,768
134,849
94,094
94,094
57,023
8,501
42,066
33,713
29,073
29,073
20,911
85,000
28,713
28,713
20,911
4,250
36,204
26,970
30,171
30,171
14,266
4,250
26,089
20,226
38,808
38,808
13,851
6,667
4,500
6,667
4,000
6,667
4,000
Option-based Awards
Option
exercise price
($)
7.50
10.35
8.34
19.333
13.98
9.20
7.50
10.35
8.34
19.333
13.98
9.20
23.441
19.333
13.98
9.20
7.50
10.35
8.34
19.333
13.98
9.20
7.50
10.35
8.34
19.333
13.98
9.20
18.90
7.50
15.30
7.50
18.90
7.50
Option
expiration date
Apr
8,
2023
Apr
27,
2024
May
27,
2024
Nov
19,
2025
May
27,
2026
Nov
9,
2026
Apr
8,
2023
Apr
27,
2024
May
27,
2024
Nov
19,
2025
May
27,
2026
Nov
9,
2026
Apr
1,
2025
Nov
19,
2025
May
27,
2026
Nov
9,
2026
Apr
8,
2023
Apr
27,
2024
May
27,
2024
Nov
19,
2025
May
27,
2026
Nov
9,
2026
Apr
8,
2023
Apr
27,
2024
May
27,
2024
Nov
19,
2025
May
27,
2026
Nov
9,
2026
Mar
6,
2024
Apr
8,
2023
Jan
29,
2024
Apr
8,
2023
Mar
6,
2024
Apr
8,
2023
Value of
unexercised in-
the-money
options (1)
($)
28,478
Nil
Nil
Nil
Nil
Nil
5,696
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
2,848
Nil
Nil
Nil
Nil
Nil
2,848
Nil
Nil
Nil
Nil
Nil
Nil
3,015
Nil
2,680
Nil
2,680
Notes:
(1)
The
value
of
the
unexercised
“in-the-money”
options
as
at
March
8,
2017
has
been
determined
based
on
the
excess
of
the
closing
price
of
the
common
shares
on
the
TSX
of
$8.17
per
common
share
over
the
exercise
price
of
such
options.
59
Our
employees
are
eligible
to
participate
in
the
2016
Stock
Option
Plan.
A
summary
of
the
Stock
Option
Plan
is
given
under
the
heading
“Item
6.B.
–
Stock
Option
Plan”.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
To
our
knowledge,
there
are
no
persons
or
companies
who
beneficially
own,
directly
or
indirectly,
or
exercise
control
or
direction
over,
securities
carrying
5%
or
more
of
the
voting
rights
attached
to
any
class
of
voting
securities
of
ours
as
at
March
8,
2017,
except
as
follows.
The
information
with
respect
to
ownership
of
our
common
shares
is
given
based
on
information
reported
in
such
shareholder“s
Schedule
13D
or
Schedule
13G,
and
if
no
Schedule
13D
or
Schedule
13G
was
filed,
based
on
information
provided
to
us
by
the
shareholders:
Shareholders
# of Common Shares
Janus
Global
Life
Sciences
Fund
Merlin
Nexus
IV,
LP
All
shareholders
have
the
same
voting
rights.
571,203
443,631
% of Total Outstanding
Common Shares
7.3%
5.7%
As
at
March
7,
2017,
approximately
66%
of
common
shares
and
100%
of
Series
I
and
Series
II
First
Preferred
shares
were
held
by
shareholders
in
the
United
States.
As
at
March
7,
2017,
there
were
80
record
holders
in
the
United
States.
B. Related Party Transactions
Other
than
as
disclosed
in
this
annual
report,
since
the
beginning
of
our
preceding
three
financial
years,
there
have
been
no
transactions
or
loans
between
us
and:
(a)
(b)
(c)
(d)
(e)
enterprises
that
directly
or
indirectly
through
one
or
more
intermediaries,
control
or
are
controlled
by,
or
are
under
common
control
with,
us;
associates,
meaning
unconsolidated
enterprises
in
which
we
have
a
significant
influence
or
which
have
significant
influence
over
us;
individuals
owning,
directly
or
indirectly,
an
interest
in
the
voting
power
of
us
that
gives
them
significant
influence
over
our
us,
and
close
members
of
any
such
individual’s
family;
key
management
personnel,
that
is,
those
persons
having
authority
and
responsibility
for
planning,
directing
and
controlling
the
activities
of
ours,
including
directors
and
senior
management
of
us
and
close
members
of
such
individuals’
families;
and
enterprises
in
which
a
substantial
interest
in
the
voting
power
is
owned,
directly
or
indirectly,
by
any
person
described
in
(c)
or
(d)
or
over
which
such
a
person
is
able
to
exercise
significant
influence,
including
enterprises
owned
by
directors
or
major
shareholders
of
us
and
enterprises
that
have
a
member
of
key
management
in
common
with
us.
The
acquisition
of
Fluorinov
was
considered
a
related
party
transaction
as
two
of
our
directors
were
determined
to
be
related
parties
of
Fluorinov.
One
director
was
a
director
of
Fluorinov
and
had
an
ownership
position
in
Fluorinov
at
the
time
of
acquisition
of
less
than
2%,
and
the
second
director
was
a
director
of
an
entity
that
was
a
beneficiary
of
a
trust
that
was
a
shareholder
and
debenture
holder
of
Fluorinov.
The
two
directors
declared
their
conflict
of
interest
and
abstained
from
all
discussions
and
decisions
concerning
the
Fluorinov
acquisition.
Accordingly,
we
determined
that
the
consideration
paid
on
the
acquisition
was
made
on
terms
equivalent
to
those
that
prevail
in
arm’s
length
transactions.
60
Compensation
For
information
regarding
compensation
for
our
directors
and
senior
management,
see
the
information
under
the
heading
“Item
6.B.
Compensation”.
C. Interests of Experts and Counsel
Not
Applicable.
ITEM 8. FINANCIAL INFORMATION
A. Financial Statements and Other Financial Information
The
following
financial
statements
and
notes
thereto
(as
applicable)
in
Canadian
dollars
are
filed
with
and
incorporated
herein
as
part
of
this
annual
report:
audited
consolidated
financial
statements
of
the
Company
for
the
years
ended
December
31,
2016
and
2015,
prepared
in
accordance
with
IFRS
as
issued
by
the
IASB,
including:
consolidated
statements
of
financial
position,
consolidated
statements
of
loss
and
comprehensive
loss,
consolidated
statements
of
changes
in
equity,
consolidated
statements
of
cash
flows,
and
notes
to
the
consolidated
financial
statements.
audited
consolidated
financial
statements
of
the
Company
for
the
years
ended
December
31,
2015
and
2014,
prepared
in
accordance
with
IFRS
as
issued
by
the
IASB,
including:
consolidated
statements
of
financial
position,
consolidated
statements
of
loss
and
comprehensive
loss,
consolidated
statements
of
changes
in
equity,
consolidated
statements
of
cash
flows,
and
notes
to
the
consolidated
financial
statements.
These
financial
statements
can
be
found
beginning
on
page
F-1
of
this
annual
report.
Export Sales
We
have
no
sales.
Legal Proceedings
To
our
knowledge,
there
have
not
been
any
legal
or
arbitration
proceedings,
including
those
relating
to
bankruptcy,
receivership
or
similar
proceedings,
those
involving
any
third
party,
and
governmental
proceedings
pending
or
known
to
be
contemplated,
which
may
have,
or
have
had
in
the
recent
past,
significant
effect
our
financial
position
or
profitability.
Also,
to
our
knowledge,
there
have
been
no
material
proceedings
in
which
any
director,
any
member
of
senior
management,
or
any
of
our
affiliates
is
either
a
party
adverse
to
us
or
any
of
our
subsidiaries
or
has
a
material
interest
adverse
to
us
or
any
of
our
subsidiaries.
Policy on Dividend Distributions
We
have
not
declared
any
dividends
since
our
inception
and
do
not
anticipate
that
we
will
do
so
in
the
foreseeable
future.
We
currently
intend
to
retain
future
earnings,
if
any,
to
finance
the
development
of
our
business.
Any
future
payment
of
dividends
or
distributions
will
be
determined
by
our
Board
of
Directors
on
the
basis
of
our
earnings,
financial
requirements
and
other
relevant
factors.
61
B. Significant Changes
We
are
not
aware
of
any
significant
change
that
has
occurred
since
December
31,
2016
included
in
this
Form
20-F
and
that
has
not
been
disclosed
elsewhere
in
this
Form
20-F.
ITEM 9. THE OFFER AND LISTING
A. Offer and Listing Details
Price History
We
were
listed
on
the
TSXV
until
April
22,
2014
when
we
delisted
from
the
TSXV
and
began
trading
on
the
TSX.
We
traded
under
the
symbol
“SSS”
until
June
6,
2014
when
the
symbol
was
changed
to
“TR”.
Effective,
February
1,
2017,
we
began
trading
under
the
symbol
“TRIL”
on
the
TSX.
We
were
also
listed
on
the
OTCQX
International,
or
the
OTCQX
under
the
symbol
“SCTPF”
until
December
18,
2014
when
we
delisted
from
the
OTCQX
and
began
trading
on
the
NASDAQ
under
the
symbol
“TRIL”.
Five Most Recent Financial Years
The
annual
high
and
low
market
prices
of
our
common
shares
for
the
five
most
recent
full
financial
years
on
the
TSXV/
TSX
and
since
May
20,
2013
on
the
OTCQX/NASDAQ
were
as
follows:
Year ended
December
31,
2016
December
31,
2015
December
31,
2014
December
31,
2013
December
31,
2012
Notes:
TSX/TSX in $ (1)(3)
OTCQX/NASDAQ in US$ (2)(3)
High
23.48
37.27
22.20
18.00
18.00
Low
7.12
10.50
6.30
4.20
4.50
High
17.70
27.989
19.596
14.28
Low
5.25
9.05
5.637
4.17
(1)
(2)
(3)
Our
common
shares
began
trading
on
the
TSX
on
April
22,
2014.
Our
common
shares
began
trading
on
the
OTCQX
on
May
20,
2013
and
on
the
NASDAQ
on
December
19,
2014.
Common
share
market
prices
are
restated
to
reflect
the
30
for
1
share
consolidation
completed
in
November
2014.
62
Full Financial Quarters
The
high
and
low
market
prices
of
our
common
shares
for
each
full
financial
quarter
for
the
two
most
recent
full
financial
years
on
the
TSXV/TSX
and
the
OTCQX/NASDAQ
were
as
follows:
Quarter ended
December
31,
2016
September
30,
2016
June
30,
2016
March
31,
2016
December
31,
2015
September
30,
2015
June
30,
2015
March
31,
2015
Most Recent Six Months
TSX in $
NASDAQ in US$
High
23.48
21.45
17.48
19.50
21.98
30.01
37.27
26.065
Low
7.12
10.46
11.00
9.01
16.00
15.95
21.21
10.50
High
17.70
16.39
13.52
13.24
16.69
23.30
27.989
20.88
Low
5.25
8.011
8.38
6.62
11.494
12.00
17.572
9.05
The
high
and
low
market
prices
of
our
common
shares
for
each
month
for
the
most
recent
six
months
on
the
TSX
and
the
NASDAQ
were
as
follows:
Month ended
February
28,
2017
January
31,
2017
December
31,
2016
November
30,
2016
October
31,
2016
September
30,
2016
Transfers of Common Shares
TSX in $
NASDAQ in US$
High
9.01
8.18
10.27
20.82
23.48
21.45
Low
6.15
5.90
7.12
9.10
18.20
16.09
High
6.80
6.30
7.945
15.50
17.70
16.39
Low
4.70
4.50
5.25
6.75
13.50
12.32
Our
common
shares,
with
no
par
value,
are
in
registered
form
and
the
transfer
of
our
common
shares
is
managed
by
our
transfer
agent,
Computershare
Investor
Services
Inc.,
8th
floor,
University
Avenue,
Toronto,
Ontario,
Canada
(Tel:
(800)
564-6253).
B. Plan of Distribution
Not
Applicable.
C. Markets
Our
common
shares
are
traded
on
the
TSX
and
the
NASDAQ
under
the
symbol
“TRIL”.
63
D. Selling Shareholders
Not
Applicable.
E. Dilution
Not
Applicable.
F. Expenses of the Issue
Not
Applicable.
ITEM 10. ADDITIONAL I
NFORMATION
A. Share Capital
Not
Applicable.
B. Memorandum and Articles of Association
Incorporation
On
November
7,
2013
we
were
continued,
and
we
became
a
corporation
subsisting,
under
the
Business Corporations Act (Ontario),
or
OBCA.
Our
Ontario
corporation
number
is
1916667
and
our
business
number
is
864092275.
A
copy
of
our
articles
of
incorporation
has
been
filed
as
an
exhibit
to
this
Form
20-F.
Objects and Purposes of Our Company
Our
articles
of
incorporation
do
not
contain
and
are
not
required
to
contain
a
description
of
our
objects
and
purposes.
There
is
no
restriction
contained
in
our
articles
of
incorporation
on
the
business
that
we
may
carry
on.
Voting on Certain Proposal, Arrangement, Contract or Compensation by Directors
Other
than
as
disclosed
below,
neither
our
articles
nor
our
corporate
by-laws
restrict
our
directors’
power
to
(a)
vote
on
a
proposal,
arrangement
or
contract
in
which
the
directors
are
materially
interested
or
(b)
to
vote
with
regard
to
compensation
payable
to
themselves
or
any
other
members
of
their
body
in
the
absence
of
an
independent
quorum.
Our
corporate
by-laws
provide
that
a
director
or
officer
who:
(a)
is
a
party
to;
or
(b)
is
a
director
or
an
officer
of,
or
has
a
material
interest
in,
any
person
who
is
a
party
to;
a
material
contract
or
transaction
or
proposed
material
contract
or
transaction
with
us
shall
disclose
the
nature
and
extent
of
such
director“s
or
officer“s
interest
at
the
time
and
in
the
manner
provided
by
the
OBCA.
Any
such
contract
or
transaction
or
proposed
material
contract
or
transaction
shall
be
referred
to
our
Board
of
Directors
or
shareholders
for
approval
in
accordance
with
the
OBCA
even
if
such
contract
or
proposed
material
contract
or
transaction
is
one
that
in
the
ordinary
course
of
our
business
would
not
require
approval
by
our
Board
of
Directors
or
shareholders,
and
a
director
interested
in
a
contract
or
transaction
so
referred
to
our
Board
of
Directors
shall
not
attend
any
part
of
a
meeting
of
our
Board
of
Directors
during
which
the
contract
or
transaction
is
discussed
and
shall
not
vote
on
any
resolution
to
approve
such
contract
or
transaction
except
as
provided
by
the
OBCA.
Subject
to
our
articles
and
any
unanimous
shareholder
agreement,
our
directors
shall
be
paid
such
remuneration
for
their
services
as
our
Board
of
Directors
may
from
time
to
time
determine.
Our
directors
shall
also
be
entitled
to
be
reimbursed
for
travelling
and
other
expenses
properly
incurred
by
them
in
attending
meetings
of
our
Board
of
Directors
or
any
committee
thereof.
64
The
OBCA
provides
that
a
director
who
holds
a
disclosable
interest
in
a
contract
or
transaction
into
which
we
have
entered
or
propose
to
enter
shall
not
attend
any
part
of
a
meeting
of
directors
during
which
the
contract
or
transaction
is
discussed
and
shall
not
vote
on
any
resolution
to
approve
the
contract
or
transaction
unless
it
is
a
contract
or
transaction:
(i)
relating
primarily
to
such
director“s
remuneration
as
a
director
of
the
company
or
one
of
our
affiliates;
(ii)
for
indemnity
or
insurance
for
the
benefit
of
such
director
in
his/her
capacity
as
a
director;
or
(iii)
with
one
of
our
affiliates.
A
director
or
officer
who
holds
a
disclosable
interest
in
a
contract
or
transaction
into
which
we
have
entered
or
propose
to
enter
is
not
accountable
to
us
or
our
shareholders
for
any
profit
or
gain
realized
from
the
contract
or
transaction
and
the
contract
or
transaction
is
neither
void
nor
voidable
by
reason
only
of
that
relationship
or
by
reason
only
that
the
director
is
present
at
or
is
counted
to
determine
the
presence
of
a
quorum
at
the
meeting
of
directors
that
authorized
the
contract
or
transaction,
if
the
director
or
officer
disclosed
his
or
her
interest
in
accordance
with
the
OBCA
and
the
contract
or
transaction
was
reasonable
and
fair
to
us
at
the
time
it
was
approved.
The
OBCA
provides
that
a
director
or
officer
generally
holds
a
disclosable
interest
in
a
contract
or
transaction
if
either
(a)
the
director
or
officer
is
a
party
to
the
contract
or
transaction
with
us
and
such
contract
or
transaction
is
material
to
us;
or
(b)
the
director
or
officer
is
a
director
or
an
officer
of,
or
has
a
material
interest
in,
any
person
who
is
a
party
to
a
material
contract
or
transaction
or
proposed
material
contract
or
transaction
with
us.
Borrowing Powers of Directors
Our
corporate
by-laws
provide
that,
if
authorized
by
our
directors,
we
may:
borrow
money
upon
our
credit;
issue,
reissue,
sell
or
pledge
debt
obligations,
including
bonds,
debentures,
notes
or
other
evidences
of
indebtedness
or
guarantees,
whether
secured
or
unsecured;
give
a
guarantee
on
our
behalf
to
secure
performance
of
an
obligation
of
any
person;
and
mortgage,
hypothecate,
pledge
or
otherwise
create
a
security
interest
in
all
or
any
currently
owned
or
subsequently
acquired
real
or
personal,
movable
or
immovable,
property
of
the
Company
including
book
debts,
rights,
powers,
franchises
and
undertakings,
to
secure
any
such
bonds,
debentures,
notes
or
other
evidences
of
indebtedness
or
guarantee
or
any
other
present
or
future
indebtedness,
liability
or
obligation
of
the
Company.
Amendment
to
the
borrowing
powers
described
above
requires
an
amendment
to
our
corporate
by-laws.
Our
corporate
by-laws
do
not
contain
any
provisions
in
connection
with
amending
the
by-laws.
The
OBCA
provides
that
our
Board
of
Directors
may
by
resolution,
make,
amend
or
repeal
any
by-laws
that
regulate
our
business
and
affairs
and
that
the
Board
of
Directors
will
submit
such
by-law,
amendment
or
repeal
to
our
shareholders
at
the
next
meeting
of
shareholders
and
the
shareholders
may,
by
ordinary
resolution,
confirm,
reject
or
amend
the
by-law,
amendment
or
repeal.
Qualifications of Directors
Under
our
articles
and
corporate
by-laws,
a
director
is
not
required
to
hold
a
share
in
our
capital
as
qualification
for
his
or
her
office
but
must
be
qualified
as
required
by
the
OBCA
to
become,
act
or
continue
to
act
as
a
director.
The
OBCA
provides
that
the
following
persons
are
disqualified
from
being
a
director
of
a
corporation:
(i)
a
person
who
is
less
than
18
years
of
age;
(ii)
a
person
who
has
been
found
under
the
Substitute Decisions Act, 1992 or
under
the
Mental Health Act
to
be
incapable
of
managing
property
or
who
has
been
found
to
be
incapable
by
a
court
in
Canada
or
elsewhere;
(iii)
a
person
who
is
not
an
individual;
and
(iv)
a
person
who
has
the
status
of
a
bankrupt.
Share Rights
Our
authorized
share
capital
consists
of
an
unlimited
number
of
common
shares,
Class
B
shares
and
First
Preferred
shares,
in
each
case
without
nominal
or
par
value.
The
holders
of
common
shares
are
entitled
to
receive
notice
of
and
to
attend
all
annual
and
special
meetings
of
our
shareholders
and
to
one
vote
per
share
held
at
each
such
meeting,
and
they
are
entitled
to
receive
dividends
as
determined
and
declared
by
our
Board
of
Directors.
Subject
to
the
rights
of
the
holders
of
any
other
class
of
our
shares
entitled
to
receive
dividends
in
priority
to
or
concurrently
with
the
holders
of
the
common
shares,
our
Board
of
Directors
may
in
its
sole
discretion
declare
dividends
on
the
common
shares
to
the
exclusion
of
any
other
class
of
shares
of
the
Company.
In
the
event
of
our
liquidation,
dissolution
or
winding
up
or
other
distribution
of
our
assets
among
our
shareholders
for
the
purpose
of
winding
up
our
affairs,
the
holders
of
the
common
shares
shall,
subject
to
the
rights
of
the
holders
of
any
other
class
of
shares
entitled
to
receive
our
assets
upon
such
a
distribution
in
priority
to
or
concurrently
with
the
holders
of
the
common
shares,
be
entitled
to
participate
in
the
distribution.
Such
distribution
shall
be
made
in
equal
amounts
per
share
on
all
the
common
shares
at
the
time
outstanding
without
preference
or
distinction.
The
holders
of
the
Class
B
shares
are
entitled
to
receive
notice
of
and
to
attend
any
meeting
of
our
shareholders
but
shall
not
be
entitled
to
vote
any
of
their
Class
B
shares
at
any
such
meeting.
Each
issued
and
fully
paid
Class
B
share
may
at
any
time
be
converted,
at
the
option
of
the
holder,
into
one
common
share.
The
First
Preferred
shares
may
at
any
time
and
from
time
to
time
be
issued
in
one
or
more
series
and
our
the
Board
of
Directors
may
before
the
issue
thereof
fix
the
number
of
shares
in,
and
determine
the
designation,
rights,
privileges,
restrictions
and
conditions
attaching
to
the
shares
of,
each
series
of
First
Preferred
shares.
The
First
Preferred
shares
shall
be
entitled
to
priority
over
the
common
shares
and
Class
B
shares
and
all
other
shares
ranking
junior
to
the
First
Preferred
shares
with
respect
to
the
payment
of
dividends
and
the
distribution
of
our
assets
in
the
event
of
our
liquidation,
dissolution
or
winding
up
or
other
distribution
of
our
assets
among
our
shareholders
for
the
purpose
of
winding
up
our
affairs.
The
First
Preferred
shares
of
each
series
rank
on
a
parity
with
the
First
Preferred
shares
of
every
other
series
with
respect
to
priority
in
the
payment
of
dividends
and
in
the
distribution
of
our
assets
in
the
event
of
our
liquidation,
dissolution
or
winding
up
or
other
distribution
of
our
assets
among
our
shareholders
for
the
purpose
of
winding
up
our
affairs.
65
Procedures to Change the Rights of Shareholders
The
rights,
privileges,
restrictions
and
conditions
attaching
to
our
shares
are
contained
in
our
articles
and
such
rights,
privileges,
restrictions
and
conditions
may
be
changed
by
amending
our
articles.
In
order
to
amend
our
articles,
the
OBCA
requires
a
resolution
to
be
passed
by
a
majority
of
not
less
than
two-thirds
of
the
votes
cast
by
the
shareholders
entitled
to
vote
thereon.
In
addition,
if
we
resolve
to
make
particular
types
of
amendments
to
our
articles,
a
holder
of
our
shares
may
dissent
with
regard
to
such
resolution
and,
if
such
shareholder
so
elects,
we
would
have
to
pay
such
shareholder
the
fair
value
of
the
shares
held
by
the
shareholder
in
respect
of
which
the
shareholder
dissents
as
of
the
close
of
business
on
the
day
before
the
resolution
was
adopted.
The
types
of
amendments
that
would
be
subject
to
dissent
rights
include
without
limitation:
(i)
to
add,
remove
or
change
restrictions
on
the
issue,
transfer
or
ownership
of
shares
of
a
class
or
series
of
our
shares;
and
(ii)
to
add,
remove
or
change
any
restriction
upon
the
business
that
we
may
carry
on
or
upon
the
powers
that
we
may
exercise.
Meetings
Each
director
holds
office
until
our
next
annual
general
meeting
or
until
his
office
is
earlier
vacated
in
accordance
with
our
articles
or
with
the
provisions
of
the
OBCA.
A
director
appointed
or
elected
to
fill
a
vacancy
on
our
board
also
holds
office
until
our
next
annual
general
meeting.
Annual
meetings
of
our
shareholders
must
be
held
at
such
time
in
each
year
not
more
than
15
months
after
the
last
annual
meeting,
as
the
Board
of
Directors
may
determine.
Notice
of
the
time
and
place
of
a
meeting
of
shareholders
must
be
sent
not
less
than
twenty-one
days
and
not
more
than
fifty
days,
before
the
meeting.
Meetings
of
our
shareholders
shall
be
held
at
our
registered
office
or,
if
our
Board
of
Directors
shall
so
determine,
at
some
other
place
in
Ontario
or,
at
some
place
outside
Ontario
if
all
the
shareholders
entitled
to
vote
at
the
meeting
so
agree.
Our
Board
of
Directors,
the
Chair
of
our
Board,
our
Chief
Executive
Officer,
or
our
President
shall
have
power
to
call
a
special
meeting
of
our
shareholders
at
any
time.
The
OBCA
provides
that
our
shareholders
may
requisition
a
special
meeting
in
accordance
with
the
OBCA.
The
OBCA
provides
that
the
holders
of
not
less
than
five
percent
of
our
issued
shares
that
carry
the
right
to
vote
at
a
meeting
may
requisition
our
directors
to
call
a
special
meeting
of
shareholders
for
the
purposes
stated
in
the
requisition.
Under
our
by-laws,
the
quorum
for
the
transaction
of
business
at
a
meeting
of
our
shareholders
is
two
or
more
persons,
present
in
person
or
by
proxy
and
holding
in
aggregate
not
less
than
33
1/3%
of
our
issued
shares
entitled
to
vote
at
such
meeting.
Limitations on Ownership of Securities
Except
as
provided
in
the
Investment Canada Act (Canada),
there
are
no
limitations
specific
to
the
rights
of
non-Canadians
to
hold
or
vote
our
shares
under
the
laws
of
Canada
or
Ontario,
or
in
our
charter
documents.
Change in Control
There
are
no
provisions
in
our
articles
or
by-laws
that
would
have
the
effect
of
delaying,
deferring
or
preventing
a
change
in
control
of
our
Company,
and
that
would
operate
only
with
respect
to
a
merger,
acquisition
or
corporate
restructuring
involving
our
Company
or
our
subsidiaries.
Each
of
the
2016
Stock
Option
Plan
and
the
2016
Cash-Settled
DSU
Plan
contain
provisions
governing
the
acceleration
of
vesting
upon
the
occurrence
of
a
termination
of
service
in
connection
with
a
change
of
control.
See
“6.B.
-
Stock
Option
Plan”
and
“6.B.
-
2016
Cash-Settled
DSU
Plan”.
66
Ownership Threshold
Neither
our
by-laws
nor
our
articles
contain
any
provisions
governing
the
ownership
threshold
above
which
shareholder
ownership
must
be
disclosed.
In
addition,
securities
legislation
in
Canada
requires
that
we
disclose
in
our
proxy
information
circular
for
our
annual
meeting
and
certain
other
disclosure
documents
filed
by
us
under
such
legislation,
holders
who
beneficially
own
more
than
10%
of
our
issued
and
outstanding
shares.
Upon
the
effectiveness
of
this
annual
report
on
Form
20-F,
United
States
federal
securities
laws
will
require
us
to
disclose,
in
our
annual
reports
on
Form
20-F,
holders
who
own
5%
or
more
of
our
issued
and
outstanding
voting
shares.
Differences in Corporate Law
We
are
governed
by
the
OBCA,
which
is
generally
similar
to
laws
applicable
to
United
States
corporations.
Significant
differences
between
the
OBCA
and
the
Delaware
General
Corporate
Law,
or
the
DGCL,
which
governs
companies
incorporated
in
the
State
of
Delaware,
include
the
following:
Number and Election of Directors
Delaware
Ontario
Under
the
DGCL,
the
board
of
directors
must
consist
of
at
least
one
member.
The
number
of
directors
shall
be
fixed
by
the
bylaws
of
the
corporation,
unless
the
certificate
of
incorporation
fixes
the
number
of
directors,
in
which
case
a
change
in
the
number
of
directors
shall
only
be
made
by
an
amendment
of
the
certificate
of
incorporation.
Under
the
DGCL,
directors
are
elected
at
annual
stockholder
meetings
by
plurality
vote
of
the
stockholders,
unless
a
shareholder-
adopted
bylaw
prescribes
a
different
required
vote.
Under
the
OBCA,
the
board
of
directors
must
consist
of
at
least
three
members
so
long
as
Trillium
remains
an
"offering
corporation"
for
purposes
of
the
OBCA,
which
includes
a
corporation
whose
securities
are
listed
on
a
recognized
stock
exchange
such
as
the
NASDAQ
or
TSX.
Under
the
OBCA,
the
shareholders
of
a
corporation
elect
directors
by
ordinary
resolution
at
each
annual
meeting
of
shareholders
at
which
such
an
election
is
required.
Removal of Directors
Delaware
Ontario
Under
the
DGCL,
any
or
all
directors
may
be
removed
with
or
without
cause
by
the
holders
of
a
majority
of
shares
entitled
to
vote
at
an
election
of
directors
unless
the
certificate
of
incorporation
otherwise
provides
or
in
certain
other
circumstances
if
the
corporation
has
cumulative
voting.
Under
the
OBCA,
the
shareholders
of
a
corporation
may,
by
resolution
passed
by
a
majority
of
the
vote
cast
thereon
at
a
meeting
of
shareholders,
remove
a
director
and
may
elect
any
qualified
person
to
fill
the
resulting
vacancy.
Vacancies on the Board of Directors
Delaware
Ontario
Under
the
DGCL,
vacancies
and
newly
created
directorships
resulting
from
an
increase
in
the
authorized
number
of
directors,
may
be
filled
by
a
majority
of
the
directors
then
in
office,
although
less
than
a
quorum,
or
by
a
sole
remaining
director.
Under
the
OBCA,
vacancies
that
exist
on
the
board
of
directors
may
generally
be
filled
by
the
board
if
the
remaining
directors
constitute
a
quorum.
In
the
absence
of
a
quorum,
the
remaining
directors
shall
call
a
meeting
of
shareholders
to
fill
the
vacancy.
67
Board of Director Quorum and Vote Requirements
Delaware
Ontario
Under
the
DGCL,
a
majority
of
the
total
number
of
directors
shall
constitute
a
quorum
for
the
transaction
of
business
unless
the
certificate
or
bylaws
require
a
greater
number.
The
bylaws
may
lower
the
number
required
for
a
quorum
to
one-third
the
number
of
directors,
but
no
less.
Under
the
DGCL,
the
board
of
directors
may
take
action
by
the
majority
vote
of
the
directors
present
at
a
meeting
at
which
a
quorum
is
present
unless
the
certificate
of
incorporation
or
bylaws
require
a
greater
vote.
Under
the
OBCA,
subject
to
an
Ontario
corporation“s
articles
or
bylaws,
a
majority
of
the
number
of
directors
or
minimum
number
of
directors
required
by
the
articles
constitutes
a
quorum
at
any
meeting
of
directors,
but
in
no
case
shall
a
quorum
be
less
than
two-fifths
of
the
number
of
directors
or
minimum
number
of
directors,
as
the
case
may
be.
Where
a
corporation
has
fewer
than
three
directors,
all
directors
must
directors
must
be
present
at
any
meeting
to
constitute
a
quorum.
Under
the
OBCA,
subject
to
an
Ontario
corporation“s
articles
or
bylaws,
where
there
is
a
vacancy
or
vacancies
in
the
board
of
directors,
the
remaining
directors
may
exercise
all
the
powers
of
the
board
so
long
as
a
quorum
of
the
board
remains
in
office.
Transactions with Directors and Officers
Delaware
Ontario
The
DGCL
generally
provides
that
no
transaction
between
a
corporation
and
one
or
more
of
its
directors
or
officers,
or
between
a
corporation
and
any
other
corporation
or
other
organization
in
which
one
or
more
of
its
directors
or
officers,
are
directors
or
officers,
or
have
a
financial
interest,
shall
be
void
or
voidable
solely
for
this
reason,
or
solely
because
the
director
or
officer
is
present
at
or
participates
in
the
meeting
of
the
board
or
committee
which
authorizes
the
transaction,
or
solely
because
any
such
director“s
or
officer“s
votes
are
counted
for
such
purpose,
if
(i)
the
material
facts
as
to
the
director“s
or
officer“s
interest
and
as
to
the
transaction
are
known
to
the
board
of
directors
or
the
committee,
and
the
board
or
committee
in
good
faith
authorizes
the
transaction
by
the
affirmative
votes
of
a
majority
of
the
disinterested
directors,
even
though
the
disinterested
directors
be
less
than
a
quorum
(ii)
the
material
facts
as
to
the
director“s
or
officer“s
interest
and
as
to
the
transaction
are
disclosed
or
are
known
to
the
stockholders
entitled
to
vote
thereon,
and
the
transaction
is
specifically
approved
in
good
faith
by
vote
of
the
stockholders;
or
(iii)
the
transaction
is
fair
as
to
the
corporation
as
of
the
time
it
is
authorized,
approved
or
ratified,
by
the
board
of
directors,
a
committee
or
the
stockholders.
The
OBCA
requires
that
a
director
or
officer
of
a
corporation
who
is:
(i)
a
party
to
a
material
contract
or
transaction
or
proposed
material
contract
or
transaction
with
the
corporation;
or
(ii)
a
director
or
an
officer
of,
or
has
a
material
interest
in,
any
person
who
is
a
party
to
a
material
contract
to
or
transaction
or
proposed
material
contract
or
transaction
with
the
corporation
shall
disclose
in
writing
to
the
corporation
or
request
to
have
entered
in
the
minutes
of
meetings
of
directors
the
nature
and
extent
of
his
or
her
interest.
An
interested
director
is
prohibited
from
attending
the
part
of
the
meeting
during
which
the
contract
or
transaction
is
discussed
and
is
prohibited
from
voting
on
a
resolution
to
approve
the
contract
or
transaction
except
in
specific
circumstances,
such
as
a
contract
or
transaction
relating
primarily
to
his
or
her
remuneration
as
a
director,
a
contract
or
transaction
for
indemnification
or
liability
insurance
of
the
director,
or
a
contract
or
transaction
with
an
affiliate
of
the
corporation.
If
a
director
or
officer
has
disclosed
his
or
her
interest
in
accordance
with
the
OBCA
and
the
contract
or
transaction
was
reasonable
and
fair
to
the
corporation
at
the
time
it
was
approved,
the
director
or
officer
is
not
accountable
to
the
corporation
or
its
shareholders
for
any
profit
or
gain
realized
from
the
contract
or
transaction
and
the
contract
or
transaction
is
neither
void
nor
voidable
by
reason
only
of
the
interest
of
the
director
or
officer
or
that
the
director
is
present
at
or
is
counted
to
determine
the
presence
of
a
quorum
at
the
meeting
of
directors
that
authorized
the
contract
or
transaction.
68
The
OBCA
further
provides
that
even
if
a
director
or
officer
does
not
disclose
his
or
her
interest
in
accordance
with
the
OBCA,
or
(in
the
case
of
a
director)
votes
in
respect
of
a
resolution
on
a
contract
or
transaction
in
which
he
or
she
is
interested
contrary
to
the
OBCA,
if
the
director
or
officer
acted
honestly
and
in
good
faith
and
the
contract
or
transaction
was
reasonable
and
fair
to
the
corporation
at
the
time
it
was
approved,
the
director
or
officer
is
not
accountable
to
the
corporation
or
to
its
shareholders
for
any
profit
or
gain
realized
from
the
contract
or
transaction
by
reason
only
of
his
or
her
holding
the
office
of
the
director
or
officer
and
the
contract
or
transaction
is
not
by
reason
only
of
the
director“s
or
officer“s
interest
therein
void
or
voidable,
if
the
contract
or
transaction
has
been
confirmed
or
approved
by
the
shareholders
by
special
resolution,
on
the
basis
of
disclosure
in
reasonable
detail
of
the
nature
and
extent
of
the
director“s
or
officer“s
interest
in
the
notice
of
meeting
or
management
information
circular.
Limitation on Liability of Directors
Delaware
Ontario
The
OBCA
does
not
permit
the
limitation
of
a
director“s
liability
as
the
DGCL
does.
The
DGCL
permits
a
corporation
to
include
a
provision
in
its
certificate
of
incorporation
eliminating
or
limiting
the
personal
liability
of
a
director
to
the
corporation
or
its
stockholders
for
monetary
damages
for
a
breach
of
the
director“s
fiduciary
duty
as
a
director,
except
for
liability:
•
•
•
•
for
breach
of
the
director“s
duty
of
loyalty
to
the
corporation
or
its
stockholders;
for
acts
or
omissions
not
in
good
faith
or
which
involve
intentional
misconduct
or
a
knowing
violation
of
the
law;
under
Section
174
of
the
DGCL,
which
concerns
unlawful
payment
of
dividends,
stock
purchases
or
redemptions;
or
for
any
transaction
from
which
the
director
derived
an
improper
personal
benefit
Indemnification of Directors and Officers
Delaware
Ontario
The
DGCL
permits
indemnification
for
derivative
suits
only
for
expenses
(including
legal
fees)
and
only
if
the
person
is
not
found
liable,
unless
a
court
determines
the
person
is
fairly
and
reasonably
entitled
to
the
indemnification.
Under
the
OBCA,
an
Ontario
corporation
may
also,
with
the
approval
of
a
court,
indemnify
or
advance
moneys
to
an
Indemnified
Person
in
respect
of
an
action
by
or
on
behalf
of
the
corporation
to
obtain
a
judgment
in
its
favour,
to
which
the
Indemnified
Person
is
made
a
party
because
of
his
or
her
association
with
the
corporation
or
other
entity,
against
all
costs,
charges
and
expenses
reasonably
incurred
by
the
Indemnified
Person
in
connection
with
such
action,
if
he
or
she
acted
honestly
and
in
good
faith
with
a
view
to
the
best
interests
of
the
corporation
or,
as
the
case
may
be,
to
the
best
interests
of
any
other
entity
for
which
the
Indemnified
Person
acted
as
a
director
or
officer
or
in
a
similar
capacity
at
the
corporation“s
request.
However,
any
such
Indemnified
Person
is
entitled
under
the
OBCA
to
indemnity
from
the
corporation
in
respect
of
all
costs,
charges
and
expenses
reasonably
incurred
by
the
Indemnified
Person
in
connection
with
the
defence
of
any
civil,
criminal,
administrative,
investigative
or
other
proceeding
to
which
he
or
she
is
subject
because
of
his
or
her
association
with
the
corporation
or
other
entity,
if
such
Indemnified
Person
(i)
was
not
judged
by
a
court
or
other
competent
authority
to
have
committed
any
fault
or
omitted
to
do
anything
that
the
individual
ought
to
have
done,
and
(ii)
acted
honestly
and
in
good
faith
with
a
view
to
the
best
interests
of
the
corporation
or
other
entity
and
had
reasonable
grounds
for
believing
that
his
or
her
conduct
was
lawful.
69
Call and Notice of Stockholder Meetings
Delaware
Ontario
Under
the
DGCL,
an
annual
or
special
stockholder
meeting
is
held
on
such
date,
at
such
time
and
at
such
place
as
may
be
designated
by
the
board
of
directors
or
any
other
person
authorized
to
call
such
meeting
under
the
corporation“s
certificate
of
incorporation
or
bylaws.
If
an
annual
meeting
for
election
of
directors
is
not
held
on
the
date
designated
or
an
action
by
written
consent
to
elect
directors
in
lieu
of
an
annual
meeting
has
not
been
taken
within
30
days
after
the
date
designated
for
the
annual
meeting,
or
if
no
date
has
been
designated,
for
a
period
of
13
months
after
the
later
of
the
last
annual
meeting
or
the
last
action
by
written
consent
to
elect
directors
in
lieu
of
an
annual
meeting,
the
Delaware
Court
of
Chancery
may
summarily
order
a
meeting
to
be
held
upon
the
application
of
any
stockholder
or
director.
Stockholder Action by Written Consent
Under
the
OBCA,
the
directors
of
a
corporation
are
required
to
call
an
annual
meeting
of
shareholders
no
later
than
fifteen
months
after
holding
the
last
preceding
annual
meeting.
Under
the
OBCA,
the
directors
of
a
corporation
may
call
a
special
meeting
at
any
time.
In
addition,
holders
of
not
less
than
five
percent
of
the
issued
shares
of
a
corporation
that
carry
the
right
to
vote
at
a
meeting
sought
to
be
held
may
requisition
the
directors
to
call
a
meeting
of
shareholders.
Delaware
Ontario
Under
the
DGCL,
a
majority
of
the
stockholders
of
a
corporation
may
act
by
written
consent
without
a
meeting
unless
such
action
is
prohibited
by
the
corporation“s
certificate
of
incorporation.
Under
the
OBCA,
a
written
resolution
signed
by
all
the
shareholders
of
a
corporation
who
would
have
been
entitled
to
vote
on
the
resolution
at
a
meeting
is
effective
to
approve
the
resolution.
70
Stockholder Nominations and Proposals
Delaware
Not
applicable.
Ontario
Under
the
OBCA,
a
shareholder
entitled
to
vote
at
a
shareholders“
meeting
may
submit
a
shareholder
proposal
relating
to
matters
which
the
shareholder
wishes
to
propose
and
discuss
at
a
shareholders“
meeting
and,
subject
to
such
shareholder“s
compliance
with
the
prescribed
time
periods
and
other
requirements
of
the
OBCA
pertaining
the
corporation
is
required
to
include
such
proposal
in
the
information
circular
pertaining
to
any
meeting
at
which
it
solicits
proxies,
subject
to
certain
exceptions.
Notice
of
such
a
proposal
must
be
provided
to
the
corporation
at
least
60
days
before
the
anniversary
date
of
the
last
annual
shareholders“
meeting,
or
at
least
60
days
before
any
other
meeting
at
which
the
matter
is
proposed
to
be
raised.
to
shareholder
proposals,
In
addition,
the
OBCA
requires
that
any
shareholder
proposal
that
includes
nominations
for
the
election
of
directors
must
be
signed
by
one
or
more
holders
of
shares
representing
in
the
aggregate
not
less
than
five
per
cent
of
the
shares
or
five
per
cent
of
the
shares
of
a
class
or
series
of
shares
of
the
corporation
entitled
to
vote
at
the
meeting
to
which
the
proposal
is
to
be
presented.
Stockholder Quorum and Vote Requirements
Delaware
Ontario
Under
the
DGCL,
quorum
for
a
stock
corporation
is
a
majority
of
the
shares
entitled
to
vote
at
the
meeting
unless
the
certificate
of
incorporation
or
bylaws
specify
a
different
quorum,
but
in
no
event
may
a
quorum
be
less
than
one-
third
of
the
shares
entitled
to
vote.
Unless
the
DGCL,
certificate
of
incorporation
or
bylaws
provide
for
a
greater
vote,
generally
the
required
vote
under
the
DGCL
is
a
majority
of
the
shares
present
in
person
or
represented
by
proxy,
except
for
the
election
of
directors
which
requires
a
plurality
of
the
votes
cast.
Amendment of Governing Instrument
Under
the
OBCA,
unless
the
bylaws
otherwise
provide,
the
holders
of
a
majority
of
the
shares
of
an
OBCA
corporation
entitled
to
vote
at
a
meeting
of
shareholders,
whether
present
in
person
or
represented
by
proxy,
constitute
a
quorum.
Delaware
Ontario
Amendment of Certificate of Incorporation .
Generally,
under
the
DGCL,
the
affirmative
vote
of
the
holders
of
a
majority
of
the
outstanding
stock
entitled
to
vote
is
required
to
approve
a
proposed
amendment
to
the
certificate
of
incorporation,
following
the
adoption
of
the
amendment
by
the
board
of
directors
of
the
corporation,
provided
that
the
certificate
of
incorporation
may
provide
for
a
greater
vote.
Under
the
DGCL,
holders
of
outstanding
shares
of
a
class
or
series
are
entitled
to
vote
separately
on
an
amendment
to
the
would
have
certain
incorporation
if
certificate
of
consequences,
including
changes
that
adversely
affect
the
rights
and
preferences
of
such
class
or
series.
the
amendment
71
Amendment of Articles .
Under
the
OBCA,
amendments
to
the
articles
of
incorporation
generally
require
the
approval
of
not
less
than
two-
thirds
of
the
votes
cast
by
shareholders
entitled
to
vote
on
the
resolution.
Amendment of Bylaws .
Under
the
DGCL,
after
a
corporation
has
received
any
payment
for
any
of
its
stock,
the
power
to
adopt,
amend
or
repeal
bylaws
shall
be
vested
in
the
stockholders
entitled
to
vote;
provided,
however,
that
any
corporation
nay,
in
its
certificate
of
incorporation,
provide
that
bylaws
may
be
adopted,
amended
or
repealed
by
the
board
of
directors.
The
fact
that
such
power
has
been
conferred
upon
the
board
of
directors
shall
not
divest
the
stockholders
of
the
power
nor
limit
their
power
to
adopt,
amend
or
repeal
the
bylaws.
Votes on Mergers, Consolidations and Sales of Assets
Amendment of Bylaws .
Under
the
OBCA,
the
directors
may,
by
resolution,
make,
amend
or
repeal
any
bylaws
that
regulate
the
business
or
affairs
of
a
corporation
and
they
must
submit
the
bylaw,
amendment
or
repeal
to
the
shareholders
at
the
next
meeting
of
shareholders,
and
the
shareholders
may
confirm,
reject
or
amend
the
bylaw,
amendment
or
repeal.
Delaware
Ontario
The
DGCL
provides
that,
unless
otherwise
provided
in
the
certificate
of
incorporation
or
bylaws,
the
adoption
of
a
merger
agreement
requires
the
approval
of
a
majority
of
the
outstanding
stock
of
the
corporation
entitled
to
vote
thereon.
Under
the
OBCA,
the
approval
of
at
least
two-thirds
of
votes
cast
by
shareholders
entitled
to
vote
on
the
resolution
is
required
for
extraordinary
corporate
actions.
Extraordinary
corporate
actions
include:
amalgamations;
continuances;
sales,
leases
or
exchanges
of
all
or
substantially
all
of
the
property
of
a
corporation;
liquidations
and
dissolutions.
Dissenter“s Rights of Appraisal
Delaware
Ontario
Under
the
DWI,
a
stockholder
of
a
Delaware
corporation
generally
has
the
right
to
dissent
flume,
merger
or
consolidation
in
which
the
Delaware
corporation
is
participating,
subject
to
specified
procedural
requirements,
including
that
such
dissenting
stockholder
does
not
vote
in
favor
of
the
merger
or
consolidation.
However,
the
DGCL
does
not
confer
appraisal
rights,
in
certain
circumstances,
including
if
the
dissenting
stockholder
owns
shares
traded
on
a
national
securities
exchange
and
will
receive
publicly
traded
shares
in
the
merger
or
consolidation.
Under
the
DGCL,
a
stockholder
asserting
appraisal
rights
does
not
receive
any
payment
for
his
or
her
shares
until
the
court
determines
the
fair
value
or
the
parties
otherwise
agree
to
a
value.
The
costs
of
the
proceeding
may
be
determined
by
the
court
and
assessed
against
the
parties
as
the
court
deems
equitable
under
the
circumstances.
Under
the
OBCA
each
of
the
following
matters
listed
will
entitle
shareholders
to
exorcise
rights
of
dissent
and
to
be
paid
the
fair
value
of
their
shares:
(i)
any
amalgamation
with
another
corporation
(other
than
with
certain
affiliated
corporations);
(ii)
an
amendment
to
the
corporation“s
articles
to
add,
change
or
remove
any
provisions
restricting
the
issue,
transfer
or
ownership
of
that
class
of
shares;
(iii)
an
amendment
to
the
corporation“s
articles
to
add,
change
or
remove
any
restriction
upon
the
business
or
businesses
that
the
corporation
may
carry
on;
(iv)
a
continuance
under
the
laws
of
another
jurisdiction;
(v)
a
sale,
lease
or
exchange
of
all
or
substantially
all
the
property
of
the
corporation
other
than
in
the
ordinary
course
of
business;
and
(vi)
where
a
court
order
permits
a
shareholder
to
dissent
in
connection
with
an
application
to
the
court
for
an
order
approving
an
arrangement.
However,
a
shareholder
is
not
entitled
to
dissent
if
an
amendment
to
the
articles
is
effected
by
a
court
order
approving
a
reorganization
or
by
a
court
order
made
in
connection
with
an
action
for
an
oppression
remedy,
unless
otherwise
authorized
by
the
court.
The
OBCA
provides
these
dissent
rights
for
both
listed
and
unlisted
shares.
72
Anti-Takeover and Ownership Provisions
Delaware
Ontario
Under
the
OBCA,
a
stockholder
may,
in
addition
to
exercising
dissent
rights,
seek
an
oppression
remedy
for
any
act
or
omission
of
a
corporation
which
is
oppressive
or
unfairly
prejudicial
to
or
that
unfairly
disregards
a
stockholder“s
interests.
Unless
an
issuer
opts
out
of
the
provisions
of
Section
203
of
the
DGCL,
Section
203
generally
prohibits
a
public
Delaware
corporation
from
engaging
in
a
"business
combination"
with
a
holder
of
15%
or
more
of
the
corporation“s
voting
stock
(as
defined
in
Section
203),
referred
to
as
an
interested
stockholder,
for
a
period
of
three
years
after
the
date
of
the
transaction
in
which
the
interested
stockholder
became
an
interested
stockholder,
except
as
otherwise
provided
in
Section
203.
For
these
purposes,
the
term
"business
combination"
includes
mergers,
assets
sales
and
other
similar
transactions
with
an
interested
stockholder.
While
the
OBCA
does
not
contain
specific
anti-takeover
provisions
with
respect
to
"business
combinations",
roles
and
policies
of
certain
Canadian
securities
regulatory
authorities,
including
Multilateral
Instrument
61-101—
Protection of Minority Security Holders in Special Transactions ,
referred
to
as
Multilateral
Instrument
61-101,
contain
requirements
in
connection
with,
among
other
things,
"related
party
transactions"
and
"business
combinations",
including,
among
other
things,
any
transaction
by
which
an
issuer
directly
or
indirectly
engages
in
the
following
with
a
related
party:
acquires,
sells,
leases
or
transfers
an
asset,
acquires
the
related
party,
acquires
or
issues
treasury
securities,
amends
the
terms
of
a
security
if
the
security
is
owned
by
the
related
party
or
assumes
or
becomes
subject
to
a
liability
or
takes
certain
other
actions
with
respect
to
debt.
The
term
"related
party"
includes
directors,
senior
officers
and
holders
of
more
than
10%
of
the
voting
rights
attached
to
all
outstanding
voting
securities
of
the
issuer
or
holders
of
a
sufficient
number
of
any
securities
of
the
issuer
to
materially
affect
control
of
the
issuer.
Multilateral
Instrument
61-101
requires,
subject
to
certain
exceptions,
the
preparation
of
a
formal
valuation
relating
to
certain
aspects
of
the
transaction
and
more
detailed
disclosure
in
the
proxy
material
sent
to
security
holders
in
connection
with
a
related
party
transaction
including
related
to
the
valuation.
Multilateral
Instrument
61-101
also
requires,
subject
to
certain
exceptions,
that
an
issuer
not
engage
in
a
related
party
transaction
unless
the
shareholders
of
the
issuer,
other
than
the
related
parties,
approve
the
transaction
by
a
simple
majority
of
the
votes
cast.
73
C. Material Contracts
There
are
no
other
contracts,
other
than
those
disclosed
in
this
annual
report
and
those
entered
into
in
the
ordinary
course
of
our
business,
that
are
material
to
us
and
which
were
entered
into
in
the
last
two
completed
fiscal
years
or
which
were
entered
into
before
the
two
most
recently
completed
fiscal
years
but
are
still
in
effect
as
of
the
date
of
this
annual
report:
1.
2.
3.
4.
5.
6.
7.
8.
9.
License
Agreement
between
Trillium
Therapeutics
Inc.
(private),
UHN
and
The
Hospital
for
Sick
Children
dated
February
1,
2010
pursuant
to
which
we
licensed
intellectual
property
relating
to
methods
and
compounds
for
the
modulation
of
the
SIRPa-
CD47
interaction
for
therapeutic
cancer
applications.
The
license
agreement
requires
us
to
use
commercially
reasonable
efforts
to
commercialize
the
licensed
technology.
The
license
agreement
will
terminate
on
a
country-by-country
basis,
in
countries
where
a
valid
claim
exists,
when
the
last
valid
claim
expires
in
such
country,
or
if
no
valid
claim
exists,
when
the
last
valid
claim
expires
in
the
U.S.
We
paid
an
up-front
license
fee
of
$150,000
and
committed
to
pay
an
annual
maintenance
fee
of
$25,000,
as
well
as
payments
on
patent
issuances,
development
milestone
payments
ranging
from
$100,000
to
$300,000
on
the
initiation
of
phase
I,
II
and
III
clinical
trials
respectively,
and
payments
upon
the
achievement
of
certain
regulatory
milestones
as
well
as
royalties
of
either
3%
or
1%
of
net
revenues
on
commercial
sales.
The
regulatory
milestone
payments
amount
to
$1
million
on
each
of
the
submission
of
a
first
BLA
in
the
U.S.
and
receipt
of
first
regulatory
approval
in
the
U.S.
and
proportionate
payments
in
other
territories
worldwide.
The
aggregate
milestones
payable
on
their
first
achievement
under
the
agreement
in
the
major
markets
of
the
U.S.,
Europe
and
Asia
combined
are
$5,660,000.
Under
the
license
agreement,
Trillium
is
required
to
pay
20%
of
any
sublicensing
revenues
to
the
licensors
on
the
first
$50
million
of
sublicensing
revenues,
and
pay
15%
of
any
sublicensing
revenues
to
the
licensors
after
the
first
$50
million
of
sublicensing
revenue
received.
GPEx®-Derived
Cell
Line
Sale
Agreement
between
Trillium
Therapeutics
Inc.
and
Catalent
Pharma
Solutions,
LLC
dated
August
12,
2014
pursuant
to
which
we
acquired
the
right
to
use
the
GPEx®
expression
system
for
the
manufacture
of
TTI-621
(SIRPaFc).
Consideration
for
the
license
includes
potential
pre-marketing
approval
milestones
of
up
to
U.S.
$875,000
and
aggregate
sales
milestone
payments
of
up
to
U.S.
$28.8
million.
GPEx®-Derived
Cell
Line
Sale
Agreement
between
Trillium
Therapeutics
Inc.
and
Catalent
Pharma
Solutions,
LLC
dated
August
12,
2014
pursuant
to
which
we
acquired
the
right
to
use
the
GPEx®
expression
system
for
the
manufacture
of
TTI-622
(SIRPaFc).
Consideration
for
the
license
includes
potential
pre-marketing
approval
milestones
of
up
to
U.S.
$875,000
and
aggregate
sales
milestone
payments
of
up
to
U.S.
$28.8
million.
2014
Stock
Option
Plan
that
was
approved
by
our
shareholders
on
May
27,
2014.
See
the
discussion
under
the
heading
“Item
6.B.
Compensation
–
Stock
Option
Plan”.
2016
Stock
Option
Plan
that
was
approved
by
our
shareholders
on
May
27,
2016.
See
the
discussion
under
the
heading
“Item
6.B.
Compensation
–
Stock
Option
Plan”.
2016
Cash-Settled
DSU
Plan
that
was
adopted
by
our
board
of
directors
on
November
9,
2016.
See
the
discussion
under
the
heading
“Item
6.B.
Compensation
–Deferred
Share
Unit
Plan”.
Warrant
Indenture
between
the
Company
and
Computershare
Trust
Company
of
Canada,
or
Computershare
dated
March
15,
2013.
This
indenture
provides
that
Computershare
will
act
as
the
trust
agent
for
the
administration
of
the
issued
warrants.
Warrant
Indenture
between
the
Company
and
Computershare
Trust
Company
of
Canada
dated
April
8,
2013.
This
indenture
provides
that
Computershare
will
act
as
the
trust
agent
for
the
administration
of
the
issued
warrants.
Warrant
Indenture
between
the
Company
and
Computershare
Trust
Company
of
Canada
dated
December
13,
2013.
This
indenture
provides
that
Computershare
will
act
as
the
trust
agent
for
the
administration
of
the
issued
warrants.
74
10.
11.
Share
purchase
agreement
among
the
Company,
Fluorinov
and
Fluorinov
shareholders
dated
January
26,
2016
pursuant
to
which
we
purchased
all
the
issued
and
outstanding
shares
of
Fluorinov
to
access
its
proprietary
medicinal
chemistry
platform.
Purchase
consideration
was
a
cash
payment
of
$10
million,
subject
to
adjustment
for
closing
working
capital,
plus
a
future
milestone
payment
of
$5
million
contingent
on
the
dosing
of
a
first
patient
in
a
clinical
trial
with
an
existing
Fluorinov
compound.
At
our
discretion,
up
to
50%
of
the
future
contingent
milestone
payment
can
be
satisfied
through
the
issuance
of
our
common
shares
provided
that
the
aggregate
number
of
common
shares
issuable
under
such
payments
will
not
exceed
1,558,447
common
shares
unless
shareholder
approval
has
first
been
obtained.
In
addition,
any
such
future
share
issuance
remains
subject
to
final
approval
from
our
board
of
directors
and
receipt
of
any
requisite
approvals
under
the
applicable
rules
of
the
TSX
and
NASDAQ.
We
have
also
committed
to
use
commercially
reasonable
efforts
to
monetize
Fluorinov’s
central
nervous
system
assets
and
share
50%
of
the
net
proceeds
with
Fluorinov
shareholders.
Royalty
agreement
among
the
Company,
Fluorinov
and
Fluorinov
shareholders
dated
January
26,
2016
in
relation
to
the
purchase
and
sale
agreement
of
the
same
date
wherein
we
acquired
all
the
issued
and
outstanding
shares
of
Fluorinov.
Consideration
under
this
agreement
includes
our
obligation
to
pay
a
lump
sum
royalty
of
$10
million
contingent
on
the
dosing
of
the
first
patient
with
a
Fluorinov
compound
in
a
Phase
2b
clinical
trial,
a
lump
sum
royalty
of
$20
million
contingent
on
the
regulatory
approval
of
the
first
Fluorinov
product
by
the
U.S.
FDA
or
the
European
Medicines
Agency,
and
variable
royalties
on
net
sales
of
Fluorinov
products
ranging
from
2%
to
5%.
At
our
discretion,
up
to
50%
of
the
future
contingent
milestone
payment
can
be
satisfied
through
the
issuance
of
our
common
shares
provided
that
the
aggregate
number
of
common
shares
issuable
under
such
payments
will
not
exceed
1,558,447
common
shares
unless
shareholder
approval
has
first
been
obtained.
In
addition,
any
such
future
share
issuance
remains
subject
to
final
approval
from
our
board
of
directors
and
receipt
of
any
requisite
approvals
under
the
applicable
rules
of
the
TSX
and
NASDAQ.
D. Exchange Controls
There
are
no
government
laws,
decrees
or
regulations
in
Canada
that
restrict
the
export
or
import
of
capital
or
that
affect
the
remittance
of
dividends,
interest
or
other
payments
to
non-resident
holders
of
our
common
shares.
Any
remittances
of
dividends
to
United
States
residents
and
to
other
non-residents
are,
however,
subject
to
withholding
tax.
See
the
discussion
under
the
heading
“Item
16.E.
Taxation
–
United
States
Federal
Income
Taxation”.
E. Taxation
Canadian Federal Income Taxation
We
consider
that
the
following
general
summary
fairly
describes
the
principal
Canadian
federal
income
tax
consequences
applicable
to
a
holder
of
our
common
shares
who
is
a
resident
of
the
United
States,
who
is
not,
will
not
be
and
will
not
be
deemed
to
be
a
resident
of
Canada
for
purposes
of
the
Income Tax Act (Canada)
and
any
applicable
tax
treaty
and
who
does
not
use
or
hold,
and
is
not
deemed
to
use
or
hold,
his,
her
or
its
common
shares
in
the
capital
of
our
Company
in
connection
with
carrying
on
a
business
in
Canada
(a
“
non-resident holder ”).
This
summary
is
based
upon
the
current
provisions
of
the
Income Tax Act (Canada),
the
regulations
thereunder
(the
“
Regulations ”),
the
current
publicly
announced
administrative
and
assessing
policies
of
the
Canada
Revenue
Agency
and
the
Canada-United
States
Tax
Convention
as
amended
by
the
Protocols
thereto
(the
“
Treaty ”).
This
summary
also
takes
into
account
the
amendments
to
the
Income Tax Act (Canada)
and
the
Regulations
publicly
announced
by
the
Minister
of
Finance
(Canada)
prior
to
the
date
hereof
(the
“
Tax Proposals ”)
and
assumes
that
all
such
Tax
Proposals
will
be
enacted
in
their
present
form.
However,
no
assurances
can
be
given
that
the
Tax
Proposals
will
be
enacted
in
the
form
proposed,
or
at
all.
This
summary
is
not
exhaustive
of
all
possible
Canadian
federal
income
tax
consequences
applicable
to
a
holder
of
our
common
shares
and,
except
for
the
foregoing,
this
summary
does
not
take
into
account
or
anticipate
any
changes
in
law,
whether
by
legislative,
administrative
or
judicial
decision
or
action,
nor
does
it
take
into
account
provincial,
territorial
or
foreign
income
tax
legislation
or
considerations,
which
may
differ
from
the
Canadian
federal
income
tax
consequences
described
herein.
75
This summary is of a general nature only and is not intended to be, and should not be construed to be, legal, business or tax advice to any particular
holder or prospective holder of our common shares, and no opinion or representation with respect to the tax consequences to any holder or prospective
holder of our common shares is made. Accordingly, holders and prospective holders of our common shares should consult their own tax advisors with
respect to the income tax consequences of purchasing, owning and disposing of our common shares in their particular circumstances.
Dividends
Dividends
paid
on
our
common
shares
to
a
non-resident
holder
will
be
subject
under
the
Income Tax Act (Canada)
to
withholding
tax
at
a
rate
of
25%
subject
to
a
reduction
under
the
provisions
of
an
applicable
tax
treaty,
which
tax
is
deducted
at
source
by
our
Company.
The
Treaty
provides
that
the
Income Tax Act (Canada)
standard
25%
withholding
tax
rate
is
reduced
to
15%
on
dividends
paid
on
shares
of
a
corporation
resident
in
Canada
(such
as
our
Company)
to
residents
of
the
United
States,
and
also
provides
for
a
further
reduction
of
this
rate
to
5%
where
the
beneficial
owner
of
the
dividends
is
a
corporation
resident
in
the
United
States
that
owns
at
least
10%
of
the
voting
shares
of
the
corporation
paying
the
dividend.
Capital Gains
A
non-resident
holder
is
not
subject
to
tax
under
the
Income
Tax
Act
(Canada)
in
respect
of
a
capital
gain
realized
upon
the
disposition
of
a
common
share
of
our
Company
unless
such
share
represents
“taxable
Canadian
property”,
as
defined
in
the
Income Tax Act (Canada),
to
the
holder
thereof.
Our
common
shares
generally
will
not
be
considered
taxable
Canadian
property
to
a
non-resident
holder
provided
that:
the
non-resident
holder;
persons
with
whom
the
non-resident
holder
did
not
deal
at
arm’s
length;
or
the
non-resident
holder
and
persons
with
whom
such
non-resident
holder
did
not
deal
at
arm’s
length,
did
not
own,
or
have
an
interest
in
an
option
in
respect
of,
25%
or
more
of
the
issued
shares
of
any
class
of
our
capital
stock
at
any
time
during
the
60
month
period
immediately
preceding
the
disposition
of
such
shares.
In
the
case
of
a
non-resident
holder
to
whom
shares
of
our
Company
represent
taxable
Canadian
property
and
who
is
resident
in
the
United
States,
no
Canadian
taxes
will
generally
be
payable
on
a
capital
gain
realized
on
such
shares
by
reason
of
the
Treaty
unless
the
value
of
such
shares
is
derived
principally
from
real
property
situated
in
Canada.
United States Federal Income Taxation
The
following
is
a
general
summary
of
material
U.S.
federal
income
tax
considerations
applicable
to
a
U.S.
Holder
(as
defined
below)
arising
from
and
relating
to
the
acquisition,
ownership,
and
disposition
of
our
common
shares.
This
summary
is
for
general
information
purposes
only
and
does
not
purport
to
be
a
complete
analysis
or
listing
of
all
potential
U.S.
federal
income
tax
considerations
that
may
apply
to
a
U.S.
Holder
arising
from
and
relating
to
the
acquisition,
ownership,
and
disposition
of
common
shares.
In
addition,
this
summary
does
not
take
into
account
the
individual
facts
and
circumstances
of
any
particular
U.S.
Holder
that
may
affect
the
U.S.
federal
income
tax
consequences
to
such
U.S.
Holder,
including
specific
tax
consequences
to
a
U.S.
Holder
under
an
applicable
tax
treaty.
Accordingly,
this
summary
is
not
intended
to
be,
and
should
not
be
construed
as,
legal
or
U.S.
federal
income
tax
advice
with
respect
to
any
U.S.
Holder.
This
summary
does
not
address
the
U.S.
federal
alternative
minimum,
U.S.
federal
estate
and
gift,
U.S.
state
and
local,
and
non-U.S.
tax
consequences
to
U.S.
Holders
of
the
acquisition,
ownership,
and
disposition
of
common
shares.
Except
as
specifically
set
forth
below,
this
summary
does
not
discuss
applicable
tax
reporting
requirements.
Each
U.S.
Holder
should
consult
its
own
tax
advisor
regarding
the
U.S.
federal,
U.S.
federal
alternative
minimum,
U.S.
federal
estate
and
gift,
U.S.
state
and
local,
and
non-U.S.
tax
consequences
relating
to
the
acquisition,
ownership
and
disposition
of
common
shares.
76
No
legal
opinion
from
U.S.
legal
counsel
or
ruling
from
the
Internal
Revenue
Service,
or
the
IRS,
has
been
requested,
or
will
be
obtained,
regarding
the
U.S.
federal
income
tax
consequences
of
the
acquisition,
ownership,
and
disposition
of
common
shares.
This
summary
is
not
binding
on
the
IRS,
and
the
IRS
is
not
precluded
from
taking
a
position
that
is
different
from,
and
contrary
to,
the
positions
taken
in
this
summary.
In
addition,
because
the
authorities
on
which
this
summary
is
based
are
subject
to
various
interpretations,
the
IRS
and
the
U.S.
courts
could
disagree
with
one
or
more
of
the
positions
taken
in
this
summary.
Scope of this Summary
Authorities
This
summary
is
based
on
the
Internal
Revenue
Code
of
1986,
as
amended,
or
the
Code,
Treasury
Regulations
(whether
final,
temporary,
or
proposed),
published
rulings
of
the
IRS,
published
administrative
positions
of
the
IRS,
the
Convention
Between
Canada
and
the
United
States
of
America
with
Respect
to
Taxes
on
Income
and
on
Capital,
signed
September
26,
1980,
as
amended,
or
the
Canada-U.S.
Tax
Convention,
and
U.S.
court
decisions
that
are
applicable
and,
in
each
case,
as
in
effect
and
available,
as
of
the
date
of
this
document.
Any
of
the
authorities
on
which
this
summary
is
based
could
be
changed
in
a
material
and
adverse
manner
at
any
time,
and
any
such
change
could
be
applied
on
a
retroactive
or
prospective
basis
which
could
affect
the
U.S.
federal
income
tax
considerations
described
in
this
summary.
This
summary
does
not
discuss
the
potential
effects,
whether
adverse
or
beneficial,
of
any
proposed
legislation
that,
if
enacted,
could
be
applied
on
a
retroactive
or
prospective
basis.
U.S. Holders
For
purposes
of
this
summary,
the
term
“U.S.
Holder”
means
a
beneficial
owner
of
common
shares
that
is
for
U.S.
federal
income
tax
purposes:
an
individual
who
is
a
citizen
or
resident
of
the
U.S.;
a
corporation
(or
other
entity
taxable
as
a
corporation
for
U.S.
federal
income
tax
purposes)
organized
under
the
laws
of
the
U.S.,
any
state
thereof
or
the
District
of
Columbia;
an
estate
whose
income
is
subject
to
U.S.
federal
income
taxation
regardless
of
its
source;
or
a
trust
that
(1)
is
subject
to
the
primary
supervision
of
a
court
within
the
U.S.
and
the
control
of
one
or
more
U.S.
persons
for
all
substantial
decisions
or
(2)
has
a
valid
election
in
effect
under
applicable
Treasury
Regulations
to
be
treated
as
a
U.S.
person.
Non-U.S. Holders
For
purposes
of
this
summary,
a
“non-U.S.
Holder”
is
a
beneficial
owner
of
common
shares
that
is
not
a
U.S.
Holder.
This
summary
does
not
address
the
U.S.
federal
income
tax
consequences
to
non-U.S.
Holders
arising
from
and
relating
to
the
acquisition,
ownership,
and
disposition
of
common
shares.
Accordingly,
a
non-U.S.
Holder
should
consult
its
own
tax
advisor
regarding
the
U.S.
federal,
U.S.
federal
alternative
minimum,
U.S.
federal
estate
and
gift,
U.S.
state
and
local,
and
non-U.S.
tax
consequences
(including
the
potential
application
of
and
operation
of
any
income
tax
treaties)
relating
to
the
acquisition,
ownership,
and
disposition
of
common
shares.
U.S. Holders Subject to Special U.S. Federal Income Tax Rules Not Addressed
This
summary
does
not
address
the
U.S.
federal
income
tax
considerations
applicable
to
U.S.
Holders
that
are
subject
to
special
provisions
under
the
Code,
including,
but
not
limited
to,
the
following:
(a)
U.S.
Holders
that
are
tax-exempt
organizations,
qualified
retirement
plans,
individual
retirement
accounts,
or
other
tax-deferred
accounts;
(b)
U.S.
Holders
that
are
financial
institutions,
underwriters,
insurance
companies,
real
estate
investment
trusts,
or
regulated
investment
companies;
(c)
U.S.
Holders
that
are
broker-dealers,
dealers,
or
traders
in
securities
or
currencies
that
elect
to
apply
a
mark-to-market
accounting
method;
(d)
U.S.
Holders
that
have
a
“functional
currency”
other
than
the
U.S.
dollar;
(e)
U.S.
Holders
that
own
common
shares
as
part
of
a
straddle,
hedging
transaction,
conversion
transaction,
constructive
sale,
or
other
arrangement
involving
more
than
one
position;
(f)
U.S.
Holders
that
acquired
common
shares
in
connection
with
the
exercise
of
employee
stock
options
or
otherwise
as
compensation
for
services;
(g)
U.S.
Holders
that
hold
common
shares
other
than
as
a
capital
asset
within
the
meaning
of
Section
1221
of
the
Code
(generally,
property
held
for
investment
purposes);
or
(h)
U.S.
Holders
that
own
or
have
owned
(directly,
indirectly,
or
by
attribution)
10%
or
more
of
the
total
combined
voting
power
of
our
outstanding
shares.
This
summary
also
does
not
address
the
U.S.
federal
income
tax
considerations
applicable
to
U.S.
Holders
who
are:
(a)
U.S.
expatriates
or
former
long-term
residents
of
the
U.S.;
(b)
persons
that
have
been,
are,
or
will
be
a
resident
or
deemed
to
be
a
resident
in
Canada
for
purposes
of
the
Income
Tax
Act
(Canada)
(the
“Tax
Act”);
(c)
persons
that
use
or
hold,
will
use
or
hold,
or
that
are
or
will
be
deemed
to
use
or
hold
common
shares
in
connection
with
carrying
on
a
business
in
Canada;
(d)
persons
whose
common
shares
constitute
“taxable
Canadian
property”
under
the
Tax
Act;
or
(e)
persons
that
have
a
permanent
establishment
in
Canada
for
the
purposes
of
the
Canada-U.S.
Tax
Convention.
U.S.
Holders
that
are
subject
to
special
provisions
under
the
Code,
including,
but
not
limited
to,
U.S.
Holders
described
immediately
above,
should
consult
their
own
tax
advisor
regarding
the
U.S.
federal,
U.S.
federal
alternative
minimum,
U.S.
federal
estate
and
gift,
U.S.
state
and
local,
and
non-U.S.
tax
consequences
relating
to
the
acquisition,
ownership
and
disposition
of
common
shares.
77
If
an
entity
or
arrangement
that
is
classified
as
a
partnership
(or
“pass-through”
entity)
for
U.S.
federal
income
tax
purposes
holds
common
shares,
the
U.S.
federal
income
tax
consequences
to
such
partnership
and
the
partners
of
such
partnership
generally
will
depend
on
the
activities
of
the
partnership
and
the
status
of
such
partners
(or
owners).
This
summary
does
not
address
the
tax
consequences
to
any
such
partnership
or
partners.
Partners
of
entities
or
arrangements
that
are
classified
as
partnerships
for
U.S.
federal
income
tax
purposes
should
consult
their
own
tax
advisors
regarding
the
U.S.
federal
income
tax
consequences
arising
from
and
relating
to
the
acquisition,
ownership,
and
disposition
of
common
shares.
Passive Foreign Investment Company Rules
If
we
were
to
constitute
a
“passive
foreign
investment
company”
under
the
meaning
of
Section
1297
of
the
Code,
or
a
PFIC,
for
any
year
during
a
U.S.
Holder’s
holding
period,
then
different
and
potentially
adverse
rules
will
affect
the
U.S.
federal
income
tax
consequences
to
a
U.S.
Holder
resulting
from
the
acquisition,
ownership
and
disposition
of
common
shares.
In
addition,
in
any
year
in
which
we
are
classified
as
a
PFIC,
such
holder
may
be
required
to
file
an
annual
report
with
the
IRS
containing
such
information
as
Treasury
Regulations
and/or
other
IRS
guidance
may
require.
U.S.
Holders
should
consult
their
own
tax
advisors
regarding
the
requirements
of
filing
such
information
returns
under
these
rules,
including
the
requirement
to
file
an
IRS
Form
8621.
PFIC Status of the Company
We
generally
will
be
a
PFIC
if,
for
a
tax
year,
(a)
75%
or
more
of
our
gross
income
is
passive
income
(the
“income
test”)
or
(b)
50%
or
more
of
the
value
of
our
assets
either
produce
passive
income
or
are
held
for
the
production
of
passive
income,
based
on
the
quarterly
average
of
the
fair
market
value
of
such
assets
(the
“asset
test”).
“Gross
income”
generally
includes
all
sales
revenues
less
the
cost
of
goods
sold,
plus
income
from
investments
and
from
incidental
or
outside
operations
or
sources,
and
“passive
income”
generally
includes,
for
example,
dividends,
interest,
rents
and
royalties,
gains
from
the
sale
of
stock
and
securities,
and
gains
from
commodities
transactions.
For
purposes
of
the
PFIC
income
test
and
asset
test
described
above,
if
we
own,
directly
or
indirectly,
25%
or
more
of
the
total
value
of
the
outstanding
shares
of
another
corporation,
we
will
be
treated
as
if
it
(a)
held
a
proportionate
share
of
the
assets
of
such
other
corporation
and
(b)
received
directly
a
proportionate
share
of
the
income
of
such
other
corporation.
In
addition,
for
purposes
of
the
PFIC
income
test
and
asset
test
described
above,
and
assuming
certain
other
requirements
are
met,
“passive
income”
does
not
include
interest,
dividends,
rents,
or
royalties
that
are
received
or
accrued
by
us
from
“related
persons”
(as
defined
in
Section
954(d)(3)
of
the
Code),
to
the
extent
such
items
are
properly
allocable
to
the
income
of
such
related
person
that
is
not
passive
income.
78
In
addition,
under
attribution
rules,
if
we
are
a
PFIC,
U.S.
Holders
will
be
deemed
to
own
their
proportionate
share
of
the
stock
of
any
subsidiary
of
ours
that
is
also
a
PFIC,
or
a
Subsidiary
PFIC,
and
will
be
subject
to
U.S.
federal
income
tax
on
their
proportionate
share
of
(a)
a
distribution
on
the
stock
of
a
Subsidiary
PFIC
and
(b)
a
disposition
or
deemed
disposition
of
the
stock
of
a
Subsidiary
PFIC,
both
as
if
such
U.S.
Holders
directly
held
the
shares
of
such
Subsidiary
PFIC.
We
believe
that
we
were
classified
as
a
PFIC
during
the
tax
year
ended
December
31,
2016,
and
may
be
a
PFIC
in
future
tax
years.
The
determination
of
whether
any
corporation
was,
or
will
be,
a
PFIC
for
a
tax
year
depends,
in
part,
on
the
application
of
complex
U.S.
federal
income
tax
rules,
which
are
subject
to
differing
interpretations.
In
addition,
whether
any
corporation
will
be
a
PFIC
for
any
tax
year
depends
on
the
assets
and
income
of
such
corporation
over
the
course
of
each
such
tax
year
and,
as
a
result,
cannot
be
predicted
with
certainty
as
of
the
date
of
this
document.
Accordingly,
there
can
be
no
assurance
that
the
IRS
will
not
challenge
any
determination
made
by
us
(or
a
Subsidiary
PFIC)
concerning
its
PFIC
status.
Each
U.S.
Holder
should
consult
its
own
tax
advisor
regarding
the
PFIC
status
of
the
Company
and
any
Subsidiary
PFIC.
Default PFIC Rules Under Section 1291 of the Code
If
we
are
a
PFIC,
the
U.S.
federal
income
tax
consequences
to
a
U.S.
Holder
of
the
acquisition,
ownership,
and
disposition
of
common
shares
will
depend
on
whether
such
U.S.
Holder
makes
an
election
to
treat
us
and
each
Subsidiary
PFIC,
if
any,
as
a
“qualified
electing
fund”
or
“QEF”
under
Section
1295
of
the
Code,
or
a
QEF
Election,
or
a
mark-to-market
election
under
Section
1296
of
the
Code,
or
a
Mark-to-Market
Election.
A
U.S.
Holder
that
does
not
make
either
a
QEF
Election
or
a
Mark-to-Market
Election
will
be
referred
to
in
this
summary
as
a
“Non-Electing
U.S.
Holder.”
A
Non-Electing
U.S.
Holder
will
be
subject
to
the
rules
of
Section
1291
of
the
Code
with
respect
to
(a)
any
gain
recognized
on
the
sale
or
other
taxable
disposition
of
common
shares
and
(b)
any
excess
distribution
received
on
our
common
shares.
A
distribution
generally
will
be
an
“excess
distribution”
to
the
extent
that
such
distribution
(together
with
all
other
distributions
received
in
the
current
tax
year)
exceeds
125%
of
the
average
distributions
received
during
the
three
preceding
tax
years
(or
during
a
U.S.
Holder’s
holding
period
for
our
common
shares,
if
shorter).
Under
Section
1291
of
the
Code,
any
gain
recognized
on
the
sale
or
other
taxable
disposition
of
common
shares
(including
an
indirect
disposition
of
the
stock
of
any
Subsidiary
PFIC),
and
any
“excess
distribution”
received
on
common
shares,
must
be
ratably
allocated
to
each
day
in
a
Non-Electing
U.S.
Holder’s
holding
period
for
the
respective
common
shares.
The
amount
of
any
such
gain
or
excess
distribution
allocated
to
the
tax
year
of
disposition
or
distribution
of
the
excess
distribution
and
to
years
before
the
entity
became
a
PFIC,
if
any,
would
be
taxed
as
ordinary
income.
The
amounts
allocated
to
any
other
tax
year
would
be
subject
to
U.S.
federal
income
tax
at
the
highest
tax
rate
applicable
to
ordinary
income
in
each
such
year,
and
an
interest
charge
would
be
imposed
on
the
tax
liability
for
each
such
year,
calculated
as
if
such
tax
liability
had
been
due
in
each
such
year.
A
Non-Electing
U.S.
Holder
that
is
not
a
corporation
must
treat
any
such
interest
paid
as
“personal
interest,”
which
is
not
deductible.
If
we
are
a
PFIC
for
any
tax
year
during
which
a
Non-Electing
U.S.
Holder
holds
common
shares,
we
will
continue
to
be
treated
as
a
PFIC
with
respect
to
such
Non-Electing
U.S.
Holder,
regardless
of
whether
we
cease
to
be
a
PFIC
in
one
or
more
subsequent
tax
years.
A
Non-Electing
U.S.
Holder
may
terminate
this
deemed
PFIC
status
by
electing
to
recognize
gain
(which
will
be
taxed
under
the
rules
of
Section
1291
of
the
Code
discussed
above),
but
not
loss,
as
if
such
common
shares
were
sold
on
the
last
day
of
the
last
tax
year
for
which
we
were
a
PFIC.
QEF Election
A
U.S.
Holder
that
makes
a
timely
and
effective
QEF
Election
for
the
first
tax
year
in
which
its
holding
period
of
its
common
shares
begins
generally
will
not
be
subject
to
the
rules
of
Section
1291
of
the
Code
discussed
above
with
respect
to
its
common
shares.
A
U.S.
Holder
that
makes
a
timely
and
effective
QEF
Election
will
be
subject
to
U.S.
federal
income
tax
on
such
U.S.
Holder’s
pro
rata
share
of
(a)
our
net
capital
gain,
which
will
be
taxed
as
long-term
capital
gain
to
such
U.S.
Holder,
and
(b)
our
ordinary
earnings,
which
will
be
taxed
as
ordinary
income
to
such
U.S.
Holder.
Generally,
“net
capital
gain”
is
the
excess
of
(a)
net
long-term
capital
gain
over
(b)
net
short-term
capital
loss,
and
“ordinary
earnings”
are
the
excess
of
(a)
“earnings
and
profits”
over
(b)
net
capital
gain.
A
U.S.
Holder
that
makes
a
QEF
Election
will
be
subject
to
U.S.
federal
income
tax
on
such
amounts
for
each
tax
year
in
which
we
are
a
PFIC,
regardless
of
whether
such
amounts
are
actually
distributed
to
such
U.S.
Holder
by
us.
However,
for
any
tax
year
in
which
we
are
a
PFIC
and
has
no
net
income
or
gain,
U.S.
Holders
that
have
made
a
QEF
Election
would
not
have
any
income
inclusions
as
a
result
of
the
QEF
Election.
If
a
U.S.
Holder
that
made
a
QEF
Election
has
an
income
inclusion,
such
a
U.S.
Holder
may
elect
to
defer
payment
of
current
U.S.
federal
income
tax
on
such
amounts,
subject
to
an
interest
charge.
If
such
U.S.
Holder
is
not
a
corporation,
any
such
interest
paid
will
be
treated
as
“personal
interest,”
which
is
not
deductible.
79
A
U.S.
Holder
that
makes
a
timely
and
effective
QEF
Election
with
respect
to
us
generally
(a)
may
receive
a
tax-free
distribution
from
us
to
the
extent
that
such
distribution
represents
“earnings
and
profits”
of
ours
that
were
previously
included
in
income
by
the
U.S.
Holder
because
of
such
QEF
Election
and
(b)
will
adjust
such
U.S.
Holder’s
tax
basis
in
our
common
shares
to
reflect
the
amount
included
in
income
or
allowed
as
a
tax-free
distribution
because
of
such
QEF
Election.
In
addition,
a
U.S.
Holder
that
makes
a
QEF
Election
generally
will
recognize
capital
gain
or
loss
on
the
sale
or
other
taxable
disposition
of
common
shares.
The
procedure
for
making
a
QEF
Election,
and
the
U.S.
federal
income
tax
consequences
of
making
a
QEF
Election,
will
depend
on
whether
such
QEF
Election
is
timely.
A
QEF
Election
will
be
treated
as
“timely”
if
such
QEF
Election
is
made
for
the
first
year
in
the
U.S.
Holder’s
holding
period
for
our
common
shares
in
which
we
were
a
PFIC.
A
U.S.
Holder
may
make
a
timely
QEF
Election
by
filing
the
appropriate
QEF
Election
documents
at
the
time
such
U.S.
Holder
files
a
U.S.
federal
income
tax
return
for
such
year.
If
a
U.S.
Holder
does
not
make
a
timely
and
effective
QEF
Election
for
the
first
year
in
the
U.S.
Holder’s
holding
period
for
our
common
shares,
the
U.S.
Holder
may
still
be
able
to
make
a
timely
and
effective
QEF
Election
in
a
subsequent
year
if
such
U.S.
Holder
also
makes
a
“purging”
election
to
recognize
gain
(which
will
be
taxed
under
the
rules
of
Section
1291
of
the
Code
discussed
above)
as
if
such
common
shares
were
sold
for
their
fair
market
value
on
the
day
the
QEF
Election
is
effective.
A
QEF
Election
will
apply
to
the
tax
year
for
which
such
QEF
Election
is
timely
made
and
to
all
subsequent
tax
years,
unless
such
QEF
Election
is
invalidated
or
terminated
or
the
IRS
consents
to
revocation
of
such
QEF
Election.
If
a
U.S.
Holder
makes
a
QEF
Election
and,
in
a
subsequent
tax
year,
we
cease
to
be
a
PFIC,
the
QEF
Election
will
remain
in
effect
(although
it
will
not
be
applicable)
during
those
tax
years
in
which
we
are
not
a
PFIC.
Accordingly,
if
we
become
a
PFIC
in
another
subsequent
tax
year,
the
QEF
Election
will
be
effective
and
the
U.S.
Holder
will
be
subject
to
the
QEF
rules
described
above
during
any
subsequent
tax
year
in
which
we
qualify
as
a
PFIC.
U.S.
Holders
should
be
aware
that
there
can
be
no
assurance
that
we
will
satisfy
the
record
keeping
requirements
that
apply
to
a
QEF
Election,
or
that
we
will
supply
U.S.
Holders
with
information
that
such
U.S.
Holders
require
to
report
under
the
QEF
Election
rules,
in
event
that
we
are
a
PFIC
and
a
U.S.
Holder
wishes
to
make
a
QEF
Election.
Thus,
U.S.
Holders
may
not
be
able
to
make
a
QEF
Election
with
respect
to
their
common
shares.
Each
U.S.
Holder
should
consult
its
own
tax
advisor
regarding
the
availability
of,
and
procedure
for
making,
a
QEF
Election.
A
U.S.
Holder
makes
a
QEF
Election
by
attaching
a
completed
IRS
Form
8621,
including
a
PFIC
Annual
Information
Statement,
to
a
timely
filed
United
States
federal
income
tax
return.
However,
if
we
do
not
provide
the
required
information
with
regard
to
us
or
any
of
our
Subsidiary
PFICs,
U.S.
Holders
will
not
be
able
to
make
a
QEF
Election
for
such
entity
and
will
continue
to
be
subject
to
the
rules
of
Section
1291
of
the
Code,
discussed
above,
that
apply
to
Non-Electing
U.S.
Holders
with
respect
to
the
taxation
of
gains
and
excess
distributions.
Mark-to-Market Election
A
U.S.
Holder
may
make
a
Mark-to-Market
Election
only
if
the
common
shares
are
marketable
stock.
Our
common
shares
generally
will
be
“marketable
stock”
if
our
common
shares
are
regularly
traded
on
(a)
a
national
securities
exchange
that
is
registered
with
the
Securities
Exchange
Commission,
(b)
the
national
market
system
established
pursuant
to
section
11A
of
the
Securities
Exchange
Act
of
1934,
or
(c)
a
foreign
securities
exchange
that
is
regulated
or
supervised
by
a
governmental
authority
of
the
country
in
which
the
market
is
located,
provided
that
(i)
such
foreign
exchange
has
trading
volume,
listing,
financial
disclosure,
and
meets
other
requirements
and
the
laws
of
the
country
in
which
such
foreign
exchange
is
located,
together
with
the
rules
of
such
foreign
exchange,
ensure
that
such
requirements
are
actually
enforced
and
(ii)
the
rules
of
such
foreign
exchange
ensure
active
trading
of
listed
stocks.
If
such
stock
is
traded
on
such
a
qualified
exchange
or
other
market,
such
stock
generally
will
be
“regularly
traded”
for
any
calendar
year
during
which
such
stock
is
traded,
other
than
in
de
minimis
quantities,
on
at
least
15
days
during
each
calendar
quarter.
80
A
U.S.
Holder
that
makes
a
Mark-to-Market
Election
with
respect
to
its
common
shares
generally
will
not
be
subject
to
the
rules
of
Section
1291
of
the
Code
discussed
above
with
respect
to
such
common
shares.
However,
if
a
U.S.
Holder
does
not
make
a
Mark-to-Market
Election
beginning
in
the
first
tax
year
of
such
U.S.
Holder’s
holding
period
for
our
common
shares
or
such
U.S.
Holder
has
not
made
a
timely
QEF
Election,
the
rules
of
Section
1291
of
the
Code
discussed
above
will
apply
to
dispositions
of,
and
distributions
on,
our
common
shares.
A
U.S.
Holder
that
makes
a
Mark-to-Market
Election
will
include
in
ordinary
income,
for
each
tax
year
in
which
we
are
a
PFIC,
an
amount
equal
to
the
excess,
if
any,
of
(a)
the
fair
market
value
of
our
common
shares,
as
of
the
close
of
such
tax
year
over
(b)
such
U.S.
Holder’s
tax
basis
in
such
common
shares.
A
U.S.
Holder
that
makes
a
Mark-to-Market
Election
will
be
allowed
a
deduction
in
an
amount
equal
to
the
excess,
if
any,
of
(a)
such
U.S.
Holder’s
adjusted
tax
basis
in
our
common
shares,
over
(b)
the
fair
market
value
of
such
common
shares
(but
only
to
the
extent
of
the
net
amount
of
previously
included
income
as
a
result
of
the
Mark-to-Market
Election
for
prior
tax
years).
A
U.S.
Holder
that
makes
a
Mark-to-Market
Election
generally
also
will
adjust
such
U.S.
Holder’s
tax
basis
in
our
common
shares
to
reflect
the
amount
included
in
gross
income
or
allowed
as
a
deduction
because
of
such
Mark-to-Market
Election.
In
addition,
upon
a
sale
or
other
taxable
disposition
of
common
shares,
a
U.S.
Holder
that
makes
a
Mark-to-Market
Election
will
recognize
ordinary
income
or
ordinary
loss
(not
to
exceed
the
excess,
if
any,
of
(a)
the
amount
included
in
ordinary
income
because
of
such
Mark-to-Market
Election
for
prior
tax
years
over
(b)
the
amount
allowed
as
a
deduction
because
of
such
Mark-to-Market
Election
for
prior
tax
years).
A
U.S.
Holder
makes
a
Mark-to-Market
Election
by
attaching
a
completed
IRS
Form
8621
to
a
timely
filed
United
States
federal
income
tax
return.
A
Mark-to-
Market
Election
applies
to
the
tax
year
in
which
such
Mark-to-Market
Election
is
made
and
to
each
subsequent
tax
year,
unless
our
common
shares
cease
to
be
“marketable
stock”
or
the
IRS
consents
to
revocation
of
such
election.
Each
U.S.
Holder
should
consult
its
own
tax
advisors
regarding
the
availability
of,
and
procedure
for
making,
a
Mark-to-Market
Election.
Although
a
U.S.
Holder
may
be
eligible
to
make
a
Mark-to-Market
Election
with
respect
to
our
common
shares,
no
such
election
may
be
made
with
respect
to
the
stock
of
any
Subsidiary
PFIC
that
a
U.S.
Holder
is
treated
as
owning,
because
such
stock
is
not
marketable.
Hence,
the
Mark-to-Market
Election
will
not
be
effective
to
eliminate
the
application
of
the
default
rules
of
Section
1291
of
the
Code
described
above
with
respect
to
deemed
dispositions
of
Subsidiary
PFIC
stock
or
distributions
from
a
Subsidiary
PFIC.
Other PFIC Rules
Under
Section
1291(f)
of
the
Code,
the
IRS
has
issued
proposed
Treasury
Regulations
that,
subject
to
exceptions,
would
cause
a
U.S.
Holder
that
had
not
made
a
timely
QEF
Election
to
recognize
gain
(but
not
loss)
upon
transfers
of
common
shares
that
would
otherwise
be
tax-deferred
(e.g.,
gifts
and
exchanges
pursuant
to
corporate
reorganizations).
However,
the
specific
U.S.
federal
income
tax
consequences
to
a
U.S.
Holder
may
vary
based
on
the
manner
in
which
common
shares
are
transferred.
Additional
adverse
rules
will
apply
with
respect
to
a
U.S.
Holder
if
we
are
a
PFIC,
regardless
of
whether
such
U.S.
Holder
makes
a
QEF
Election.
For
example
under
Section
1298(b)(6)
of
the
Code,
a
U.S.
Holder
that
uses
common
shares
as
security
for
a
loan
will,
except
as
may
be
provided
in
future
Treasury
Regulations,
be
treated
as
having
made
a
taxable
disposition
of
such
common
shares.
Special
rules
also
apply
to
the
amount
of
foreign
tax
credit
that
a
U.S.
Holder
may
claim
on
a
distribution
from
a
PFIC.
Subject
to
such
special
rules,
foreign
taxes
paid
with
respect
to
any
distribution
in
respect
of
stock
in
a
PFIC
are
generally
eligible
for
the
foreign
tax
credit.
The
rules
relating
to
distributions
by
a
PFIC
and
their
eligibility
for
the
foreign
tax
credit
are
complicated,
and
a
U.S.
Holder
should
consult
with
their
own
tax
advisor
regarding
the
availability
of
the
foreign
tax
credit
with
respect
to
distributions
by
a
PFIC.
81
The
PFIC
rules
are
complex,
and
each
U.S.
Holder
should
consult
its
own
tax
advisor
regarding
the
PFIC
rules
and
how
the
PFIC
rules
may
affect
the
U.S.
federal
income
tax
consequences
of
the
acquisition,
ownership,
and
disposition
of
common
shares.
Ownership and Disposition of Common Shares
The
following
discussion
is
subject
in
its
entirety
to
the
rules
described
above
under
the
heading
“Passive
Foreign
Investment
Company
Rules”.
Distributions on Common Shares
Subject
to
the
PFIC
rules
discussed
above,
a
U.S.
Holder
that
receives
a
distribution,
including
a
constructive
distribution,
with
respect
to
an
Offered
Share
will
be
required
to
include
the
amount
of
such
distribution
in
gross
income
as
a
dividend
(without
reduction
for
any
Canadian
income
tax
withheld
from
such
distribution)
to
the
extent
of
the
current
or
accumulated
“earnings
and
profits”
of
ours,
as
computed
for
U.S.
federal
income
tax
purposes.
A
dividend
generally
will
be
taxed
to
a
U.S.
Holder
at
ordinary
income
tax
rates
if
we
are
a
PFIC.
To
the
extent
that
a
distribution
exceeds
the
current
and
accumulated
“earnings
and
profits”
of
ours,
such
distribution
will
be
treated
first
as
a
tax-free
return
of
capital
to
the
extent
of
a
U.S.
Holder“s
tax
basis
in
our
common
shares
and
thereafter
as
gain
from
the
sale
or
exchange
of
such
common
shares.
(See
“Sale
or
Other
Taxable
Disposition
of
Common
Shares”
below).
However,
we
may
not
maintain
the
calculations
of
earnings
and
profits
in
accordance
with
U.S.
federal
income
tax
principles,
and
each
U.S.
Holder
should
therefore
assume
that
any
distribution
by
us
with
respect
to
our
common
shares
will
constitute
ordinary
dividend
income.
Dividends
received
on
common
shares
generally
will
not
be
eligible
for
the
“dividends
received
deduction”.
Provided
we
are
eligible
for
the
benefits
of
the
Canada-U.S.
Tax
Convention,
dividends
paid
by
us
to
non-corporate
U.S.
Holders,
including
individuals,
generally
will
be
eligible
for
the
preferential
tax
rates
applicable
to
long-term
capital
gains
for
dividends,
provided
holding
period
and
other
conditions
are
satisfied,
including
that
we
not
be
classified
as
a
PFIC
in
the
tax
year
of
distribution
or
in
the
preceding
tax
year.
The
dividend
rules
are
complex,
and
each
U.S.
Holder
should
consult
its
own
tax
advisor
regarding
the
application
of
such
rules.
Sale or Other Taxable Disposition of Common Shares
Subject
to
the
PFIC
rules
discussed
above,
upon
the
sale
or
other
taxable
disposition
of
common
shares,
a
U.S.
Holder
generally
will
recognize
capital
gain
or
loss
in
an
amount
equal
to
the
difference
between
the
amount
of
cash
plus
the
fair
market
value
of
any
property
received
and
such
U.S.
Holder“s
tax
basis
in
such
common
shares
sold
or
otherwise
disposed
of.
Subject
to
the
PFIC
rules
discussed
above,
gain
or
loss
recognized
on
such
sale
or
other
disposition
generally
will
be
long-term
capital
gain
or
loss
if,
at
the
time
of
the
sale
or
other
disposition,
our
common
shares
have
been
held
for
more
than
one
year.
Preferential
tax
rates
apply
to
long-term
capital
gain
of
a
U.S.
Holder
that
is
an
individual,
estate,
or
trust.
There
are
currently
no
preferential
tax
rates
for
long-term
capital
gain
of
a
U.S.
Holder
that
is
a
corporation.
Deductions
for
capital
losses
are
subject
to
significant
limitations
under
the
Code.
Additional Considerations
Additional Tax on Passive Income
Certain
U.S.
Holders
that
are
individuals,
estates
or
trusts
(other
than
trusts
that
are
exempt
from
tax)
will
be
subject
to
a
3.8%
tax
on
all
or
a
portion
of
their
“net
investment
income,”
which
includes
dividends
on
our
common
shares,
and
net
gains
from
the
disposition
of
our
common
shares.
Further,
excess
distributions
treated
as
dividends,
gains
treated
as
excess
distributions,
and
mark-to-market
inclusions
and
deductions
are
all
included
in
the
calculation
of
net
investment
income.
82
Treasury
Regulations
provide,
subject
to
the
election
described
in
the
following
paragraph,
that
solely
for
purposes
of
this
additional
tax,
distributions
of
previously
taxed
income
will
be
treated
as
dividends
and
included
in
net
investment
income
subject
to
the
additional
3.8%
tax.
Additionally,
to
determine
the
amount
of
any
capital
gain
from
the
sale
or
other
taxable
disposition
of
our
common
shares
that
will
be
subject
to
the
additional
tax
on
net
investment
income,
a
U.S.
Holder
who
has
made
a
QEF
Election
will
be
required
to
recalculate
its
basis
in
our
common
shares
excluding
QEF
basis
adjustments.
Alternatively,
a
U.S.
Holder
may
make
an
election
which
will
be
effective
with
respect
to
all
interests
in
a
PFIC
for
which
a
QEF
Election
has
been
made
and
which
is
held
in
that
year
or
acquired
in
future
years.
Under
this
election,
a
U.S.
Holder
pays
the
additional
3.8%
tax
on
QEF
income
inclusions
and
on
gains
calculated
after
giving
effect
to
related
tax
basis
adjustments.
U.S.
Holders
that
are
individuals,
estates
or
trusts
should
consult
their
own
tax
advisors
regarding
the
applicability
of
this
tax
to
any
of
their
income
or
gains
in
respect
of
our
common
shares.
Receipt of Foreign Currency
The
amount
of
any
distribution
paid
to
a
U.S.
Holder
in
foreign
currency,
or
on
the
sale,
exchange
or
other
taxable
disposition
of
common
shares,
generally
will
be
equal
to
the
U.S.
dollar
value
of
such
foreign
currency
based
on
the
exchange
rate
applicable
on
the
date
of
receipt
(regardless
of
whether
such
foreign
currency
is
converted
into
U.S.
dollars
at
that
time).
A
U.S.
Holder
will
have
a
basis
in
the
foreign
currency
equal
to
its
U.S.
dollar
value
on
the
date
of
receipt.
Any
U.S.
Holder
who
converts
or
otherwise
disposes
of
the
foreign
currency
after
the
date
of
receipt
may
have
a
foreign
currency
exchange
gain
or
loss
that
would
be
treated
as
ordinary
income
or
loss,
and
generally
will
be
U.S.
source
income
or
loss
for
foreign
tax
credit
purposes.
Different
rules
apply
to
U.S.
Holders
who
use
the
accrual
method
of
tax
accounting.
Each
U.S.
Holder
should
consult
its
own
U.S.
tax
advisors
regarding
the
U.S.
federal
income
tax
consequences
of
receiving,
owning,
and
disposing
of
foreign
currency.
Foreign Tax Credit
Subject
to
the
PFIC
rules
discussed
above,
a
U.S.
Holder
that
pays
(whether
directly
or
through
withholding)
Canadian
income
tax
with
respect
to
dividends
paid
on
the
common
shares
generally
will
be
entitled,
at
the
election
of
such
U.S.
Holder,
to
receive
either
a
deduction
or
a
credit
for
such
Canadian
income
tax.
Generally,
a
credit
will
reduce
a
U.S.
Holder’s
U.S.
federal
income
tax
liability
on
a
dollar-for-dollar
basis,
whereas
a
deduction
will
reduce
a
U.S.
Holder’s
income
subject
to
U.S.
federal
income
tax.
This
election
is
made
on
a
year-by-year
basis
and
applies
to
all
foreign
taxes
paid
(whether
directly
or
through
withholding)
by
a
U.S.
Holder
during
a
year.
Complex
limitations
apply
to
the
foreign
tax
credit,
including
the
general
limitation
that
the
credit
cannot
exceed
the
proportionate
share
of
a
U.S.
Holder’s
U.S.
federal
income
tax
liability
that
such
U.S.
Holder’s
“foreign
source”
taxable
income
bears
to
such
U.S.
Holder’s
worldwide
taxable
income.
In
applying
this
limitation,
a
U.S.
Holder’s
various
items
of
income
and
deduction
must
be
classified,
under
complex
rules,
as
either
“foreign
source”
or
“U.S.
source.”
Generally,
dividends
paid
by
a
foreign
corporation
should
be
treated
as
foreign
source
for
this
purpose,
and
gains
recognized
on
the
sale
of
stock
of
a
foreign
corporation
by
a
U.S.
Holder
should
be
treated
as
U.S.
source
for
this
purpose,
except
as
otherwise
provided
in
an
applicable
income
tax
treaty,
and
if
an
election
is
properly
made
under
the
Code.
However,
the
amount
of
a
distribution
with
respect
to
the
common
shares
that
is
treated
as
a
“dividend”
may
be
lower
for
U.S.
federal
income
tax
purposes
than
it
is
for
Canadian
federal
income
tax
purposes,
resulting
in
a
reduced
foreign
tax
credit
allowance
to
a
U.S.
Holder.
In
addition,
this
limitation
is
calculated
separately
with
respect
to
specific
categories
of
income.
The
foreign
tax
credit
rules
are
complex,
and
each
U.S.
Holder
should
consult
its
own
U.S.
tax
advisors
regarding
the
foreign
tax
credit
rules.
Backup Withholding and Information Reporting
Payments
made
within
the
U.S.
or
by
a
U.S.
payor
or
U.S.
middleman,
of
dividends
on,
and
proceeds
arising
from
the
sale
or
other
taxable
disposition
of,
common
shares
will
generally
be
subject
to
information
reporting
and
backup
withholding
tax,
at
the
rate
of
28%,
if
a
U.S.
Holder
(a)
fails
to
furnish
such
U.S.
Holder’s
correct
U.S.
taxpayer
identification
number
(generally
on
Form
W-9),
(b)
furnishes
an
incorrect
U.S.
taxpayer
identification
number,
(c)
is
notified
by
the
IRS
that
such
U.S.
Holder
has
previously
failed
to
properly
report
items
subject
to
backup
withholding
tax,
or
(d)
fails
to
certify,
under
penalty
of
perjury,
that
such
U.S.
Holder
has
furnished
its
correct
U.S.
taxpayer
identification
number
and
that
the
IRS
has
not
notified
such
U.S.
Holder
that
it
is
subject
to
backup
withholding
tax.
However,
certain
exempt
persons
generally
are
excluded
from
these
information
reporting
and
backup
withholding
rules.
Backup
withholding
is
not
an
additional
tax.
Any
amounts
withheld
under
the
U.S.
backup
withholding
tax
rules
will
be
allowed
as
a
credit
against
a
U.S.
Holder’s
U.S.
federal
income
tax
liability,
if
any,
or
will
be
refunded,
if
such
U.S.
Holder
furnishes
required
information
to
the
IRS
in
a
timely
manner.
83
Under
U.S.
federal
income
tax
law
and
Treasury
Regulations,
U.S.
Holders
must
generally
file
information
returns
with
respect
to
their
investment
in,
or
involvement
in,
a
foreign
corporation.
For
example,
U.S.
return
disclosure
obligations
(and
related
penalties)
are
imposed
on
individuals
who
are
U.S.
Holders
that
hold
specified
foreign
financial
assets
in
excess
of
threshold
amounts.
The
definition
of
specified
foreign
financial
assets
includes
not
only
financial
accounts
maintained
in
foreign
financial
institutions,
but
also,
unless
held
in
accounts
maintained
by
a
financial
institution,
any
stock
or
security
issued
by
a
non-U.S.
person,
any
financial
instrument
or
contract
held
for
investment
that
has
an
issuer
or
counterparty
other
than
a
U.S.
person
and
any
interest
in
a
foreign
entity.
U.S.
Holders
may
be
subject
to
these
reporting
requirements
unless
their
common
shares
are
held
in
an
account
at
financial
institutions
meeting
specified
requirements.
Penalties
for
failure
to
file
information
returns
can
be
substantial.
U.S.
Holders
should
consult
with
their
own
tax
advisors
regarding
the
requirements
of
filing
information
returns,
including
the
requirement
to
file
an
IRS
Form
8938.
The
discussion
of
reporting
requirements
set
forth
above
is
not
intended
to
constitute
an
exhaustive
description
of
all
reporting
requirements
that
may
apply
to
a
U.S.
Holder.
A
failure
to
satisfy
reporting
requirements
may
result
in
an
extension
of
the
time
period
during
which
the
IRS
can
assess
a
tax,
and
under
certain
circumstances,
such
an
extension
may
apply
to
assessments
of
amounts
unrelated
to
any
unsatisfied
reporting
requirement.
Each
U.S.
Holder
should
consult
its
own
tax
advisors
regarding
the
information
reporting
and
backup
withholding
rules.
F. Dividends and Paying Agents
Not
Applicable.
G. Statement by Experts
Not
Applicable.
H. Documents on Display
We
are
subject
to
the
informational
requirements
of
the
Exchange
Act
and
file
reports
and
other
information
with
the
SEC.
You
may
read
and
copy
any
of
our
reports
and
other
information
at,
and
obtain
copies
upon
payment
of
prescribed
fees
from,
the
Public
Reference
Room
maintained
by
the
SEC
at
100
F
Street,
N.E.,
Washington,
D.C.
20549.
In
addition,
the
SEC
maintains
a
website
that
contains
reports,
proxy
and
information
statements
and
other
information
regarding
registrants
that
file
electronically
with
the
SEC
at
http://www.sec.gov.
The
public
may
obtain
information
on
the
operation
of
the
Public
Reference
Room
by
calling
the
SEC
at
1-800-SEC-0330.
We
are
required
to
file
reports
and
other
information
with
the
securities
commissions
in
Canada.
You
are
invited
to
read
and
copy
any
reports,
statements
or
other
information,
other
than
confidential
filings,
that
we
file
with
the
provincial
securities
commissions.
These
filings
are
also
electronically
available
from
the
Canadian
System
for
Electronic
Document
Analysis
and
Retrieval
("SEDAR")
(www.sedar.com),
the
Canadian
equivalent
of
the
SEC“s
electronic
document
gathering
and
retrieval
system.
As
a
foreign
private
issuer,
we
are
exempt
from
the
rules
under
the
Exchange
Act
prescribing
the
furnishing
and
content
of
proxy
statements
to
shareholders.
We
will
provide
without
charge
to
each
person,
including
any
beneficial
owner,
to
whom
a
copy
of
this
annual
report
has
been
delivered,
on
the
written
or
oral
request
of
such
person,
a
copy
of
any
or
all
documents
referred
to
above
which
have
been
or
may
be
incorporated
by
reference
in
this
annual
report
(not
including
exhibits
to
such
incorporated
information
that
are
not
specifically
incorporated
by
reference
into
such
information).
Requests
for
such
copies
should
be
directed
to
us
at
the
following
address:
130
Adelaide
St.
West,
Suite
1901,
Toronto,
ON,
M5H
3P5.
We
are
required
to
file
financial
statements
and
other
information
with
the
Securities
Commission
in
each
of
the
Provinces
and
Territories
of
Canada,
except
Quebec,
electronically
through
SEDAR
which
can
be
viewed
at
www.sedar.com.
84
I. Subsidiary Information
We
own
100%
of
the
voting
securities
of
Trillium
Therapeutics
USA
Inc.
which
was
incorporated
March
26,
2015
in
the
State
of
Delaware.
ITEM 11. QUANTITATIVE & QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Fair value
IFRS
13
Fair
Value
Measurement
provides
a
hierarchy
of
valuation
techniques
based
on
whether
the
inputs
to
those
valuation
techniques
are
observable
or
unobservable.
Observable
inputs
are
those
that
reflect
market
data
obtained
from
independent
sources,
while
unobservable
inputs
reflect
our
assumptions
with
respect
to
how
market
participants
would
price
an
asset
or
liability.
These
two
inputs
used
to
measure
fair
value
fall
into
the
following
three
different
levels
of
the
fair
value
hierarchy:
Level
1
Quoted
prices
in
active
markets
for
identical
instruments
that
are
observable.
Level
2
Quoted
prices
in
active
markets
for
similar
instruments;
inputs
other
than
quoted
prices
that
are
observable
and
derived
from
or
corroborated
by
observable
market
data.
Level
3
Valuations
derived
from
valuation
techniques
in
which
one
or
more
significant
inputs
are
unobservable.
The
hierarchy
requires
the
use
of
observable
market
data
when
available.
We
have
classified
cash
and
cash
equivalents
as
Level
1.
The
loan
payable
has
been
classified
as
Level
2.
The
Fluorinov
contingent
consideration
in
other
liabilities
has
been
classified
as
Level
3.
The
fair
value
of
the
contingent
consideration
increases
as
the
time
to
the
expected
milestones
decreases
assuming
the
probability
of
achieving
the
milestones
remains
unchanged.
Cash
and
cash
equivalents,
amounts
receivable,
accounts
payable
and
accrued
liabilities,
and
other
current
liabilities,
due
within
one
year,
are
all
short-term
in
nature
and,
as
such,
their
carrying
values
approximate
fair
values.
The
fair
value
of
the
non-current
loan
payable
is
estimated
by
discounting
the
expected
future
cash
flows
at
the
cost
of
money
to
us,
which
is
equal
to
its
carrying
value.
Risks
We
have
exposure
to
credit
risk,
liquidity
risk,
interest
rate
risk
and
currency
risk.
Our
Board
has
overall
responsibility
for
the
establishment
and
oversight
of
our
risk
management
framework.
The
Audit
Committee
of
the
board
of
directors
is
responsible
for
reviewing
our
risk
management
policies.
Credit risk
Credit
risk
is
the
risk
of
financial
loss
to
us
if
a
counterparty
to
a
financial
instrument
fails
to
meet
its
contractual
obligations,
and
arises
principally
from
our
cash
and
amounts
receivable.
The
carrying
amount
of
these
financial
assets
represents
the
maximum
credit
exposure.
We
follow
an
investment
policy
to
mitigate
against
the
deterioration
of
principal
and
to
enhance
our
ability
to
meet
our
liquidity
needs.
Cash
is
on
deposit
with
major
Canadian
chartered
banks
and
we
invest
in
high
grade
short-term
instruments.
Amounts
receivable
are
primarily
comprised
of
amounts
due
from
the
federal
government.
85
Liquidity risk
Liquidity
risk
is
the
risk
that
we
will
not
be
able
to
meet
our
financial
obligations
as
they
fall
due.
We
are
a
development
stage
company
and
are
reliant
on
external
fundraising
to
support
our
operations.
Once
funds
have
been
raised,
we
manage
our
liquidity
risk
by
investing
in
cash
and
short-term
instruments
to
provide
regular
cash
flow
for
current
operations.
We
also
manage
liquidity
risk
by
continuously
monitoring
actual
and
projected
cash
flows.
Our
board
reviews
and
approves
our
operating
and
capital
budgets,
as
well
as
any
material
transactions
not
in
the
ordinary
course
of
business.
The
majority
of
our
accounts
payable
and
accrued
liabilities
have
maturities
of
less
than
three
months.
Interest rate risk
Interest
rate
risk
is
the
risk
that
the
fair
value
or
future
cash
flows
of
a
financial
instrument
will
fluctuate
because
of
changes
in
market
interest
rates.
We
hold
our
cash
in
bank
accounts
or
high
interest
savings
accounts
which
have
a
variable
rate
of
interest.
We
manage
our
interest
rate
risk
by
holding
highly
liquid
short-term
instruments
and
by
holding
our
investments
to
maturity,
where
possible.
For
the
years
ended
December
31,
2016
and
2015,
we
earned
interest
income
of
$417,517
and
$488,486,
respectively.
Therefore,
a
1%
change
in
the
average
interest
rate
for
the
years
ended
December
31,
2016
and
2015,
would
have
a
net
impact
on
finance
income
of
$4,175
and
$4,885,
respectively.
Currency risk
We
are
exposed
to
currency
risk
related
to
the
fluctuation
of
foreign
exchange
rates
and
the
degree
of
volatility
of
those
rates.
Currency
risk
is
limited
to
the
portion
of
our
business
transactions
denominated
in
currencies
other
than
the
Canadian
dollar,
which
are
primarily
expenses
in
U.S.
dollars.
As
at
December
31,
2016
and
2015,
we
held
U.S.
dollar
cash
and
cash
equivalents
in
the
amount
of
U.S.
$30,247,141
and
U.S.
$44,547,591
and
had
U.S.
dollar
denominated
accounts
payable
and
accrued
liabilities
in
the
amount
of
U.S.
$2,418,828
and
U.S.
$1,033,319,
respectively.
Therefore,
a
1%
change
in
the
foreign
exchange
rate
would
have
a
net
impact
on
finance
costs
as
at
December
31,
2016
and
2015
of
$368,816
and
$435,143,
respectively.
U.S.
dollar
expenses
for
the
years
ended
December
31,
2016
and
2015
were
approximately
U.S.
$9,674,000
and
U.S.
$8,700,000,
respectively.
Varying
the
US
exchange
rate
for
the
years
ended
December
31,
2016
and
2015
to
reflect
a
5%
strengthening
of
the
Canadian
dollar
would
have
decreased
the
net
loss
by
approximately
$641,000
and
$556,000,
respectively,
assuming
that
all
other
variables
remained
constant.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
None.
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
PART II
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS.
We
had
a
shareholder
rights
plan
pursuant
to
an
agreement
between
us
and
Computershare
Investor
Services
Inc.
dated
September
16,
2013
and
amended
on
June
3,
2014.
Our
shareholder
rights
plan
expired
on
May
27,
2016
and
was
not
renewed.
86
ITEM 15. CONTROL AND PROCEDURES
A. Disclosure Controls and Procedures
As
of
the
end
of
our
fiscal
year
ended
December
31,
2016,
an
evaluation
of
the
effectiveness
of
our
“disclosure
controls
and
procedures”
(as
such
term
is
defined
in
Rules
13a-15(e)
and
15d-15(e)
under
the
Exchange
Act)
was
carried
out
by
our
management,
with
the
participation
of
the
President
and
Chief
Executive
Officer,
or
CEO
and
the
Chief
Financial
Officer,
or
CFO.
Based
upon
that
evaluation,
the
CEO
and
CFO
have
concluded
that
as
of
the
end
of
that
fiscal
year,
our
disclosure
controls
and
procedures
were
effective
to
ensure
that
information
required
to
be
disclosed
by
us
in
reports
that
we
file
or
submit
under
the
Securities
Exchange
Act
of
1934,
as
amended,
is
(i)
recorded,
processed,
summarized
and
reported
within
the
time
periods
specified
in
Securities
and
Exchange
Commission
(the
“Commission”)
rules
and
forms
and
(ii)
accumulated
and
communicated
to
our
management,
including
the
CEO
and
CFO,
to
allow
timely
decisions
regarding
required
disclosure.
It
should
be
noted
that
while
the
CEO
and
CFO
believe
that
our
disclosure
controls
and
procedures
provide
a
reasonable
level
of
assurance
that
they
are
effective,
they
do
not
expect
that
our
disclosure
controls
and
procedures
or
internal
control
over
financial
reporting
will
prevent
all
errors
and
fraud.
A
control
system,
no
matter
how
well
conceived
or
operated,
can
provide
only
reasonable,
not
absolute,
assurance
that
the
objectives
of
the
control
system
are
met.
B. Management’s Annual Report on Internal Control Over Financial Reporting
Management
is
responsible
for
establishing
and
maintaining
adequate
internal
control
over
our
financial
reporting.
Our
internal
control
system
was
designed
to
provide
reasonable
assurance
that
all
transactions
are
accurately
recorded,
that
transactions
are
recorded
as
necessary
to
permit
preparation
of
financial
statements
in
accordance
with
generally
accepted
accounting
principles,
and
that
our
assets
are
safeguarded.
Management
has
assessed
the
effectiveness
of
our
internal
control
over
financial
reporting
as
at
December
31,
2016.
In
making
its
assessment,
management
used
the
Committee
of
Sponsoring
Organizations
of
the
Treadway
Commission
framework
in
Internal
Control
–
Integrated
Framework
(2013),
or
COSO,
to
evaluate
the
effectiveness
of
our
internal
control
over
financial
reporting.
Based
on
this
assessment,
management
has
concluded
that
our
internal
control
over
financial
reporting
was
effective
as
of
December
31,
2016.
C. Attestation Report of the Registered Public Accounting Firm.
This
annual
report
does
not
include
an
attestation
report
of
our
independent
registered
public
accounting
firm
regarding
internal
control
over
financial
reporting
because
emerging
growth
companies
are
exempt
from
this
requirement
for
so
long
as
they
remain
emerging
growth
companies.
Therefore,
management’s
report
on
internal
control
over
financial
reporting
is
not
subject
to
attestation
by
our
independent
registered
public
accounting
firm.
D. Changes in Internal Control Over Financial Reporting
There
were
no
changes
in
our
internal
control
over
financial
reporting
that
occurred
during
the
year
ended
December
31,
2016
that
have
materially
affected,
or
are
reasonably
likely
to
materially
affect,
our
internal
control
over
financial
reporting.
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our
board
has
determined
that
Luke
Beshar,
a
member
of
our
audit
committee,
qualifies
as
an
“audit
committee
financial
expert”
(as
such
term
is
defined
in
Form
20-F)
and
is
“independent”
as
that
term
is
defined
in
the
rules
of
the
Nasdaq
Stock
Market.
87
ITEM 16B. CODE OF ETHICS
We
have
adopted
a
Code
of
Business
Conduct
and
Ethics,
which
qualifies
as
a
“code
as
ethics”
within
the
meaning
of
Form
20-F,
that
is
applicable
to
each
of
our
directors,
officers
and
employees,
including
our
principal
executive
officer,
principal
financial
officer,
principal
accounting
officer
or
controller
and
persons
performing
similar
functions.
The
Code
of
Business
Conduct
and
Ethics
is
available
for
viewing
on
our
website
at
www.trilliumtherapeutics.com,
and
is
available
in
print,
without
charge,
to
any
shareholder
who
requests
a
copy
of
it.
Requests
for
copies
of
the
Code
of
Business
Conduct
and
Ethics
should
be
made
by
contacting:
James
Parsons,
Chief
Financial
Officer,
by
phone
at
(416)
595-0627
or
by
e-mail
to
info@trilliumtherapeutics.com
.
Since
the
date
on
which
we
became
subject
to
the
reporting
requirements
of
Section
13(a)
or
15(d)
of
the
Exchange
Act,
there
have
not
been
any
amendments
to,
or
waivers,
including
implicit
waivers,
granted
from,
any
provision
of
the
Code
of
Business
Conduct
and
Ethics.
If
any
amendment
to
the
Code
of
Ethics
is
made,
or
if
any
waiver
from
the
provisions
thereof
is
granted,
we
may
elect
to
disclose
the
information
about
such
amendment
or
waiver
required
by
Form
20-F
to
be
disclosed,
by
posting
such
disclosure
on
its
website,
which
may
be
accessed
at
www.trilliumtherapeutics.com.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The
aggregate
fees
billed
and
accrued
by
our
external
auditor
in
the
last
two
fiscal
years
for
auditor
service
fees
were
as
follows:
Financial Year Ending
Audit Fees (1)
Audit Related Fees (2)
Tax Fees (3)
All Other Fees (4)
December
31,
2016
December
31,
2015
Notes:
$240,000
$378,970
Nil
Nil
$22,285
$22,805
Nil
Nil
(1)
(2)
(3)
(4)
“Audit
fees”
are
the
aggregate
fees
billed
by
Ernst
&
Young
LLP
for
the
audit
of
our
consolidated
annual
financial
statements,
reviews
of
interim
financial
statements
and
attestation
services
that
are
provided
in
connection
with
statutory
and
regulatory
filings
or
engagements.
“Audit-related
fees”
are
fees
charged
by
Ernst
&
Young
LLP
for
assurance
and
related
services
that
are
reasonably
related
to
the
performance
of
the
audit
or
review
of
the
our
financial
statements
and
are
not
reported
under
“Audit
Fees.”
“Tax
fees”
are
fees
billed
by
Ernst
&
Young
LLP
for
tax
compliance
and
tax
advice.
“All
other
fees”
are
fees
billed
by
Ernst
&
Young
LLP
for
services
not
described
above.
88
Pre-Approval Policies and Procedures
The
audit
committee
of
our
board
of
directors
has
adopted
an
Auditor
Services
Pre-Approval
Policy,
or
the
Policy
with
respect
to
the
pre-approval
of
audit
and
permitted
non-audit
services
to
be
provided
by
Ernst
&
Young
LLP,
our
independent
auditor.
Pursuant
to
the
Policy,
the
audit
committee
on
an
annual
basis
may
approve
the
provision
of
a
specified
list
of
audit
and
permitted
non-audit
services
that
the
audit
committee
believes
to
be
typical,
reoccurring
or
otherwise
likely
to
be
provided
by
the
external
auditor
during
the
then
current
fiscal
year.
All
pre-approvals
granted
under
this
Policy
shall
be
sufficiently
detailed
as
to
the
particular
services
being
provided
that
it
will
not
be
necessary
for
our
management
to
exercise
any
discretion
in
determining
whether
a
particular
service
has
been
pre-
approved.
In
addition,
pursuant
to
the
Policy
the
audit
committee
has
delegated
its
pre-approval
authority
to
the
Chair
of
the
audit
committee
for
services
where
the
aggregate
fees
are
estimated
to
be
less
than
or
equal
to
$50,000.
The
Chair
of
the
audit
committee
is
required
to
report
any
such
granted
pre-approvals
to
the
audit
committee
at
its
next
scheduled
meeting.
The
audit
committee
shall
not
delegate
to
management
the
audit
committee“s
responsibilities
for
pre-approving
audit
and
non-audit
services
to
be
performed
by
the
external
auditor.
Pursuant
to
the
Policy,
there
is
an
exception
to
the
pre-approval
requirements
for
permitted
non-audit
services,
provided
all
such
services
were
not
recognized
at
the
time
of
the
engagement
to
be
non-audit
services
and,
once
recognized,
are
promptly
brought
to
the
attention
of
the
audit
committee
and
approved
prior
to
the
completion
of
the
audit.
The
aggregate
amount
of
all
services
approved
in
this
manner
may
not
constitute
more
than
five
percent
of
the
total
fees
paid
to
the
external
auditor
during
the
fiscal
year
in
which
the
services
are
provided.
Of
the
fees
reported
in
this
annual
report
under
the
heading
“Principal
Accountant
Fees
and
Services”,
none
of
the
fees
billed
by
Ernst
&
Young
LLP
were
approved
by
our
audit
committee
pursuant
to
the
de
minimus
exception
provided
by
Section
(c)(7)(i)(C)
of
Rule
2-01
of
Regulation
S-X.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not
Applicable.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Not
Applicable.
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
None.
ITEM 16G. CORPORATE GOVERNANCE
As
a
Canadian
corporation
listed
on
NASDAQ,
we
are
not
required
to
comply
with
most
of
the
NASDAQ
corporate
governance
standards,
so
long
as
we
comply
with
Canadian
corporate
governance
practices.
In
order
to
claim
such
an
exemption,
however,
we
must
disclose
the
significant
differences
between
our
corporate
governance
practices
and
those
required
to
be
followed
by
U.S.
domestic
issuers
under
NASDAQ’s
corporate
governance
standards.
Our
corporate
governance
practices
meet
or
exceed
all
applicable
Canadian
requirements.
They
also
incorporate
some
best
practices
derived
from
the
NASDAQ
rules
and
comply
with
applicable
rules
adopted
by
the
Securities
and
Exchange
Commission
to
give
effect
to
the
provisions
of
the
United
States
Sarbanes-Oxley
Act
of
2002.
89
The
following
is
a
summary
of
the
significant
ways
in
which
our
corporate
governance
practices
differ
from
those
required
to
be
followed
by
U.S.
domestic
issuers
under
NASDAQ’s
corporate
governance
standards.
Except
as
described
in
this
summary,
we
are
in
compliance
with
the
NASDAQ
corporate
governance
standards
in
all
significant
respects.
Shareholder Approval
Section
5635
of
the
NASDAQ
Marketplace
Rules
requires
shareholder
approval
to
be
obtained
in
connection
with
the
undertaking
of
certain
actions.
The
circumstances
under
which
shareholder
approval
is
required
under
the
NASDAQ
Marketplace
Rules
are
not
identical
to
the
circumstances
under
which
shareholder
approval
is
required
under
Canadian
corporate
and
securities
laws
and
TSX
requirements.
For
example,
but
without
limitation,
Section
5635
requires
shareholder
approval
of
most
equity
compensation
plans
and
material
revisions
to
such
plans.
This
requirement
covers
plans
that
provide
for
the
delivery
of
both
newly
issued
and
treasury
securities.
The
TSX
rules
provide
that
only
the
creation
of
or
certain
material
amendments
to
equity
compensation
plans
that
provide
for
new
issuances
of
securities
are
subject
to
shareholder
approval.
We
follow
the
TSX
rules
with
respect
to
the
requirements
for
shareholder
approval
of
potential
transactions,
including,
without
limitation,
shareholder
approval
of
equity
compensation
plans
and
material
revisions
to
such
plans.
ITEM 16H. MINE SAFETY DISCLOSURE
Not
Applicable.
ITEM 17. FINANCIAL STATEMENTS
PART III
We
have
elected
to
provide
financial
statements
pursuant
to
Item
18.
See
the
Index
to
the
Financial
Statements
on
page
F-1
following
the
signature
page
of
this
Form
20-F.
ITEM 18. FINANCIAL STATEMENTS
The
following
financial
statements
and
notes
thereto
(as
applicable)
in
Canadian
dollars
are
filed
with
and
incorporated
herein
as
part
of
this
Form
20-F,
beginning
on
page
F-1
following
the
signature
page
of
this
Form
20-F:
audited
consolidated
financial
statements
of
the
Company
for
the
years
ended
December
31,
2016
and
2015,
prepared
in
accordance
with
IFRS
as
issued
by
the
IASB,
including:
consolidated
statements
of
financial
position,
consolidated
statements
of
loss
and
comprehensive
loss,
consolidated
statements
of
changes
in
equity,
consolidated
statements
of
cash
flows,
and
notes
to
the
consolidated
financial
statements.
audited
consolidated
financial
statements
of
the
Company
for
the
years
ended
December
31,
2015
and
2014,
prepared
in
accordance
with
IFRS
as
issued
by
the
IASB,
including:
consolidated
statements
of
financial
position,
consolidated
statements
of
loss
and
comprehensive
loss,
consolidated
statements
of
changes
in
equity,
consolidated
statements
of
cash
flows,
and
notes
to
the
consolidated
financial
statements.
90
ITEM 19. EXHIBITS
Exhibit
Number
Description
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
4.1
4.2*
4.3*
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
Articles
of
Incorporation
dated
March
31,
2004
(incorporated
by
reference
to
Exhibit
1.1
to
the
Registration
Statement
on
Form
20-F
of
Trillium
Therapeutics
Inc.,
filed
on
August
12,
2014
(File
No.
1-36596)).
Articles
of
Amendment
dated
October
19,
2004
(incorporated
by
reference
to
Exhibit
1.2
to
the
Registration
Statement
on
Form
20-F
of
Trillium
Therapeutics
Inc.,
filed
on
August
12,
2014
(File
No.
1-36596)).
Articles
of
Amendment
dated
February
6,
2013
(incorporated
by
reference
to
Exhibit
1.3
to
the
Registration
Statement
on
Form
20-F
of
Trillium
Therapeutics
Inc.,
filed
on
August
12,
2014
(File
No.
1-36596)).
Articles
of
Continuance
dated
November
7,
2013
(incorporated
by
reference
to
Exhibit
1.4
to
the
Registration
Statement
on
Form
20-F
of
Trillium
Therapeutics
Inc.,
filed
on
August
12,
2014
(File
No.
1-36596)).
Articles
of
Amendment
dated
December
12,
2013
(incorporated
by
reference
to
Exhibit
1.5
to
the
Registration
Statement
on
Form
20-F
of
Trillium
Therapeutics
Inc.,
filed
on
August
12,
2014
(File
No.
1-36596)).
Articles
of
Amalgamation
dated
June
1,
2014
(incorporated
by
reference
to
Exhibit
1.6
to
the
Registration
Statement
on
Form
20-F
of
Trillium
Therapeutics
Inc.,
filed
on
August
12,
2014
(File
No.
1-36596)).
By-law
No.1
of
Trillium
Therapeutics
Inc.
amended
and
restated
as
of
May
27,
2014
(incorporated
by
reference
to
Exhibit
1.7
to
the
Registration
Statement
on
Form
20-F
of
Trillium
Therapeutics
Inc.,
filed
on
August
12,
2014
(File
No.
1-36596)).
Articles
of
Amendment
dated
November
14,
2014
(incorporated
by
reference
to
Exhibit
1.8
to
Amendment
No.
2
to
the
Registration
Statement
on
Form
20-F
of
Trillium
Therapeutics
Inc.,
filed
on
November
26,
2014
(File
No.
1-36596)).
Articles
of
Amalgamation
dated
January
1,
2017
(incorporated
by
reference
to
Exhibit
99.1
to
the
Report
on
6-K
of
Trillium
Therapeutics
Inc.,
furnished
on
January
6,
2017
(File
No.
1-36596)).
Amended
and
restated
License
Agreement
between
Trillium
Therapeutics
Inc.
(private),
the
University
Health
Network
and
The
Hospital
for
Sick
Children
effective
February
1,
2010
and
amended
June
1,
2012
(incorporated
by
reference
to
Exhibit
4.1
to
the
Registration
Statement
on
Form
20-
F
of
Trillium
Therapeutics
Inc.,
filed
on
August
12,
2014
(File
No.
1-36596)).
GPEx
-Derived
Cell
Line
Sale
Agreement
between
Trillium
Therapeutics
Inc.
and
Catalent
Pharma
Solutions,
LLC
dated
August
12,
2014
for
TTI-
621
(incorporated
by
reference
to
Exhibit
4.3
to
Amendment
No.
1
to
the
Registration
Statement
on
Form
20-F
of
Trillium
Therapeutics
Inc.,
filed
on
October
3,
2014
(File
No.
1-36596)).
GPEx
-Derived
Cell
Line
Sale
Agreement
between
Trillium
Therapeutics
Inc.
and
Catalent
Pharma
Solutions,
LLC
dated
August
12,
2014
for
TTI-
622
(incorporated
by
reference
to
Exhibit
4.4
to
Amendment
No.
1
to
the
Registration
Statement
on
Form
20-F
of
Trillium
Therapeutics
Inc.,
filed
on
October
3,
2014
(File
No.
1-36596)).
2014
Stock
Option
Plan
amended
and
restated
as
of
May
27,
2014
(incorporated
by
reference
to
Exhibit
4.5
to
the
Registration
Statement
on
Form
20-F
of
Trillium
Therapeutics
Inc.,
filed
on
August
12,
2014
(File
No.
1-36596)).
2016
Stock
Option
Plan
amended
and
restated
as
of
March
22,
2016
(incorporated
by
reference
to
Exhibit
99.1
to
the
Report
on
6-K
of
Trillium
Therapeutics
Inc.,
furnished
on
April
21,
2016
(File
No.
1-36596)).
2014
Equity
Deferred
Share
Unit
Plan
amended
and
restated
as
of
May
27,
2014
and
terminated
on
March
9,
2017
(incorporated
by
reference
to
Exhibit
4.6
to
the
Registration
Statement
on
Form
20-F
of
Trillium
Therapeutics
Inc.,
filed
on
August
12,
2014
(File
No.
1-36596)).
2016
Cash-Settled
Deferred
Share
Unit
Plan
dated
November
9,
2016
Warrant
Indenture
between
Stem
Cell
Therapeutics
Corp.
and
Computershare
Trust
Company
of
Canada
dated
March
15,
2013
(incorporated
by
reference
to
Exhibit
4.7
to
the
Registration
Statement
on
Form
20-F
of
Trillium
Therapeutics
Inc.,
filed
on
August
12,
2014
(File
No.
1-36596)).
Warrant
Indenture
between
Stem
Cell
Therapeutics
Corp.
and
Computershare
Trust
Company
of
Canada
dated
April
8,
2013
(incorporated
by
reference
to
Exhibit
4.8
to
the
Registration
Statement
on
Form
20-F
of
Trillium
Therapeutics
Inc.,
filed
on
August
12,
2014
(File
No.
1-36596)).
Warrant
Indenture
between
Stem
Cell
Therapeutics
Corp.
and
Computershare
Trust
Company
of
Canada
dated
December
13,
2013
(incorporated
by
reference
to
Exhibit
4.9
to
the
Registration
Statement
on
Form
20-F
of
Trillium
Therapeutics
Inc.,
filed
on
August
12,
2014
(File
No.
1-36596)).
Share
purchase
agreement
among
Trillium
Therapeutics
Inc.,
Fluorinov
and
Fluorinov
shareholders
dated
January
26,
2016
(incorporated
by
reference
to
Exhibit
99.1
to
the
Report
on
6-K
of
Trillium
Therapeutics
Inc.,
furnished
on
February
5,
2017
(File
No.
1-36596)).
Royalty
agreement
among
the
Trillium
Therapeutics
Inc.,
Fluorinov
and
Fluorinov
shareholders
dated
January
26,
2016
(incorporated
by
reference
to
Exhibit
99.2
to
the
Report
on
6-K
of
Trillium
Therapeutics
Inc.,
furnished
on
February
5,
2017
(File
No.
1-36596)).
12.1
12,2
13.1
13.2
15.1
15.2
Certification
of
President
&
Chief
Executive
Officer
pursuant
to
Rule
13a-14(a)
or
15d-14
of
the
Securities
Exchange
Act
of
1934
Certification
of
Chief
Financial
Officer
pursuant
to
Rule
13a-14(a)
or
15d-14
of
the
Securities
Exchange
Act
of
1934
Certification
of
Chief
Executive
Officer
pursuant
to
18
U.S.C.
Section
1350
Certification
of
Chief
Financial
Officer
pursuant
to
18
U.S.C.
Section
1350
Consent
of
Ernst
&
Young
LLP
Charter
of
the
Audit
Committee
of
the
Board
of
Directors
dated
March
9,
2017
*
Confidential
treatment
granted
as
to
portions
of
this
exhibit.
91
The
registrant
hereby
certifies
that
it
meets
all
of
the
requirements
for
filing
on
Form
20-F
and
that
it
has
duly
caused
and
authorized
the
undersigned
to
sign
this
annual
report
on
its
behalf
on
March
10,
2017.
SIGNATURES
TRILLIUM
THERAPEUTICS
INC.
/s/
Niclas
Stiernholm
Niclas
Stiernholm
President
&
Chief
Executive
Officer
92
INDEX TO THE FINANCIAL STATEMENTS
Trillium Therapeutics Inc.
For the years ended December 31, 2016 and 2015
Report
of
Independent
Registered
Public
Accounting
Firm
Consolidated
Statements
of
Financial
Position
Consolidated
Statements
of
Loss
and
Comprehensive
Loss
Consolidated
Statements
of
Changes
in
Equity
Consolidated
Statements
of
Cash
Flows
Notes
to
the
Consolidated
Financial
Statements
F-1
F-2
F-3
F-4
F-5
F-6
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2016 AND 2015
2488
Dunwin
Drive
Mississauga,
Ontario
L5L
1J9
www.trilliumtherapeutics.com
INDEPENDENT AUDITORS’ REPORT OF REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Shareholders
of
Trillium Therapeutics Inc.
We
have
audited
the
accompanying
consolidated
financial
statements
of
Trillium Therapeutics Inc .
which
comprise
the
consolidated
statements
of
financial
position
as
at
December
31,
2016
and
2015,
and
the
consolidated
statements
of
loss
and
comprehensive
loss,
changes
in
equity
and
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,
as
issued
by
the
International
Accounting
Standards
Board,
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.
Auditors’ 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
and
the
standards
of
the
Public
Company
Accounting
Oversight
Board
(United
States).
Those
standards
require
that
we
comply
with
ethical
requirements
and
plan
and
perform
the
audits
to
obtain
reasonable
assurance
about
whether
the
consolidated
financial
statements
are
free
from
material
misstatement.
We
were
not
engaged
to
perform
an
audit
of
the
Company’s
internal
control
over
financial
reporting.
Our
audits
included
consideration
of
internal
control
over
financial
reporting
as
a
basis
for
designing
audit
procedures
that
are
appropriate
in
the
circumstances,
but
not
for
the
purpose
of
expressing
an
opinion
on
the
effectiveness
of
the
Company’s
internal
control
over
financial
reporting.
Accordingly,
we
express
no
such
opinion.
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
auditors’
judgment,
including
the
assessment
of
the
risks
of
material
misstatement
of
the
consolidated
financial
statements,
whether
due
to
fraud
or
error.
An
audit
also
includes,
on
a
test
basis,
evidence
supporting
the
amounts
and
disclosures
in
the
consolidated
financial
statements,
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
Trillium Therapeutics Inc. as
at
December
31,
2016
and
2015,
and
its
financial
performance
and
its
cash
flows
for
the
years
then
ended
in
accordance
with
International
Financial
Reporting
Standards,
as
issued
by
the
International
Accounting
Standards
Board.
Toronto,
Canada
March
9,
2017
F-1
/s/
Ernst
&
Young
LLP
Chartered
Professional
Accountants
Licensed
Public
Accountants
TRILLIUM THERAPEUTICS INC.
Consolidated Statements of Financial Position
Amounts
in
Canadian
Dollars
ASSETS
Current
Cash
and
cash
equivalents
Amounts
receivable
Prepaid
expenses
Total current assets
Property
and
equipment
Intangible
assets
Other
assets
Total non-current assets
Total assets
LIABILITIES
Current
Accounts
payable
and
accrued
liabilities
Other
current
liabilities
Total current liabilities
Loan
payable
Deferred
lease
inducement
Other
liabilities
Total non-current liabilities
Total liabilities
EQUITY
Common
shares
Series
I
preferred
shares
Series
II
preferred
shares
Warrants
Contributed
surplus
Deficit
Total equity
Total liabilities and equity
Commitments
and
contingencies
[note 15]
Approved
by
the
Board
and
authorized
for
issue
on
March
9,
2017:
Note
As at
December 31, 2016
$
As
at
December
31,
2015
$
5
6
4,7
8
9
9
9
9
10
10
10
10
50,472,971
526,530
402,650
86,770,542
974,822
1,181,481
51,402,151
88,926,845
3,260,013
11,849,596
110,931
897,390
93,585
121,648
15,220,540
1,112,623
66,622,691
90,039,468
5,512,941
402,687
3,233,749
323,151
5,915,628
3,556,900
190,573
437,711
1,959,260
2,587,544
270,386
348,205
60,109
678,700
8,503,172
4,235,600
103,819,203
7,716,243
24,369,384
6,887,746
12,349,763
(97,022,820)
103,340,072
7,797,773
24,369,384
6,926,019
8,660,355
(65,289,735)
58,119,519
85,803,868
66,622,691
90,039,468
(signed)
Luke
Beshar,
Director
(signed)
Henry
Friesen,
Director
See accompanying notes to the consolidated financial statements
F-2
TRILLIUM THERAPEUTICS INC.
Consolidated Statements of Loss and Comprehensive Loss
Amounts
in
Canadian
Dollars
EXPENSES
Research
and
development
General
and
administrative
Operating
expenses
Finance
income
Finance
costs
Net
foreign
currency
loss
(gain)
Net
finance
costs
(income)
Net loss before income taxes
Current
income
tax
expense
Deferred
income
tax
recovery
Net loss and comprehensive loss for the year
Note
Year ended
December 31, 2016
$
Year
ended
December
31,
2015
$
12
13
14
14
14
11
4
29,788,795
3,932,910
18,050,091
3,184,347
33,721,705
21,234,438
(417,517)
82,406
2,026,791
(488,486)
84,948
(6,106,703)
1,691,680
(6,510,241)
35,413,385
14,724,197
9,374
(3,689,674)
9,502
-
31,733,085
14,733,699
Basic and diluted loss per common share
10(c)
(4.06)
(2.22)
See accompanying notes to the consolidated financial statements
F-3
TRILLIUM THERAPEUTICS INC.
Consolidated Statements of Changes in Equity
Amounts
in
Canadian
Dollars
Balance,
December
31,
2015
Net loss and
comprehensive
loss for the
year
Transactions with
owners
of the
Company,
recognized
directly in
equity
Exercise
of
warrants
Conversion
of
-
-
30,301
397,601
-
-
-
-
preferred
shares
18,746
81,530
(562,388)
(81,530)
Share-based
compensation
-
-
-
-
Total transactions
with
owners of the
Company
Balance, December
49,047
479,131
(562,388)
(81,530)
Common
shares
Series
I
preferred
shares
Number
#
Amount
$
(note
10)
Number
#
Amount
$
(note
10)
Series
II
preferred
shares
Number
#
Amount
$
(note
10)
Warrants
Number
#
Amount
$
(note
10)
Contributed
surplus
$
(note
10)
Deficit
$
Total
$
7,796,137
103,340,072
53,788,579
7,797,773
1,077,605
24,369,384
106,096,356
6,926,019
8,660,355
(65,289,735)
85,803,868
-
-
-
-
-
-
-
-
-
-
-
-
-
(31,733,085)
(31,733,085)
(909,059)
(38,273)
-
-
-
-
-
-
3,689,408
(909,059)
(38,273)
3,689,408
-
-
-
-
359,328
-
3,689,408
4,048,736
31, 2016
7,845,184
103,819,203
53,226,191
7,716,243
1,077,605
24,369,384
105,187,297
6,887,746
12,349,763
(97,022,820)
58,119,519
Common
shares
Series
I
preferred
shares
Number
#
Amount
$
(note
10)
Number
#
Amount
$
(note
10)
Series
II
preferred
shares
Number
#
Amount
$
(note
10)
Warrants
Number
#
Amount
$
(note
10)
Contributed
surplus
$
(note
10)
Deficit
$
Total
$
Balance,
December
31,
2014
Net loss and
comprehensive
loss for the
year
Transactions with
owners
of the
Company,
recognized
directly in
equity
Shares
issued,
net
of
issue
costs
Exercise
of
warrants
Exercise
of
stock
options
Conversion
of
4,427,244
49,505,792
69,504,689
10,076,151
-
-
1,750,754
39,592,240
1,087,603
11,872,467
6,666
91,195
-
-
-
-
-
-
-
-
preferred
shares
523,870
2,278,378
(15,716,110)
(2,278,378)
Share-based
compensation
-
-
-
-
-
-
-
138,724,781
9,283,332
5,995,055
(50,556,036)
24,304,294
-
(14,733,699)
(14,733,699)
-
-
-
-
-
(32,628,425)
(2,357,313)
1,077,605
24,369,384
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(41,200)
-
2,706,500
-
-
-
-
-
63,961,624
9,515,154
49,995
-
2,706,500
Total transactions
with
owners of the
Company
Balance, December
3,368,893
53,834,280
(15,716,110)
(2,278,378)
1,077,605
24,369,384
(32,628,425)
(2,357,313)
2,665,300
-
76,233,273
31, 2015
7,796,137
103,340,072
53,788,579
7,797,773
1,077,605
24,369,384
106,096,356
6,926,019
8,660,355
(65,289,735)
85,803,868
See accompanying notes to the consolidated financial statements
F-4
TRILLIUM THERAPEUTICS INC.
Consolidated Statements of Cash Flows
Amounts
in
Canadian
Dollars
OPERATING ACTIVITIES
Net
loss
for
the
year
Adjustments
for
items
not
affecting
cash
Share-based
compensation
Interest
accretion
Amortization
of
intangible
assets
Depreciation
of
property
and
equipment
Non-cash
change
in
deferred
lease
inducement
Change
in
fair
value
of
contingent
consideration
Deferred
income
tax
recovery
Unrealized
foreign
exchange
loss
(gain)
Changes
in
non-cash
working
capital
balances
Amounts
receivable
Prepaid
expenses
Accounts
payable
and
accrued
liabilities
Other
current
liabilities
Decrease
(increase)
in
other
assets
Cash used in operating activities
INVESTING ACTIVITIES
Purchase
of
property
and
equipment
Acquisition
of
Fluorinov,
net
of
cash
acquired
Cash used in investing activities
FINANCING ACTIVITIES
Repayment
of
loan
payable
Receipt
of
deferred
lease
inducement
Change
in
other
liabilities
Issue
of
share
capital,
net
of
issuance
costs
Cash provided by financing activities
Impact
of
foreign
exchange
rate
on
cash
and
cash
equivalents
Net increase (decrease) in cash and cash equivalents during the year
Cash
and
cash
equivalents,
beginning
of
year
Cash and cash equivalents, end of year
Supplemental cash flow information
Note
Year ended
December 31, 2016
$
Year
ended
December
31,
2015
$
(31,733,085)
(14,733,699)
10
9
7,12
6,12
9
9
4
8
6
4
9
9
10
3,689,408
65,370
3,683,748
603,694
2,581
209,260
(3,689,674)
1,249,207
(25,919,491)
485,178
778,831
1,817,054
(23,230)
10,717
(22,850,941)
(2,966,317)
(9,574,833)
(12,541,150)
(105,446)
89,845
-
359,328
343,727
(1,249,207)
(36,297,571)
2,706,500
73,391
339,348
118,394
105,805
-
-
(6,010,996)
(17,401,257)
(630,406)
(173,256)
(15,235)
43,690
(121,648)
(18,298,112)
(750,382)
-
(750,382)
(68,761)
212,400
(27,428)
73,526,773
73,642,984
6,010,996
60,605,486
86,770,542
26,165,056
50,472,971
86,770,542
Preferred
shares
converted
to
common
shares
(note
10)
81,530
2,278,378
See accompanying notes to the consolidated financial statements
F-5
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2016 and 2015
Amounts
in
Canadian
Dollars
1.
Corporate information
Trillium
Therapeutics
Inc.
(the
“Company”
or
“Trillium”)
is
a
clinical-stage
immuno-oncology
company
developing
innovative
therapies
for
the
treatment
of
cancer.
The
Company
was
incorporated
under
the
laws
of
the
Province
of
Alberta
on
March
31,
2004
with
nominal
share
capital
and
filed
Articles
of
Continuance
to
change
its
jurisdiction
to
Ontario
on
November
7,
2013.
On
June
1,
2014,
the
Company
amalgamated
with
its
wholly
owned
subsidiary
and
changed
its
name
from
Stem
Cell
Therapeutics
Corp.
to
Trillium
Therapeutics
Inc.
The
Company’s
head
office
is
located
at
2488
Dunwin
Drive,
Mississauga,
Ontario,
L5L
1J9,
and
it
is
listed
on
the
Toronto
Stock
Exchange
and
on
the
NASDAQ
Stock
Market.
2.
Basis of presentation
(a)
Statement of compliance
The
consolidated
financial
statements
have
been
prepared
in
accordance
with
International
Financial
Reporting
Standards
(“IFRS”),
as
issued
by
the
International
Accounting
Standards
Board
(“IASB”).
These
consolidated
financial
statements
were
approved
by
the
Company’s
Board
of
Directors
on
March
9,
2017.
(b)
Basis of measurement
These
consolidated
financial
statements
have
been
prepared
on
the
historical
cost
basis,
except
for
held-for-trading
financial
assets
which
are
measured
at
fair
value.
(c)
Functional and presentation currency
These
consolidated
financial
statements
are
presented
in
Canadian
dollars,
which
is
the
Company“s
functional
currency.
(d)
Use of significant estimates and assumptions
The
preparation
of
financial
statements
in
conformity
with
IFRS
requires
management
to
make
judgments,
estimates
and
assumptions
that
affect
the
application
of
accounting
policies
and
the
reported
amounts
of
assets,
liabilities,
revenue
and
expenses,
and
related
disclosures
of
contingent
assets
and
liabilities,
and
the
determination
of
the
Company’s
ability
to
continue
as
a
going
concern.
Actual
results
could
differ
materially
from
these
estimates
and
assumptions.
The
Company
reviews
its
estimates
and
underlying
assumptions
on
an
ongoing
basis.
Revisions
are
recognized
in
the
period
in
which
the
estimates
are
revised
and
may
impact
future
periods.
Management
has
applied
significant
estimates
and
assumptions
to
the
following:
Valuation
of
share-based
compensation
and
warrants
Management
measures
the
costs
for
share-based
compensation
and
warrants
using
market-based
option
valuation
techniques.
Assumptions
are
made
and
estimates
are
used
in
applying
the
valuation
techniques.
These
include
estimating
the
future
volatility
of
the
share
price,
expected
dividend
yield,
expected
risk-free
interest
rate,
future
employee
turnover
rates,
future
exercise
behaviours
and
corporate
performance.
Such
estimates
and
assumptions
are
inherently
uncertain.
Changes
in
these
assumptions
affect
the
fair
value
estimates
of
share-based
compensation
and
warrants.
Impairment
of
long-lived
assets
Long-lived
assets
are
reviewed
for
impairment
upon
the
occurrence
of
events
or
changes
in
circumstances
indicating
that
the
carrying
value
of
the
asset
may
not
be
recoverable.
For
the
purpose
of
measuring
recoverable
amounts,
assets
are
grouped
at
the
lowest
levels
for
which
there
are
separately
identifiable
cash
flows
(cash-generating
units).
The
recoverable
amount
is
the
higher
of
an
asset’s
fair
value
less
costs
to
sell
and
value
in
use
(being
the
present
value
of
the
expected
future
cash
flows
of
the
relevant
asset
or
cash-generating
unit).
An
impairment
loss
is
recognized
for
the
amount
by
which
the
asset’s
carrying
amount
exceeds
its
recoverable
amount.
Management
evaluates
impairment
losses
for
potential
reversals
when
events
or
circumstances
warrant
such
consideration.
F-6
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2016 and 2015
Amounts
in
Canadian
Dollars
2.
Basis of presentation (continued)
Intangible
assets
The
Company
estimates
the
useful
lives
of
intangible
assets
from
the
date
they
are
available
for
use
in
the
manner
intended
by
management
and
periodically
reviews
the
useful
lives
to
reflect
management’s
intent
about
developing
and
commercializing
the
assets.
The
Company
is
amortizing
the
intangible
assets
acquired
on
the
acquisition
of
Fluorinov
Pharma
Inc.
(“Fluorinov”)
over
four
years.
Valuation
of
contingent
obligations
The
fair
value
of
contingent
consideration
on
the
acquisition
of
Fluorinov
was
calculated
using
a
discounted
cash
flow
approach,
where
a
risk-adjusted
discount
rate
was
applied
to
future
cash
flows.
The
discount
rates
used
require
significant
estimates
of
probabilities
of
future
preclinical
and
clinical
success
that
are
inherently
uncertain.
The
estimate
of
the
potential
timing
of
future
events
is
also
uncertain.
Changes
in
these
estimates
affect
the
fair
value
estimates
of
other
liabilities.
Functional
currency
Management
considers
the
determination
of
the
functional
currency
of
the
Company
a
significant
judgment.
Management
has
used
its
judgment
to
determine
the
functional
currency
that
most
faithfully
represents
the
economic
effects
of
the
underlying
transactions,
events
and
conditions
and
considered
various
factors
including
the
currency
of
historical
and
future
expenditures
and
the
currency
in
which
funds
from
financing
activities
are
generated.
A
Company’s
functional
currency
is
only
changed
when
there
is
a
material
change
in
the
underlying
transactions,
events
and
conditions.
3.
Significant accounting policies
The
accounting
policies
set
out
below
have
been
applied
consistently
to
all
periods
presented
in
these
consolidated
financial
statements.
(a)
Basis of consolidation
These
consolidated
financial
statements
include
the
accounts
of
the
Company
and
its
wholly
owned
subsidiaries:
Fluorinov
from
the
date
of
its
acquisition
on
January
26,
2016,
and
Trillium
Therapeutics
USA
Inc.
from
its
date
of
incorporation
on
March
26,
2015.
Subsidiaries
are
fully
consolidated
from
the
date
at
which
control
is
determined
to
have
occurred
and
are
deconsolidated
from
the
date
that
the
Company
no
longer
controls
the
entity.
The
financial
statements
of
the
subsidiaries
are
prepared
for
the
same
reporting
period
as
the
Company
using
consistent
accounting
policies.
Intercompany
transactions,
balances
and
gains
and
losses
on
transactions
between
subsidiaries
are
eliminated.
(b)
Foreign currency
Transactions
in
foreign
currencies
are
translated
to
the
functional
currency
at
the
rate
on
the
date
of
the
transactions.
Monetary
assets
and
liabilities
denominated
in
foreign
currencies
are
retranslated
at
the
spot
rate
of
exchange
as
at
the
reporting
date.
All
differences
are
taken
to
profit
or
loss.
Non-
monetary
items
that
are
measured
in
terms
of
historical
cost
in
a
foreign
currency
are
translated
using
the
exchange
rate
as
at
the
date
of
the
initial
transaction.
Non-monetary
items
measured
at
fair
value
in
a
foreign
currency
are
translated
using
the
exchange
rate
at
the
date
when
the
fair
value
was
determined.
F-7
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2016 and 2015
Amounts
in
Canadian
Dollars
3.
(c)
Significant accounting policies (continued)
Financial instruments
Financial assets
A
financial
asset
is
classified
as
fair
value
through
profit
or
loss
if
it
is
held
for
trading
or
is
designated
as
such
upon
initial
recognition.
Attributable
transaction
costs
are
recognized
in
profit
or
loss
as
incurred.
Financial
assets
at
fair
value
through
profit
or
loss
are
measured
at
fair
value
and
changes
therein
are
recognized
in
profit
or
loss.
Cash and cash equivalents
Cash
equivalents
include
guaranteed
investment
certificates
(as
at
December
31,
2016
and
2015
of
$21,528,539
and
nil,
respectively)
with
a
maturity
of
90
days
or
less.
The
Company
has
classified
its
cash
and
cash
equivalents
as
fair
value
through
profit
or
loss.
Loans and receivables
Loans
and
receivables
are
non-derivative
financial
assets
with
fixed
or
determinable
payments
that
are
not
quoted
in
an
active
market.
Loans
and
receivables
are
initially
recognized
at
fair
value
plus
transaction
costs
and
subsequently
measured
at
amortized
cost
using
the
effective
interest
rate
method
less
any
impairment
losses.
The
Company
has
classified
its
amounts
receivable
as
loans
and
receivables.
Derecognition
A
financial
asset
is
derecognized
when
the
rights
to
receive
cash
flows
from
the
asset
have
expired
or
when
the
Company
has
transferred
its
rights
to
receive
cash
flows
from
the
asset.
Financial liabilities
Financial
liabilities
are
recognized
initially
at
fair
value
plus
any
directly
attributable
transaction
costs,
and
subsequently
at
amortized
cost
using
the
effective
interest
rate
method.
The
Company
has
classified
its
accounts
payable
and
accrued
liabilities,
and
loan
payable
as
financial
liabilities.
Derecognition
A
financial
liability
is
derecognized
when
its
contractual
obligations
are
discharged,
cancelled
or
expired.
Equity
Common
shares,
preferred
shares
and
warrants
to
purchase
common
shares
are
classified
as
equity.
Incremental
costs
directly
attributable
to
the
issue
of
common
shares,
preferred
shares
and
warrants
are
recognized
as
a
deduction
from
equity,
net
of
any
tax
effects.
(d)
Property and equipment
Recognition and measurement
Items
of
property
and
equipment
are
measured
at
cost
less
accumulated
depreciation
and
accumulated
impairment
losses.
Cost
includes
the
expenditure
that
is
directly
attributable
to
the
acquisition
of
the
asset.
When
parts
of
an
item
of
property
and
equipment
have
different
useful
lives,
they
are
accounted
for
as
separate
items
of
property
and
equipment.
Gains
and
losses
on
disposal
of
an
item
of
property
and
equipment
are
determined
by
comparing
the
proceeds
from
disposal
with
the
carrying
amount
of
property
and
equipment,
and
are
recognized
in
profit
or
loss.
F-8
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2016 and 2015
Amounts
in
Canadian
Dollars
3.
Significant accounting policies (continued)
Depreciation
The
estimated
useful
lives
and
the
methods
of
depreciation
are
as
follows:
Asset
Lab
equipment
Computer
equipment
Office
equipment
Leaseholds
Basis
20%
declining
balance
30%
declining
balance
20%
declining
balance
Straight-line
over
expected
lease
term
Estimates
for
depreciation
methods,
useful
lives
and
residual
values
are
reviewed
at
each
reporting
period-end
and
adjusted
if
appropriate.
Depreciation
expense
is
recognized
in
research
and
development
expenses.
(e)
Intangible assets
Research and development
Expenditures
on
research
activities,
undertaken
with
the
prospect
of
gaining
new
scientific
or
technical
knowledge
and
understanding,
are
recognized
in
profit
or
loss
as
incurred.
Development
activities
involve
a
plan
or
design
for
the
production
of
new
or
substantially
improved
products
and
processes.
Development
expenditures
are
capitalized
only
if
development
costs
can
be
measured
reliably,
the
product
or
process
is
technically
and
commercially
feasible,
future
economic
benefits
are
probable,
and
the
Company
intends
to
complete
development
and
has
sufficient
resources
to
complete
development
and
to
use
or
sell
the
asset.
Other
development
expenditures
are
expensed
as
incurred.
No
internal
development
costs
have
been
capitalized
to
date.
Research
and
development
expenses
include
all
direct
and
indirect
operating
expenses
supporting
the
products
in
development.
The
costs
incurred
in
establishing
and
maintaining
patents
are
expensed
as
incurred.
Intangible assets
Intangible
assets
that
are
acquired
separately
and
have
finite
useful
lives
are
measured
at
cost
less
accumulated
amortization
and
accumulated
impairment
losses.
Subsequent
expenditures
are
capitalized
only
when
they
increase
the
future
economic
benefits
embodied
in
the
specific
asset
to
which
it
relates.
All
other
expenditures
are
recognized
in
profit
or
loss
as
incurred.
Amortization
is
recognized
in
profit
or
loss
on
a
straight-line
basis
over
the
estimated
useful
lives
of
intangible
assets
from
the
date
they
are
available
for
use
in
the
manner
intended
by
management.
The
amortization
method
and
amortization
period
of
an
intangible
asset
with
a
finite
life
is
reviewed
at
least
annually.
Changes
in
the
expected
useful
life
or
the
expected
pattern
of
consumption
of
future
economic
benefits
embodied
in
the
asset
are
accounted
for
by
changing
the
amortization
period
or
method,
as
appropriate,
and
are
treated
as
changes
in
accounting
estimates.
The
amortization
expense
on
intangible
assets
with
finite
lives
is
recognized
in
research
and
development
expenses.
F-9
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2016 and 2015
Amounts
in
Canadian
Dollars
3.
(f)
Significant accounting policies (continued)
Impairment
Financial assets
A
financial
asset
not
carried
as
fair
value
through
profit
or
loss
is
assessed
at
each
reporting
date
to
determine
whether
there
is
objective
evidence
that
it
is
impaired.
A
financial
asset
is
impaired
if
objective
evidence
indicates
that
a
loss
event
has
occurred
after
the
initial
recognition
of
the
asset,
and
that
the
loss
event
had
a
negative
effect
on
the
estimated
future
cash
flows
of
that
asset
that
can
be
estimated
reliably.
An
impairment
test
is
performed,
on
an
individual
basis,
for
each
material
financial
asset.
Other
individually
non-material
financial
assets
are
tested
as
groups
of
financial
assets
with
similar
risk
characteristics.
Impairment
losses
are
recognized
in
profit
or
loss.
An
impairment
loss
in
respect
of
a
financial
asset
measured
at
amortized
cost
is
calculated
as
the
difference
between
its
carrying
amount
and
the
present
value
of
the
estimated
future
cash
flows
discounted
at
the
asset“s
original
effective
interest
rate.
Losses
are
recognized
in
profit
or
loss
and
reflected
in
an
allowance
account
against
the
respective
financial
asset.
Interest
on
the
impaired
asset
continues
to
be
recognized
through
the
unwinding
of
the
discount.
When
a
subsequent
event
causes
the
amount
of
impairment
loss
to
decrease,
the
decrease
in
impairment
loss
is
reversed
through
profit
or
loss.
Non-financial assets
The
carrying
amounts
of
the
Company“s
non-financial
assets
are
reviewed
at
each
reporting
date
to
determine
whether
there
is
any
indication
of
impairment.
If
such
an
indication
exists,
the
recoverable
amount
is
estimated.
The
recoverable
amount
of
an
asset
or
a
cash-generating
unit
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
or
cash-generating
unit.
For
the
purpose
of
impairment
testing,
assets
that
cannot
be
tested
individually
are
grouped
together
into
the
smallest
group
of
assets
that
generate
cash
inflows
from
continuing
use
that
are
largely
independent
of
cash
inflows
of
other
assets
or
cash-generating
units.
An
impairment
loss
is
recognized
if
the
carrying
amount
of
an
asset
or
its
related
cash-generating
unit
exceeds
its
estimated
recoverable
amount.
Impairment
losses
for
intangible
assets
are
recognized
in
research
and
development
expenses.
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.
(g)
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
assessed
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
on
provisions
is
recognized
in
finance
costs.
A
provision
for
onerous
contracts
is
recognized
when
the
unavoidable
costs
of
meeting
the
obligations
under
the
contract
exceed
the
economic
benefits
expected
to
be
received
under
it.
The
provision
is
measured
at
the
present
value
of
the
lower
of
the
expected
cost
of
terminating
the
contract
and
the
expected
net
cost
of
continuing
with
the
contract.
(h)
Government assistance
Government
assistance
relating
to
research
and
development
is
recorded
as
a
reduction
of
expenses
when
the
related
expenditures
are
incurred.
F-10
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2016 and 2015
Amounts
in
Canadian
Dollars
3.
(i)
Significant accounting policies (continued)
Share-based compensation
The
grant-date
fair
value
of
share-based
payment
awards
granted
to
employees
is
recognized
as
personnel
costs,
with
a
corresponding
increase
in
contributed
surplus,
over
the
period
that
the
employees
unconditionally
become
entitled
to
the
awards.
The
amount
recognized
as
an
expense
is
adjusted
to
reflect
the
number
of
awards
for
which
the
related
service
and
non-market
vesting
conditions
are
expected
to
be
met,
such
that
the
amount
ultimately
recognized
as
an
expense
is
based
on
the
number
of
awards
that
met
the
related
service
and
non-market
performance
conditions
at
the
vesting
date.
For
equity-settled
share-based
payment
transactions,
the
Company
measures
the
goods
or
services
received,
and
the
corresponding
increase
in
contributed
surplus,
directly,
at
the
fair
value
of
the
goods
or
services
received,
unless
that
fair
value
cannot
be
estimated
reliably.
If
the
Company
cannot
estimate
reliably
the
fair
value
of
the
goods
or
services
received,
it
measures
their
value
by
reference
to
the
fair
value
of
the
equity
instruments
granted.
Transactions
measured
by
reference
to
the
fair
value
of
the
equity
instruments
granted
have
their
fair
values
remeasured
at
each
vesting
and
reporting
date
until
fully
vested.
(j)
Income taxes
Deferred
tax
is
recognized
in
respect
of
temporary
differences
between
the
carrying
amounts
of
assets
and
liabilities
for
financial
reporting
purposes
and
the
amounts
used
for
taxation
purposes.
Deferred
tax
is
not
recognized
for
temporary
differences
on
the
initial
recognition
of
assets
or
liabilities
in
a
transaction
that
is
not
a
business
combination
and
that
affects
neither
accounting
nor
taxable
income
nor
loss.
Deferred
tax
assets
and
liabilities
are
offset
if
there
is
a
legally
enforceable
right
to
offset
current
tax
assets
and
liabilities,
and
they
relate
to
income
taxes
levied
by
the
same
tax
authority
on
the
same
taxable
entity.
Deferred
tax
is
measured
at
the
tax
rates
that
are
expected
to
be
applied
to
temporary
differences
when
they
reverse,
based
on
the
laws
that
have
been
enacted
or
substantively
enacted
at
the
reporting
date.
A
deferred
tax
asset
is
recognized
for
unused
tax
losses,
tax
credits
and
deductible
temporary
differences,
to
the
extent
that
it
is
probable
that
future
taxable
profits
will
be
available
against
which
they
can
be
utilized.
Investment
tax
credits
earned
from
scientific
research
and
development
expenditures
are
recorded
when
collectability
is
reasonably
assured.
(k)
Loss per share
Basic
loss
per
share
is
computed
by
dividing
the
net
loss
available
to
common
shareholders
by
the
weighted
average
number
of
shares
outstanding
during
the
reporting
period.
Diluted
loss
per
share
is
computed
similar
to
basic
loss
per
share
except
that
the
weighted
average
number
of
shares
outstanding
are
increased
to
include
additional
shares
for
the
assumed
exercise
of
stock
options,
deferred
share
units,
warrants,
and
conversion
of
preferred
shares,
if
dilutive.
The
number
of
additional
shares
is
calculated
by
assuming
that
outstanding
preferred
shares
would
convert
to
common
shares
and
that
outstanding
stock
options
and
warrants
were
exercised
and
that
the
proceeds
from
such
exercises
were
used
to
acquire
common
stock
at
the
average
market
price
during
the
reporting
period.
The
inclusion
of
the
Company“s
stock
options,
deferred
share
units,
warrants
and
preferred
shares
in
the
computation
of
diluted
loss
per
share
has
an
antidilutive
effect
on
the
loss
per
share
and
have
therefore
been
excluded
from
the
calculation
of
diluted
loss
per
share.
(l)
Business combinations
Business
combinations
are
accounted
for
using
the
acquisition
method.
The
cost
of
an
acquisition
is
measured
as
the
aggregate
of
the
consideration
transferred
measured
at
the
acquisition
date
fair
value.
Acquisition
costs
incurred
are
expensed
and
included
in
general
and
administrative
expenses
in
the
consolidated
statements
of
loss.
When
the
Company
acquires
a
business,
it
assesses
the
assets
acquired
and
liabilities
assumed
for
appropriate
classification
and
designation
in
accordance
with
the
contractual
terms,
economic
circumstances
and
pertinent
conditions
at
the
acquisition
date.
Any
contingent
consideration
to
be
transferred
by
the
acquirer
will
be
recognized
at
fair
value
at
the
acquisition
date.
Subsequent
changes
to
the
fair
value
of
the
contingent
consideration
that
is
deemed
to
be
an
asset
or
liability
will
be
recognized
in
accordance
with
IAS
39
Financial Instruments: Recognition and Measurement
,
in
the
consolidated
statements
of
loss.
F-11
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2016 and 2015
Amounts
in
Canadian
Dollars
3.
Significant accounting policies (continued)
Goodwill
is
initially
measured
at
cost,
being
the
excess
of
the
aggregate
of
the
consideration
transferred
and
the
amount
recognized
for
non-controlling
interests,
and
any
previous
interest
held,
over
the
net
identifiable
assets
acquired
and
liabilities
assumed.
If
the
fair
value
of
the
net
assets
acquired
is
in
excess
of
the
aggregate
consideration
transferred,
the
Company
re-assesses
whether
it
has
correctly
identified
all
of
the
assets
acquired
and
all
of
the
liabilities
assumed
and
reviews
the
procedures
used
to
measure
the
amounts
to
be
recognized
at
the
acquisition
date.
If
the
reassessment
still
results
in
an
excess
of
the
fair
value
of
net
assets
acquired
over
the
aggregate
consideration
transferred,
then
the
gain
is
recognized
in
the
consolidated
statements
of
income
(loss).
(m)
New standards and interpretations not yet effective
IAS
7
Statement of Cash Flows
In
February
2016,
the
IASB
issued
amendments
to
IAS
7
Statement of Cash Flows (“IAS
7”)
which
requires
entities
to
provide
disclosures
that
enable
investors
to
evaluate
changes
in
liabilities
arising
from
financing
activities,
including
changes
arising
from
cash
flows
and
non-cash
changes.
The
IAS
7
amendments
are
effective
for
annual
periods
beginning
on
or
after
January
1,
2017.
The
Company
does
not
expect
the
adoption
of
this
amendment
to
have
a
material
impact
on
its
consolidated
financial
statements.
IFRS
9
Financial Instruments
In
October
2010,
the
IASB
published
amendments
to
IFRS
9
Financial Instruments (“IFRS
9”)
which
provides
added
guidance
on
the
classification
and
measurement
of
financial
liabilities.
In
July
2014,
the
IASB
issued
its
final
version
of
IFRS
9,
which
completes
the
classification
and
measurement,
impairment
and
hedge
accounting
phases
of
the
IASB’s
project
to
replace
IAS
39
Financial Instruments: Recognition and Measurement .
The
final
standard
is
mandatorily
effective
for
annual
periods
beginning
on
or
after
January
1,
2018,
with
earlier
application
permitted.
The
Company
is
reviewing
the
standard
to
determine
the
impact
that
the
adoption
of
this
standard
may
have
on
its
consolidated
financial
statements.
IFRS
15
Revenue from Contracts with Customers
In
May
2014,
the
IASB
issued
IFRS
15
Revenue from Contracts with Customers (“IFRS
15”)
which
covers
principles
for
reporting
about
the
nature,
amount,
timing
and
uncertainty
of
revenue
and
cash
flows
arising
from
contracts
with
customers.
IFRS
15
is
effective
for
annual
periods
beginning
on
or
after
January
1,
2018.
Entities
will
transition
following
either
a
full
or
modified
retrospective
approach.
The
Company
believes
that
the
adoption
of
this
standard
will
not
have
a
material
impact
on
the
consolidated
financial
statements.
IFRS
16
Leases
In
January
2016,
the
IASB
has
issued
IFRS
16
Leases (“IFRS
16”)
which
requires
lessees
to
recognize
assets
and
liabilities
for
most
leases
on
their
balance
sheets.
Lessees
applying
IFRS
16
will
have
a
single
accounting
model
for
all
leases,
with
certain
exemptions.
The
new
standard
will
be
effective
for
annual
periods
beginning
on
or
after
January
1,
2019
with
limited
early
application
permitted.
The
Company
has
not
yet
begun
the
process
of
evaluating
the
impact
of
this
standard
on
its
consolidated
financial
statements.
Other
accounting
standards
or
amendments
to
existing
accounting
standards
that
have
been
issued,
but
have
future
effective
dates,
are
either
not
applicable
or
are
not
expected
to
have
a
significant
impact
on
the
Company’s
consolidated
financial
statements.
The
Company
assesses
the
impact
of
adoption
of
future
standards
on
its
consolidated
financial
statements,
but
does
not
anticipate
significant
changes
in
2017.
F-12
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2016 and 2015
Amounts
in
Canadian
Dollars
4.
Acquisition of Fluorinov
On
January
26,
2016,
Trillium
purchased
all
the
issued
and
outstanding
shares
of
Fluorinov,
a
private
oncology
company,
to
access
its
proprietary
medicinal
chemistry
platform.
The
acquisition
date
fair
value
of
consideration
transferred
and
the
fair
value
of
identifiable
assets
acquired
and
liabilities
assumed
are
as
follows:
Fair
value
of
consideration
paid:
Cash
Working
capital
deficiency
Contingent
consideration
Assets
acquired:
Cash
Amount
due
from
Fluorinov
shareholders
Acquired
technology
Liabilities
assumed:
Accounts
payable
and
accrued
liabilities
Deferred
tax
liabilities
Net
identifiable
assets
acquired
$
10,000,000
(134,089)
1,750,000
11,615,911
291,078
36,886
15,439,759
15,767,723
462,138
3,689,674
4,151,812
11,615,911
The
upfront
consideration
for
Fluorinov
was
$10,000,000
less
the
working
capital
deficiency
of
$134,089.
The
Company
may
also
incur
up
to
$35
million
of
future
payments
contingent
on
Trillium
achieving
certain
clinical
and
regulatory
milestones
with
an
existing
Fluorinov
compound.
The
amount
of
contingent
consideration
recognized
by
the
Company
as
of
the
acquisition
date
was
$1,750,000
and
has
been
classified
as
other
liabilities
on
the
consolidated
statement
of
financial
position.
The
fair
value
of
the
contingent
consideration
was
calculated
using
a
discounted
cash
flow
approach,
where
a
risk-adjusted
discount
rate
was
applied
to
future
cash
flows.
Trillium
also
has
an
obligation
to
pay
royalty
payments
on
future
sales
of
such
compounds.
At
Trillium’s
discretion,
up
to
50%
of
the
future
contingent
payments
can
be
satisfied
through
the
issuance
of
common
shares
of
Trillium
provided
that
the
aggregate
number
of
common
shares
issuable
under
such
payments
will
not
exceed
1,558,447
common
shares
unless
shareholder
approval
has
first
been
obtained.
In
addition,
any
such
future
share
issuance
remains
subject
to
final
approval
from
Trillium’s
board
of
directors
and
receipt
of
any
requisite
approvals
under
the
applicable
rules
of
the
Toronto
Stock
Exchange
and
the
NASDAQ
Stock
Market.
Trillium
has
also
committed
to
use
commercially
reasonable
efforts
to
monetize
Fluorinov’s
central
nervous
system
assets
and
share
50%
of
the
net
proceeds
with
Fluorinov
shareholders.
Cash
used
in
the
acquisition
was
determined
as
follows:
Cash
consideration
Less
cash
acquired
F-13
$
9,865,911
291,078
9,574,833
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2016 and 2015
Amounts
in
Canadian
Dollars
4.
Acquisition of Fluorinov (continued)
Acquisition
costs
incurred
by
the
Company
and
included
in
general
and
administrative
expenses
for
the
years
ended
December
31,
2016
and
2015,
were
$106,887
and
$174,671,
respectively.
From
the
date
of
the
acquisition
to
December
31,
2016,
Fluorinov
contributed
revenue
of
nil
and
a
loss
of
$7,334,368.
If
the
acquisition
had
occurred
on
January
1,
2016,
the
combined
loss
for
the
Company
for
the
year
ended
December
31,
2016,
would
be
$31,789,540.
In
connection
with
the
acquisition,
the
Company
established
deferred
tax
liabilities
related
to
the
acquired
identifiable
intangible
assets
and
determined
that
these
deferred
tax
liabilities
exceeded
the
acquired
deferred
tax
assets.
This
allowed
the
Company
to
realize
a
deferred
tax
benefit
of
$3,689,674
by
releasing
the
valuation
allowance
associated
with
the
Company’s
overall
deferred
tax
assets.
The
acquisition
of
Fluorinov
was
considered
a
related
party
transaction
as
two
Company
directors
were
determined
to
be
related
parties
of
Fluorinov.
One
Company
director
was
a
director
of
Fluorinov
and
had
an
ownership
position
in
Fluorinov
at
the
time
of
acquisition
of
less
than
2%,
and
the
second
director
was
a
director
of
an
entity
that
was
a
beneficiary
of
a
trust
that
was
a
shareholder
and
debenture
holder
of
Fluorinov.
The
two
directors
declared
their
conflict
of
interest
and
abstained
from
all
discussions
and
decisions
concerning
the
Fluorinov
acquisition.
Accordingly,
the
Company
determined
that
the
consideration
paid
on
the
acquisition
was
made
on
terms
equivalent
to
those
that
prevail
in
arm’s-length
transactions.
5.
Amounts receivable
Government
receivable
Other
amounts
receivable
December 31,
2016
$
December
31,
2015
$
502,515
24,015
526,530
957,951
16,871
974,822
F-14
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2016 and 2015
Amounts
in
Canadian
Dollars
6.
Property and equipment
Cost
Balance,
December
31,
2014
Additions
Balance,
December
31,
2015
Additions
Disposals
Balance,
December
31,
2016
Accumulated depreciation
Balance,
December
31,
2014
Depreciation
Balance,
December
31,
2015
Depreciation
Disposals
Balance
December
31,
2016
Net carrying amounts
December
31,
2015
December
31,
2016
7.
Intangible assets
Cost
Balance,
December
31,
2014
and
2015
Fluorinov
acquisition
(note
4)
Balance,
December
31,
2016
Accumulated amortization
Balance,
December
31,
2014
Amortization
Balance,
December
31,
2015
Amortization
Balance,
December
31,
2016
Net carrying amounts
December
31,
2015
December
31,
2016
Lab
equipment
$
Computer
equipment
$
Office
equipment
and
leaseholds
$
252,076
457,796
709,872
833,585
-
1,543,457
48,089
86,577
134,666
198,400
-
333,066
40,028
57,180
97,208
147,685
-
244,893
23,558
26,679
50,237
47,099
-
97,336
20,016
265,406
285,422
1,985,047
(9,381)
2,261,088
5,071
5,138
10,209
358,195
(9,381)
359,023
Total
$
312,120
780,382
1,092,502
2,966,317
(9,381)
4,049,438
76,718
118,394
195,112
603,694
(9,381)
789,425
575,206
1,210,391
46,971
147,557
275,213
1,902,065
897,390
3,260,013
Total
$
1,018,037
15,439,759
16,457,796
585,104
339,348
924,452
3,683,748
4,608,200
93,585
11,849,596
As
at
December
31,
2015,
intangible
assets
were
comprised
of
licensed
patent
rights
related
to
the
SIRPαFc
program.
F-15
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2016 and 2015
Amounts
in
Canadian
Dollars
8.
Accounts payable and accrued liabilities
Trade
and
other
payables
Accrued
liabilities
Due
to
related
parties
December 31,
2016
$
December
31,
2015
$
1,086,452
3,977,083
449,406
5,512,941
1,401,462
1,728,636
103,651
3,233,749
9.
(a)
(b)
(c)
Amounts
due
to
related
parties
represent
expense
reimbursements,
and
accrued
vacation
and
cash-settled
DSU
units.
Non-current liabilities
Trillium
is
indebted
to
the
Federal
Economic
Development
Agency
for
Southern
Ontario
under
a
non-interest
bearing
contribution
agreement
and
is
making
monthly
repayments
of
$9,586
through
November
2019.
As
at
December
31,
2016
and
2015,
the
balance
repayable
was
$335,489
and
$440,935,
respectively.
The
loan
payable
was
discounted
using
an
estimated
market
interest
rate
of
15%.
Interest
expense
accretes
on
the
discounted
loan
amount
until
it
reaches
its
face
value
at
maturity.
As
at
December
31,
2016
and
2015,
the
Company
has
a
deferred
lease
inducement
of
$437,711
and
$348,205,
respectively,
for
a
facility
lease.
The
inducement
benefit
is
being
recognized
over
the
expected
term
of
the
lease.
As
at
December
31,
2016
and
2015,
the
Company
had
a
long-term
liability
of
$1,959,260
and
nil,
respectively,
related
to
contingent
consideration
on
the
acquisition
of
Fluorinov.
The
remeasurement
of
the
fair
value
of
the
contingent
consideration
recognized
a
reduction
in
the
time
estimate
to
the
potential
milestones
based
on
progress
of
the
research
in
2016.
The
current
portions
of
the
loan
payable,
deferred
lease
inducement
and
other
liabilities
are
included
in
other
current
liabilities
in
the
statements
of
financial
position.
10.
(a)
Share capital
Authorized
The
authorized
share
capital
of
the
Company
consists
of
an
unlimited
number
of
common
shares,
Class
B
shares
and
First
Preferred
Shares,
in
each
case
without
nominal
or
par
value.
Common
shares
are
voting
and
may
receive
dividends
as
declared
at
the
discretion
of
the
board
of
directors.
Class
B
shares
are
non-voting
and
convertible
to
common
shares
at
the
holder’s
discretion,
on
a
one-for-one
basis.
Upon
dissolution
or
wind-up
of
the
Company,
Class
B
shares
participate
rateably
with
the
common
shares
in
the
distribution
of
the
Company’s
assets.
Preferred
shares
have
voting
rights
as
decided
upon
by
the
board
of
directors
at
the
time
of
grant.
Upon
dissolution
or
wind-up
of
the
Company,
First
Preferred
Shares
are
entitled
to
priority
over
common
and
Class
B
shares.
The
Company
has
Series
I
First
Preferred
Shares
that
are
non-voting,
may
receive
dividends
as
declared
at
the
discretion
of
the
board
of
directors,
and
are
convertible
to
common
shares
at
the
holder’s
discretion,
on
the
basis
of
30
Series
I
First
Preferred
Shares
for
one
common
share.
The
Company
has
Series
II
First
Preferred
Shares
that
are
non-voting,
may
receive
dividends
as
declared
at
the
discretion
of
the
board
of
directors,
and
are
convertible
to
common
shares
at
the
holder’s
discretion,
on
the
basis
of
one
Series
II
First
Preferred
Share
for
one
common
share.
F-16
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2016 and 2015
Amounts
in
Canadian
Dollars
10.
Share capital (continued)
Holders
may
not
convert
Series
I
or
Series
II
First
Preferred
Shares
into
common
shares
if,
after
giving
effect
to
the
exercise
of
conversion,
the
holder
would
have
beneficial
ownership
or
direction
or
control
over
common
shares
in
excess
of
4.99%
of
the
then
outstanding
common
shares.
This
limit
may
be
raised
at
the
option
of
the
holder
on
61
days’
prior
written
notice:
(i)
up
to
9.99%,
(ii)
up
to
19.99%,
subject
to
clearance
of
a
personal
information
form
submitted
by
the
holder
to
the
Toronto
Stock
Exchange,
and
(iii)
above
19.99%,
subject
to
approval
by
the
Toronto
Stock
Exchange
and
shareholder
approval.
(b)
Share capital issued – year ended December 31, 2016
During
the
year
ended
December
31,
2016,
30,301
common
shares
were
issued
on
the
exercise
of
909,059
warrants
for
proceeds
of
$359,328.
During
the
year
ended
December
31,
2016,
562,388
Series
I
First
Preferred
Shares
were
converted
into
18,746
common
shares.
Share capital issued – year ended December 31, 2015
On
April
7,
2015,
the
Company
completed
an
underwritten
public
offering
of
common
shares
and
non-voting
convertible
preferred
shares
in
the
United
States.
In
the
offering,
Trillium
sold
1,750,754
common
shares
and
1,077,605
Series
II
First
Preferred
Shares
at
a
price
of
US$19.50
per
share.
The
gross
proceeds
to
Trillium
from
this
offering
were
$68,875,067
(US$55,153,000)
before
deducting
offering
expenses
of
$4,913,443.
During
the
year
ended
December
31,
2015,
1,087,603
common
shares
were
issued
on
the
exercise
of
32,628,425
warrants
for
proceeds
of
$9,515,154
and
6,666
stock
options
were
exercised
for
proceeds
of
$49,995.
During
the
year
ended
December
31,
2015,
15,716,110
Series
I
First
Preferred
Shares
were
converted
into
523,870
common
shares.
(c)
Weighted average number of common shares
The
weighted
average
number
of
common
shares
outstanding
for
the
years
ended
December
31,
2016
and
2015
were
7,820,196
and
6,641,161,
respectively.
The
Company
has
not
adjusted
its
weighted
average
number
of
common
shares
outstanding
in
the
calculation
of
diluted
loss
per
share,
as
any
adjustment
would
be
antidilutive.
(d)
Warrants
The
following
table
shows
the
number
of
warrants
outstanding,
the
exercise
prices,
and
the
number
of
common
shares
issuable
on
exercise
of
the
warrants
and
the
exercise
price
per
common
share
for
30
warrants
as
at
December
31,
2016:
Expiry
dates
March
15,
2018
March
27,
2018
December
13,
2018
Exercise
price
$0.40
$0.40
$0.28
Number
of
common
shares
issuable
on
exercise
Exercise
price
per
common
share
(30
warrants)
278,014
10,000
3,218,229
3,506,243
$12.00
$12.00
$8.40
Number
of
warrants
8,340,435
300,000
96,546,862
105,187,297
F-17
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2016 and 2015
Amounts
in
Canadian
Dollars
10.
Share capital (continued)
Changes
in
the
number
of
warrants
outstanding
during
the
years
ended
December
31
were
as
follows:
2016
Weighted
average
exercise
price
Number
of
warrants
$ 0.29
0.40
138,724,781
(32,628,425)
Number
of
warrants
106,096,356
(909,059)
105,187,297
$ 0.29
106,096,356
2015
Weighted
average
exercise
price
$
0.29
0.29
$
0.29
Balance,
beginning
of
year
Exercised
Balance,
end
of
year
(e)
Stock option plan
The
2016
Stock
Option
Plan
was
approved
by
the
Company’s
shareholders
at
the
annual
meeting
held
on
May
27,
2016.
Options
granted
are
equity-settled,
have
a
vesting
period
of
four
years
and
have
a
maximum
term
of
ten
years.
The
total
number
of
common
shares
available
for
issuance
under
the
Company’s
2016
Stock
Option
Plan
is
1,894,501.
As
at
December
31,
2016,
the
Company
was
entitled
to
issue
an
additional
462,476
stock
options
under
the
2016
Stock
Option
Plan.
Changes
in
the
number
of
options
outstanding
during
the
years
ended
December
31
were
as
follows:
Balance,
beginning
of
year
Granted
Exercised
Expired
Forfeited
Balance,
end
of
year
2016
Weighted
average
exercise
price
$ 14.07
12.60
-
30.00
28.52
Number
of
options
590,141
347,359
(6,666)
(3,000)
-
2015
Weighted
average
exercise
price
$
9.76
21.40
7.50
30.00
-
Number
of
options
927,834
470,321
-
(5,418)
(12,500)
1,380,237
$ 13.38
927,834
$
14.07
Options
exercisable,
end
of
year
509,750
$ 12.18
333,927
$
10.94
F-18
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2016 and 2015
Amounts
in
Canadian
Dollars
10.
Share capital (continued)
The
following
table
reflects
stock
options
outstanding
as
at
December
31,
2016:
Exercise
prices
$7.50
-
$9.20
$10.35
-
$12.01
$13.98
-
$15.30
$17.00
-
$23.44
$28.05
-
$30.00
Number
outstanding
428,461
283,127
307,125
332,191
29,333
1,380,237
Stock
options
outstanding
Stock
options
exercisable
Weighted
average
remaining
contractual
life
(in
years)
Weighted
average
exercise
price
Number
exercisable
Weighted
average
exercise
price
8.0
7.4
9.3
8.7
8.3
8.4
$
8.47
$
10.42
$
14.01
$
20.33
$
28.07
$
13.38
206,206
176,085
4,444
111,203
11,812
509,750
$
8.09
$
10.35
$
15.30
$
20.87
$
28.10
$
12.18
Share-based
compensation
expense
was
determined
based
on
the
fair
value
of
the
options
at
the
date
of
measurement
using
the
Black-Scholes
option
pricing
model
with
the
weighted
average
assumptions
for
the
years
ended
December
31
as
follows:
Expected
option
life
Risk-free
interest
rate
Dividend
yield
Expected
volatility
2016
6 years
0.7%
0%
84%
2015
6
years
1.2%
0%
83%
The
Black-Scholes
option
pricing
model
was
developed
to
estimate
the
fair
value
of
freely
tradable,
fully
transferable
options
without
vesting
restrictions,
which
significantly
differs
from
the
Company“s
stock
option
awards.
This
model
also
requires
highly
subjective
assumptions,
including
future
stock
price
volatility
and
average
option
life,
which
significantly
affect
the
calculated
values.
The
risk-free
interest
rate
is
based
on
the
implied
yield
on
a
Government
of
Canada
zero-coupon
issue
with
a
remaining
term
equal
to
the
expected
term
of
the
option.
Expected
volatility
was
determined
using
a
combination
of
historical
volatilities
of
a
peer
group
of
biotechnology
companies
and
the
Company’s
own
historical
volatility.
The
life
of
the
options
is
estimated
considering
the
vesting
period
at
the
grant
date,
the
life
of
the
option
and
the
average
length
of
time
similar
grants
have
remained
outstanding
in
the
past.
The
forfeiture
rate
is
an
estimate
based
on
historical
evidence
and
future
expectations.
The
dividend
yield
was
excluded
from
the
calculation
since
it
is
the
present
policy
of
the
Company
to
retain
all
earnings
to
finance
operations
and
future
growth.
For
the
years
ended
December
31,
2016
and
2015,
the
Company
issued
470,321
and
347,359
stock
options
with
a
fair
value
of
$4,163,107
and
$5,227,499
and
a
weighted
average
grant
date
fair
value
of
$8.85
and
$15.05,
respectively.
F-19
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2016 and 2015
Amounts
in
Canadian
Dollars
10.
Share capital (continued)
(f)
Deferred Share Unit Plan
The
shareholders
of
the
Company
approved
the
2014
Deferred
Share
Unit
Plan
(the
“2014
DSU
Plan”)
on
May
27,
2014
and
the
reservation
for
issuance
of
up
to
66,667
common
shares
under
the
plan.
DSUs
granted
under
the
2014
DSU
Plan
are
equity-settled.
There
were
no
DSUs
issued
during
the
year
ended
December
31,
2016
and
23,011
DSUs
issued
during
the
year
ended
December
31,
2015
for
payment
of
directors’
fees.
A
total
of
51,788
DSUs
were
outstanding
under
this
plan
as
at
December
31,
2016.
The
board
of
directors
approved
a
new
cash-settled
DSU
plan
(the
“Cash-Settled
DSU
Plan”)
on
November
9,
2016
and
granted
47,614
DSUs
for
the
payment
of
directors’
fees
that
will
ultimately
be
cash-settled.
A
total
of
47,614
DSUs
were
outstanding
under
this
plan
as
at
December
31,
2016.
11.
Income taxes
Income
taxes
have
not
been
recognized
in
the
consolidated
statements
of
loss
and
comprehensive
loss,
as
the
Company
has
been
incurring
losses
since
inception,
and
it
is
not
probable
that
future
taxable
profits
will
be
available
against
which
the
accumulated
tax
losses
can
be
utilized.
(a)
Unrecognized deferred tax assets
As
at
December
31,
2016
and
2015,
deferred
tax
assets
have
not
been
recognized
with
respect
to
the
following
items:
Non-capital
losses
carried
forward
Tax
credits
carried
forward
Accounting
basis
of
property
and
equipment
and
intangible
assets
in
excess
of
tax
basis
Scientific
research
and
experimental
development
expenditures
Share
issue
costs
and
other
Less
amount
recognized
on
Fluorinov
acquisition
2016
$
17,603,679
4,318,442
(1,288,113)
7,352,815
346,027
28,332,850
(977,764)
27,355,086
2015
$
11,750,952
3,090,833
1,577,156
5,524,225
493,476
22,436,642
-
22,436,642
(b)
As
at
December
31,
2016
and
2015,
the
Company
had
available
research
and
development
expenditures
of
approximately
$27,746,000
and
$20,846,000,
respectively,
for
income
tax
purposes
which
may
be
carried
forward
indefinitely
to
reduce
future
years’
taxable
income.
As
at
December
31,
2016
and
2015,
the
Company
also
had
unclaimed
Canadian
scientific
research
and
development
tax
credits
of
$5,458,000
and
$3,920,000,
respectively,
which
are
available
to
reduce
future
taxes
payable
with
expiries
from
2017
through
2036.
The
benefit
of
these
expenditures
and
tax
credits
has
not
been
recorded
in
the
accounts.
F-20
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2016 and 2015
Amounts
in
Canadian
Dollars
11.
(c)
Income taxes (continued)
As
at
December
31,
2016,
the
Company
has
accumulated
non-capital
losses
for
federal
and
provincial
income
tax
purposes
in
Canada
which
are
available
for
application
against
future
taxable
income.
The
benefit
of
these
losses
has
not
been
recorded
in
the
accounts.
The
non-capital
tax
losses
expire
as
follows:
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
(d)
The
reconciliation
of
the
Canadian
statutory
income
tax
rate
applied
to
the
net
loss
for
the
year
to
the
income
tax
expense
is
as
follows:
Statutory
income
tax
rate
Income
tax
recovery
based
on
statutory
income
tax
rate
Investment
tax
credits
Share-based
compensation
and
other
Change
in
unrecognized
tax
assets
2016
$
26.5%
(9,388,390)
(1,203,887)
4,705,443
5,896,208
Federal
$
3,213,000
6,457,000
4,659,000
4,169,000
3,784,000
1,905,000
1,624,000
2,883,000
2,132,000
5,708,000
9,172,000
20,722,000
66,428,000
2015
$
26.5%
(3,901,912)
(473,156)
485,009
3,899,561
Income
tax
expense
9,374
9,502
F-21
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2016 and 2015
Amounts
in
Canadian
Dollars
12.
Research and development
Components
of
research
and
development
expenses
for
the
years
ended
December
31
were
as
follows:
Research
and
development
programs,
excluding
the
below
items
Salaries,
fees
and
short-term
benefits
Share-based
compensation
Amortization
of
intangible
assets
Fair
value
remeasurement
of
contingent
consideration
Depreciation
of
property
and
equipment
Tax
credits
13.
General and administrative
Components
of
general
and
administrative
expenses
for
the
years
ended
December
31
were
as
follows:
General
and
administrative
expenses,
excluding
the
below
items
Salaries,
fees
and
short-term
benefits
DSU
units
issued
for
director
compensation
Share-based
compensation
14.
Finance income and finance costs
Finance
income
for
the
years
ended
December
31
was
as
follows:
Interest
income
Finance
costs
for
the
years
ended
December
31
were
as
follows:
Bank
charges
Accreted
interest
F-22
2016
$
16,084,144
6,256,371
3,192,338
3,683,748
209,260
603,694
(240,760)
29,788,795
2016
$
1,789,396
1,284,001
362,443
497,070
3,932,910
2016
$
417,517
417,517
2016
$
17,036
65,370
82,406
2015
$
12,083,797
4,120,109
1,942,173
339,348
-
118,394
(553,730)
18,050,091
2015
$
1,521,639
898,381
540,000
224,327
3,184,347
2015
$
488,486
488,486
2015
$
11,557
73,391
84,948
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2016 and 2015
Amounts
in
Canadian
Dollars
15.
Commitments and contingencies
As
at
December
31,
2016,
the
Company
had
obligations
to
make
future
payments,
representing
significant
research
and
development
contracts
and
other
commitments
that
are
known
and
committed
in
the
amount
of
approximately
$10,509,000.
These
commitments
include
agreements
related
to
the
conduct
of
the
Phase
I
clinical
trials,
sponsored
research,
manufacturing
and
preclinical
studies.
The
Company
also
has
minimum
lease
payments
relating
to
operating
lease
commitments
in
the
amount
of
$223,000
over
the
next
12
months,
$994,000
from
12
to
60
months,
and
$858,000
thereafter.
The
facility
lease
contains
options
for
early
termination
and
for
lease
extension.
The
Company
enters
into
research,
development
and
license
agreements
in
the
ordinary
course
of
business
where
the
Company
receives
research
services
and
rights
to
proprietary
technologies.
Milestone
and
royalty
payments
that
may
become
due
under
various
agreements
are
dependent
on,
among
other
factors,
clinical
trials,
regulatory
approvals
and
ultimately
the
successful
development
of
a
new
drug,
the
outcome
and
timing
of
which
is
uncertain.
Under
the
license
agreement
for
SIRPαFc,
the
Company
has
future
contingent
milestones
payable
of
$35,000
related
to
successful
patent
grants,
$200,000
and
$300,000
on
the
first
patient
dosed
in
phase
II
and
III
trials,
respectively,
and
regulatory
milestones
on
their
first
achievement
totalling
$5,000,000.
In
connection
with
the
acquisition
of
Fluorinov,
the
Company
is
obligated
to
pay
up
to
$35
million
of
additional
future
payments
that
are
contingent
upon
achieving
certain
clinical
and
regulatory
milestones
with
an
existing
Fluorinov
compound.
The
Company
also
has
an
obligation
to
pay
royalty
payments
on
future
sales
of
such
compounds.
The
Company
has
two
agreements
with
Catalent
Pharma
Solutions
pursuant
to
which
Trillium
acquired
the
right
to
use
a
proprietary
expression
system
for
the
manufacture
of
two
SIRPαFc
constructs.
Consideration
for
each
license
includes
potential
pre-marketing
approval
milestones
of
up
to
US$875,000
and
aggregate
sales
milestone
payments
of
up
to
US$28.8
million.
The
Company
periodically
enters
into
research
and
license
agreements
with
third
parties
that
include
indemnification
provisions
customary
in
the
industry.
These
guarantees
generally
require
the
Company
to
compensate
the
other
party
for
certain
damages
and
costs
incurred
as
a
result
of
claims
arising
from
research
and
development
activities
undertaken
by
or
on
behalf
of
the
Company.
In
some
cases,
the
maximum
potential
amount
of
future
payments
that
could
be
required
under
these
indemnification
provisions
could
be
unlimited.
These
indemnification
provisions
generally
survive
termination
of
the
underlying
agreement.
The
nature
of
the
indemnification
obligations
prevents
the
Company
from
making
a
reasonable
estimate
of
the
maximum
potential
amount
it
could
be
required
to
pay.
Historically,
the
Company
has
not
made
any
indemnification
payments
under
such
agreements
and
no
amount
has
been
accrued
in
the
consolidated
financial
statements
with
respect
to
these
indemnification
obligations.
16.
Related parties
For
the
years
ended
December
31,
2016
and
2015,
the
key
management
personnel
of
the
Company
were
the
Board
of
Directors,
Chief
Executive
Officer,
Chief
Medical
Officer,
Chief
Scientific
Officer,
Chief
Financial
Officer
and
the
Chief
Development
Officer.
Compensation
for
key
management
personnel
of
the
Company
for
the
years
ended
December
31
was
as
follows:
Salaries,
fees
and
short-term
benefits
Share-based
compensation
Total
2016
$
3,107,798
3,512,045
6,619,843
2015
$
2,595,536
2,433,710
5,029,246
Executive
officers
and
directors
participate
in
the
2014
Stock
Option
Plan,
the
2014
DSU
Plan
and
the
Cash-Settled
DSU
Plan,
and
officers
participate
in
the
Company’s
benefit
plans.
Directors
receive
annual
fees
for
their
services.
As
at
December
31,
2016,
the
key
management
personnel
controlled
approximately
1%
of
the
voting
shares
of
the
Company.
F-23
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2016 and 2015
Amounts
in
Canadian
Dollars
16.
Related parties (continued)
Under
IFRS,
the
acquisition
of
Fluorinov
was
considered
a
related
party
transaction
as
two
Company
directors
were
determined
to
be
related
parties
of
Fluorinov.
Outstanding
balances
with
related
parties
at
year-end
are
unsecured,
interest
free
and
settlement
occurs
in
cash.
There
have
been
no
guarantees
provided
or
received
for
any
related
party
receivables
or
payables.
17.
Operating segment
The
Company
has
a
single
operating
segment,
the
research
and
development
therapies
for
the
treatment
of
cancer.
Substantially
all
of
the
Company’s
operations,
assets
and
employees
are
in
Canada.
18.
Management of capital
The
Company
defines
its
capital
as
share
capital,
warrants
and
contributed
surplus.
The
Company’s
objectives
when
managing
capital
are
to
ensure
there
are
sufficient
funds
available
to
carry
out
its
research
and
development
programs.
To
date,
these
programs
have
been
funded
primarily
through
the
sale
of
equity
securities
and
the
exercise
of
common
share
purchase
warrants.
The
Company
also
sources
non-dilutive
funding
by
accessing
grants,
government
assistance
and
tax
incentives,
and
through
partnerships
with
corporations
and
research
institutions.
The
Company
uses
budgets
and
purchasing
controls
to
manage
its
costs.
The
Company
is
not
exposed
to
any
externally
imposed
capital
requirements.
19.
Financial instruments
Fair value
IFRS
13
Fair Value Measurement provides
a
hierarchy
of
valuation
techniques
based
on
whether
the
inputs
to
those
valuation
techniques
are
observable
or
unobservable.
Observable
inputs
are
those
that
reflect
market
data
obtained
from
independent
sources,
while
unobservable
inputs
reflect
the
Company’s
assumptions
with
respect
to
how
market
participants
would
price
an
asset
or
liability.
These
two
inputs
used
to
measure
fair
value
fall
into
the
following
three
different
levels
of
the
fair
value
hierarchy:
Level
1
Level
2
Level
3
Quoted
prices
in
active
markets
for
identical
instruments
that
are
observable.
Quoted
prices
in
active
markets
for
similar
instruments;
inputs
other
than
quoted
prices
that
are
observable
and
derived
from
or
corroborated
by
observable
market
data.
Valuations
derived
from
valuation
techniques
in
which
one
or
more
significant
inputs
are
unobservable.
The
hierarchy
requires
the
use
of
observable
market
data
when
available.
The
Company
has
classified
cash
and
cash
equivalents
as
Level
1.
The
loan
payable
has
been
classified
as
Level
2.
The
Fluorinov
contingent
consideration
in
other
liabilities
has
been
classified
as
Level
3.
The
fair
value
of
the
contingent
consideration
increases
as
the
time
to
the
expected
milestones
decreases
assuming
the
probability
of
achieving
the
milestones
remains
unchanged.
Cash
and
cash
equivalents,
amounts
receivable,
accounts
payable
and
accrued
liabilities,
and
other
current
liabilities,
due
within
one
year,
are
all
short-term
in
nature
and,
as
such,
their
carrying
values
approximate
fair
values.
The
fair
value
of
the
non-current
loan
payable
is
estimated
by
discounting
the
expected
future
cash
flows
at
the
cost
of
money
to
the
Company,
which
is
equal
to
its
carrying
value.
F-24
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2016 and 2015
Amounts
in
Canadian
Dollars
19.
Financial instruments (continued)
Risks
The
Company
has
exposure
to
credit
risk,
liquidity
risk,
interest
rate
risk
and
currency
risk.
The
Company’s
board
of
directors
has
overall
responsibility
for
the
establishment
and
oversight
of
the
Company’s
risk
management
framework.
The
Audit
Committee
of
the
board
of
directors
is
responsible
for
reviewing
the
Company’s
risk
management
policies.
(a)
Credit risk
Credit
risk
is
the
risk
of
financial
loss
to
the
Company
if
a
counterparty
to
a
financial
instrument
fails
to
meet
its
contractual
obligations,
and
arises
principally
from
the
Company’s
cash
and
amounts
receivable.
The
carrying
amount
of
these
financial
assets
represents
the
maximum
credit
exposure.
The
Company
follows
an
investment
policy
to
mitigate
against
the
deterioration
of
principal
and
to
enhance
the
Company’s
ability
to
meet
its
liquidity
needs.
Cash
is
on
deposit
with
major
Canadian
chartered
banks
and
the
Company
invests
in
high
grade
short-term
instruments.
Amounts
receivable
are
primarily
comprised
of
amounts
due
from
the
federal
government.
(b)
Liquidity risk
Liquidity
risk
is
the
risk
that
the
Company
will
not
be
able
to
meet
its
financial
obligations
as
they
fall
due.
The
Company
is
a
development
stage
company
and
is
reliant
on
external
fundraising
to
support
its
operations.
Once
funds
have
been
raised,
the
Company
manages
its
liquidity
risk
by
investing
in
cash
and
short-term
instruments
to
provide
regular
cash
flow
for
current
operations.
It
also
manages
liquidity
risk
by
continuously
monitoring
actual
and
projected
cash
flows.
The
board
of
directors
reviews
and
approves
the
Company’s
operating
and
capital
budgets,
as
well
as
any
material
transactions
not
in
the
ordinary
course
of
business.
The
majority
of
the
Company’s
accounts
payable
and
accrued
liabilities
have
maturities
of
less
than
three
months.
(c)
Interest rate risk
Interest
rate
risk
is
the
risk
that
the
fair
value
or
future
cash
flows
of
a
financial
instrument
will
fluctuate
because
of
changes
in
market
interest
rates.
The
Company
holds
its
cash
in
bank
accounts
or
high
interest
savings
accounts
which
have
a
variable
rate
of
interest.
The
Company
manages
its
interest
rate
risk
by
holding
highly
liquid
short-term
instruments
and
by
holding
its
investments
to
maturity,
where
possible.
For
the
years
ended
December
31,
2016
and
2015,
the
Company
earned
interest
income
of
$417,517
and
$488,486,
respectively.
Therefore,
a
1%
change
in
the
average
interest
rate
for
the
years
ended
December
31,
2016
and
2015,
would
have
a
net
impact
on
finance
income
of
$4,175
and
$4,885,
respectively.
(d)
Currency risk
The
Company
is
exposed
to
currency
risk
related
to
the
fluctuation
of
foreign
exchange
rates
and
the
degree
of
volatility
of
those
rates.
Currency
risk
is
limited
to
the
portion
of
the
Company’s
business
transactions
denominated
in
currencies
other
than
the
Canadian
dollar
which
are
primarily
expenses
in
US
dollars.
As
at
December
31,
2016
and
2015,
the
Company
held
US
dollar
cash
and
cash
equivalents
in
the
amount
of
US$30,247,141
and
US$44,547,591
and
had
US
dollar
denominated
accounts
payable
and
accrued
liabilities
in
the
amount
of
US$2,418,828
and
US$1,033,319,
respectively.
Therefore,
a
1%
change
in
the
foreign
exchange
rate
would
have
a
net
impact
on
finance
costs
as
at
December
31,
2016
and
2015
of
$368,816
and
$435,143,
respectively.
US
dollar
expenses
for
the
years
ended
December
31,
2016
and
2015
were
approximately
US$9,674,000
and
US$8,700,000,
respectively.
Varying
the
US
exchange
rate
for
the
years
ended
December
31,
2016
and
2015
to
reflect
a
5%
strengthening
of
the
Canadian
dollar
would
have
decreased
the
net
loss
by
approximately
$641,000
and
$556,000,
respectively,
assuming
that
all
other
variables
remained
constant.
F-25
Trillium Therapeutics Inc.
For the years ended December 31, 2015 and 2014
Report
of
Independent
Registered
Public
Accounting
Firm
Consolidated
Statements
of
Financial
Position
Consolidated
Statements
of
Loss
and
Comprehensive
Loss
Consolidated
Statements
of
Changes
in
Equity
Consolidated
Statements
of
Cash
Flows
Notes
to
the
Consolidated
Financial
Statements
F-26
F-27
F-28
F-29
F-30
F-31
(formerly Stem Cell Therapeutics Corp.)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2015 AND 2014
96
Skyway
Avenue
Toronto,
Ontario
M9W
4Y9
www.trilliumtherapeutics.com
INDEPENDENT AUDITORS’ REPORT OF REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Shareholders
of
Trillium Therapeutics Inc.
We
have
audited
the
accompanying
consolidated
financial
statements
of
Trillium Therapeutics Inc .
which
comprise
the
consolidated
statements
of
financial
position
as
at
December
31,
2015
and
2014,
and
the
consolidated
statements
of
loss
and
comprehensive
loss,
changes
in
equity
and
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,
as
issued
by
the
International
Accounting
Standards
Board,
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.
Auditors’ 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
and
the
standards
of
the
Public
Company
Accounting
Oversight
Board
(United
States).
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.
We
were
not
engaged
to
perform
an
audit
of
the
Company’s
internal
control
over
financial
reporting.
Our
audits
included
consideration
of
internal
control
over
financial
reporting
as
a
basis
for
designing
audit
procedures
that
are
appropriate
in
the
circumstances,
but
not
for
the
purpose
of
expressing
an
opinion
on
the
effectiveness
of
the
Company’s
internal
control
over
financial
reporting.
Accordingly,
we
express
no
such
opinion.
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
auditors’
judgment,
including
the
assessment
of
the
risks
of
material
misstatement
of
the
consolidated
financial
statements,
whether
due
to
fraud
or
error.
An
audit
also
includes,
on
a
test
basis,
evidence
supporting
the
amounts
and
disclosures
in
the
consolidated
financial
statements,
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
Trillium Therapeutics Inc. as
at
December
31,
2015
and
2014,
and
its
financial
performance
and
its
cash
flows
for
the
years
then
ended
in
accordance
with
International
Financial
Reporting
Standards,
as
issued
by
the
International
Accounting
Standards
Board.
Toronto,
Canada
March
9,
2016
F-26
/s/
Ernst
&
Young
LLP
Chartered
Professional
Accountants
Licensed
Public
Accountants
TRILLIUM THERAPEUTICS INC.
Consolidated Statements of Financial Position
Amounts
in
Canadian
Dollars
ASSETS
Current
Cash
Amounts
receivable
Prepaid
expenses
Total current assets
Property
and
equipment
Intangible
assets
Other
assets
Total non-current assets
Total assets
LIABILITIES
Current
Accounts
payable
and
accrued
liabilities
Other
current
liabilities
Total current liabilities
Loan
payable
Deferred
lease
inducement
Long-term
liability
Total non-current liabilities
Total liabilities
EQUITY
Common
shares
Series
I
preferred
shares
Series
II
preferred
shares
Warrants
Contributed
surplus
Deficit
Total equity
Total liabilities and equity
Note
As at
December 31, 2015
$
As
at
December
31,
2014
$
4
5
6
7
8
8
8
8
9
9
9
9
9
86,770,542
974,822
1,181,481
26,165,056
344,416
1,008,225
88,926,845
27,517,697
897,390
93,585
121,648
1,112,623
235,402
432,933
-
668,335
90,039,468
28,186,032
3,233,749
323,151
3,248,984
279,461
3,556,900
3,528,445
270,386
348,205
60,109
678,700
283,352
-
69,941
353,293
4,235,600
3,881,738
103,340,072
7,797,773
24,369,384
6,926,019
8,660,355
(65,289,735)
49,505,792
10,076,151
-
9,283,332
5,995,055
(50,556,036)
85,803,868
24,304,294
90,039,468
28,186,032
Commitments
and
contingencies
[note 14]
Approved
by
the
Board
and
authorized
for
issue
on
March
9,
2016:
(signed)
Luke
Beshar,
Director
(signed)
Henry
Friesen,
Director
See accompanying notes to the consolidated financial statements
F-27
TRILLIUM THERAPEUTICS INC.
Consolidated Statements of Loss and Comprehensive Loss
Amounts
in
Canadian
Dollars
EXPENSES
Research
and
development
General
and
administrative
Operating
expenses
Finance
income
Finance
costs
Net
finance
income
Net loss before income taxes
Current
income
tax
expense
Note
Year ended
December 31, 2015
$
Year
ended
December
31,
2014
$
11
12
13
13
18,050,091
3,184,347
10,595,808
2,577,460
21,234,438
13,173,268
(6,595,189)
84,948
(378,692)
87,244
(6,510,241)
(291,448)
14,724,197
12,881,820
10
9,502
-
Net loss and comprehensive loss for the year
14,733,699
12,881,820
Basic and diluted loss per common share
9(c)
(2.22)
(3.06)
See accompanying notes to the consolidated financial statements
F-28
TRILLIUM THERAPEUTICS INC.
Consolidated Statements of Changes in Equity
Amounts
in
Canadian
Dollars
Balance,
December
31,
2014
Net loss and
comprehensive
loss for the
period
Transactions with
owners
of the
Company,
recognized
directly in
equity
Shares
issued,
net
of
issue
costs
Exercise
of
warrants
Exercise
of
stock
options
Conversion
of
Common
shares
Series
I
preferred
shares
Number
#
Amount
$
(note
9)
Number
#
Amount
$
(note
9)
Series
II
preferred
shares
Number
#
Amount
$
(note
9)
Warrants
Number
#
Amount
$
(note
9)
Contributed
surplus
$
(note
9)
Deficit
$
Total
$
4,427,244
49,505,792
69,504,689
10,076,151
-
-
-
-
-
-
-
138,724,781
9,283,332
5,995,055
(50,556,036)
24,304,294
-
-
-
-
(14,733,699)
(14,733,699)
1,750,754
39,592,240
1,087,603
11,872,467
6,666
91,195
-
-
-
-
-
-
1,077,605
24,369,384
-
-
(32,628,425)
(2,357,313)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(41,200)
-
2,706,500
preferred
shares
523,870
2,278,378
(15,716,110)
(2,278,378)
Share-based
compensation
-
-
-
-
-
-
-
-
-
63,961,624
9,515,154
49,995
-
2,706,500
Total transactions
with
owners of the
Company
Balance, December
3,368,893
53,834,280
(15,716,110)
(2,278,378)
1,077,605
24,369,384
(32,628,425)
(2,357,313)
2,665,300
-
76,233,273
31, 2015
7,796,137
103,340,072
53,788,579
7,797,773
1,077,605
24,369,384
106,096,356
6,926,019
8,660,355
(65,289,735)
85,803,868
Common
shares
Number
#
Amount
$
Series
I
preferred
shares
Number
#
Amount
$
Warrants
Number
#
Amount
$
Contributed
surplus
$
Deficit
$
Total
$
Balance,
December
31,
2013
4,058,408
47,191,303
77,895,165
11,292,525
142,230,123
9,818,179
3,280,656
(37,674,216)
33,908,447
Net loss and comprehensive
loss for the period
Transactions with owners
of the Company, recognized
directly in equity
Exercise
of
warrants
Exercise
of
stock
options
Conversion
of
preferred
shares
Expiry
of
warrants
Share-based
compensation
Total transactions with
owners of the Company
Balance, December 31, 2014
-
-
-
-
-
-
-
(12,881,820)
(12,881,820)
86,540
2,614
279,682
-
-
1,065,015
33,100
1,216,374
-
-
-
-
(8,390,476)
-
-
-
-
(1,216,374)
-
-
(2,596,251)
-
-
(909,091)
-
(118,202)
-
-
(416,645)
-
-
(13,500)
-
416,645
2,311,254
-
-
-
-
-
946,813
19,600
-
-
2,311,254
368,836
4,427,244
2,314,489
49,505,792
(8,390,476)
69,504,689
(1,216,374)
10,076,151
(3,505,342)
138,724,781
(534,847)
9,283,332
2,714,399
5,995,055
-
(50,556,036)
3,277,667
24,304,294
See accompanying notes to the consolidated financial statements
F-29
TRILLIUM THERAPEUTICS INC.
Consolidated Statements of Cash Flows
Amounts
in
Canadian
Dollars
OPERATING ACTIVITIES
Net
loss
for
the
year
Adjustments
for
items
not
affecting
cash
Share-based
compensation
Interest
accretion
Amortization
of
intangible
assets
Impairment
of
intangible
assets
Depreciation
of
property
and
equipment
Non-cash
change
in
deferred
lease
inducement
Unrealized
foreign
exchange
gain
Changes
in
non-cash
working
capital
balances
Amounts
receivable
Prepaid
expenses
Accounts
payable
and
accrued
liabilities
Other
current
liabilities
Increase
in
other
assets
Cash used in operating activities
INVESTING ACTIVITIES
Purchase
of
property
and
equipment
Net
change
in
marketable
securities
Cash provided by (used) in investing activities
FINANCING ACTIVITIES
Change
in
loan
payable
Receipt
of
deferred
lease
inducement
Change
in
long-term
liability
Issue
of
share
capital,
net
of
issuance
costs
Cash provided by financing activities
Impact
of
foreign
exchange
rate
on
cash
Net increase (decrease) in cash during the year
Cash,
beginning
of
year
Cash, end of year
Supplemental cash flow information
Note
Year ended
December 31, 2015
$
Year
ended
December
31,
2014
$
(14,733,699)
(12,881,820)
9
8,13
6,11
6,11
5,11
5
8
8
8
9
2,706,500
73,391
339,348
-
118,394
105,805
(6,010,996)
(17,401,257)
(630,406)
(173,256)
(15,235)
43,690
(121,648)
(18,298,112)
(750,382)
-
(750,382)
(68,761)
212,400
(27,428)
73,526,773
73,642,984
6,010,996
60,605,486
2,311,254
69,770
610,776
429,763
47,208
-
-
(9,413,049)
82,818
(913,656)
2,579,124
216,695
-
(7,448,068)
(173,603)
526,598
352,995
(115,031)
-
(47,759)
966,413
803,623
-
(6,291,450)
26,165,056
32,456,506
86,770,542
26,165,056
Preferred
shares
converted
to
common
shares
(note
9)
2,278,378
1,216,374
See accompanying notes to the consolidated financial statements
F-30
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015 and 2014
Amounts
in
Canadian
Dollars
1.
Corporate information
Trillium
Therapeutics
Inc.
(the
“Company”
or
“Trillium”)
is
a
Canadian
public
immuno-oncology
company
developing
innovative
therapies
for
the
treatment
of
cancer.
The
Company
was
incorporated
under
the
laws
of
the
Province
of
Alberta
on
March
31,
2004
with
nominal
share
capital
and
filed
Articles
of
Continuance
to
change
its
jurisdiction
to
Ontario
on
November
7,
2013.
On
June
1,
2014,
the
Company
amalgamated
with
its
wholly-owned
subsidiary
Trillium
Therapeutics
Inc.
(“Trillium
Privateco”)
and
changed
its
name
from
Stem
Cell
Therapeutics
Corp.
to
Trillium
Therapeutics
Inc.
The
Company’s
head
office
is
located
at
96
Skyway
Avenue,
Toronto,
Ontario,
M9W
4Y9
and
is
listed
on
the
Toronto
Stock
Exchange
under
the
symbol
TR
and
on
the
NASDAQ
Stock
Exchange
under
the
symbol
TRIL.
2.
Basis of presentation
(a)
Statement of compliance
The
consolidated
financial
statements
have
been
prepared
in
accordance
with
International
Financial
Reporting
Standards
(“IFRS”),
as
issued
by
the
International
Accounting
Standards
Board
(“IASB”).
These
consolidated
financial
statements
were
approved
by
the
Company’s
Board
of
Directors
on
March
9,
2016.
(b)
Basis of measurement
These
consolidated
financial
statements
have
been
prepared
on
the
historical
cost
basis,
except
for
held-for-trading
financial
assets
which
are
measured
at
fair
value.
(c)
Functional and presentation currency
These
consolidated
financial
statements
are
presented
in
Canadian
dollars,
which
is
the
Company“s
functional
currency.
(d)
Use of significant estimates and assumptions
The
preparation
of
financial
statements
in
conformity
with
IFRS
requires
management
to
make
judgments,
estimates
and
assumptions
that
affect
the
application
of
accounting
policies
and
the
reported
amounts
of
assets
and
liabilities,
revenue
and
expenses
and
the
related
disclosures
of
contingent
assets
and
liabilities
and
the
determination
of
the
Company’s
ability
to
continue
as
a
going
concern.
Actual
results
could
differ
materially
from
these
estimates
and
assumptions.
The
Company
reviews
its
estimates
and
underlying
assumptions
on
an
ongoing
basis.
Revisions
are
recognized
in
the
period
in
which
the
estimates
are
revised
and
may
impact
future
periods.
Management
has
applied
significant
estimates
and
assumptions
to
the
following:
Valuation
of
share-based
compensation
and
warrants
Management
measures
the
costs
for
share-based
compensation
and
warrants
using
market-based
option
valuation
techniques.
Assumptions
are
made
and
estimates
are
used
in
applying
the
valuation
techniques.
These
include
estimating
the
future
volatility
of
the
share
price,
expected
dividend
yield,
expected
risk-free
interest
rate,
future
employee
turnover
rates,
future
exercise
behaviours
and
corporate
performance.
Such
estimates
and
assumptions
are
inherently
uncertain.
Changes
in
these
assumptions
affect
the
fair
value
estimates
of
share-based
payments
and
warrants.
F-31
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015 and 2014
Amounts
in
Canadian
Dollars
2.
Basis of presentation (continued)
Impairment
of
long
lived
assets
Long-lived
assets
are
reviewed
for
impairment
upon
the
occurrence
of
events
or
changes
in
circumstances
indicating
that
the
carrying
value
of
the
asset
may
not
be
recoverable.
For
the
purpose
of
measuring
recoverable
amounts,
assets
are
grouped
at
the
lowest
levels
for
which
there
are
separately
identifiable
cash
flows
(cash-generating
units).
The
recoverable
amount
is
the
higher
of
an
asset’s
fair
value
less
costs
to
sell
and
value
in
use
(being
the
present
value
of
the
expected
future
cash
flows
of
the
relevant
asset
or
cash-generating
unit).
An
impairment
loss
is
recognized
for
the
amount
by
which
the
asset’s
carrying
amount
exceeds
its
recoverable
amount.
Management
evaluates
impairment
losses
for
potential
reversals
when
events
or
circumstances
warrant
such
consideration.
Intangible
assets
The
Company
estimates
the
useful
lives
of
intangible
assets
from
the
date
they
are
available
for
use
in
the
manner
intended
by
management
and
at
least
annually
reviews
the
useful
lives
to
reflect
management“s
intent
about
developing
and
commercializing
the
assets.
3.
Significant accounting policies
The
accounting
policies
set
out
below
have
been
applied
consistently
to
all
periods
presented
in
these
consolidated
financial
statements.
(a)
Basis of consolidation
These
consolidated
financial
statements
include
the
accounts
of
the
Company
and
its
wholly-owned
subsidiaries,
Stem
Cell
Therapeutics
Inc.
to
the
date
of
its
dissolution
on
September
17,
2014,
and
Trillium
Privateco
from
April
9,
2013,
the
date
of
acquisition
to
the
date
of
its
amalgamation
with
the
Company
on
June
1,
2014.
Investments
in
entities
where
the
Company
is
exposed,
or
has
rights,
to
variable
returns
from
its
involvement
with
the
investee
and
has
the
ability
to
affect
those
returns
through
its
power
over
the
investee,
are
considered
subsidiaries
due
to
the
control
exercised
over
the
investee
by
the
Company.
Subsidiaries
are
fully
consolidated
from
the
date
at
which
control
is
determined
to
have
occurred
and
are
de-consolidated
from
the
date
that
the
Company
no
longer
controls
the
entity.
The
financial
statements
of
the
subsidiaries
are
prepared
for
the
same
reporting
period
as
the
Company,
using
consistent
accounting
policies.
Intercompany
transactions,
balances
and
unrealized
gains
and
losses
on
transactions
between
subsidiaries
are
eliminated.
(b)
Foreign currency
Transactions
in
foreign
currencies
are
translated
to
the
functional
currency
at
the
rate
on
the
date
of
the
transactions.
Monetary
assets
and
liabilities
denominated
in
foreign
currencies
are
retranslated
at
the
spot
rate
of
exchange
as
at
the
reporting
date.
All
differences
are
taken
to
profit
or
loss.
Non-
monetary
items
that
are
measured
in
terms
of
historical
cost
in
a
foreign
currency
are
translated
using
the
exchange
rate
as
at
the
date
of
the
initial
transaction.
Non-monetary
items
measured
at
fair
value
in
a
foreign
currency
are
translated
using
the
exchange
rate
at
the
date
when
the
fair
value
was
determined.
F-32
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015 and 2014
Amounts
in
Canadian
Dollars
3.
(c)
Significant accounting policies (continued)
Financial instruments
Financial assets
A
financial
asset
is
classified
at
fair
value
through
profit
or
loss
if
it
is
held
for
trading
or
is
designated
as
such
upon
initial
recognition.
Attributable
transaction
costs
are
recognized
in
profit
or
loss
as
incurred.
Financial
assets
at
fair
value
through
profit
or
loss
are
measured
at
fair
value
and
changes
therein
are
recognized
in
profit
or
loss.
Loans and receivables
Loans
and
receivables
are
non-derivative
financial
assets
with
fixed
or
determinable
payments
that
are
not
quoted
in
an
active
market.
Loans
and
receivables
are
initially
recognized
at
fair
value
plus
transaction
costs
and
subsequently
measured
at
amortized
cost
using
the
effective
interest
rate
method
less
any
impairment
losses.
The
Company
has
classified
its
amounts
receivable
as
loans
and
receivables.
Derecognition
A
financial
asset
is
derecognized
when
the
rights
to
receive
cash
flows
from
the
asset
have
expired
or
when
the
Company
has
transferred
its
rights
to
receive
cash
flows
from
the
asset.
Financial liabilities
Financial
liabilities
are
recognized
initially
at
fair
value
plus
any
directly
attributable
transaction
costs,
and
subsequently
at
amortized
cost
using
the
effective
interest
method.
The
Company
has
classified
its
accounts
payable
and
accrued
liabilities,
and
loan
payable
as
financial
liabilities.
Derecognition
A
financial
liability
is
derecognized
when
its
contractual
obligations
are
discharged,
cancelled
or
expired.
Equity
Common
shares,
preferred
shares
and
warrants
to
purchase
common
shares
are
classified
as
equity.
Incremental
costs
directly
attributable
to
the
issue
of
common
shares,
preferred
shares
and
warrants
are
recognized
as
a
deduction
from
equity,
net
of
any
tax
effects.
(d)
Property and equipment
Recognition and measurement
Items
of
property
and
equipment
are
measured
at
cost
less
accumulated
depreciation
and
accumulated
impairment
losses.
Cost
includes
the
expenditure
that
is
directly
attributable
to
the
acquisition
of
the
asset.
When
parts
of
an
item
of
property
and
equipment
have
different
useful
lives,
they
are
accounted
for
as
separate
items
(major
components)
of
property
and
equipment.
Gains
and
losses
on
disposal
of
an
item
of
property
and
equipment
are
determined
by
comparing
the
proceeds
from
disposal
with
the
carrying
amount
of
property
and
equipment,
and
are
recognized
in
profit
or
loss.
Subsequent costs
The
cost
of
replacing
a
part
of
an
item
of
property
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
then
derecognized.
The
costs
of
the
day-to-day
servicing
of
property
and
equipment
are
recognized
in
profit
or
loss
as
incurred.
F-33
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015 and 2014
Amounts
in
Canadian
Dollars
3.
Significant accounting policies (continued)
Depreciation
The
estimated
useful
lives
and
the
methods
of
depreciation
for
the
current
and
comparative
periods
are
as
follows:
Asset
Lab
equipment
Computer
equipment
Office
equipment
Leaseholds
Basis
20%
declining
balance
30%
declining
balance
20%
declining
balance
Straight-line
over
expected
lease
term
Estimates
for
depreciation
methods,
useful
lives
and
residual
values
are
reviewed
at
each
reporting
period-end
and
adjusted
if
appropriate.
Depreciation
expense
is
recognized
in
research
and
development
expenses.
(e)
Intangible assets
Research and development
Expenditures
on
research
activities,
undertaken
with
the
prospect
of
gaining
new
scientific
or
technical
knowledge
and
understanding,
are
recognized
in
profit
or
loss
as
incurred.
Development
activities
involve
a
plan
or
design
for
the
production
of
new
or
substantially
improved
products
and
processes.
Development
expenditures
are
capitalized
only
if
development
costs
can
be
measured
reliably,
the
product
or
process
is
technically
and
commercially
feasible,
future
economic
benefits
are
probable,
and
the
Company
intends
to
complete
development
and
has
sufficient
resources
to
complete
development
and
to
use
or
sell
the
asset.
Other
development
expenditures
are
expensed
as
incurred.
No
internal
development
costs
have
been
capitalized
to
date.
Research
and
development
expenses
include
all
direct
and
indirect
operating
expenses
supporting
the
products
in
development.
The
costs
incurred
in
establishing
and
maintaining
patents
are
expensed
as
incurred.
Intangible assets
Intangible
assets
that
are
acquired
separately
and
have
finite
useful
lives
are
measured
at
cost
less
accumulated
amortization
and
accumulated
impairment
losses.
Subsequent
expenditures
are
capitalized
only
when
they
increase
the
future
economic
benefits
embodied
in
the
specific
asset
to
which
it
relates.
All
other
expenditure
is
recognized
in
profit
or
loss
as
incurred.
Amortization
is
recognized
in
profit
or
loss
on
a
straight-line
basis
over
the
estimated
useful
lives
of
intangible
assets
from
the
date
they
are
available
for
use
in
the
manner
intended
by
management.
The
period
that
the
technologies
acquired
in
the
Trillium
Privateco
acquisition
are
available
for
use
is
estimated
at
three
years,
which
reflects
management“s
intent
about
developing
and
commercializing
the
assets.
The
amortization
method
and
amortization
period
of
an
intangible
asset
with
a
finite
life
is
reviewed
at
least
annually.
Changes
in
the
expected
useful
life
or
the
expected
pattern
of
consumption
of
future
economic
benefits
embodied
in
the
asset
are
accounted
for
by
changing
the
amortization
period
or
method,
as
appropriate,
and
are
treated
as
changes
in
accounting
estimates.
The
amortization
expense
on
intangible
assets
with
finite
lives
is
recognized
in
research
and
development
expenses.
F-34
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015 and 2014
Amounts
in
Canadian
Dollars
3.
(f)
Significant accounting policies (continued)
Impairment
Financial assets
A
financial
asset
not
carried
at
fair
value
through
profit
or
loss
is
assessed
at
each
reporting
date
to
determine
whether
there
is
objective
evidence
that
it
is
impaired.
A
financial
asset
is
impaired
if
objective
evidence
indicates
that
a
loss
event
has
occurred
after
the
initial
recognition
of
the
asset,
and
that
the
loss
event
had
a
negative
effect
on
the
estimated
future
cash
flows
of
that
asset
that
can
be
estimated
reliably.
An
impairment
test
is
performed,
on
an
individual
basis,
for
each
material
financial
asset.
Other
individually
non-material
financial
assets
are
tested
as
groups
of
financial
assets
with
similar
risk
characteristics.
Impairment
losses
are
recognized
in
profit
or
loss.
An
impairment
loss
in
respect
of
a
financial
asset
measured
at
amortized
cost
is
calculated
as
the
difference
between
its
carrying
amount
and
the
present
value
of
the
estimated
future
cash
flows
discounted
at
the
asset“s
original
effective
interest
rate.
Losses
are
recognized
in
profit
or
loss
and
reflected
in
an
allowance
account
against
the
respective
financial
asset.
Interest
on
the
impaired
asset
continues
to
be
recognized
through
the
unwinding
of
the
discount.
When
a
subsequent
event
causes
the
amount
of
impairment
loss
to
decrease,
the
decrease
in
impairment
loss
is
reversed
through
profit
or
loss.
Non-financial assets
The
carrying
amounts
of
the
Company“s
non-financial
assets
are
reviewed
at
each
reporting
date
to
determine
whether
there
is
any
indication
of
impairment.
If
such
an
indication
exists,
the
recoverable
amount
is
estimated.
The
recoverable
amount
of
an
asset
or
a
cash-generating
unit
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
or
cash-generating
unit.
For
the
purpose
of
impairment
testing,
assets
that
cannot
be
tested
individually
are
grouped
together
into
the
smallest
group
of
assets
that
generate
cash
inflows
from
continuing
use
that
are
largely
independent
of
cash
inflows
of
other
assets
or
cash-generating
units.
An
impairment
loss
is
recognized
if
the
carrying
amount
of
an
asset
or
its
related
cash-generating
unit
exceeds
its
estimated
recoverable
amount.
Impairment
losses
for
intangible
assets
are
recognized
in
research
and
development
expenses.
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.
(g)
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
assessed
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
on
provisions
is
recognized
in
finance
costs.
A
provision
for
onerous
contracts
is
recognized
when
the
unavoidable
costs
of
meeting
the
obligations
under
the
contract
exceed
the
economic
benefits
expected
to
be
received
under
it.
The
provision
is
measured
at
the
present
value
of
the
lower
of
the
expected
cost
of
terminating
the
contract
and
the
expected
net
cost
of
continuing
with
the
contract.
(h)
Government assistance
Government
assistance
relating
to
research
and
development
is
recorded
as
a
reduction
of
expenses
when
the
related
expenditures
are
incurred.
F-35
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015 and 2014
Amounts
in
Canadian
Dollars
3.
(i)
Significant accounting policies (continued)
Share-based compensation
The
grant-date
fair
value
of
share-based
payment
awards
granted
to
employees
is
recognized
as
personnel
costs,
with
a
corresponding
increase
in
contributed
surplus,
over
the
period
that
the
employees
unconditionally
become
entitled
to
the
awards.
The
amount
recognized
as
an
expense
is
adjusted
to
reflect
the
number
of
awards
for
which
the
related
service
and
non-market
vesting
conditions
are
expected
to
be
met,
such
that
the
amount
ultimately
recognized
as
an
expense
is
based
on
the
number
of
awards
that
met
the
related
service
and
non-market
performance
conditions
at
the
vesting
date.
For
equity-settled
share-based
payment
transactions,
the
Company
measures
the
goods
or
services
received,
and
the
corresponding
increase
in
contributed
surplus,
directly,
at
the
fair
value
of
the
goods
or
services
received,
unless
that
fair
value
cannot
be
estimated
reliably.
If
the
Company
cannot
estimate
reliably
the
fair
value
of
the
goods
or
services
received,
it
measures
their
value
by
reference
to
the
fair
value
of
the
equity
instruments
granted.
Transactions
measured
by
reference
to
the
fair
value
of
the
equity
instruments
granted
have
their
fair
values
remeasured
at
each
vesting
and
reporting
date
until
fully
vested.
(j)
Income taxes
Deferred
tax
is
recognized
in
respect
of
temporary
differences
between
the
carrying
amounts
of
assets
and
liabilities
for
financial
reporting
purposes
and
the
amounts
used
for
taxation
purposes.
Deferred
tax
is
not
recognized
for
temporary
differences
on
the
initial
recognition
of
assets
or
liabilities
in
a
transaction
that
is
not
a
business
combination
and
that
affects
neither
accounting
nor
taxable
income
nor
loss.
Deferred
tax
assets
and
liabilities
are
offset
if
there
is
a
legally
enforceable
right
to
offset
current
tax
assets
and
liabilities,
and
they
relate
to
income
taxes
levied
by
the
same
tax
authority
on
the
same
taxable
entity.
Deferred
tax
is
measured
at
the
tax
rates
that
are
expected
to
be
applied
to
temporary
differences
when
they
reverse,
based
on
the
laws
that
have
been
enacted
or
substantively
enacted
at
the
reporting
date.
A
deferred
tax
asset
is
recognized
for
unused
tax
losses,
tax
credits
and
deductible
temporary
differences,
to
the
extent
that
it
is
probable
that
future
taxable
profits
will
be
available
against
which
they
can
be
utilized.
Investment
tax
credits
earned
from
scientific
research
and
development
expenditures
are
recorded
when
collectability
is
reasonably
assured.
(k)
Loss per share
Basic
loss
per
share
is
computed
by
dividing
the
net
loss
available
to
common
shareholders
by
the
weighted
average
number
of
shares
outstanding
during
the
reporting
period.
Diluted
loss
per
share
is
computed
similar
to
basic
loss
per
share
except
that
the
weighted
average
number
of
shares
outstanding
are
increased
to
include
additional
shares
for
the
assumed
exercise
of
stock
options,
deferred
share
units,
warrants,
and
conversion
of
preferred
shares,
if
dilutive.
The
number
of
additional
shares
is
calculated
by
assuming
that
outstanding
preferred
shares
would
convert
to
common
shares
and
that
outstanding
stock
options
and
warrants
were
exercised
and
that
the
proceeds
from
such
exercises
were
used
to
acquire
common
stock
at
the
average
market
price
during
the
reporting
period.
The
inclusion
of
the
Company“s
stock
options,
deferred
share
units,
warrants
and
preferred
shares
in
the
computation
of
diluted
loss
per
share
has
an
anti-dilutive
effect
on
the
loss
per
share
and
therefore,
they
have
been
excluded
from
the
calculation
of
diluted
loss
per
share.
(l)
New standards and interpretations not yet effective
IFRS
9
Financial Instruments
In
October
2010,
the
IASB
published
amendments
to
IFRS
9
Financial Instruments (“IFRS
9”),
which
provides
added
guidance
on
the
classification
and
measurement
of
financial
liabilities.
In
July
2014,
the
IASB
issued
its
final
version
of
IFRS
9,
which
completes
the
classification
and
measurement,
impairment
and
hedge
accounting
phases
of
the
IASB’s
project
to
replace
IAS
39.
The
final
standard
is
mandatorily
effective
for
annual
periods
beginning
on
or
after
January
1,
2018,
with
earlier
application
permitted.
The
Company
is
reviewing
the
standard
to
determine
the
impact
that
the
adoption
of
this
standard
may
have
on
the
consolidated
financial
statements.
F-36
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015 and 2014
Amounts
in
Canadian
Dollars
3.
Significant accounting policies (continued)
IFRS
15
Revenue from Contracts with Customers
In
May
2014,
the
IASB
issued
IFRS
15
Revenue from Contracts with Customers (“IFRS
15”),
which
covers
principles
for
reporting
about
the
nature,
amount,
timing
and
uncertainty
of
revenue
and
cash
flows
arising
from
contracts
with
customers.
IFRS
15
is
effective
for
annual
periods
beginning
on
or
after
January
1,
2018.
Entities
will
transition
following
either
a
full
or
modified
retrospective
approach.
The
Company
is
reviewing
the
standard
to
determine
the
impact
that
the
adoption
of
this
standard
may
have
on
the
consolidated
financial
statements.
IFRS
16
Leases
In
January
2016,
the
IASB
has
issued
IFRS
16
Leases (“IFRS
16”),
its
new
leases
standard
that
requires
lessees
to
recognize
assets
and
liabilities
for
most
leases
on
their
balance
sheets.
Lessees
applying
IFRS
16
will
have
a
single
accounting
model
for
all
leases,
with
certain
exemptions.
Lessor
accounting
is
substantially
unchanged.
The
new
standard
will
be
effective
from
January
1,
2019
with
limited
early
application
permitted.
The
Company
has
not
yet
begun
the
process
of
evaluating
the
impact
of
this
standard
on
its
consolidated
financial
statements.
Other
accounting
standards
or
amendments
to
existing
accounting
standards
that
have
been
issued,
but
have
future
effective
dates,
are
either
not
applicable
or
are
not
expected
to
have
a
significant
impact
on
the
Company’s
consolidated
financial
statements.
The
Company
assesses
the
impact
of
adoption
of
future
standards
on
its
consolidated
financial
statements,
but
does
not
anticipate
significant
changes
in
2016.
4.
Amounts receivable
Government
receivable
Other
amounts
receivable
December 31,
2015
$
December
31,
2014
$
957,951
16,871
974,822
344,416
-
344,416
F-37
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015 and 2014
Amounts
in
Canadian
Dollars
5.
Property and equipment
Cost
Balance,
December
31,
2013
Additions
Balance,
December
31,
2014
Additions
Balance,
December
31,
2015
Accumulated depreciation
Balance,
December
31,
2013
Depreciation
Balance,
December
31,
2014
Depreciation
Balance
December
31,
2015
Net carrying amounts
December
31,
2014
December
31,
2015
6.
Intangible assets
Cost
Balance,
December
31,
2013
Disposals
Balance
December
31,
2014
and
2015
Accumulated amortization
Balance,
December
31,
2013
Amortization
Disposals
Balance,
December
31,
2014
Amortization
Balance,
December
31,
2015
Net carrying amounts
December
31,
2014
December
31,
2015
Lab
equipment
$
Computer
equipment
and
software
$
Office
equipment
and
leaseholds
$
111,025
141,051
252,076
457,796
709,872
14,723
33,366
48,089
86,577
134,666
203,987
575,206
18,111
21,917
40,028
57,180
97,208
14,004
9,554
23,558
26,679
50,237
16,470
46,971
9,381
10,635
20,016
265,406
285,422
783
4,288
5,071
5,138
10,209
14,945
275,213
Total
$
138,517
173,603
312,120
780,382
1,092,502
29,510
47,208
76,718
118,394
195,112
235,402
897,390
Total
$
2,103,751
(1,085,714)
1,018,037
630,279
610,776
(655,951)
585,104
339,348
924,452
432,933
93,585
As
at
December
31,
2015,
intangible
assets
were
comprised
of
licensed
patent
rights
related
to
the
SIRPαFc
program
acquired
in
2013
in
the
amount
of
$1,018,037.
The
Company
returned
rights
related
to
tigecycline
and
recorded
an
impairment
loss
of
$429,763
in
the
second
quarter
of
2014.
F-38
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015 and 2014
Amounts
in
Canadian
Dollars
7.
Accounts payable and accrued liabilities
Trade
and
other
payables
Accrued
liabilities
Due
to
related
parties
(note
15)
December 31,
2015
$
December
31,
2014
$
1,401,462
1,728,636
103,651
3,233,749
1,604,533
1,585,823
58,628
3,248,984
8.
(a)
(b)
(c)
Amounts
due
to
related
parties
represent
expense
reimbursements,
accrued
vacation
payable
and
directors’
fees
payable.
Non-current liabilities
Trillium
is
indebted
to
the
Federal
Economic
Development
Agency
for
Southern
Ontario
under
a
non-interest
bearing
contribution
agreement
and
is
making
monthly
repayments
of
$9,586
through
November
2019.
As
at
December
31,
2015
and
2014,
the
balance
repayable
was
$440,935
and
$555,968,
respectively.
The
loan
payable
was
discounted
using
an
estimated
market
interest
rate
of
15%.
Interest
expense
accretes
on
the
discounted
loan
amount
until
it
reaches
its
face
value
at
maturity.
As
at
December
31,
2015
and
2014,
the
Company
has
a
deferred
lease
inducement
of
$348,205
and
nil,
respectively,
for
a
new
facility
lease.
The
inducement
benefit
will
be
recognized
over
the
expected
term
of
the
lease.
As
at
December
31,
2015
and
2014,
the
Company
has
a
long-term
liability
of
$60,109
and
$69,941,
respectively,
related
to
certain
discontinued
technologies.
This
liability
has
been
discounted
using
an
estimated
market
interest
rate
of
15%
and
interest
expense
is
accreting.
The
current
portions
of
the
loan
payable
and
long-term
liability
are
included
in
other
current
liabilities
in
the
statements
of
financial
position.
9.
Share capital
(a)
Authorized
The
authorized
share
capital
of
the
Company
consists
of
an
unlimited
number
of
common
shares,
Class
B
shares
and
First
Preferred
Shares,
in
each
case
without
nominal
or
par
value.
Common
shares
are
voting
and
may
receive
dividends
as
declared
at
the
discretion
of
the
Board
of
Directors.
Class
B
shares
are
non-voting
and
convertible
to
common
shares
at
the
holder’s
discretion,
on
a
one-for-one
basis.
Upon
dissolution
or
wind-up
of
the
Company,
Class
B
shares
participate
rateably
with
the
common
shares
in
the
distribution
of
the
Company’s
assets.
Preferred
shares
have
voting
rights
as
decided
upon
by
the
Board
of
Directors
at
the
time
of
grant.
Upon
dissolution
or
wind-up
of
the
Company,
First
Preferred
Shares
are
entitled
to
priority
over
common
and
Class
B
shares.
The
Company
has
Series
I
First
Preferred
Shares
that
are
non-voting,
may
receive
dividends
as
declared
at
the
discretion
of
the
Board
of
Directors,
and
are
convertible
to
common
shares
at
the
holder’s
discretion,
on
the
basis
of
30
Series
I
First
Preferred
Shares
for
one
common
share.
The
Company
has
Series
II
First
Preferred
Shares
that
are
non-voting,
may
receive
dividends
as
declared
at
the
discretion
of
the
Board
of
Directors,
and
are
convertible
to
common
shares
at
the
holder’s
discretion,
on
the
basis
of
one
Series
II
First
Preferred
Share
for
one
common
share.
Holders
may
not
convert
Series
I
or
Series
II
Non-Voting
Convertible
First
Preferred
Shares
into
common
shares
if,
after
giving
effect
to
the
exercise
of
conversion,
the
holder
and
its
joint
actors
would
have
beneficial
ownership
or
direction
or
control
over
common
shares
in
excess
of
4.99%
of
the
then
outstanding
common
shares.
This
limit
may
be
raised
at
the
option
of
the
holder
on
61
days’
prior
written
notice:
(i)
up
to
9.99%,
(ii)
up
to
19.99%,
subject
to
clearance
of
a
personal
information
form
submitted
by
the
holder
to
the
Toronto
Stock
Exchange,
and
(iii)
above
19.99%,
subject
to
approval
by
the
Toronto
Stock
Exchange
and
shareholder
approval.
F-39
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015 and 2014
Amounts
in
Canadian
Dollars
9.
Share capital (continued)
(b)
Share capital issued – year ended December 31, 2015
On
April
7,
2015,
the
Company
completed
an
underwritten
public
offering
of
common
shares
and
non-voting
convertible
preferred
shares
in
the
United
States.
In
the
offering,
Trillium
sold
1,750,754
common
shares
and
1,077,605
Series
II
Non-Voting
Convertible
First
Preferred
Shares
at
a
price
of
U.S.
$19.50
per
share,
including
228,359
common
shares
sold
pursuant
to
the
full
exercise
of
the
underwriters’
option
to
purchase
additional
common
shares.
The
gross
proceeds
to
Trillium
from
this
offering
were
$68,875,067
(U.S.
$55,153,000)
before
deducting
offering
expenses
of
$4,913,443.
During
the
year
ended
December
31,
2015,
1,087,603
common
shares
were
issued
on
the
exercise
of
32,628,425
warrants
for
proceeds
of
$9,515,154
and
6,666
stock
options
were
exercised
for
proceeds
of
$49,995.
During
the
year
ended
December
31,
2015,
15,716,110
Series
I
First
Preferred
Shares
were
converted
into
523,870
common
shares.
Share capital issued – year ended December 31, 2014
On
November
14,
2014,
the
Company
consolidated
its
outstanding
common
shares
issuing
one
post-consolidated
share
for
each
30
pre-consolidated
shares.
All
references
in
these
consolidated
financial
statements
and
notes
to
the
number
of
common
shares,
deferred
share
units
and
stock
options
have
been
adjusted
to
the
post-consolidation
amounts.
During
the
year
ended
December
31,
2014,
2,596,251
warrants
were
exercised
for
86,540
common
shares
and
for
proceeds
of
$946,813
and
2,614
stock
options
were
exercised
for
proceeds
of
$19,600.
Also,
909,091
warrants
issued
in
March
2011
expired
unexercised.
During
the
year
ended
December
31,
2014,
8,390,476
Series
I
First
Preferred
Shares
were
converted
into
279,682
common
shares.
(c)
Weighted average number of common shares
The
weighted
average
number
of
common
shares
outstanding
for
the
purposes
of
calculating
earnings
per
share
have
been
adjusted
for
2015
and
2014
to
the
post-consolidated
number.
The
post-consolidated
weighted
average
number
of
common
shares
outstanding
for
the
years
ended
December
31,
2015
and
2014
were
6,641,161
and
4,202,900,
respectively.
The
Company
has
not
adjusted
its
weighted
average
number
of
common
shares
outstanding
in
the
calculation
of
diluted
loss
per
share,
as
any
adjustment
would
be
antidilutive.
F-40
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015 and 2014
Amounts
in
Canadian
Dollars
9.
Share capital (continued)
(d)
Warrants
All
warrants
were
exercisable
on
issuance.
As
a
result
of
the
November
14,
2014
common
share
consolidation,
the
ratio
of
the
number
of
warrants
exercisable
for
one
common
share
was
adjusted
from
one
warrant
for
each
common
share
to
30
warrants
for
each
common
share.
The
number
of
warrants
outstanding
was
not
adjusted.
The
following
table
shows
the
number
of
warrants
outstanding,
the
exercise
prices,
and
the
number
of
common
shares
issuable
on
exercise
of
the
warrants
and
the
exercise
price
per
common
share
for
30
warrants
as
at
December
31,
2015:
Expiry
dates
March
15,
2018
March
27,
2018
December
13,
2018
Number
of
warrants
Exercise
price
Number
of
common
shares
issuable
on
exercise
Exercise
price
per
common
share
(30
warrants)
9,213,780
$
300,000
$
96,582,576
$
106,096,356
0.40
0.40
0.28
307,126
$
10,000
$
3,219,419
$
3,536,545
12.00
12.00
8.40
Changes
in
the
number
of
warrants
outstanding
during
the
years
ended
December
31
were
as
follows:
Balance,
beginning
of
year
Exercised
Expired
Balance,
end
of
year
(e)
Stock option plan
2015
Weighted
average
exercise
price
Number
of
warrants
Number
of
warrants
138,724,781
$
(32,628,425)
-
0.29
0.29
-
142,230,123
$
(2,596,251)
(909,091)
106,096,356
$
0.29
138,724,781
$
2014
Weighted
average
exercise
price
0.30
0.36
1.60
0.29
The
Company
has
a
10%
rolling
stock
option
plan
(the
“2014
Stock
Option
Plan”)
that
was
approved
by
the
Company’s
shareholders
at
its
annual
general
meeting
held
on
May
27,
2014.
Pursuant
to
the
2014
Stock
Option
Plan,
the
Company
may
grant
stock
options
to
purchase
up
to
an
aggregate
of
10%
of
the
Company’s
issued
and
outstanding
common
shares
plus
10%
of
the
total
number
of
common
shares
into
which
the
outstanding
Series
I
First
Preferred
Shares
may
be
converted.
Options
granted
under
the
2014
Stock
Option
plan
are
equity-settled,
have
a
vesting
period
of
four
years
and
have
a
maximum
term
of
ten
years.
As
at
December
31,
2015,
the
Company
was
entitled
to
issue
an
additional
87,048
stock
options
under
the
2014
Stock
Option
Plan.
F-41
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015 and 2014
Amounts
in
Canadian
Dollars
9.
Share capital (continued)
Changes
in
the
number
of
options
outstanding
during
the
years
ended
December
31
were
as
follows:
2015
Weighted
average
exercise
price
9.76
21.40
7.50
30.00
14.07
10.94
2014
Weighted
average
exercise
price
9.94
9.78
7.50
16.58
9.76
Number
of
options
97,372
$
499,883
(2,614)
(4,500)
590,141
$
219,470
$
10.13
Number
of
options
590,141
$
347,359
(6,666)
(3,000)
927,834
$
333,927
$
Balance,
beginning
of
year
Granted
Exercised
Cancelled/forfeited
Balance,
end
of
year
Options
exercisable,
end
of
year
The
following
table
reflects
stock
options
outstanding
at
December
31,
2015:
Stock
options
outstanding
Stock
options
exercisable
Exercise
prices
Number
outstanding
Weighted
average
remaining
contractual
life
(in
years)
Weighted
average
exercise
price
Exercisable
number
Weighted
average
exercise
price
$7.50
$8.34
$10.35
$15.30
$18.90
$19.33
$23.44
$28.05
$28.52
$30.00
74,841
215,758
264,127
6,666
13,332
220,859
85,000
29,000
12,500
5,751
927,834
7.3
$
8.4
$
8.3
$
8.1
$
8.2
$
9.9
$
9.3
$
9.4
$
9.4
$
0.6
$
8.7
$
F-42
7.50
8.34
10.35
15.30
18.90
19.33
23.44
28.05
28.52
30.00
14.07
49,903
$
107,878
$
132,064
$
3,333
$
6,666
$
-
$
28,332
$
-
$
-
$
5,751
$
333,927
$
7.50
8.34
10.35
15.30
18.90
19.33
23.44
28.05
28.52
30.00
10.94
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015 and 2014
Amounts
in
Canadian
Dollars
9.
Share capital (continued)
Share-based
compensation
expense
was
determined
based
on
the
fair
value
of
the
options
at
the
date
of
measurement
using
the
Black-Scholes
option
pricing
model
with
the
weighted
average
assumptions
for
the
years
ended
December
31
as
follows:
Expected
option
life
Risk-free
interest
rate
Dividend
yield
Expected
volatility
2015
6 years
1.2%
0%
83%
2014
6
years
1.7%
0%
90%
The
Black-Scholes
option
pricing
model
was
developed
to
estimate
the
fair
value
of
freely
tradable,
fully
transferable
options
without
vesting
restrictions,
which
significantly
differs
from
the
Company“s
stock
option
awards.
This
model
also
requires
highly
subjective
assumptions,
including
future
stock
price
volatility
and
average
option
life,
which
significantly
affect
the
calculated
values.
The
risk-free
interest
rate
is
based
on
the
implied
yield
on
a
Government
of
Canada
zero-coupon
issue
with
a
remaining
term
equal
to
the
expected
term
of
the
option.
Expected
volatility
was
determined
using
a
combination
of
historical
volatilities
of
a
peer
group
of
biotechnology
companies
and
the
Company’s
own
historical
volatility.
The
life
of
the
options
is
estimated
considering
the
vesting
period
at
the
grant
date,
the
life
of
the
option
and
the
average
length
of
time
similar
grants
have
remained
outstanding
in
the
past.
The
forfeiture
rate
is
an
estimate
based
on
historical
evidence
and
future
expectations.
The
dividend
yield
was
excluded
from
the
calculation
since
it
is
the
present
policy
of
the
Company
to
retain
all
earnings
to
finance
operations
and
future
growth.
For
the
years
ended
December
31,
2015
and
2014,
the
Company
issued
347,359
and
499,883
stock
options
with
a
fair
value
of
$5,227,499
and
$3,580,892
and
a
weighted
average
grant
date
fair
value
of
$15.05
and
$7.16,
respectively.
(f)
Deferred Share Unit Plan
The
2014
Deferred
Share
Unit
Plan
(the
“2014
DSU
Plan”)
promotes
greater
alignment
of
long-term
interests
between
non-executive
directors
and
executive
officers
of
the
Company
and
its
shareholders
through
the
issuance
of
deferred
share
units
(“DSUs”).
Since
the
value
of
a
DSU
increases
or
decreases
with
the
market
price
of
the
common
shares,
DSUs
reflect
a
philosophy
of
aligning
the
interests
of
directors
and
executive
officers
with
those
of
the
shareholders
by
tying
compensation
to
share
price
performance.
For
the
years
ended
December
31,
2015
and
2014,
a
total
of
23,011
and
28,777
DSUs
were
issued
for
payment
of
directors’
fees,
respectively.
The
Company
has
reserved
for
issuance
up
to
66,667
common
shares
under
the
2014
DSU
Plan
and
51,788
DSUs
were
outstanding
as
at
December
31,
2015.
(g)
Shareholder Rights Plan
On
October
17,
2013
the
Company’s
shareholders
adopted
a
shareholder
rights
plan
(the
“2013
Rights
Plan”)
and
approved
certain
amendments
on
May
27,
2014
(the
“Rights
Plan
Amendment”
which
together
with
the
2013
Rights
Plan
may
be
referred
to
as
the
“Rights
Plan”).
The
Rights
Plan
is
designed
to
provide
adequate
time
for
the
Board
of
Directors
and
the
shareholders
to
assess
an
unsolicited
takeover
bid
for
the
Company,
to
provide
the
Board
of
Directors
with
sufficient
time
to
explore
and
develop
alternatives
for
maximizing
shareholder
value
if
a
takeover
bid
is
made,
and
to
provide
shareholders
with
an
equal
opportunity
to
participate
in
a
takeover
bid
and
receive
full
and
fair
value
for
their
common
shares.
The
Rights
Plan
will
expire
at
the
close
of
the
Company’s
annual
meeting
of
shareholders
in
2016.
F-43
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015 and 2014
Amounts
in
Canadian
Dollars
9.
Share capital (continued)
The
rights
issued
under
the
Rights
Plan
initially
attach
to
and
trade
with
the
common
shares
and
no
separate
certificates
will
be
issued
unless
an
event
triggering
these
rights
occurs.
The
rights
will
become
exercisable
only
when
a
person,
including
any
party
related
to
it,
acquires
or
attempts
to
acquire
20%
or
more
of
the
outstanding
common
shares
without
complying
with
the
“Permitted
Bid”
provisions
of
the
Rights
Plan
or
without
approval
of
the
Board
of
Directors.
Should
such
an
acquisition
occur
or
be
announced,
each
right
would,
upon
exercise,
entitle
a
rights
holder,
other
than
the
acquiring
person
and
related
persons,
to
purchase
common
shares
at
an
approximate
50%
discount
to
the
market
price
at
the
time.
Under
the
Rights
Plan,
a
Permitted
Bid
is
a
bid
made
to
all
holders
of
the
common
shares
and
which
is
open
for
acceptance
for
not
less
than
60
days.
If
at
the
end
of
60
days
at
least
50%
of
the
outstanding
common
shares,
other
than
those
owned
by
the
offeror
and
certain
related
parties
have
been
tendered,
the
offeror
may
take
up
and
pay
for
the
common
shares
but
must
extend
the
bid
for
a
further
10
days
to
allow
other
shareholders
to
tender.
The
issuance
of
common
shares
upon
the
exercise
of
the
rights
is
subject
to
receipt
of
certain
regulatory
approvals.
10.
Income taxes
Income
taxes
have
not
been
recognized
in
the
consolidated
statements
of
loss
and
comprehensive
loss,
as
the
Company
has
been
incurring
losses
since
inception,
and
it
is
not
probable
that
future
taxable
profits
will
be
available
against
which
the
accumulated
tax
losses
can
be
utilized.
(a)
Unrecognized deferred tax assets
As
at
December
31,
2015
and
2014,
deferred
tax
assets
have
not
been
recognized
with
respect
to
the
following
items:
Non-capital
losses
carried
forward
Tax
credits
carryforward
Tax
basis
of
property
and
equipment
and
intangible
assets
in
excess
of
accounting
basis
Scientific
research
and
experimental
development
expenditures
Share
issue
costs
and
other
2015
$
11,750,952
3,090,833
1,577,156
5,524,225
493,476
22,436,642
2014
$
9,234,460
2,607,496
1,413,171
4,801,014
436,795
18,492,936
(b)
As
at
December
31,
2015
and
2014,
the
Company
has
available
research
and
development
expenditures
of
approximately
$20,846,000
and
$18,117,000,
respectively,
for
income
tax
purposes
which
may
be
carried
forward
indefinitely
to
reduce
future
years’
taxable
income.
As
at
December
31,
2015
and
2014,
the
Company
also
has
unclaimed
Canadian
scientific
research
and
development
tax
credits
of
$3,920,000
and
$3,293,000,
respectively,
which
are
available
to
reduce
future
taxes
payable
with
expiries
from
2017
through
2034.
The
benefit
of
these
expenditures
and
tax
credits
has
not
been
recorded
in
the
accounts.
(c)
As
at
December
31,
2015,
the
Company
has
accumulated
non-capital
losses
for
federal
and
provincial
income
tax
purposes
in
Canada
which
are
available
for
application
against
future
taxable
income.
The
benefit
of
these
losses
has
not
been
recorded
in
the
accounts.
F-44
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015 and 2014
Amounts
in
Canadian
Dollars
10.
Income taxes (continued)
The
non-capital
tax
losses
expire
as
follows:
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
(d)
The
reconciliation
of
the
Canadian
statutory
income
tax
rate
applied
to
the
net
loss
for
the
year
to
the
income
tax
recovery
is
as
follows:
Statutory
income
tax
rate
Income
tax
recovery
based
on
statutory
income
tax
rate
Investment
tax
credits
Share-based
compensation
and
other
Change
in
unrecognized
tax
assets
Income
tax
expense
11.
Research and development
Components
of
research
and
development
expenses
for
the
years
ended
December
31
were
as
follows:
Research
and
development
programs,
excluding
the
below
items
Salaries,
fees
and
short-term
benefits
Share-based
compensation
Amortization
of
intangible
assets
Impairment
of
intangible
assets
Depreciation
of
property
and
equipment
Tax
credits
F-45
Federal
$
3,213,000
6,457,000
4,659,000
4,144,000
3,736,000
1,819,000
1,387,000
2,715,000
1,971,000
5,001,000
9,241,000
44,343,000
2014
$
26.5%
(3,413,682)
(1,091,870)
657,494
3,848,058
2015
$
26.5%
(3,901,912)
(473,156)
485,009
3,899,561
9,502
-
2015
$
12,083,797
4,120,109
1,942,173
339,348
-
118,394
(553,730)
18,050,091
2014
$
5,893,030
2,311,755
1,626,824
610,776
429,763
47,208
(323,548)
10,595,808
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015 and 2014
Amounts
in
Canadian
Dollars
12.
General and administrative
Components
of
general
and
administrative
expenses
for
the
years
ended
December
31
were
as
follows:
General
and
administrative
expenses,
excluding
the
below
items
Salaries,
fees
and
short-term
benefits
DSU
units
issued
for
director
compensation
Share-based
compensation
13.
Finance income and finance costs
Finance
income
for
the
years
ended
December
31
was
as
follows:
Interest
income
Net
foreign
currency
gain
Finance
costs
for
the
years
ended
December
31
were
as
follows:
Bank
charges
Accreted
interest
Net
foreign
currency
loss
14.
Commitments and contingencies
2015
$
1,521,639
898,381
540,000
224,327
3,184,347
2015
$
488,486
6,106,703
6,595,189
2015
$
11,557
73,391
-
84,948
2014
$
1,198,181
694,849
240,000
444,430
2,577,460
2014
$
378,692
-
378,692
2014
$
7,212
69,770
10,262
87,244
As
at
December
31,
2015,
the
Company
had
capital
commitments
for
the
acquisition
of
property
and
equipment
of
approximately
$1,026,000.
As
at
December
31,
2015,
the
Company
had
obligations
to
make
future
payments,
representing
significant
research
and
development
contracts
and
other
commitments
that
are
known
and
committed
in
the
amount
of
approximately
$7,789,000.
These
contracts
include
the
clinical
research
organization
agreement
for
conducting
the
Phase
I
trial,
and
other
preclinical
and
manufacturing
activities.
The
Company
also
has
minimum
lease
payments
relating
to
operating
lease
commitments
in
the
amount
of
$266,000
over
the
next
12
months,
$955,000
from
12
to
60
months,
and
$1,289,000
thereafter.
The
Company
enters
into
research,
development
and
license
agreements
in
the
ordinary
course
of
business
where
the
Company
receives
research
services
and
rights
to
proprietary
technologies.
Milestone
and
royalty
payments
that
may
become
due
under
various
agreements
are
dependent
on,
among
other
factors,
clinical
trials,
regulatory
approvals
and
ultimately
the
successful
development
of
a
new
drug,
the
outcome
and
timing
of
which
is
uncertain.
Under
the
license
agreement
for
SIRPαFc,
the
Company
has
future
contingent
milestones
payable
of
$35,000
related
to
successful
patent
grants,
$100,000,
$200,000
and
$300,000
on
the
first
patient
dosed
in
phase
I,
II
and
III
trials
respectively,
and
regulatory
milestones
on
their
first
achievement
totalling
$5,000,000.
The
Company
is
required
to
pay
20%
of
any
sublicensing
revenues
to
the
licensors
on
the
first
$50
million
of
sublicensing
revenues,
and
pay
15%
of
any
sublicensing
revenues
to
the
licensors
after
the
first
$50
million
of
sublicensing
revenue
received.
F-46
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015 and 2014
Amounts
in
Canadian
Dollars
14.
Commitments and contingencies (continued)
The
Company
entered
into
two
agreements
with
Catalent
Pharma
Solutions
in
August
2014
pursuant
to
which
Trillium
acquired
the
right
to
use
a
proprietary
expression
system
for
the
manufacture
of
two
SIRPαFc
constructs.
Consideration
for
each
license
includes
potential
pre-marketing
approval
milestones
of
up
to
U.S.
$875,000
and
aggregate
sales
milestone
payments
of
up
to
U.S.
$28.8
million.
The
Company
periodically
enters
into
research
and
license
agreements
with
third
parties
that
include
indemnification
provisions
customary
in
the
industry.
These
guarantees
generally
require
the
Company
to
compensate
the
other
party
for
certain
damages
and
costs
incurred
as
a
result
of
claims
arising
from
research
and
development
activities
undertaken
by
or
on
behalf
of
the
Company.
In
some
cases,
the
maximum
potential
amount
of
future
payments
that
could
be
required
under
these
indemnification
provisions
could
be
unlimited.
These
indemnification
provisions
generally
survive
termination
of
the
underlying
agreement.
The
nature
of
the
indemnification
obligations
prevents
the
Company
from
making
a
reasonable
estimate
of
the
maximum
potential
amount
it
could
be
required
to
pay.
Historically,
the
Company
has
not
made
any
indemnification
payments
under
such
agreements
and
no
amount
has
been
accrued
in
the
audited
consolidated
financial
statements
with
respect
to
these
indemnification
obligations.
15.
Related parties
For
the
years
ended
December
31,
2015
and
2014,
the
key
management
personnel
of
the
Company
were
the
Board
of
Directors,
Chief
Executive
Officer,
Chief
Medical
Officer,
Chief
Scientific
Officer,
Chief
Financial
Officer
and
the
Chief
Development
Officer.
Compensation
for
key
management
personnel
of
the
Company
for
the
years
ended
December
31
was
as
follows:
Salaries,
fees
and
short-term
benefits
Share-based
compensation
Total
2015
$
2,595,536
2,433,710
5,029,246
2014
$
1,708,717
2,281,561
3,990,278
Executive
officers
and
directors
participate
in
the
2014
Stock
Option
Plan
and
the
2014
DSU
Plan,
and
officers
participate
in
the
Company’s
benefit
plans.
Directors
receive
annual
fees
for
their
services.
As
at
December
31,
2015,
the
key
management
personnel
controlled
approximately
1%
of
the
voting
shares
of
the
Company.
Under
IFRS,
the
acquisition
of
Fluorinov
Pharma
Inc.
(“Fluorinov”)
was
considered
a
related
party
transaction
as
two
Company
directors
were
determined
to
be
related
parties
of
Fluorinov
(see
Note
19).
One
Company
director
was
a
director
of
Fluorinov
and
had
an
ownership
position
in
Fluorinov
at
the
time
of
acquisition
of
less
than
2%,
and
the
second
director
was
a
director
of
an
entity
that
was
a
beneficiary
of
a
trust
that
was
a
shareholder
and
debenture
holder
of
Fluorinov.
The
two
directors
declared
their
conflict
of
interest
and
abstained
from
all
discussions
and
decisions
concerning
the
Fluorinov
acquisition.
Accordingly,
the
Company
determined
that
the
consideration
paid
on
the
acquisition
was
made
on
terms
equivalent
to
those
that
prevail
in
arm’s
length
transactions.
Outstanding
balances
with
related
parties
at
the
year-end
are
unsecured,
interest
free
and
settlement
occurs
in
cash.
There
have
been
no
guarantees
provided
or
received
for
any
related
party
receivables
or
payables.
For
the
years
ended
December
31,
2015
and
2014,
a
former
director
was
paid
consulting
fees
of
$0
and
$7,916,
respectively.
16.
Operating segment
The
Company
has
a
single
operating
segment,
the
research
and
development
therapies
for
the
treatment
of
cancer.
Substantially
all
of
the
Company’s
operations,
assets,
and
employees
are
in
Canada.
F-47
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015 and 2014
Amounts
in
Canadian
Dollars
17.
Management of capital
The
Company
defines
its
capital
as
share
capital,
warrants
and
contributed
surplus.
The
Company’s
objectives
when
managing
capital
are
to
ensure
there
are
sufficient
funds
available
to
carry
out
its
research
and
development
programs.
To
date,
these
programs
have
been
funded
primarily
through
the
sale
of
equity
securities
and
the
exercise
of
common
share
purchase
warrants.
The
Company
also
sources
non-dilutive
funding
by
accessing
grants,
government
assistance
and
tax
incentives,
and
through
partnerships
with
corporations
and
research
institutions.
The
Company
uses
budgets
and
purchasing
controls
to
manage
its
costs.
The
Company
is
not
exposed
to
any
externally
imposed
capital
requirements.
18.
Financial instruments
Fair value
IFRS
13
Fair Value Measurement provides
a
hierarchy
of
valuation
techniques
based
on
whether
the
inputs
to
those
valuation
techniques
are
observable
or
unobservable.
Observable
inputs
are
those
which
reflect
market
data
obtained
from
independent
sources,
while
unobservable
inputs
reflect
the
Company’s
assumptions
with
respect
to
how
market
participants
would
price
an
asset
or
liability.
These
two
inputs
used
to
measure
fair
value
fall
into
the
following
three
different
levels
of
the
fair
value
hierarchy:
Level
1
Level
2
Level
3
Quoted
prices
in
active
markets
for
identical
instruments
that
are
observable.
Quoted
prices
in
active
markets
for
similar
instruments;
inputs
other
than
quoted
prices
that
are
observable
and
derived
from
or
corroborated
by
observable
market
data.
Valuations
derived
from
valuation
techniques
in
which
one
or
more
significant
inputs
are
unobservable.
The
hierarchy
requires
the
use
of
observable
market
data
when
available.
The
Company
has
classified
cash
as
Level
1.
The
loan
payable
has
been
classified
as
Level
2.
Cash,
amounts
receivable,
accounts
payable
and
accrued
liabilities,
and
other
current
liabilities,
due
within
one
year,
are
all
short-term
in
nature
and,
as
such,
their
carrying
values
approximate
fair
values.
The
fair
value
of
the
non-current
loan
payable
is
estimated
by
discounting
the
expected
future
cash
flows
at
the
cost
of
money
to
the
Company,
which
is
equal
to
its
carrying
value.
Risks
The
Company
has
exposure
to
credit
risk,
liquidity
risk,
interest
rate
risk
and
currency
risk.
The
Company’s
Board
of
Directors
has
overall
responsibility
for
the
establishment
and
oversight
of
the
Company’s
risk
management
framework.
The
Audit
Committee
of
the
Board
is
responsible
for
reviewing
the
Company’s
risk
management
policies.
(a)
Credit risk
Credit
risk
is
the
risk
of
financial
loss
to
the
Company
if
a
counterparty
to
a
financial
instrument
fails
to
meet
its
contractual
obligations,
and
arises
principally
from
the
Company’s
cash
and
amounts
receivable.
The
carrying
amount
of
these
financial
assets
represents
the
maximum
credit
exposure.
The
Company
follows
an
investment
policy
to
mitigate
against
the
deterioration
of
principal
and
to
enhance
the
Company’s
ability
to
meet
its
liquidity
needs.
Cash
is
on
deposit
with
major
Canadian
chartered
banks
and
the
Company
invests
in
high
grade
short-term
instruments.
Amounts
receivable
are
primarily
comprised
of
amounts
due
from
the
federal
government.
(b)
Liquidity risk
Liquidity
risk
is
the
risk
that
the
Company
will
not
be
able
to
meet
its
financial
obligations
as
they
fall
due.
The
Company
is
a
development
stage
company
and
is
reliant
on
external
fundraising
to
support
its
operations.
Once
funds
have
been
raised,
the
Company
manages
its
liquidity
risk
by
investing
in
cash
and
short-term
instruments
to
provide
regular
cash
flow
for
current
operations.
It
also
manages
liquidity
risk
by
continuously
monitoring
actual
and
projected
cash
flows.
The
Board
of
Directors
reviews
and
approves
the
Company’s
operating
and
capital
budgets,
as
well
as
any
material
transactions
not
in
the
ordinary
course
of
business.
The
majority
of
the
Company’s
accounts
payable
and
accrued
liabilities
have
maturities
of
less
than
three
months.
F-48
TRILLIUM THERAPEUTICS INC.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2015 and 2014
Amounts
in
Canadian
Dollars
18.
(c)
Financial instruments (continued)
Interest rate risk
Interest
rate
risk
is
the
risk
that
the
fair
value
or
future
cash
flows
of
a
financial
instrument
will
fluctuate
because
of
changes
in
market
interest
rates.
The
Company
holds
its
cash
in
bank
accounts
or
high
interest
savings
accounts
which
have
a
variable
rate
of
interest.
The
Company
manages
its
interest
rate
risk
by
holding
highly
liquid
short-term
instruments
and
by
holding
its
investments
to
maturity,
where
possible.
For
the
years
ended
December
31,
2015
and
2014,
the
Company
earned
interest
income
of
$488,486
and
$378,692,
respectively.
Therefore,
a
1%
change
in
the
average
interest
rate
for
the
years
ended
December
31,
2015
and
2014,
would
have
a
net
impact
on
finance
income
of
$4,885
and
$3,787,
respectively.
(d)
Currency risk
The
Company
is
exposed
to
currency
risk
related
to
the
fluctuation
of
foreign
exchange
rates
and
the
degree
of
volatility
of
those
rates.
Currency
risk
is
limited
to
the
portion
of
the
Company’s
business
transactions
denominated
in
currencies
other
than
the
Canadian
dollar
which
are
primarily
expenses
in
US
dollars.
As
at
December
31,
2015
and
2014,
the
Company
held
US
dollar
cash
in
the
amount
of
US$44,547,591
and
US$142,558
and
had
US
dollar
denominated
accounts
payable
and
accrued
liabilities
in
the
amount
of
US$1,033,319
and
US$1,910,430,
respectively.
Therefore,
a
1%
change
in
the
foreign
exchange
rate
would
have
a
net
impact
on
finance
costs
as
at
December
31,
2015
and
2014
of
$435,143
and
$17,679,
respectively.
US
dollar
expenses
for
the
years
ended
December
31,
2015
and
2014
were
approximately
US$8,700,000
and
US$3,260,000,
respectively.
Varying
the
US
exchange
rate
for
the
years
ended
December
31,
2015
and
2014
to
reflect
a
5%
strengthening
of
the
Canadian
dollar
would
have
decreased
the
net
loss
by
approximately
$435,000
and
$163,000,
respectively,
assuming
that
all
other
variables
remained
constant.
19.
Events after the balance sheet date
On
January
26,
2016,
the
Company
acquired
all
of
the
outstanding
shares
of
Fluorinov,
a
private
oncology
company,
for
an
upfront
payment
of
$10
million
plus
up
to
$35
million
of
additional
future
payments
that
are
contingent
on
Trillium
achieving
certain
clinical
and
regulatory
milestones
with
an
existing
Fluorinov
compound.
Trillium
will
also
have
an
obligation
to
pay
royalty
payments
on
future
sales
of
such
compounds.
The
upfront
payment
was
subject
to
adjustment
based
on
the
net
working
capital
of
Fluorinov
and
other
adjustments
at
the
time
of
closing.
At
Trillium’s
discretion,
up
to
50%
of
the
future
contingent
payments
can
be
satisfied
through
the
issuance
of
common
shares
of
Trillium
provided
that
the
aggregate
number
of
common
shares
issuable
under
such
payments
will
not
exceed
1,558,447
common
shares
unless
shareholder
approval
has
first
been
obtained.
In
addition,
any
such
future
share
issuance
remains
subject
to
final
approval
from
Trillium’s
board
of
directors
and
receipt
of
any
requisite
approvals
under
the
applicable
rules
of
the
Toronto
Stock
Exchange
and
the
NASDAQ
Stock
Market.
Trillium
has
also
committed
to
use
commercially
reasonable
efforts
to
monetize
Fluorinov’s
CNS
assets
and
share
50%
of
the
net
proceeds
with
Fluorinov
shareholders.
The
acquisition
of
Fluorinov
will
be
accounted
for
as
a
business
combination
under
the
acquisition
method
of
accounting.
The
Company
will
record
the
assets
acquired
and
liabilities
assumed
at
their
fair
values
as
of
the
acquisition
date.
Due
to
the
limited
amount
of
time
since
the
acquisition
date,
the
preliminary
acquisition
valuation
for
the
business
combination
is
incomplete
at
this
time.
As
a
result,
the
Company
is
unable
to
provide
the
amounts
recognized
as
of
the
acquisition
date
for
the
major
classes
of
assets
acquired
and
liabilities
assumed.
F-49
Exhibit
Number
Description
EXHIBIT INDEX
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
4.1
4.2*
4.3*
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
Articles
of
Incorporation
dated
March
31,
2004
(incorporated
by
reference
to
Exhibit
1.1
to
the
Registration
Statement
on
Form
20-F
of
Trillium
Therapeutics
Inc.,
filed
on
August
12,
2014
(File
No.
1-36596)).
Articles
of
Amendment
dated
October
19,
2004
(incorporated
by
reference
to
Exhibit
1.2
to
the
Registration
Statement
on
Form
20-F
of
Trillium
Therapeutics
Inc.,
filed
on
August
12,
2014
(File
No.
1-36596)).
Articles
of
Amendment
dated
February
6,
2013
(incorporated
by
reference
to
Exhibit
1.3
to
the
Registration
Statement
on
Form
20-F
of
Trillium
Therapeutics
Inc.,
filed
on
August
12,
2014
(File
No.
1-36596)).
Articles
of
Continuance
dated
November
7,
2013
(incorporated
by
reference
to
Exhibit
1.4
to
the
Registration
Statement
on
Form
20-F
of
Trillium
Therapeutics
Inc.,
filed
on
August
12,
2014
(File
No.
1-36596)).
Articles
of
Amendment
dated
December
12,
2013
(incorporated
by
reference
to
Exhibit
1.5
to
the
Registration
Statement
on
Form
20-F
of
Trillium
Therapeutics
Inc.,
filed
on
August
12,
2014
(File
No.
1-36596)).
Articles
of
Amalgamation
dated
June
1,
2014
(incorporated
by
reference
to
Exhibit
1.6
to
the
Registration
Statement
on
Form
20-F
of
Trillium
Therapeutics
Inc.,
filed
on
August
12,
2014
(File
No.
1-36596)).
By-law
No.1
of
Trillium
Therapeutics
Inc.
amended
and
restated
as
of
May
27,
2014
(incorporated
by
reference
to
Exhibit
1.7
to
the
Registration
Statement
on
Form
20-F
of
Trillium
Therapeutics
Inc.,
filed
on
August
12,
2014
(File
No.
1-36596)).
Articles
of
Amendment
dated
November
14,
2014
(incorporated
by
reference
to
Exhibit
1.8
to
Amendment
No.
2
to
the
Registration
Statement
on
Form
20-F
of
Trillium
Therapeutics
Inc.,
filed
on
November
26,
2014
(File
No.
1-36596)).
Articles
of
Amalgamation
dated
January
1,
2017
(incorporated
by
reference
to
Exhibit
99.1
to
the
Report
on
6-K
of
Trillium
Therapeutics
Inc.,
furnished
on
January
6,
2017
(File
No.
1-36596)).
Amended
and
restated
License
Agreement
between
Trillium
Therapeutics
Inc.
(private),
the
University
Health
Network
and
The
Hospital
for
Sick
Children
effective
February
1,
2010
and
amended
June
1,
2012
(incorporated
by
reference
to
Exhibit
4.1
to
the
Registration
Statement
on
Form
20-
F
of
Trillium
Therapeutics
Inc.,
filed
on
August
12,
2014
(File
No.
1-36596)).
GPEx
-Derived
Cell
Line
Sale
Agreement
between
Trillium
Therapeutics
Inc.
and
Catalent
Pharma
Solutions,
LLC
dated
August
12,
2014
for
TTI-
621
(incorporated
by
reference
to
Exhibit
4.3
to
Amendment
No.
1
to
the
Registration
Statement
on
Form
20-F
of
Trillium
Therapeutics
Inc.,
filed
on
October
3,
2014
(File
No.
1-36596)).
GPEx
-Derived
Cell
Line
Sale
Agreement
between
Trillium
Therapeutics
Inc.
and
Catalent
Pharma
Solutions,
LLC
dated
August
12,
2014
for
TTI-
622
(incorporated
by
reference
to
Exhibit
4.4
to
Amendment
No.
1
to
the
Registration
Statement
on
Form
20-F
of
Trillium
Therapeutics
Inc.,
filed
on
October
3,
2014
(File
No.
1-36596)).
2014
Stock
Option
Plan
amended
and
restated
as
of
May
27,
2014
(incorporated
by
reference
to
Exhibit
4.5
to
the
Registration
Statement
on
Form
20-F
of
Trillium
Therapeutics
Inc.,
filed
on
August
12,
2014
(File
No.
1-36596)).
2016
Stock
Option
Plan
amended
and
restated
as
of
March
22,
2016
(incorporated
by
reference
to
Exhibit
99.1
to
the
Report
on
6-K
of
Trillium
Therapeutics
Inc.,
furnished
on
April
21,
2016
(File
No.
1-36596)).
2014
Equity
Deferred
Share
Unit
Plan
amended
and
restated
as
of
May
27,
2014
and
terminated
on
March
9,
2017
(incorporated
by
reference
to
Exhibit
4.6
to
the
Registration
Statement
on
Form
20-F
of
Trillium
Therapeutics
Inc.,
filed
on
August
12,
2014
(File
No.
1-36596)).
2016
Cash-Settled
Deferred
Share
Unit
Plan
dated
November
9,
2016
Warrant
Indenture
between
Stem
Cell
Therapeutics
Corp.
and
Computershare
Trust
Company
of
Canada
dated
March
15,
2013
(incorporated
by
reference
to
Exhibit
4.7
to
the
Registration
Statement
on
Form
20-F
of
Trillium
Therapeutics
Inc.,
filed
on
August
12,
2014
(File
No.
1-36596)).
Warrant
Indenture
between
Stem
Cell
Therapeutics
Corp.
and
Computershare
Trust
Company
of
Canada
dated
April
8,
2013
(incorporated
by
reference
to
Exhibit
4.8
to
the
Registration
Statement
on
Form
20-F
of
Trillium
Therapeutics
Inc.,
filed
on
August
12,
2014
(File
No.
1-36596)).
Warrant
Indenture
between
Stem
Cell
Therapeutics
Corp.
and
Computershare
Trust
Company
of
Canada
dated
December
13,
2013
(incorporated
by
reference
to
Exhibit
4.9
to
the
Registration
Statement
on
Form
20-F
of
Trillium
Therapeutics
Inc.,
filed
on
August
12,
2014
(File
No.
1-36596)).
Share
purchase
agreement
among
Trillium
Therapeutics
Inc.,
Fluorinov
and
Fluorinov
shareholders
dated
January
26,
2016
(incorporated
by
reference
to
Exhibit
99.1
to
the
Report
on
6-K
of
Trillium
Therapeutics
Inc.,
furnished
on
February
5,
2017
(File
No.
1-36596)).
4.12
12.1
12,2
13.1
13.2
15.1
15.2
Royalty
agreement
among
the
Trillium
Therapeutics
Inc.,
Fluorinov
and
Fluorinov
shareholders
dated
January
26,
2016
(incorporated
by
reference
to
Exhibit
99.2
to
the
Report
on
6-K
of
Trillium
Therapeutics
Inc.,
furnished
on
February
5,
2017
(File
No.
1-36596)).
Certification
of
President
&
Chief
Executive
Officer
pursuant
to
Rule
13a-14(a)
or
15d-14
of
the
Securities
Exchange
Act
of
1934
Certification
of
Chief
Financial
Officer
pursuant
to
Rule
13a-14(a)
or
15d-14
of
the
Securities
Exchange
Act
of
1934
Certification
of
Chief
Executive
Officer
pursuant
to
18
U.S.C.
Section
1350
Certification
of
Chief
Financial
Officer
pursuant
to
18
U.S.C.
Section
1350
Consent
of
Ernst
&
Young
LLP
Charter
of
the
Audit
Committee
of
the
Board
of
Directors
dated
March
9,
2017
*
Confidential
treatment
granted
as
to
portions
of
this
exhibit.
TRILLIUM THERAPEUTICS INC.
DEFERRED SHARE UNIT PLAN
FOR DIRECTORS AND EXECUTIVE OFFICERS
(CASH SETTLED)
Effective as of November 9, 2016
PART l - GENERAL PROVISIONS
Purpose
1.1
The
purpose
of
this
Plan
is
to
provide
an
alternative
form
of
compensation
to
satisfy
annual
and
special
bonuses
payable
to
Directors
and
Executive
Officers
and
to
satisfy
fees
that
may
be
payable
to
Directors
for
acting
as
directors
of
the
Company.
This
form
of
compensation
promotes
a
greater
alignment
of
interests
amongst
Directors
and
Executive
Officers
and
the
Company“s
shareholders.
Definitions
1.2
In
this
Plan,
Annual Board Retainer means
the
annual
retainer
paid
by
the
Company
to
a
Director,
but
does
not
include
Chair
Fees,
Committee
Fees
and
Meeting
Fees;
Applicable Withholding Taxes means
any
and
all
taxes
and
other
source
deductions
or
other
amounts
which
the
Company
is
required
by
law
to
withhold
from
any
amounts
paid
or
credited
to
the
account
of
an
Eligible
Person
under
this
Plan;
Awarded Amount has
the
meaning
set
forth
in
Section
2.1;
Board means
the
Board
of
Directors
of
the
Company;
Chair means
the
chair
of
the
Board;
Chair Fees means
the
fees
or
retainers,
other
than
Meeting
Fees,
the
Annual
Board
Retainer
and
Committee
Fees,
paid
by
the
Company
to
a
Director
for
service
as
the
Chair
and
as
chairperson
of
a
committee
of
the
Board;
Change of Control means:
(a)
any
transaction
at
any
time
and
by
whatever
means
pursuant
to
which
(A)
the
Company
goes
out
of
existence
by
any
means,
except
for
any
corporate
transaction
or
reorganization
in
which
the
proportionate
voting
power
among
holders
of
securities
of
the
entity
resulting
from
such
corporate
transaction
or
reorganization
is
substantially
the
same
as
the
proportionate
voting
power
of
such
holders
of
Company
voting
securities
immediately
prior
to
such
corporate
transaction
or
reorganization
or
(B)
any
person
or
any
group
of
two
or
more
persons
acting
jointly
or
in
concert
(other
than
the
Company,
a
wholly-owned
Subsidiary
(as
defined
in
the
Securities Act (Ontario))
of
the
Company,
an
employee
benefit
plan
of
the
Company
or
of
any
of
its
wholly-owned
Subsidiaries,
including
the
trustee
of
any
such
plan
acting
as
trustee)
hereafter
acquires
the
direct
or
indirect
“beneficial
ownership”
(as
defined
by
the
Business Corporations Act (Ontario))
of,
or
acquires
the
right
to
exercise
control
or
direction
over,
securities
of
the
Company
representing
50%
or
more
of
the
Company’s
then
issued
and
outstanding
securities
in
any
manner
whatsoever,
including,
without
limitation,
as
a
result
of
a
take-over
bid,
an
exchange
of
securities,
an
amalgamation
of
the
Company
with
any
other
entity,
an
arrangement,
a
capital
reorganization
or
any
other
business
combination
or
reorganization;
2
(b)
(c)
(d)
the
sale,
assignment
or
other
transfer
of
all
or
substantially
all
of
the
assets
of
the
Company
to
a
person
other
than
a
wholly-owned
Subsidiary
of
the
Company;
the
dissolution
or
liquidation
of
the
Company
except
in
connection
with
the
distribution
of
assets
of
the
Company
to
one
or
more
persons
which
were
wholly-owned
subsidiaries
of
the
Company
immediately
prior
to
such
event;
the
occurrence
of
a
transaction
requiring
approval
of
the
Company’s
shareholders
whereby
the
Company
is
acquired
through
consolidation,
merger,
exchange
of
securities,
purchase
of
assets,
amalgamation,
arrangement
or
otherwise
by
any
other
person
(other
than
a
short
form
amalgamation
or
exchange
of
securities
with
a
wholly-owned
subsidiary
of
the
Company);
or
(e)
the
Board
passes
a
resolution
to
the
effect
that
an
event
set
forth
in
(a),
(b),
(c)
or
(d)
above
has
occurred;
Code means
the
United
States
Internal
Revenue
Code
of
1986,
as
amended;
Committee means
the
Compensation
Committee
of
the
Board,
or
any
other
persons
designated
by
the
Board
to
perform
the
duties
contemplated
herein;
Committee Fees means
the
fees
or
retainers,
other
than
Meeting
Fees,
the
Annual
Board
Retainer
and
Chair
Fees,
paid
by
the
Company
to
a
Director
for
service
on
a
committee
of
the
Board;
Company means
Trillium
Therapeutics
Inc.
or
any
successor
thereof;
Deferred Share Unit means
a
right
granted
by
the
Company
to
an
Eligible
Person
to
receive
a
cash
payment,
evidenced
by
way
of
book-keeping
entry
in
the
books
of
the
Company,
equal
to
the
Fair
Market
Value
of
a
Share
as
of
the
applicable
determination
date;
Director means
any
Director
of
the
Company,
or
a
subsidiary
of
the
Company,
appointed
and
approved
by
the
Board
or
the
shareholders;
Director Fees means
the
aggregate
total
of
the
Annual
Board
Retainer,
Chair
Fees,
Committee
Fees,
Meeting
Fees
and
any
other
fees
payable
to
a
Director;
Eligible Person means
any
person
who
is
a
Director
or
Executive
Officer;
Executive Officer means
the
Chief
Executive
Officer,
President,
Chief
Financial
Officer
and
any
senior
officer
of
the
Company,
or
any
subsidiary
of
the
Company,
or
any
persons
acting
in
any
such
capacity
on
behalf
of
the
Company
or
subsidiary
of
the
Company;
3
Fair Market Value means
the
five-day
volume
weighted
average
trading
price,
being
the
VWAP
(as
the
term
VWAP
is
defined
in
the
TSX
Company
Manual),
as
at,
and
including,
the
relevant
determination
date
or
such
other
applicable
date
referenced
herein
provided
that
such
date
is
a
business
day
and
if
it
is
not
then
calculated
as
at
and
including
the
last
business
day
which
preceded
such
applicable
date
referenced
herein,
except
that
if
the
Shares
are
not
listed
on
the
TSX,
the
Fair
Market
Value
will
be
the
value
established
by
the
Board
based
on
the
five-day
average
closing
price
per
Share
on
any
other
public
exchange
on
which
the
Shares
are
listed
calculated
as
at,
and
including,
the
relevant
determination
date
or
such
other
applicable
date
referenced
herein
provided
that
such
date
is
a
business
day
and
if
it
is
not
then
calculated
as
at
and
including
the
last
business
day
which
proceeded
such
applicable
date
referenced
herein,
or
if
the
Shares
are
not
listed
on
any
public
exchange,
by
the
Board
based
on
its
determination
of
the
fair
value
of
a
Share;
Filing Date means
the
date
on
which
a
Redemption
Notice
is
filed
with
the
Company
by
an
Eligible
Person
following
the
occurrence
of
Terminated
Service;
Insider means
an
“insider”
as
defined
in
Section
613
of
the
TSX
Company
Manual;
Meeting Fees means
the
fees
or
retainers,
other
than
the
Annual
Board
Retainer,
Chair
Fees,
and
Committee
Fees,
paid
by
the
Company
to
a
Director
for
attending
meetings
of
the
Board
or
any
committee
of
the
Board;
Plan means
this
Deferred
Share
Unit
Plan,
as
amended
from
time
to
time;
Redemption Notice means
a
notice
filed
(or
deemed
to
be
filed)
by
an
Eligible
Person
with
the
Company
following
the
occurrence
of
Terminated
Service
to
trigger
the
redemption
of
Deferred
Share
Units
in
accordance
with
Section
3.2,
which
notice
shall
be
in
the
form
prescribed
from
time
to
time
by
the
Company;
Section 409A means
Section
409A
of
the
Code
and
any
applicable
United
States
Treasury
Regulations
and
other
binding
regulatory
guidance
thereunder;
Separation from Service of
a
US
Taxpayer
means
the
date
the
US
Taxpayer
incurs
a
separation
from
service
with
the
Company
within
the
meaning
of
U.S.
Treas.
Regs.
§
1.409A
-1(h);
Share means
a
common
share
in
the
capital
of
the
Company;
Specified Employee means
a
US
Taxpayer
who
meets
the
definition
of
“specified
employee,”
as
defined
in
Section
409A(a)(2)(B)(i)
of
the
Code;
Tax Act means
the
Income
Tax
Act
(Canada);
Terminated Service means
that
the
Eligible
Person
has
ceased
to
be
a
Director
and/or
Executive
Officer,
as
applicable,
including
through
the
termination,
voluntary
resignation,
retirement
or
death
of
such
Eligible
Person;
Total Compensation for
a
particular
Eligible
Person
means
the
aggregate
of:
(a)
the
discretionary
annual
bonus
determined
by
the
Board
for
which
Directors
or
Executive
Officers
are
eligible;
4
(b)
(c)
a
bonus,
that
is
not
an
annual
bonus,
that
may
be
awarded
to
a
Director
or
Executive
Officer
at
the
discretion
of
the
Board;
and
Director
Fees.
TSX means
the
Toronto
Stock
Exchange;
and
US Taxpayer means
an
Eligible
Person
whose
compensation
from
the
Company
is
subject
to
Section
409A.
Effective Date
1.3
This
Plan
will
become
effective
as
of
November
9,
2016.
Administration
1.4
The
Board
will,
in
its
sole
and
absolute
discretion,
but
taking
into
account
relevant
corporate,
securities
and
tax
laws:
(a)
(b)
(c)
interpret
and
administer
this
Plan;
establish,
amend
and
rescind
any
rules
and
regulations
relating
to
this
Plan;
and
make
any
other
determinations
that
the
Board
deems
necessary
or
desirable
for
the
administration
of
this
Plan.
The
Board
may
correct
any
defect
or
any
omission
or
reconcile
any
inconsistency
in
this
Plan
in
the
manner
and
to
the
extent
the
Board
deems,
in
its
sole
and
absolute
discretion,
necessary
or
desirable.
Any
decision
of
the
Board
in
the
interpretation
and
administration
of
this
Plan
will
be
final,
conclusive
and
binding
on
all
parties
concerned.
All
expenses
of
administration
of
this
Plan
will
be
borne
by
the
Company.
Delegation
1.5
The
Board
may,
to
the
extent
permitted
by
law,
delegate
any
of
its
responsibilities
under
this
Plan
and
powers
related
thereto
(including,
without
limiting
the
generality
of
the
foregoing,
those
referred
to
under
Section
1.4)
to
the
Committee
or
to
one
or
more
officers
of
the
Company
and
all
actions
taken
and
decisions
made
by
the
Committee
or
by
such
officers
in
this
regard
will
be
final,
conclusive
and
binding
on
all
parties
concerned,
including,
but
not
limited
to,
the
Company,
the
Eligible
Person,
and
their
legal
representatives.
Limitation of Liability
1.6
None
of
the
Company,
the
Board,
the
Committee
nor
any
other
person
to
whom
authority
is
delegated
under
Section
1.5
of
this
Plan
shall
be
liable
for
any
action,
omission
or
determination
made
in
good
faith
with
respect
to
this
Plan.
5
Determination of Deferred Share Units
PART 2 - AWARDS UNDER THIS PLAN
2.1
The
Board
will,
in
its
sole
and
absolute
discretion,
decide
at
the
time
of
declaring
or
awarding
any
Total
Compensation
to
any
Eligible
Person
the
amount
(the
"
Awarded Amount ")
of
the
Total
Compensation
that
will
be
satisfied
in
the
form
of
Deferred
Share
Units.
2.2
The
Board
shall
also
determine,
in
connection
with
each
grant,
the
effective
date
thereof,
the
terms
and
conditions
of
vesting,
and
such
other
terms
and
conditions
which
the
Board
considers
appropriate
to
the
award
in
question,
and
which
terms
and
conditions
need
not
be
identical
as
between
any
two
awards,
whether
or
not
contemporaneous.
Issue of Deferred Share Units
2.3
The
number
of
Deferred
Share
Units
(including
fractional
Deferred
Share
Units,
computed
to
three
digits)
to
be
credited
to
an
Eligible
Person
for
services
will
be
determined
by
dividing
the
Awarded
Amount
by
the
Fair
Market
Value
as
at
the
last
trading
day
before
the
date
the
Awarded
Amount
is
declared
by
the
Board.
Dividend Equivalents
2.4
On
any
date
on
which
a
cash
dividend
is
paid
on
Shares,
an
Eligible
Person“s
account
will
be
credited
with
the
number
of
Deferred
Share
Units
(including
fractional
Deferred
Share
Units,
computed
to
three
digits)
calculated
by:
(a)
multiplying
the
amount
of
the
dividend
per
Share
by
the
aggregate
number
of
Deferred
Share
Units
that
were
credited
to
the
Eligible
Person“s
account
as
of
the
record
date
for
payment
of
the
dividend;
and
(b)
dividing
the
amount
obtained
in
Section
2.4(a)
by
the
Fair
Market
Value
on
the
date
on
which
the
dividend
is
paid.
Eligible Person“s Account
2.5
The
Company
shall
maintain
or
cause
to
be
maintained
in
its
records
an
account
for
each
Eligible
Person
recording
at
all
times
the
number
of
Deferred
Share
Units
credited
to
the
Eligible
Person’s
account.
Upon
payment
in
satisfaction
of
Deferred
Share
Units
in
accordance
with
Part
3
of
the
Plan,
the
Eligible
Person’s
entitlement
to
receive
any
and
all
amounts
in
respect
of
Deferred
Share
Units
so
paid
shall
be
fully
discharged
and
satisfied
and
such
Deferred
Share
Units
shall
be
cancelled
and
thereupon
deleted
from
the
account
of
such
Eligible
Person.
2.6
A
written
confirmation
of
the
balance
in
each
Eligible
Person“s
account
will
be
sent
by
the
Company
to
the
Eligible
Person
upon
request
of
the
Eligible
Person.
Adjustments and Reorganizations
2.7
In
the
event
of
any
dividend
paid
in
shares,
share
subdivision,
combination
or
exchange
of
shares,
merger,
consolidation,
spin-off
or
other
distribution
of
Company
assets
to
shareholders,
or
any
other
change
in
the
capital
of
the
Company
affecting
Shares,
the
Board,
in
its
sole
and
absolute
discretion,
will
make,
with
respect
to
the
number
of
Deferred
Share
Units
outstanding
under
this
Plan,
any
proportionate
adjustments
as
it
considers
appropriate
to
reflect
that
change.
Change of Control
2.8
In
the
event
that
an
Eligible
Person
has
Terminated
Service
(other
than
as
a
result
of
termination
for
cause
or
death)
within
24
months
following
a
Change
of
Control,
all
Deferred
Share
Units
credited
to
each
Eligible
Person’s
account
shall
immediately
vest
in
full.
6
Redemption of Deferred Share Units
PART 3 - PAYMENT OF BENEFITS
3.1
Subject
to
the
provisions
of
this
Plan,
a
Deferred
Share
Unit
held
by
an
Eligible
Person
shall
be
redeemed
by
the
Company
upon
Terminated
Service
in
accordance
with
Section
3.2
or
Section
3.3,
as
applicable.
Payment of Benefits
3.2
Any
Deferred
Share
Unit
awarded
pursuant
to
this
Plan
shall
be
settled
in
cash
only
as
follows:
(a)
(b)
(c)
An
Eligible
Person
who
has
Terminated
Service
may
elect
the
date
on
which
the
Deferred
Share
Units
held
by
that
Eligible
Person
shall
be
redeemed
by
the
Company
by
filing
with
the
Chief
Financial
Officer
of
the
Company
a
Redemption
Notice
on
or
before
December
15
of
the
first
calendar
year
commencing
after
the
date
on
which
the
Eligible
Person
has
Terminated
Service.
If
the
Eligible
Person
fails
to
file
such
Redemption
Notice
on
or
before
that
December
15,
the
Eligible
Person
shall
be
deemed
to
have
filed
the
Redemption
Notice
on
that
December
15.
The
date
on
which
a
Redemption
Notice
is
filed,
or
deemed
to
be
filed,
shall
hereinafter
be
referred
to
as
the
“
Filing Date ”.
The
Company
may
defer
the
Filing
Date
to
any
other
date
if
such
deferral
is,
in
the
sole
opinion
of
the
Company,
desirable
to
ensure
compliance
with
Section
4.6.
The
cash
payment
to
which
an
Eligible
Person
shall
be
entitled
in
settlement
of
a
Deferred
Share
Unit
shall
be
equal
in
amount
to
the
product
that
results
by
multiplying:
(x)
the
number
of
Deferred
Share
Units
credited
to
the
Eligible
Person
as
at
the
date
on
which
the
Eligible
Person
has
Terminated
Service,
by
(y)
the
Fair
Market
Value
of
a
Share
as
of
the
Filing
Date,
net
of
Applicable
Withholding
Taxes.
A
cash
payment
pursuant
to
this
Section
3.2
shall
be
made
to
the
Eligible
Person
as
soon
as
reasonably
possible
following
the
Filing
Date,
but
in
any
event
not
later
than
the
date
that
is
60
days
following
the
Filing
Date;
provided,
however,
that
in
no
event
will
such
payment
be
made
later
than
December
31
of
the
first
calendar
year
commencing
after
the
Eligible
Person
has
Terminated
Service.
Upon
payment
of
such
amount,
the
Deferred
Share
Units
shall
be
cancelled
and
such
Eligible
Person
shall
have
no
further
rights
under
the
Plan.
US Taxpayers
3.3
Notwithstanding
the
foregoing
provisions
of
Section
3.2,
if
an
Eligible
Person
is
a
US
Taxpayer,
then
the
following
rules
shall
apply
relating
to
the
redemption
of
Deferred
Share
Units:
7
Deferred
Share
Units
which
become
redeemable
under
Section
3.1
shall
be
redeemed
only
upon
a
Separation
from
Service;
and
the
redemption
date
shall
be
any
date
determined
by
the
Company
to
occur
as
soon
as
reasonably
possible
(but
not
later
than
60
days)
after
the
Separation
from
Service,
except
that
if
the
US
Taxpayer
is
determined
to
be
a
Specified
Employee,
the
redemption
date
shall
be
the
first
day
of
the
seventh
month
after
the
Separation
from
Service
of
the
US
Taxpayer.
(a)
(b)
Death
3.4
In
the
event
of
the
death
of
an
Eligible
Person
prior
to
the
settlement
of
the
Deferred
Share
Units
credited
to
his
her
own
account:
(a)
(b)
all
unvested
Deferred
Share
Units
shall
automatically
vest
in
full;
and
the
Company
will,
as
soon
as
reasonably
practicable
and
any
event
not
later
than
60
days
following
the
Eligible
Person’s
death,
cause
to
be
delivered
to
the
legal
representatives
of
the
Eligible
Person,
the
cash
payment
such
Eligible
Person
would
otherwise
have
been
entitled
to
if
the
Eligible
Person
had
Terminated
Service
(which
cash
payment
shall,
for
the
avoidance
of
doubt,
be
determined
in
accordance
with
Section
3.2(b),
with
the
reference
date
for
the
purposes
of
both
subclauses
(x)
and
(y)
of
that
Section
being
the
date
of
the
Eligible
Person’s
death).
Tax Consequences
PART 4 - GENERAL
4.1
It
is
the
responsibility
of
the
Eligible
Person
to
complete
and
file
any
tax
returns
which
may
be
required
under
any
applicable
tax
laws
within
the
periods
specified
in
those
laws
as
a
result
of
the
Eligible
Person’s
participation
in
this
Plan.
The
Company
shall
not
be
responsible
for
any
tax
consequences
to
the
Eligible
Person
as
a
result
of
the
Eligible
Person’s
participation
in
this
Plan.
The
Eligible
Person
shall
remain
responsible
at
all
times
for
paying
any
federal,
provincial,
state,
local
and
foreign
income
or
employment
tax
due
with
respect
to
any
Deferred
Share
Units
awarded
to
the
Eligible
Person,
and
the
Company
shall
not
be
liable
for
any
interest
or
penalty
that
an
Eligible
Person
incurs
by
failing
to
make
timely
payments
of
tax.
Withholding Requirements
4.2
Prior
to
the
delivery
of
any
cash
pursuant
to
this
Plan,
the
Company
shall
be
required,
and
shall
have
the
power
and
the
right,
to
deduct
or
withhold
from
any
payment
to
or
for
the
benefit
of
an
Eligible
Person
any
amount
required
to
comply
with
the
applicable
provisions
of
any
federal,
provincial,
state,
local
or
foreign
law
relating
to
the
withholding
of
tax
or
the
making
of
any
other
source
deductions,
including
on
the
amount,
if
any,
included
in
the
income
of
an
Eligible
Person
and
may
adopt
and
apply
such
rules
and
regulations
that
in
its
opinion
will
ensure
that
the
Company
will
be
able
to
so
comply.
8
Tax Status
4.3
With
respect
to
any
Eligible
Participant
that
is
not
a
US
Taxpayer,
it
is
intended
that
at
all
times
this
Plan
shall
be
administered
or
operated
such
that
it
meets
the
conditions
of
Regulation
6801(d)
enacted
pursuant
to
the
Tax
Act,
or
any
successor
provisions
thereto
(“
Regulation 6801(d) ”).
Non-Transferability
4.4
Deferred
Share
Units
and
all
other
rights,
benefits
or
interests
in
this
Plan
are
non-transferable
and
may
not
be
pledged
or
assigned
or
encumbered
in
any
way
and
are
not
subject
to
attachment
or
garnishment,
except
that
if
the
Eligible
Person
dies,
the
legal
representatives
of
the
Eligible
Person
will
be
entitled
to
receive
the
amount
of
any
payment
otherwise
payable
to
the
Eligible
Person
hereunder
in
accordance
with
the
provisions
hereof.
No Right to Service
4.5
Neither
participation
in
this
Plan
nor
any
action
under
this
Plan
will
be
construed
to
give
any
Eligible
Person
a
right
to
be
retained
in
the
service
of
the
Company
or
a
right
to
receive
any
benefits
not
expressly
provided
in
this
Plan.
Compliance with Applicable Laws
4.6
Any
obligation
of
the
Company
under
this
Plan
is
subject
to
compliance
with
all
applicable
laws,
regulations,
rules,
orders
of
governmental
or
regulatory
authorities,
the
requirements
of
the
applicable
stock
exchange(s)
on
which
the
Shares
trade
and
any
applicable
policies
of
the
Company
relating
to
insider
trading
or
"blackout"
periods
in
effect
from
time
to
time.
Each
Eligible
Person
shall
comply
with
all
such
laws,
regulations,
rules,
orders
and
requirements,
and
shall
furnish
the
Company
with
any
and
all
information
and
undertakings
as
may
be
required
to
ensure
compliance
therewith.
Successors and Assigns
4.7
This
Plan
will
enure
to
the
benefit
of
and
be
binding
upon
all
successors
and
assigns
of
the
Company
and
any
Eligible
Person,
including
the
estate
of
such
Participant
and
the
executor,
liquidator,
administrator
or
trustee
of
such
estate,
or
any
receiver
or
trustee
in
bankruptcy
or
representative
of
the
Eligible
Person’s
creditors.
Plan Amendment
4.8
Subject
to
applicable
law,
this
Plan
may
be
amended
in
whole
or
in
part
at
any
time
by
the
Board
without
the
consent
of
the
Eligible
Persons
provided
that
such
amendment
shall
not
materially
adversely
impair
the
rights
of
any
Eligible
Person
with
respect
to
Deferred
Share
Units
to
which
the
Eligible
Person
is
then
entitled
under
this
Plan,
except
as
permitted
by
the
provisions
of
Section
2.7.
4.9
Shareholder
approval
will
be
required
for
any
amendments
required
to
be
approved
by
shareholders
under
applicable
law
(including
the
rules,
regulations
and
policies
of
the
applicable
stock
exchange(s)
on
which
the
Shares
trade).
9
4.10
Notwithstanding
anything
to
the
contrary
herein,
no
amendments
shall
be
made
if
such
amendments
would
cause
the
Plan
to
breach
the
requirements
for
Regulation
6801(d),
as
may
apply
to
Eligible
Persons
who
are
taxable
under
the
Tax
Act,
or
the
requirements
of
Section
409A,
as
may
apply
to
Eligible
Persons
under
the
Plan
who
are
US
Taxpayers.
Plan Termination
4.11
The
Board
may
terminate
this
Plan
at
any
time,
but
no
termination
will,
without
the
consent
of
the
Eligible
Person
or
unless
required
by
law,
adversely
affect
the
rights
of
an
Eligible
Person
with
respect
to
Deferred
Share
Units
to
which
the
Eligible
Person
is
then
entitled
under
this
Plan.
In
no
event
will
a
termination
of
this
Plan
accelerate
the
time
at
which
the
Eligible
Person
would
otherwise
be
entitled
to
receive
a
cash
payment
in
respect
of
Deferred
Share
Units
hereunder.
Governing Law
4.12
This
Plan
and
all
matters
to
which
reference
is
made
in
this
Plan
will
be
governed
by
and
construed
in
accordance
with
the
laws
of
Ontario
and
the
laws
of
Canada
applicable
therein.
The
Eligible
Persons
and
the
Company
hereby
attorn
to
the
jurisdiction
of
the
courts
of
the
Province
of
Ontario
with
respect
to
any
and
all
actions
in
relation
thereto.
Reorganization of the Company
4.13
The
existence
of
this
Plan
or
Deferred
Share
Units
will
not
affect
in
any
way
the
right
or
power
of
the
Company
or
its
shareholders
to
make
or
authorize
any
adjustment,
recapitalization,
reorganization
or
other
change
in
the
Company“s
capital
structure
or
its
business,
or
to
create
or
issue
any
bonds,
debentures,
shares
or
other
securities
of
the
Company
or
to
amend
or
modify
the
rights
and
conditions
attaching
thereto
or
to
effect
the
dissolution
or
liquidation
of
the
Company,
or
any
amalgamation,
combination,
merger
or
consolidation
involving
the
Company
or
any
sale
or
transfer
of
all
or
any
part
of
its
assets
or
business,
or
any
other
corporate
act
or
proceeding,
whether
of
a
similar
nature
or
otherwise.
No Shareholder Rights
4.14
Deferred
Share
Units
are
not
considered
to
be
Shares
or
securities
of
the
Company,
and
an
Eligible
Person
whose
account
is
credited
with
Deferred
Share
Units
will
not,
as
such,
be
entitled
to
exercise
voting
rights
or
any
other
rights
attaching
to
the
ownership
of
Shares
of
other
securities
of
the
Company,
or
be
considered
the
owner
of
Shares
by
virtue
of
such
crediting
of
Deferred
Share
Units.
No Other Benefit
4.15
The
Company
makes
no
representation
or
warranty
as
to
the
future
market
value
of
any
Shares
to
which
the
Deferred
Share
Units
relate.
No
amount
will
be
paid
to,
or
in
respect
of,
an
Eligible
Person
under
this
Plan
to
compensate
for
a
downward
fluctuation
in
the
price
of
a
Share,
nor
will
any
other
form
of
benefit
be
conferred
upon,
or
in
respect
of,
an
Eligible
Person
for
such
purpose.
Unfunded Plan
4.16
For
greater
certainty,
this
Plan
will
be
an
unfunded
plan,
including
for
tax
purposes.
Any
Eligible
Person
holding
Deferred
Share
Units
or
related
accruals
under
this
Plan
will
have
the
status
of
a
general
unsecured
creditor
of
the
Company
with
respect
to
any
relevant
rights
hereunder.
Existing Deferred Share Unit Plan
4.17
For
greater
certainty,
the
Company’s
existing
Deferred
Share
Unit
Plan
adopted
effective
May
27,
2014
(the
“
Existing Plan ”)
shall
continue
in
full
force
and
effect
until
such
Existing
Plan
is
amended
or
terminated
in
accordance
with
its
terms.
10
CERTIFICATION PURSUANT TO RULE 13a-14 OR 15d-14 OF THE
SECURITIES EXCHANGE ACT OF 1934
I,
Niclas
Stiernholm,
certify
that:
1.
2.
3.
4.
I
have
reviewed
this
annual
report
on
Form
20-F
of
Trillium
Therapeutics
Inc.;
Based
on
my
knowledge,
this
report
does
not
contain
any
untrue
statement
of
a
material
fact
or
omit
to
state
a
material
fact
necessary
to
make
the
statements
made,
in
light
of
the
circumstances
under
which
such
statements
were
made,
not
misleading
with
respect
to
the
period
covered
by
this
report;
Based
on
my
knowledge,
the
financial
statements,
and
other
financial
information
included
in
this
report,
fairly
present
in
all
material
respects
the
financial
condition,
results
of
operations
and
cash
flows
of
the
company
as
of,
and
for,
the
periods
presented
in
this
report;
The
company’s
other
certifying
officer
and
I
are
responsible
for
establishing
and
maintaining
disclosure
controls
and
procedures
(as
defined
in
Exchange
Act
Rules
13a-15(e)
and
15d-15(e))
and
internal
control
over
financial
reporting
(as
defined
in
Exchange
Act
Rules
13a-15(f)
and
15d-15(f))
for
the
company
and
have:
a)
b)
c)
d)
Designed
such
disclosure
controls
and
procedures,
or
caused
such
disclosure
controls
and
procedures
to
be
designed
under
our
supervision,
to
ensure
that
material
information
relating
to
the
company,
including
its
consolidated
subsidiaries,
is
made
known
to
us
by
others
within
those
entities,
particularly
during
the
period
in
which
this
report
is
being
prepared;
Designed
such
internal
control
over
financial
reporting,
or
caused
such
internal
control
over
financial
reporting
to
be
designed
under
our
supervision,
to
provide
reasonable
assurance
regarding
the
reliability
of
financial
reporting
and
the
preparation
of
financial
statements
for
external
purposes
in
accordance
with
generally
accepted
accounting
principles;
Evaluated
the
effectiveness
of
the
company’s
disclosure
controls
and
procedures
and
presented
in
this
report
our
conclusions
about
the
effectiveness
of
the
disclosure
controls
and
procedures,
as
of
the
end
of
the
period
covered
by
this
report
based
on
such
evaluation;
and
Disclosed
in
this
report
any
change
in
the
company’s
internal
control
over
financial
reporting
that
occurred
during
the
period
covered
by
the
annual
report
that
has
materially
affected,
or
is
reasonably
likely
to
materially
affect,
the
company’s
internal
control
over
financial
reporting;
and
5.
The
company’s
other
certifying
officer
and
I
have
disclosed,
based
on
our
most
recent
evaluation
of
internal
control
over
financial
reporting,
to
the
company’s
auditors
and
the
audit
committee
of
the
company’s
board
of
directors
(or
persons
performing
the
equivalent
function):
a)
b)
All
significant
deficiencies
and
material
weaknesses
in
the
design
or
operation
of
internal
control
over
financial
reporting
which
are
reasonably
likely
to
adversely
affect
the
company’s
ability
to
record,
process,
summarize
and
report
financial
information;
and
Any
fraud,
whether
or
not
material,
that
involves
management
or
other
employees
who
have
a
significant
role
in
the
company’s
internal
control
over
financial
reporting.
Date:
March
10,
2017
/s/
Niclas
Stiernholm
Niclas
Stiernholm
President
and
Chief
Executive
Officer
CERTIFICATION PURSUANT TO RULE 13a-14 OR 15d-14 OF THE
SECURITIES EXCHANGE ACT OF 1934
I,
James
Parsons,
certify
that:
1.
2.
3.
4.
I
have
reviewed
this
annual
report
on
Form
20-F
of
Trillium
Therapeutics
Inc.;
Based
on
my
knowledge,
this
report
does
not
contain
any
untrue
statement
of
a
material
fact
or
omit
to
state
a
material
fact
necessary
to
make
the
statements
made,
in
light
of
the
circumstances
under
which
such
statements
were
made,
not
misleading
with
respect
to
the
period
covered
by
this
report;
Based
on
my
knowledge,
the
financial
statements,
and
other
financial
information
included
in
this
report,
fairly
present
in
all
material
respects
the
financial
condition,
results
of
operations
and
cash
flows
of
the
company
as
of,
and
for,
the
periods
presented
in
this
report;
The
company’s
other
certifying
officer
and
I
are
responsible
for
establishing
and
maintaining
disclosure
controls
and
procedures
(as
defined
in
Exchange
Act
Rules
13a-15(e)
and
15d-15(e))
and
internal
control
over
financial
reporting
(as
defined
in
Exchange
Act
Rules
13a-15(f)
and
15d-15(f))
for
the
company
and
have:
a)
b)
c)
d)
Designed
such
disclosure
controls
and
procedures,
or
caused
such
disclosure
controls
and
procedures
to
be
designed
under
our
supervision,
to
ensure
that
material
information
relating
to
the
company,
including
its
consolidated
subsidiaries,
is
made
known
to
us
by
others
within
those
entities,
particularly
during
the
period
in
which
this
report
is
being
prepared;
Designed
such
internal
control
over
financial
reporting,
or
caused
such
internal
control
over
financial
reporting
to
be
designed
under
our
supervision,
to
provide
reasonable
assurance
regarding
the
reliability
of
financial
reporting
and
the
preparation
of
financial
statements
for
external
purposes
in
accordance
with
generally
accepted
accounting
principles;
Evaluated
the
effectiveness
of
the
company’s
disclosure
controls
and
procedures
and
presented
in
this
report
our
conclusions
about
the
effectiveness
of
the
disclosure
controls
and
procedures,
as
of
the
end
of
the
period
covered
by
this
report
based
on
such
evaluation;
and
Disclosed
in
this
report
any
change
in
the
company’s
internal
control
over
financial
reporting
that
occurred
during
the
period
covered
by
the
annual
report
that
has
materially
affected,
or
is
reasonably
likely
to
materially
affect,
the
company’s
internal
control
over
financial
reporting;
and
5.
The
company’s
other
certifying
officer
and
I
have
disclosed,
based
on
our
most
recent
evaluation
of
internal
control
over
financial
reporting,
to
the
company’s
auditors
and
the
audit
committee
of
the
company’s
board
of
directors
(or
persons
performing
the
equivalent
function):
a)
b)
All
significant
deficiencies
and
material
weaknesses
in
the
design
or
operation
of
internal
control
over
financial
reporting
which
are
reasonably
likely
to
adversely
affect
the
company’s
ability
to
record,
process,
summarize
and
report
financial
information;
and
Any
fraud,
whether
or
not
material,
that
involves
management
or
other
employees
who
have
a
significant
role
in
the
company’s
internal
control
over
financial
reporting.
Date:
March
10,
2017
/s/
James
Parsons
James
Parsons
Chief
Financial
Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection
with
the
annual
report
on
Form
20-F
of
Trillium
Therapeutics
Inc.
(the
“Company”)
for
the
period
ended
December
31,
2016,
as
filed
with
the
Securities
and
Exchange
Commission
on
the
date
hereof
(the
“Report”),
I,
Niclas
Stiernholm,
President
and
Chief
Executive
Officer
of
the
Company,
hereby
certify,
pursuant
to
18
U.S.C.
section
1350,
as
adopted
pursuant
to
section
906
of
the
Sarbanes-Oxley
Act
of
2002,
that,
to
the
best
of
my
knowledge:
1.
2.
The
Report
fully
complies
with
the
requirements
of
Section
13(a)
or
15(d)
of
the
Securities
Exchange
Act
of
1934;
and
The
information
contained
in
the
Report
fairly
presents,
in
all
material
respects,
the
financial
condition
and
results
of
operations
of
the
Company.
/s/
Niclas
Stiernholm
Niclas
Stiernholm
President
and
Chief
Executive
Officer
March
10,
2017
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection
with
the
annual
report
on
Form
20-F
of
Trillium
Therapeutics
Inc.
(the
“Company”)
for
the
period
ended
December
31,
2016,
as
filed
with
the
Securities
and
Exchange
Commission
on
the
date
hereof
(the
“Report”),
I,
James
Parsons,
Chief
Financial
Officer
of
the
Company,
hereby
certify,
pursuant
to
18
U.S.C.
section
1350,
as
adopted
pursuant
to
section
906
of
the
Sarbanes-Oxley
Act
of
2002,
that,
to
the
best
of
my
knowledge:
1.
2.
The
Report
fully
complies
with
the
requirements
of
Section
13(a)
or
15(d)
of
the
Securities
Exchange
Act
of
1934;
and
The
information
contained
in
the
Report
fairly
presents,
in
all
material
respects,
the
financial
condition
and
results
of
operations
of
the
Company.
/s/
James
Parsons
James
Parsons
Chief
Financial
Officer
March
10,
2017
We
consent
to
the
incorporation
by
reference
in
the
registration
statement
on
Form
F-10
File
No.
333-204551
of
Trillium
Therapeutics
Inc.
and
in
the
related
prospectus,
of
our
report
dated
March
9,
2017,
with
respect
to
the
consolidated
financial
statements
of
Trillium
Therapeutics
Inc.,
included
in
this
Annual
Report
(Form
20-F)
for
the
year
ended
December
31,
2016.
Consent
of
Independent
Registered
Public
Accounting
Firm
Toronto,
Canada
March
10,
2017
/s/
Ernst
&
Young
LLP
Chartered
Professional
Accountants
Licensed
Public
Accountants
TRILLIUM THERAPEUTICS INC.
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
Approved by the Board of Directors on March 9, 2017
POWER, AUTHORITY AND PURPOSE OF THE COMMITTEE
The
purpose
of
the
Audit
Committee
(the
“Committee”)
of
the
Board
of
Directors
(the
“Board”)
of
Trillium
Therapeutics
Inc.
(together
with
its
subsidiaries,
the
“Company”)
is
to
assist
the
Board
in:
Overseeing
the
integrity
of
the
Company’s
financial
statements
and
the
Company’s
accounting
and
financial
reporting
processes
and
financial
statement
audits.
Overseeing
the
Company’s
compliance
with
legal
and
regulatory
requirements.
Overseeing
the
qualifications
and
independence
of
the
Company’s
registered
public
accounting
firm
(independent
auditor).
Overseeing
the
performance
of
the
Company’s
independent
auditor.
Overseeing
the
design,
implementation
and
on-going
effectiveness
of
the
Company’s
systems
of
disclosure
controls
and
procedures,
risk
management
systems,
internal
control
over
financial
reporting
and
compliance
with
ethical
standards
adopted
by
the
Company.
The
operation
of
the
Committee
shall
be
subject
to
the
Bylaws
of
the
Company,
as
in
effect
from
time
to
time,
and
the
rules
and
regulations
promulgated
by
the
Ontario
Securities
Commission,
the
Toronto
Stock
Exchange,
the
U.S.
Securities
and
Exchange
Commission
(“SEC”)
and
the
NASDAQ
Stock
Market
LLC
(“NASDAQ”),
as
in
effect
from
time
to
time.
The
Committee
shall
have
the
full
power
and
authority
to
carry
out
the
duties
and
responsibilities
listed
below.
While
the
Committee
has
the
responsibilities
and
powers
set
forth
in
this
charter
(this
“Charter”),
it
is
not
the
duty
of
the
Committee
to
plan
or
conduct
audits
or
to
determine
that
the
Company’s
financial
statements
are
complete
and
accurate
and
are
in
accordance
with
generally
accepted
accounting
principles.
Management
is
responsible
for
preparing
the
Company’s
financial
statements,
and
the
Company’s
independent
auditor
is
responsible
for
auditing
those
financial
statements.
The
Committee
has
the
authority
to
undertake
the
specific
duties
and
responsibilities
listed
below
and
such
other
duties
as
the
Board
may
from
time
to
time
prescribe.
It
is
acknowledged,
however,
that
all
of
the
areas
of
oversight
listed
below
may
not
be
relevant
to
all
of
the
matters
and
tasks
that
the
Committee
may
consider
and
act
upon
from
time
to
time,
and
the
members
of
the
Committee
in
their
judgment
may
determine
the
relevance
thereof
and
the
attention
such
items
will
receive
in
any
particular
context.
The
Committee
shall
have
the
power
and
authority
to
act
independently
of
management,
conduct
investigations
into
any
matters
within
its
scope
of
responsibility,
hire
and
obtain
advice
from
its
own
outside
legal,
accounting
or
other
advisors
who
will
report
solely
to
the
Committee,
set
and
1
pay
the
compensation
for
any
advisors
employed
by
the
Committee
and
communicate
directly
with
internal
and
external
auditors.
Committee
members
and
the
Committee
Chair
shall
receive
such
remuneration
for
their
service
on
the
Committee
as
the
Board
may
determine
from
time
to
time,
on
the
recommendation
of
the
Compensation
Committee.
COMPOSITION
The
Committee
shall
be
comprised
of
a
minimum
of
three
members,
each
of
whom,
in
the
determination
of
the
Board,
satisfies
the
independence,
financial
literacy
and
experience
requirements
of
applicable
U.S.
and
Canadian
securities
laws,
rules
and
guidelines,
any
applicable
stock
exchange
requirements
or
guidelines
and
any
other
applicable
regulatory
rules.
In
particular:
1.
2.
3.
4.
5.
each
member
shall
be
(a)
an
“Independent
Director,”
as
defined
in
NASDAQ
Marketplace
Rule
5605(a)(2),
and
(b)
“independent”
within
the
meaning
of
Rule
10A-3
under
the
Securities
Exchange
Act
of
1934,
as
amended
(the
“Exchange
Act”),
and
the
determination
of
independence
will
be
affirmatively
made
by
the
Board
annually,
provided
that
the
Board
may
elect
to
take
advantage
of
any
exemption
from
such
requirements
provided
in
the
NASDAQ
rules
or
the
Exchange
Act;
each
member
shall
meet
the
independence
and
financial
literacy
requirements
set
forth
in
Canadian
National
Instrument
52-110
Audit Committees
and
such
additional
criteria
for
independence
as
the
Board
may
establish;
each
member
shall
not
have
participated
in
the
preparation
of
the
financial
statements
of
the
Company
(or
any
then
current
subsidiary
of
the
Company)
at
any
time
during
the
past
three
years;
each
member
shall
be
able
to
read
and
understand
fundamental
financial
statements
in
accordance
with
the
audit
committee
requirements
for
companies
listed
on
NASDAQ
in
NASDAQ
Marketplace
Rule
5605(c)(2)(A)(iv);
and
at
least
one
(1)
member
shall,
in
the
judgment
of
the
Board,
be
an
“audit
committee
financial
expert”
within
the
meaning
of
such
term
in
Item
407(d)
of
Regulation
S-K
of
the
SEC.
The
chairperson
of
the
Committee
(the
“Chair”)
will
be
appointed
by
the
Board
on
the
recommendation
of
the
Corporate
Governance
and
Nominating
Committee
and
will
serve
at
the
discretion
of
the
Board,
and
all
members
will
serve
at
the
pleasure
of
the
Board,
continuing
as
a
member
of
the
Committee
until
resignation
or
replacement.
The
Board
may
fill
vacancies
on
the
Committee
by
appointment,
on
the
recommendation
of
the
Corporate
Governance
and
Nominating
Committee,
from
qualified
members
of
the
Board.
The
designation
of
the
Chair
shall
occur
annually
at
the
first
meeting
of
the
Board
after
a
meeting
of
shareholders
at
which
Directors
are
elected.
If
the
Chair
is
not
so
designated,
the
Director
who
is
then
serving
as
Chair
shall
continue
as
Chair
until
his
or
her
successor
is
appointed.
2
COMMITTEE FUNCTION AND PROCESS
The
Committee
will
meet
at
least
once
each
fiscal
quarter.
The
Committee
may
establish
its
own
schedule
and
call
additional
meetings
as
it
deems
necessary
to
fulfill
its
responsibilities.
The
Committee
shall
fix
its
own
rules
of
procedure,
which
shall
be
consistent
with
the
Bylaws
of
the
Company
and
this
Charter.
A
majority
of
the
Committee
members,
but
not
less
than
two,
shall
constitute
a
quorum.
Committee
meetings
may
be
attended
in
person
or
by
telephone
or
video
conferencing
or
any
other
electronic
means
of
communication
as
permit
all
persons
participating
in
the
meeting
to
communicate
with
each
other
simultaneously
and
instantaneously.
The
Committee
may
request
that
any
directors,
officers
or
employees
of
the
Company,
or
other
persons
whose
advice
and
counsel
are
sought
by
the
Committee,
attend
any
meeting
to
provide
such
information
as
the
Committee
requests.
The
Committee
may
take
action
by
unanimous
written
consent
when
deemed
necessary
or
desirable
by
the
Committee
or
its
Chair,
subject
to
the
requirements
of
any
applicable
law,
regulation
or
rule.
Committee
members
may
raise
any
subjects
that
are
not
set
on
the
agenda
by
the
Committee
Chair.Each
regularly
scheduled
meeting
will
conclude
with
an
executive
session
of
the
Committee
absent
members
of
management.
The
Committee
will
meet
separately
with
the
Chief
Executive
Officer
and
the
Chief
Financial
Officer
at
such
times
as
it
deems
appropriate
to
review
the
financial
affairs
of
the
Company.
The
Committee
will
meet
separately
with
the
independent
auditor
and
without
management
present,
at
such
times
as
it
deems
appropriate,
but
not
less
than
quarterly,
to
fulfill
the
responsibilities
of
the
Committee
under
this
Charter.
The
independent
auditor
shall
receive
notice
of
each
meeting
of
the
Committee
and
shall
be
entitled
to
attend
and
be
heard
at
any
such
meeting
at
the
Company's
expense.
The
Committee
shall
maintain
copies
of
minutes
of
each
meeting
and
each
written
consent
to
action
taken
without
a
meeting,
reflecting
the
actions
so
authorized
or
taken
by
the
Committee.
After
approval,
the
minutes
shall
be
signed
by
the
Chair
or
Secretary
of
the
meeting
and
a
copy
of
the
minutes
and
all
consents
shall
be
placed
in
the
Company’s
minute
book.
The
Committee
will
summarize
its
examinations
and
recommendations
to
the
Board
as
may
be
appropriate,
consistent
with
this
Charter.
ROLE OF THE CHAIR
The
Chair’s
primary
role
is
to
ensure
that
the
Committee
functions
properly,
meets
its
obligations
and
responsibilities,
fulfills
its
purpose
and
that
its
organization
and
mechanisms
are
in
place
and
working
effectively.
More
specifically,
the
Chair
shall:
1.
2.
3.
chair
meetings
of
the
Committee;
in
consultation
with
the
Chair
of
the
Board,
the
members,
and
the
Chief
Financial
Officer,
set
the
agendas
for
the
meetings
of
the
Committee;
in
collaboration
with
the
Chair
of
the
Board,
the
Chief
Executive
Officer,
and
the
Chief
Financial
Officer,
ensure
that
agenda
items
for
all
Committee
meetings
are
ready
for
presentation
and
that
adequate
information
is
distributed
to
members
in
advance
of
such
3
meetings
in
order
that
members
may
properly
inform
themselves
on
matters
to
be
acted
upon;
assign
work
to
members;
act
as
liaison
and
maintain
communication
with
the
Chair
of
the
Board
and
the
Board
to
optimize
and
co-ordinate
input
from
directors,
and
to
optimize
the
effectiveness
of
the
Committee;
and
provide
leadership
to
the
Committee
with
respect
to
its
functions
as
described
in
this
Charter
and
as
otherwise
may
be
appropriate.
4.
5.
6.
DUTIES AND RESPONSIBILITIES
The
Committee
shall:
1.
2.
3.
4.
Be
responsible
for
overseeing
the
design,
implementation
and
on-going
effectiveness
of
policies
and
procedures
for
providing
reasonable
assurance
regarding
the
reliability
of
financial
reporting
and
the
preparation
of
financial
statements
for
external
purposes
in
accordance
with
generally
accepted
accounting
principles,
including
those
policies
and
procedures
that:
(i)
pertain
to
the
maintenance
of
records
that
in
reasonable
detail
accurately
and
fairly
reflect
the
transactions
and
dispositions
of
the
assets
of
the
Company;
(ii)
provide
reasonable
assurance
that
transactions
are
recorded
as
necessary
to
permit
preparation
of
financial
statements
in
accordance
with
generally
accepted
accounting
principles,
and
that
receipts
and
expenditures
of
the
Company
are
being
made
only
in
accordance
with
authorizations
of
management
and
directors
of
the
Company;
and
(iii)
provide
reasonable
assurance
regarding
prevention
or
timely
detection
of
unauthorized
acquisition,
use
or
disposition
of
the
Company’s
assets
that
could
have
a
material
effect
on
the
financial
statements.
Periodically
review
the
adequacy
and
effectiveness
of
the
Company’s
system
of
internal
control
over
financial
reporting
and
disclosure
controls
and
procedures,
by
meeting
with
the
Company’s
management,
the
independent
auditor
and
the
Chair
of
the
Disclosure
Committee
to
review
the
adequacy
and
effectiveness
of
such
controls;
and
review
before
its
release
the
disclosure
regarding
such
system
of
internal
control
and
disclosure
controls
required
to
be
contained
in
the
Company’s
periodic
filings
and
the
attestations
or
reports
by
the
independent
auditor
relating
to
such
disclosure.
Review
with
the
chief
executive
officer,
the
chief
financial
officer,
and
the
independent
auditor:
(i)
all
significant
deficiencies
and
material
weaknesses
in
the
design
or
operation
of
the
Company’s
internal
controls
that
could
adversely
affect
the
Company’s
ability
to
record,
process,
summarize
and
report
financial
information
required
to
be
disclosed
by
the
Company
in
the
reports
that
it
files
or
submits
with
applicable
securities
regulators
within
the
required
time
periods,
and
(ii)
any
fraud,
whether
or
not
material,
that
involves
management
of
the
Company
or
other
employees
who
have
a
significant
role
in
the
Company’s
internal
controls.
Be
directly
responsible,
in
its
capacity
as
a
committee
of
the
Board
and
subject
to
the
rights
of
shareholders
and
applicable
law,
for
the
selection,
nomination,
retention,
termination
and
oversight
of
the
work
of
any
independent
auditor
(including
the
resolution
of
disagreements
between
management
and
the
independent
auditor
regarding
financial
reporting)
engaged
for
the
purpose
of
preparing
or
issuing
an
audit
report
or
4
performing
other
audit,
review
or
attest
services
for
the
Company.
The
Committee
shall
recommend
to
the
Board
the
independent
auditor
to
be
nominated
for
approval
by
the
shareholders
and
the
compensation
of
the
independent
auditor.
Each
such
independent
auditor
shall
report
directly
to
the
Committee.
Pre-approve
all
audit
services
to
be
provided
to
the
Company
by
the
independent
auditor,
and
pre-approve,
or
establish
policies
and
procedures
for
the
review
and
pre-approval
of
all
permitted
non-audit
services
to
be
provided
to
the
Company
by
the
independent
auditor.
Review
and
provide
guidance
with
respect
to
the
external
audit
and
the
Company’s
relationship
with
its
independent
auditor
by
(a)
reviewing
the
independent
auditor’s
proposed
audit
plan
(including
scope,
fees
and
schedule),
approach
and
independence;
(b)
obtaining
on
a
periodic
basis,
but
no
less
frequently
than
annually,
a
formal
written
statement
from
the
independent
auditor
delineating
all
relationships
between
the
independent
auditor
and
the
Company
concerning
auditor
independence;
being
actively
engaged
in
dialogue
with
the
independent
auditor
with
respect
to
any
disclosed
relationship
or
services
with
the
Company
that
may
impact
the
objectivity
and
independence
of
the
independent
auditor,
presenting
this
statement
to
the
Board,
and
to
the
extent
there
are
relationships,
monitoring
and
investigating
them;
(c)
taking,
or
recommending
to
the
Board
to
take,
appropriate
action
to
oversee
the
independence
of
the
independent
auditor;
(d)
reviewing
any
publicly
available
inspection
report
on
the
independent
auditor
issued
by
the
Public
Company
Accounting
Oversight
Board
or
the
Canadian
Public
Accountability
Board;
(e)
discussing
with
the
Company’s
independent
auditor
the
financial
statements
and
audit
findings,
including
any
significant
adjustments,
management
judgments
and
accounting
estimates,
significant
new
accounting
policies
and
disagreements
with
management;
(f)
reviewing
with
both
management
and
the
independent
auditor
the
appropriateness
and
acceptability
of
the
Company’s
critical
accounting
policies
and
any
proposed
changes
thereto;
and
(g)
reviewing
reports
submitted
to
the
audit
committee
by
the
independent
auditor
in
accordance
with
the
applicable
regulatory
requirements.
Review
any
problems
experienced
by
the
independent
auditor
in
performing
audits.
Review
and
discuss
with
management
and
the
independent
auditor,
and
approve
the
annual
audited
financial
statements
and
quarterly
unaudited
financial
statements,
including
the
Company’s
disclosures
under
“Management’s
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operations,”
prior
to
filing
with
regulatory
authorities.
Recommend
to
the
Board
the
approval
and
filing
of
the
annual
audited
financial
statements.
Periodically
review
and
discuss
with
the
Chair
of
the
Disclosure
Committee
the
disclosures
contained
in
the
Company’s
filings
with
the
regulatory
authorities
prior
to
filing
and
the
processes
and
procedures
followed
to
ensure
the
accuracy
of
such
disclosure.
Direct
the
Company’s
independent
auditor
to
review
before
filing
with
all
regulatory
authorities
the
Company’s
interim
financial
statements,
using
professional
standards
and
procedures
for
conducting
such
reviews.
Review
all
material
written
communications
between
the
independent
auditor
and
management,
including
post
audit
or
management
letters
containing
recommendations
of
5.
6.
7.
8.
9.
10.
11.
12.
5
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
the
independent
auditor,
management’s
response
and
follow
up
with
respect
to
the
identified
weaknesses.
Review
before
release
any
press
release
including
annual
and
quarterly
results
or
forecasts.
Satisfy
itself
that
adequate
procedures
are
in
place
for
the
review
of
the
Company’s
public
disclosure
of
financial
information
extracted
or
derived
from
the
Company’s
financial
statements
(including,
without
limitation,
the
use
of
“pro
forma”
or
non-GAAP
financial
information),
other
than
the
public
dissemination
referred
to
in
the
foregoing
paragraph,
and
periodically
assess
the
adequacy
of
those
procedures.
Oversee
compliance
with
the
regulatory
requirements
for
disclosure
of
auditor’s
services
and
audit
committee
members,
member
qualifications
and
activities.
Review
and
reassess
the
adequacy
of
the
Whistleblower
Policy,
the
Auditor
Services
Pre-
Approval
Policy,
and
the
Corporate
Disclosure
and
Confidentiality
Policy
on
at
least
an
annual
basis
and
recommend
any
proposed
changes
to
the
Board
for
approval.
Review,
in
conjunction
with
counsel,
any
legal
matters
that
could
have
a
significant
impact
on
the
Company’s
financial
statements.
Engage,
as
appropriate,
outside
legal,
accounting
and
other
advisors,
with
(a)
the
authority
to
retain
such
counsel
or
other
advisors
as
the
Committee
may
deem
appropriate
in
its
sole
discretion,
and
(b)
the
sole
authority
to
determine
funding,
approve
fees
and
retention
terms
for
such
counsel
and
advisors.
Review
and
approve
in
advance
any
proposed
related-party
transactions,
and
report
any
such
transactions
to
the
Board.
Review
and
reassess
the
adequacy
of
the
Audit
Committee
charter,
structure,
processes
and
membership
requirements
on
at
least
an
annual
basis
and
recommend
any
proposed
changes
to
the
Board
for
approval.
Establish
procedures
for
the
receipt,
retention
and
treatment
of
complaints
received
by
the
Company
regarding
accounting,
internal
accounting
controls
or
auditing
matters;
and
establish
procedures
for
the
confidential,
anonymous
submission
by
employees
of
the
Company
of
concerns
regarding
questionable
accounting
or
auditing
matters.
Review,
approve
and
monitor
the
Company’s
investment
policy,
investment
portfolio,
cash
management
objectives,
and
exposure
to
market
risk.
Review
the
effectiveness
of
the
Company’s
risk
management
system
to
assure
that
material
risks
are
identified
and
appropriate
risk
management
processes
are
in
place.
Review
and
discuss
with
management
the
Company’s
major
financial
risk
exposures
and
the
steps
management
has
taken
to
monitor
and
control
such
exposures.
Review
with
management
and
the
external
auditor
the
presentation
and
impact
of
significant
risks
and
uncertainties
associated
with
the
Company’s
business,
all
alternative
treatments
of
financial
information
with
generally
accepted
accounting
principles
that
have
been
discussed
with
management,
the
material
assumptions
made
by
management
relating
to
them
and
their
effect
on
the
Company’s
financial
statements.
26.
Periodically
review
the
Company’s
practices
to
maintain
the
security
of
its
information
technology
systems.
6
27.
28.
29.
30.
31.
32.
33.
34.
Ensure
the
regular
rotation
of
the
lead
audit
partner,
the
concurring
partner
and
other
audit
partners
engaged
in
the
Company’s
annual
audit
to
the
extent
required
by
applicable
law.
Perform
an
evaluation
of
its
performance
at
least
annually
to
determine
whether
it
is
functioning
effectively.
Establish,
or
review
and
approve,
in
accordance
with
applicable
law,
hiring
policies
for
partners,
employees
or
former
partners
and
employees
of
the
present
and
former
independent
auditor
and
oversee
the
hiring
of
any
personnel
from
the
independent
auditor
into
positions
within
the
Company.
Obtain
assurance
from
the
independent
auditor
that
disclosure
to
the
Committee
is
not
required
pursuant
to
the
provisions
of
the
Exchange
Act
regarding
the
discovery
of
illegal
acts
by
the
independent
auditor.
Review
management’s
processes
in
place
to
prevent
and
detect
fraud.
Review
policies
and
practices
with
respect
to
off-balance
sheet
transactions
and
trading
and
hedging
activities,
and
consider
the
results
of
any
review
of
these
areas
by
the
independent
auditor.
Review
with
the
chief
executive
officer
and
the
chief
financial
officer
their
certifications
required
to
be
included
in
periodic
reports
filed
with
securities
regulators.
Perform
any
other
activities
consistent
with
this
Charter,
the
Company’s
bylaws
and
governing
laws
that
the
Board
or
the
Committee
determines
are
necessary
or
appropriate.
DELEGATION OF AUTHORITY
The
Committee
may,
in
accordance
with
law,
delegate
to
one
or
more
independent
members
of
the
Committee
the
authority
to
pre-approve
audit
and
permitted
non-audit
services,
provided
that
such
pre-approval
decision
is
presented
to
the
full
Committee
at
its
first
scheduled
meeting
following
such
pre-approval.
RESOURCES AND ADDITIONAL AUTHORITY OF THE COMMITTEE
The
Committee
shall
have
the
resources
and
authority
appropriate
to
discharge
its
duties
and
responsibilities
in
accordance
with
this
Charter.
Without
limiting
the
generality
of
the
foregoing,
(i)
the
Committee
shall
have
the
authority
to
retain
or
obtain
advice
and
counsel
from
legal
or
other
advisors,
including
legal
counsel
or
other
advisors;
(ii)
the
Committee
shall
be
directly
responsible
for
the
appointment,
compensation
and
oversight
of
the
work
of
any
legal
counsel
and
other
advisors
retained
by
the
Committee,
and
in
connection
therewith,
the
Committee
shall
have
the
sole
authority
to
approve
the
advisors’
or
counsels’
fees
and
other
retention
terms;
and
(iii)
subject
to
such
funding
either
being
included
in
an
annual
budget
of
the
Company
or
otherwise
being
approved
by
the
Board,
the
Company
shall
provide
appropriate
funding,
for
payment
of
(A)
compensation
to
any
independent
auditor
engaged
for
the
purpose
of
preparing
or
issuing
an
audit
report
or
performing
other
audit,
review
or
attest
services
for
the
Company;
(B)
compensation
to
any
legal
counsel
or
other
advisors
retained
by
the
Committee;
and
(C)
ordinary
administrative
expenses
of
the
Committee
that
are
necessary
or
appropriate
in
carrying
out
its
duties.
7