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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 nine months ended September 30, 2013 and September 30, 2012
TEKMIRA PHARMACEUTICALS CORPORATION
Interim Condensed Consolidated Balance Sheets
(Expressed in Canadian Dollars)
accordance with U.S. GAAP)
| September 30 2013 | December 31 2012 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 36,919,072 | $ | 46,785,518 | ||||
| Accounts receivable | 4,106,997 | 1,069,437 | ||||||
| Accrued revenue | 1,164,840 | 2,361,836 | ||||||
| Deferred expenses | 254,569 | 429,221 | ||||||
| Investment tax credits receivable | 9,825 | |||||||
| Prepaid expenses and other assets | 892,522 | 327,609 | ||||||
| Total current assets | 43,338,000 | 50,983,446 | ||||||
| Property and equipment | 13,668,214 | 13,121,268 | ||||||
| Less accumulated depreciation | (12,256,797 | ) | (11,776,396 | ) | ||||
| Property and equipment, net of accumulated depreciation | 1,411,417 | 1,344,872 | ||||||
| Total assets | $ | 44,749,417 | $ | 52,328,318 | ||||
| Liabilities and stockholders equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities (note 4) | $ | 4,412,527 | $ | 3,776,287 | ||||
| Deferred revenue (note 3) | 4,453,488 | 3,127,629 | ||||||
| Warrants (note 2) | 5,105,173 | 3,994,449 | ||||||
| Total current liabilities | 13,971,188 | 10,898,365 | ||||||
| Deferred revenue, net of current portion (note 3) | 718,779 | |||||||
| Total liabilities | 13,971,188 | 11,617,144 | ||||||
| Stockholders equity: | ||||||||
| Common shares | ||||||||
| Authorized unlimited number with no par value | ||||||||
| Issued and outstanding: | ||||||||
| 14,554,211 (December 31, 2012 14,305,356) | 239,749,898 | 238,245,333 | ||||||
| Additional paid-in capital | 31,893,102 | 31,520,480 | ||||||
| Deficit | (240,864,771 | ) | (229,054,639 | ) | ||||
| Total stockholders equity | 30,778,229 | 40,711,174 | ||||||
| Total liabilities and stockholders equity | $ | 44,749,417 | $ | 52,328,318 |
Nature of business 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 September 30, | Nine months ended September 30, | |||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| Revenue (note 3) | ||||||||||||||||
| Collaborations and contracts | $ | 3,049,341 | $ | 2,055,934 | $ | 8,173,502 | $ | 8,221,763 | ||||||||
| Licensing fees, milestone and royalty payments | 2,100 | 992,000 | 2,100 | 2,010,100 | ||||||||||||
| Total revenue | 3,051,441 | 3,047,934 | 8,175,602 | 10,231,863 | ||||||||||||
| Expenses | ||||||||||||||||
| Research, development, collaborations and contracts | 5,670,974 | 3,101,825 | 14,920,628 | 10,810,861 | ||||||||||||
| General and administrative | 989,061 | 1,504,637 | 2,782,226 | 5,730,051 | ||||||||||||
| Depreciation of property and equipment | 152,852 | 214,701 | 480,401 | 681,487 | ||||||||||||
| Total expenses | 6,812,887 | 4,821,163 | 18,183,255 | 17,222,399 | ||||||||||||
| Loss from operations | (3,761,446 | ) | (1,773,229 | ) | (10,007,653 | ) | (6,990,536 | ) | ||||||||
| Other income (losses) | ||||||||||||||||
| Interest income | 132,891 | 25,631 | 431,694 | 79,170 | ||||||||||||
| Foreign exchange gains (losses) | 54,016 | 56,891 | (14,425 | ) | 61,770 | |||||||||||
| Warrant issuance costs | (47,000 | ) | ||||||||||||||
| Increase in fair value of warrant liability | (2,508,059 | ) | (1,744,734 | ) | (2,219,748 | ) | (1,622,078 | ) | ||||||||
| Net loss and comprehensive loss | $ | (6,082,598 | ) | $ | (3,435,441 | ) | $ | (11,810,132 | ) | $ | (8,518,674 | ) | ||||
| Loss per common share | ||||||||||||||||
| Basic and diluted | $ | (0.42 | ) | $ | (0.25 | ) | $ | (0.82 | ) | $ | (0.63 | ) | ||||
| Weighted average number of common shares | ||||||||||||||||
| Basic and diluted | 14,511,760 | 14,006,774 | 14,421,444 | 13,596,800 |
See accompanying notes to the interim condensed consolidated financial statements.
TEKMIRA PHARMACEUTICALS CORPORATION
Interim Condensed Consolidated Statement of Stockholders Equity
For the nine months ended September 30, 2013
(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, 2012 | 14,305,356 | $ | 238,245,333 | $ | 31,520,480 | $ | (229,054,639 | ) | $ | 40,711,174 | ||||||||||
| Stock-based compensation | 477,008 | 477,008 | ||||||||||||||||||
| Issuance of common shares pursuant to exercise of options | 44,475 | 219,197 | (104,386 | ) | 114,811 | |||||||||||||||
| Issuance of common shares pursuant to exercise of warrants | 204,380 | 1,285,368 | 1,285,368 | |||||||||||||||||
| Net loss | (11,810,132 | ) | (11,810,132 | ) | ||||||||||||||||
| Balance, September 30, 2013 | 14,554,211 | $ | 239,749,898 | $ | 31,893,102 | $ | (240,864,771 | ) | $ | 30,778,229 |
See accompanying notes to the interim condensed consolidated financial statements.
TEKMIRA PHARMACEUTICALS CORPORATION
Interim Condensed Consolidated Statements of Cash Flow
(Expressed in Canadian Dollars)
(Prepared in accordance with U.S. GAAP)
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| OPERATING ACTIVITIES | ||||||||||||||||
| Loss for the period | $ | (6,082,598 | ) | $ | (3,435,441 | ) | $ | (11,810,132 | ) | $ | (8,518,674 | ) | ||||
| Items not involving cash: | ||||||||||||||||
| Depreciation of property and equipment | 152,852 | 214,701 | 480,401 | 681,487 | ||||||||||||
| Stock-based compensation expense | 226,473 | 140,656 | 477,008 | 469,230 | ||||||||||||
| Foreign exchange losses arising on foreign currency cash balances | 16,516 | 16,362 | 25,630 | 55,646 | ||||||||||||
| Warrant issuance costs | 47,000 | |||||||||||||||
| Change in fair value of warrant liability | 2,508,059 | 1,744,734 | 2,219,748 | 1,622,078 | ||||||||||||
| Net change in non-cash operating items: | ||||||||||||||||
| Accounts receivable | (2,374,841 | ) | (99,998 | ) | (3,037,560 | ) | (1,068,971 | ) | ||||||||
| Accrued revenue | 2,057,996 | 10,811 | 1,196,996 | 87,580 | ||||||||||||
| Deferred expenses | 52,017 | 141,346 | 174,652 | 300,000 | ||||||||||||
| Investment tax credits receivable | 9,825 | 207,635 | 9,825 | 321,207 | ||||||||||||
| Prepaid expenses and other assets | (37,694 | ) | (80,958 | ) | (564,913 | ) | (1,120 | ) | ||||||||
| Accounts payable and accrued liabilities | (775,571 | ) | 76,515 | 636,240 | (939,189 | ) | ||||||||||
| Deferred revenue | 491,352 | (230,965 | ) | 607,080 | (388,246 | ) | ||||||||||
| Net cash (used in) operating activities | (3,755,614 | ) | (1,294,602 | ) | (9,585,025 | ) | (7,331,972 | ) | ||||||||
| INVESTING ACTIVITIES | ||||||||||||||||
| Proceeds from sale of property and equipment | 2,488 | 2,488 | ||||||||||||||
| Acquisition of property and equipment | (123,165 | ) | (546,946 | ) | (12,767 | ) | ||||||||||
| Net cash provided by (used in) investing activities | (123,165 | ) | 2,488 | (546,946 | ) | (10,279 | ) | |||||||||
| FINANCING ACTIVITIES | ||||||||||||||||
| Proceeds from issuance of common shares and warrants, net of issuance costs | 3,841,515 | |||||||||||||||
| Issuance of common shares pursuant to exercise of options | 22,794 | 3,640 | 114,811 | 5,140 | ||||||||||||
| Issuance of common shares pursuant to exercise of warrants | 55,569 | 176,344 | ||||||||||||||
| Net cash provided by financing activities | 78,363 | 3,640 | 291,155 | 3,846,655 | ||||||||||||
| Foreign exchange losses arising on foreign currency cash balances | (16,516 | ) | (16,362 | ) | (25,630 | ) | (55,646 | ) | ||||||||
| Decrease in cash and cash equivalents | (3,816,932 | ) | (1,304,836 | ) | (9,866,446 | ) | (3,551,242 | ) | ||||||||
| Cash and cash equivalents, beginning of period | 40,736,004 | 6,937,728 | 46,785,518 | 9,184,134 | ||||||||||||
| Cash and cash equivalents, end of period | $ | 36,919,072 | $ | 5,632,892 | $ | 36,919,072 | $ | 5,632,892 | ||||||||
| Supplemental cash flow information | ||||||||||||||||
| Fair value of warrants exercised on a cashless basis | $ | 698,120 | $ | $ | 920,345 | $ | ||||||||||
| Investment tax credits received | $ | 9,825 | $ | 207,635 | $ | 9,825 | $ | 321,207 | ||||||||
| Fair value of warrants issued in conjunction with public offering | $ | $ | $ | $ | 850,358 |
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 and nine months ended September 30, 2013 and September 30, 2012
1. 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.
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.
2. Significant accounting policies
Basis of presentation
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.
should be read in conjunction with the Company s audited consolidated financial statements and notes thereto for the year ended December 31, 2012 and included in the Company s 2012 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 September 30, 2013 and for all periods presented.
results of operations for the three and nine months ended September 30, 2013 and September 30, 2012 are not necessarily indicative of the results for the full year.
These interim condensed consolidated financial statements follow the same significant accounting policies as those described in the notes to the audited consolidated financial statements of the Company
for the year ended December 31, 2012.
These interim condensed consolidated 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
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 September 30, 2013, potential common shares of 3,163,771 (September 30, 2012 3,675,159) were excluded from the calculation of net loss per common share because their inclusion would be anti-dilutive.
Fair value of financial instruments
We measure certain financial instruments and other items at fair value.
To determine the fair
value, we use the fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable
inputs are inputs market participants would use to value an asset or liability and are developed based on market data obtained from independent sources. Unobservable inputs are inputs based on assumptions about the factors market participants would
use to value an asset or liability. The three levels of inputs that may be used to measure fair value are as follows:
TEKMIRA PHARMACEUTICALS CORPORATION
Notes to Interim Condensed Consolidated financial statements (unaudited)
(Expressed in Canadian
Three and nine months ended September 30, 2013 and September 30, 2012
The following tables present information about the Company s assets and
liabilities that are measured at fair value on a recurring basis, and indicates the fair value hierarchy of the valuation techniques used to determine such fair value:
| Level 1 | Level 2 | Level 3 | September 30, 2013 | |||||||||||||
| Assets | ||||||||||||||||
| Cash and cash equivalents | $ | 36,919,072 | $ | 36,919,072 | ||||||||||||
| Liabilities | ||||||||||||||||
| Warrants | $ | 5,105,173 | $ | 5,105,173 | ||||||||||||
| Level 1 | Level 2 | Level 3 | December 31, 2012 | |||||||||||||
| Assets | ||||||||||||||||
| Cash and cash equivalents | $ | 46,785,518 | $ | 46,785,518 | ||||||||||||
| Liabilities | ||||||||||||||||
| Warrants | $ | 3,994,449 | $ | 3,994,449 |
The following table presents the changes in fair value of the Company s warrants:
| Liability at January 1, 2013 | $ | 3,994,449 | ||
| Fair value of warrants exercised in the period | (1,109,024 | ) | ||
| Increase in fair value of warrant liability | 2,219,748 | |||
| Liability at September 30, 2013 | $ | 5,105,173 |
The change in fair value of warrant liability for the nine months ended September 30, 2013 is recorded in the
statement of operations and comprehensive loss.
The weighted average Black-Scholes warrant-pricing assumptions and the resultant fair values
for warrants outstanding at September 30, 2013 and at December 31, 2012 are as follows:
| September 30, 2013 | December 31, 2012 | |||||||
| Dividend yield | 0.00 | % | 0.00 | % | ||||
| Expected volatility | 52.39 | % | 40.00 | % | ||||
| Risk-free interest rate | 1.21 | % | 1.28 | % | ||||
| Expected average term | 1.8 years | 3.8 years | ||||||
| Fair value of warrants outstanding | $ | 4.45 | $ | 2.51 | ||||
| Aggregate fair value of warrants outstanding | $ | 5,105,173 | $ | 3,994,449 |
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.
TEKMIRA PHARMACEUTICALS CORPORATION
Notes to Interim Condensed Consolidated financial statements (unaudited)
(Expressed in Canadian
Three and nine months ended September 30, 2013 and September 30, 2012
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 balance sheet 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 balance sheet. 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. The adoption of this standard did not impact the Company s financial position or statement of operations.
In February 2013, the FASB issued amendments to the accounting guidance for presentation of comprehensive income to improve the reporting of
reclassifications out of accumulated other comprehensive income. The amendments do not change the current requirements for reporting net income or other comprehensive income, but do require an entity to provide information about the amounts
reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where the net income is presented or in the notes, significant amounts reclassified out of
accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are
not required under GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under GAAP that provide additional detail about these amounts. For public companies, these amendments
are effective prospectively for reporting periods beginning after December 15, 2012. The adoption of this guidance did not impact our consolidated financial statements.
3. Collaborations, contracts and licensing agreements
The following tables set forth
revenue recognized under collaborations, contracts and licensing agreements: