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TEKMIRA PHARMACEUTICALS CORPORATION
Unaudited Interim Condensed Consolidated Financial
Statements (expressed in Canadian dollars)
(Prepared in accordance with generally accepted accounting principles used in the United States of
America (U.S. GAAP))
Three and six months ended June 30, 2012 and June 30, 2011
TEKMIRA PHARMACEUTICALS CORPORATION
Interim Condensed Consolidated Balance Sheets
(Expressed in Canadian Dollars)
accordance with U.S. GAAP)
| June 30 2012 | December 31 2011 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 6,937,728 | $ | 9,184,134 | ||||
| Accounts receivable | 1,849,666 | 880,693 | ||||||
| Accrued revenue | 108,587 | 185,356 | ||||||
| Deferred expenses | 629,457 | 788,111 | ||||||
| Investment tax credits receivable | 217,460 | 331,032 | ||||||
| Prepaid expenses and other assets | 344,549 | 424,387 | ||||||
| Total current assets | 10,087,447 | 11,793,713 | ||||||
| Property and equipment | 18,697,257 | 18,684,491 | ||||||
| Less accumulated depreciation and impairment | (16,953,697 | ) | (16,486,912 | ) | ||||
| Property and equipment net of accumulated depreciation and impairment | 1,743,560 | 2,197,579 | ||||||
| Total assets | $ | 11,831,007 | $ | 13,991,292 | ||||
| Liabilities and stockholders equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities (note 4) | $ | 2,956,847 | $ | 3,972,551 | ||||
| Deferred revenue (note 2) | 3,050,342 | 2,807,898 | ||||||
| Warrants (notes 5) | 932,746 | 205,044 | ||||||
| Total current liabilities | 6,939,935 | 6,985,493 | ||||||
| Deferred revenue, net of current portion (note 2) | 1,290,804 | 1,690,529 | ||||||
| Total liabilities | 8,230,739 | 8,676,022 | ||||||
| Stockholders equity: | ||||||||
| Common shares (note 5) | ||||||||
| Authorized - unlimited number with no par value | ||||||||
| Issued and outstanding: | ||||||||
| 13,999,661 (December 31, 2011 - 12,148,635) | 236,553,636 | 233,501,253 | ||||||
| Additional paid-in capital | 30,977,552 | 30,661,704 | ||||||
| Deficit | (263,930,920 | ) | (258,847,687 | ) | ||||
| Total stockholders equity | 3,600,268 | 5,315,270 | ||||||
| Total liabilities and stockholders equity | $ | 11,831,007 | $ | 13,991,292 |
Basis of presentation and future operations (note 1)
Contingencies and commitments (note 6)
Subsequent events (note 7)
See accompanying notes to the interim condensed consolidated financial statements.
TEKMIRA PHARMACEUTICALS CORPORATION
Interim Condensed Consolidated Statements of Operations and Comprehensive Loss
(Expressed in Canadian Dollars)
(Prepared in accordance with U.S. GAAP)
| Three months ended June 30 | Six months ended June 30 | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Revenue (note 2) | ||||||||||||||||
| Collaborations and contracts | $ | 2,601,847 | $ | 4,407,823 | $ | 6,165,829 | $ | 8,751,308 | ||||||||
| Licensing fees and milestone payments | 1,018,100 | 1,018,100 | ||||||||||||||
| Total revenue | 3,619,947 | 4,407,823 | 7,183,929 | 8,751,308 | ||||||||||||
| Expenses | ||||||||||||||||
| Research, development, collaborations and contracts | 3,572,507 | 6,198,149 | 7,709,036 | 11,837,724 | ||||||||||||
| General and administrative | 2,403,862 | 1,594,427 | 4,225,414 | 3,136,026 | ||||||||||||
| Depreciation of property and equipment | 225,949 | 238,286 | 466,786 | 476,935 | ||||||||||||
| Total expenses | 6,202,318 | 8,030,862 | 12,401,236 | 15,450,685 | ||||||||||||
| Loss from operations | (2,582,371 | ) | (3,623,039 | ) | (5,217,307 | ) | (6,699,377 | ) | ||||||||
| Other income (losses) | ||||||||||||||||
| Interest income | 29,325 | 28,995 | 53,539 | 62,252 | ||||||||||||
| Foreign exchange gains (losses) | (5,331 | ) | (10,166 | ) | 4,879 | (64,794 | ) | |||||||||
| Warrant issuance costs (note 5) | (80,000 | ) | (47,000 | ) | (80,000 | ) | ||||||||||
| Change in fair value of warrant liability (note 5) | 635,022 | 152,142 | 122,656 | 152,142 | ||||||||||||
| Net loss and comprehensive loss | $ | (1,923,355 | ) | $ | (3,532,068 | ) | $ | (5,083,233 | ) | $ | (6,629,777 | ) | ||||
| Loss per common share | ||||||||||||||||
| Basic and diluted | $ | (0.14 | ) | $ | (0.33 | ) | $ | (0.38 | ) | $ | (0.63 | ) | ||||
| Weighted average number of common shares | ||||||||||||||||
| Basic and diluted | 13,999,626 | 10,617,303 | 13,389,599 | 10,480,044 |
See accompanying notes to the interim condensed consolidated financial statements.
TEKMIRA PHARMACEUTICALS CORPORATION
Interim Condensed Consolidated Statements of Stockholders Equity
ended June 30, 2012 (unaudited)
(Expressed in Canadian Dollars)
(Prepared in accordance with U.S. GAAP)
| Number of shares | Share capital | Additional paid-in capital | Deficit | Total stockholders equity | ||||||||||||||||
| Balance, December 31, 2011 | 12,148,635 | $ | 233,501,253 | $ | 30,661,704 | $ | (258,847,687 | ) | $ | 5,315,270 | ||||||||||
| Stock-based compensation | 328,574 | 328,574 | ||||||||||||||||||
| Issuance of common shares pursuant to exercise of options | 2,425 | 14,226 | (12,726 | ) | 1,500 | |||||||||||||||
| Issuance of common shares in conjunction with the private offering, net of issuance costs of $178,407 and net of initial fair value of warrants of $850,358 | 1,848,601 | 3,038,157 | 3,038,157 | |||||||||||||||||
| Net loss | (5,083,233 | ) | (5,083,233 | ) | ||||||||||||||||
| Balance, June 30, 2012 | 13,999,661 | $ | 236,553,636 | $ | 30,977,552 | $ | (263,930,920 | ) | $ | 3,600,268 |
See accompanying notes to the interim condensed consolidated financial statements.
TEKMIRA PHARMACEUTICALS CORPORATION
Interim Condensed Consolidated Statements of Cash Flow
(Expressed in Canadian Dollars)
accordance with U.S. GAAP)
| Three months ended June 30 | Six months ended June 30 | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| OPERATING ACTIVITIES | ||||||||||||||||
| Loss for the period | $ | (1,923,355 | ) | $ | (3,532,068 | ) | $ | (5,083,233 | ) | $ | (6,629,777 | ) | ||||
| Items not involving cash: | ||||||||||||||||
| Depreciation of property and equipment | 225,949 | 238,286 | 466,786 | 476,935 | ||||||||||||
| Stock-based compensation expense | 149,926 | 84,130 | 328,574 | 172,505 | ||||||||||||
| Foreign exchange (gains) losses arising on foreign currency cash balances | 10,369 | 26,256 | 39,284 | 30,902 | ||||||||||||
| Warrant issuance costs | 80,000 | 47,000 | 80,000 | |||||||||||||
| Change in fair value of warrant liability | (635,022 | ) | (152,142 | ) | (122,656 | ) | (152,142 | ) | ||||||||
| Net change in non-cash operating items: | ||||||||||||||||
| Accounts receivable | 535,535 | (831,767 | ) | (968,973 | ) | (833,401 | ) | |||||||||
| Accrued revenue | (55,110 | ) | (176,684 | ) | 76,769 | 438,026 | ||||||||||
| Deferred expenses | 43,091 | (525 | ) | 158,654 | (6,426 | ) | ||||||||||
| Investment tax credits receivable | 113,572 | 82,372 | 113,572 | 82,372 | ||||||||||||
| Inventory | (211,047 | ) | (60,316 | ) | ||||||||||||
| Prepaid expenses and other assets | 171,607 | (150,904 | ) | 79,838 | (106,468 | ) | ||||||||||
| Accounts payable and accrued liabilities | (108,490 | ) | (49,736 | ) | (1,015,704 | ) | (1,509,417 | ) | ||||||||
| Deferred revenue | (313,421 | ) | 558,583 | (157,281 | ) | 923,084 | ||||||||||
| Net cash provided by (used in) operating activities | (1,785,349 | ) | (4,035,246 | ) | (6,037,369 | ) | (7,094,123 | ) | ||||||||
| INVESTING ACTIVITIES | ||||||||||||||||
| Acquisition of property and equipment | (11,928 | ) | (1,190 | ) | (12,767 | ) | (56,448 | ) | ||||||||
| Net cash provided by (used in) investing activities | (11,928 | ) | (1,190 | ) | (12,767 | ) | (56,448 | ) | ||||||||
| FINANCING ACTIVITIES | ||||||||||||||||
| Proceeds from issuance of common shares and warrants, net of issuance costs | 4,545,647 | 3,841,515 | 4,545,647 | |||||||||||||
| Issuance of common shares pursuant to exercise of options | 300 | 1,500 | 1,436 | |||||||||||||
| Net cash provided by (used in) financing activities | 300 | 4,545,647 | 3,843,015 | 4,547,083 | ||||||||||||
| Foreign exchange gains (losses) arising on foreign currency cash balances | (10,369 | ) | (26,256 | ) | (39,284 | ) | (30,902 | ) | ||||||||
| Increase (Decrease) in cash and cash equivalents | (1,807,346 | ) | 482,955 | (2,246,406 | ) | (2,634,390 | ) | |||||||||
| Cash and cash equivalents, beginning of period | 8,745,074 | 9,228,665 | 9,184,134 | 12,346,010 | ||||||||||||
| Cash and cash equivalents, end of period | $ | 6,937,728 | $ | 9,711,620 | $ | 6,937,728 | $ | 9,711,620 | ||||||||
| Supplemental cash flow information | ||||||||||||||||
| Investment tax credits received | $ | 113,572 | $ | 102,464 | $ | 113,572 | $ | 102,464 | ||||||||
| Fair value of warrants issued in conjunction with debt facility | $ | $ | 742,809 | $ | $ | 742,809 |
See accompanying notes to the interim condensed consolidated financial statements.
TEKMIRA PHARMACEUTICALS CORPORATION
Notes to interim condensed consolidated financial statements (unaudited)
(Expressed in Canadian
Three months and six months ended June 30, 2012
Nature of business and future operations
Tekmira Pharmaceuticals Corporation (the Company ) is a Canadian biopharmaceutical business focused on advancing novel RNA interference therapeutics and providing its leading lipid nanoparticle
delivery technology to pharmaceutical partners.
The success of the Company is dependent on obtaining the necessary regulatory approvals to
bring its products to market and achieve profitable operations. The continuation of the research and development activities and the commercialization of its products are dependent on the Company s ability to successfully complete these
activities and to obtain adequate financing through a combination of financing activities and operations. It is not possible to predict either the outcome of future research and development programs or the Company s ability to fund these
programs in the future.
Basis of presentation and significant accounting policies
These unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles of the
United States of America ( U.S. GAAP ) for interim financial statements and accordingly, do not include all disclosures required for annual financial statements.
These statements should be read in conjunction with the Company s audited consolidated financial statements and notes thereto for the year ended December 31, 2011 and included in the
Company s 2011 annual report on Form 20-F.
The unaudited interim condensed consolidated financial statements reflect, in the opinion of
management, all adjustments and reclassifications necessary to present fairly the financial position, results of operations and cash flows at June 30, 2012 and for all periods presented.
The results of operations for the three and six months ended June 30, 2012 and June 30, 2011 are not necessarily indicative of the results for the full year.
These interim financial statements follow the same significant accounting policies as those described in the notes to the audited consolidated financial
statements of Tekmira Pharmaceuticals Corporation ( the Company ) for the year ended December 31, 2011.
financial statements include the accounts of the Company and its two wholly-owned subsidiaries, Protiva Biotherapeutics Inc. ( Protiva ) and Protiva Biotherapeutics (USA), Inc. All intercompany transactions and balances have been
eliminated on consolidation.
Income or loss per share
Income or loss per share is calculated based on the weighted average number of common shares outstanding. Diluted loss per share does not differ from basic loss per share since the effect of the
Company s stock options and warrants are anti-dilutive. Diluted income per share is calculated using the treasury stock method which uses the weighted average number of common shares outstanding during the period and also includes the dilutive
effect of potentially issuable common shares from outstanding stock options and warrants. At June 30, 2012, potential common shares of 4,302,840 were excluded from the calculation of net loss per common share because their inclusion would be
Fair value of financial instruments
The Company s financial instruments consist of cash and cash equivalents, accounts receivable, investment tax credits receivable, accounts payable and accrued liabilities, warrants, contingently
payable promissory notes and a loan facility.
The carrying values of cash and cash equivalents are recorded at fair value based on quoted
prices in active markets (Level 1 inputs). The carrying values of accounts receivable, investment tax credits receivable and accounts payable and accrued liabilities approximate their fair values, as based upon Level 3 inputs, due to the immediate
or short-term maturity of these financial instruments.
TEKMIRA PHARMACEUTICALS CORPORATION
Notes to interim condensed consolidated financial statements (unaudited)
(Expressed in Canadian
Three months and six months ended June 30, 2012
As quoted prices for the warrants are not readily available, the Company has used a Black-Scholes
pricing model, as described in Note 5, to estimate fair value. These are level 3 inputs as defined in the Company s accounting policy for the fair value of financial instruments as described in the annual financial statements for the year ended
The Company has not yet drawn down any funds under its loan facility.
Recent accounting pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) or other standard setting bodies that are
adopted by the Company as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of
operations upon adoption.
In December 2011, the FASB issued ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets
and Liabilities. This newly issued accounting standard requires an entity to disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position as well as instruments and
transactions executed under a master netting or similar arrangement and was issued to enable users of financial statements to understand the effects or potential effects of those arrangements on its financial position. This ASU is required to be
applied retrospectively and is effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. As this accounting standard only requires enhanced disclosure, the adoption of this standard is not
expected to have an impact on the Company s financial position or results of operations.
In June 2011, the FASB issued ASU
No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. This newly issued accounting standard (1) eliminates the option to present the components of other comprehensive income as part of the statement of
changes in stockholders equity; (2) requires the consecutive presentation of the statement of net income and other comprehensive income; and (3) requires an entity to present reclassification adjustments on the face of the financial
statements from other comprehensive income to net income. The amendments in this ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income nor do
the amendments affect how earnings per share is calculated or presented. In December 2011, the FASB issued ASU No. 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated
Other Comprehensive Income in Accounting Standards Update No. 2011-05, which defers the requirement within ASU 2011-05 to present on the face of the financial statements the effects of reclassifications out of accumulated other
comprehensive income on the components of net income and other comprehensive income for all periods presented. During the deferral, entities should continue to report reclassifications out of accumulated other comprehensive income consistent with
the presentation requirements in effect prior to the issuance of ASU 2011-05. These ASUs are required to be applied retrospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011,
which for the Company means January 1, 2012. As these accounting standards do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income, the
adoption of these standards did not have an impact on the Company s financial position or results of operations.
In May 2011, the FASB
issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This newly issued accounting standard clarifies the application of
certain existing fair value measurement guidance and expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. This ASU is effective on a prospective basis for annual and
interim reporting periods beginning on or after December 15, 2011, which for the Company means January 1, 2012. The adoption of this standard did not have a material impact on the Company s financial position or results of operations.
TEKMIRA PHARMACEUTICALS CORPORATION
Notes to interim condensed consolidated financial statements (unaudited)
(Expressed in Canadian