Full Press Release Details
Aeterna Zentaris Inc.
Consolidated Financial Statements
As at December 31, 2019 and December 31, 2018 and for the years
December 31, 2019, 2018 and 2017
(presented in thousands of U.S. dollars)
Aeterna Zentaris Inc.
Consolidated Financial Statements
As at December 31, 2019 and December 31, 2018 and years ended
December 31, 2019, 2018 and 2017
| Consolidated Statements of Financial Position | 4 |
| Consolidated Statements of Changes in Shareholders' (Deficiency) Equity | 6 |
| Consolidated Statements of Comprehensive (Loss) Income | 8 |
| Consolidated Statements of Cash Flows | 9 |
| Notes to Consolidated Financial Statements | 10 |
Report of Independent Registered Public Accounting Firm
Directors and Shareholders of Aeterna Zentaris Inc.
Opinion on the Financial Statements
the accompanying consolidated statements of financial position of Aeterna Zentaris Inc. and its subsidiaries (together, the Company)
as of December 31, 2019 and 2018, and the related consolidated statements of changes in shareholders' (deficiency) equity,
comprehensive (loss) income, and cash flows for each of the three years in the period ended December 31, 2019, including the related
notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and its financial
performance and its cash flows for each of the three years in the period ended December 31, 2019 in conformity with International
Financial Reporting Standards as issued by the International Accounting Standards Board.
Doubt About the Company's Ability to Continue as a Going Concern
consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed
in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a net capital
deficiency that raises substantial doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the
Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company
in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control
over financial reporting 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.
performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements. We believe that our audits provide a reasonable basis for our opinion.
"/s/ PricewaterhouseCoopers LLP"
Chartered Professional
Accountants, Licensed Public Accountants
as the Company's auditor since 1993.
| Aeterna Zentaris Inc. |
| Consolidated Statements of Financial Position |
| (in thousands of US dollars) |
| December 31, 2019 | December 31, 2018 | |||||||
| $ | $ | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents (note 7) | 7,838 | 14,512 | ||||||
| Trade and other receivables (note 8) | 658 | 294 | ||||||
| Inventory (note 9) | 1,203 | 240 | ||||||
| Prepaid expenses and other current assets (note 10) | 1,211 | 1,210 | ||||||
| Total current assets | 10,910 | 16,256 | ||||||
| Restricted cash equivalents (note 11) | 364 | 418 | ||||||
| Right of use assets (note 5(a)) | 582 | - | ||||||
| Property, plant and equipment (note 12) | 35 | 65 | ||||||
| Identifiable intangible assets (note 13) | 40 | 62 | ||||||
| Goodwill (note 14) | 8,050 | 8,210 | ||||||
| Total Assets | 19,981 | 25,011 | ||||||
| LIABILITIES | ||||||||
| Current liabilities | ||||||||
| Payables and accrued liabilities (note 15) | 2,148 | 2,791 | ||||||
| Provision for restructuring and other costs (note 16) | 418 | 887 | ||||||
| Income taxes (note 22) | 1,448 | 1,669 | ||||||
| Current portion of deferred revenues (note 6(a)(ii) and 6(a)(iv)) | 991 | 249 | ||||||
| Current portion of lease liabilities (note 5(a)) | 648 | - | ||||||
| Current portion of warrant liability (note 17) | 6 | - | ||||||
| Total current liabilities | 5,659 | 5,596 | ||||||
| Deferred revenues (note 6(a)(ii)) | 185 | 258 | ||||||
| Lease liabilities (note 5(a)) | 255 | - | ||||||
| Warrant liability (note 17) | 2,249 | 3,634 | ||||||
| Employee future benefits (note 18) | 13,788 | 13,205 | ||||||
| Non-current portion of provision for restructuring and other costs (note 16) | 308 | 411 | ||||||
| Total liabilities | 22,444 | 23,104 | ||||||
| SHAREHOLDERS' (DEFICIENCY) EQUITY | ||||||||
| Share capital (note 19) | 224,528 | 222,335 | ||||||
| Other capital (note 19) | 89,806 | 89,342 | ||||||
| Deficit | (316,891 | ) | (309,781 | ) | ||||
| Accumulated other comprehensive income | 94 | 11 | ||||||
| Total shareholders' (deficiency) equity | (2,463 | ) | 1,907 | |||||
| Total liabilities and shareholders' (deficiency) equity | 19,981 | 25,011 |
Going concern (note 1)
Commitments and contingencies (note 27)
Subsequent events (note 29)
The accompanying notes are an integral part
of these consolidated financial statements.
| Aeterna Zentaris Inc. |
| Consolidated Statements of Financial Position |
| (in thousands of US dollars) |
Approved by the Board of Directors
| /s/ Carolyn Egbert | /s/ G rard Limoges | |
| Carolyn Egbert Chair of the Board | G rard Limoges Director |
| Aeterna Zentaris Inc. |
| Consolidated Statements of Changes in Shareholders' (Deficiency) Equity |
| For the years ended December 31, 2019, 2018 and 2017 |
| (in thousands of US dollars, except share data) |
| Common shares (number of) 1 | Share capital | Other capital | Deficit | Accumulated other comprehensive income | Total | |||||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||||||
| Balance - January 1, 2019 | 16,440,760 | 222,335 | 89,342 | (309,781 | ) | 11 | 1,907 | |||||||||||||||||
| Net loss | - | - | - | (6,042 | ) | - | (6,042 | ) | ||||||||||||||||
| Other comprehensive (loss) income: | ||||||||||||||||||||||||
| Foreign currency translation adjustments | - | - | - | - | 83 | 83 | ||||||||||||||||||
| Actuarial (loss) on defined benefit plans (note 18) | - | - | - | (1,068 | ) | - | (1,068 | ) | ||||||||||||||||
| Comprehensive loss | - | - | - | (7,110 | ) | 83 | (7,027 | ) | ||||||||||||||||
| Share issuance from the exercise of warrants, stock options and deferred share units | 228,750 | 906 | (329 | ) | - | - | 577 | |||||||||||||||||
| Issuance of common shares and warrants, net (notes 17 and 19) | 3,325,000 | 1,287 | - | - | - | 1,287 | ||||||||||||||||||
| Share-based compensation costs | - | - | 793 | - | - | 793 | ||||||||||||||||||
| Balance - December 31, 2019 | 19,994,510 | 224,528 | 89,806 | (316,891 | ) | 94 | (2,463 | ) |
| Common shares (number of) 1 | Share capital | Other capital | Deficit | Accumulated other comprehensive income | Total | |||||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||||||
| Balance - January 1, 2018 | 16,440,760 | 222,335 | 88,772 | (314,161 | ) | 271 | (2,783 | ) | ||||||||||||||||
| Net income | - | - | - | 4,187 | - | 4,187 | ||||||||||||||||||
| Other comprehensive income (loss): | ||||||||||||||||||||||||
| Foreign currency translation adjustments | - | - | - | - | (260 | ) | (260 | ) | ||||||||||||||||
| Actuarial gain on defined benefit plans (note 18) | - | - | - | 193 | - | 193 | ||||||||||||||||||
| Comprehensive income | - | - | - | 4,380 | (260 | ) | 4,120 | |||||||||||||||||
| Share-based compensation costs | - | - | 570 | - | - | 570 | ||||||||||||||||||
| Balance - December 31, 2018 | 16,440,760 | 222,335 | 89,342 | (309,781 | ) | 11 | 1,907 |
| Aeterna Zentaris Inc. |
| Consolidated Statements of Changes in Shareholders' (Deficiency) Equity |
| For the years ended December 31, 2019, 2018 and 2017 |
| (in thousands of US dollars, except share data) |
| Common shares (number of) 1 | Share capital | Pre- funded warrants | Other capital | Deficit | Accumulated other comprehensive income (loss) | Total | ||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
| Balance - January 1, 2017 | 12,917,995 | 213,980 | - | 88,590 | (298,059 | ) | 1,701 | 6,212 | ||||||||||||||||||||
| Net loss | - | - | - | - | (16,796 | ) | - | (16,796 | ) | |||||||||||||||||||
| Other comprehensive (loss) income: | ||||||||||||||||||||||||||||
| Foreign currency translation adjustments | - | - | - | - | - | (1,430 | ) | (1,430 | ) | |||||||||||||||||||
| Actuarial gain on defined benefit plans (note 18) | - | - | - | - | 694 | - | 694 | |||||||||||||||||||||
| Comprehensive loss | - | - | - | - | (16,102 | ) | (1,430 | ) | (17,532 | ) | ||||||||||||||||||
| Share issuances pursuant to the exercise of pre-funded warrants | 301,343 | 977 | - | - | - | - | 977 | |||||||||||||||||||||
| Share issuances in connection with "at-the-market" drawdowns (note 19) | 3,221,422 | 7,378 | - | - | - | - | 7,378 | |||||||||||||||||||||
| Share-based compensation costs | - | - | 182 | - | - | 182 | ||||||||||||||||||||||
| Balance - December 31, 2017 | 16,440,760 | 222,335 | - | 88,772 | (314,161 | ) | 271 | (2,783 | ) |
The accompanying notes are an integral part
of these consolidated financial statements
| Aeterna Zentaris Inc. |
| Consolidated Statements of Comprehensive (Loss) Income |
| For the years ended December 31, 2019, 2018 and 2017 |
| (in thousands of US dollars, except share and per share data) |
| Years Ended December 31, | ||||||||||||
| 2019 | 2018 | 2017 | ||||||||||
| $ | $ | $ | ||||||||||
| Revenues (note 6) | ||||||||||||
| License fees | 74 | 24,325 | 458 | |||||||||
| Product sales | 129 | 2,167 | - | |||||||||
| Royalty income | 45 | 184 | - | |||||||||
| Sales commission | - | 110 | 465 | |||||||||
| Supply chain | 284 | 95 | - | |||||||||
| Total revenues | 532 | 26,881 | 923 | |||||||||
| Operating expenses (note 20) | ||||||||||||
| Cost of sales | 410 | 2,104 | - | |||||||||
| Research and development costs | 1,837 | 2,932 | 10,704 | |||||||||
| General and administrative expenses | 6,615 | 8,894 | 8,198 | |||||||||
| Selling expenses | 1,214 | 3,109 | 5,095 | |||||||||
| Restructuring costs (note 16) | 507 | - | - | |||||||||
| Impairment of right of use asset (note 5a) | 22 | - | - | |||||||||
| Impairment of prepaid asset (note 10) | 169 | - | - | |||||||||
| Total operating expenses | 10,774 | 17,039 | 23,997 | |||||||||
| (Loss) income from operations | (10,242 | ) | 9,842 | (23,074 | ) | |||||||
| Settlements (note 27) | - | (1,400 | ) | - | ||||||||
| Gain due to changes in foreign currency exchange rates | 87 | 656 | 502 | |||||||||
| Change in fair value of warrant liability (note 17) | 4,518 | 263 | 2,222 | |||||||||
| Other finance (costs) income | (593 | ) | 278 | 75 | ||||||||
| Net finance income | 4,012 | 1,197 | 2,799 | |||||||||
| (Loss) income before income taxes | (6,230 | ) | 9,639 | (20,275 | ) | |||||||
| Income tax recovery (expense) (note 22) | 188 | (5,452 | ) | 3,479 | ||||||||
| Net (loss) income | (6,042 | ) | 4,187 | (16,796 | ) | |||||||
| Other comprehensive (loss) income: | ||||||||||||
| Items that may be reclassified subsequently to profit or loss: | ||||||||||||
| Foreign currency translation adjustments | 83 | (260 | ) | (1,430 | ) | |||||||
| Items that will not be reclassified to profit or loss: | ||||||||||||
| Actuarial (loss) gain on defined benefit plans | (1,068 | ) | 193 | 694 | ||||||||
| Comprehensive (loss) income | (7,027 | ) | 4,120 | (17,532 | ) | |||||||
| Net (loss) income per share (basic) (note 26) | (0.35 | ) | 0.25 | (1.12 | ) | |||||||
| Net (loss) income per share (diluted) (note 26) | (0.35 | ) | 0.24 | (1.12 | ) | |||||||
| Weighted average number of shares outstanding (note 26) | ||||||||||||
| Basic | 17,494,472 | 16,440,760 | 14,958,704 | |||||||||
| Diluted | 17,494,472 | 17,034,812 | 14,958,704 |
The accompanying notes are an integral part
of these consolidated financial statements.
| Aeterna Zentaris Inc. |
| Consolidated Statements of Cash Flows |
| For the years ended December 31, 2019, 2018 and 2017 |
| (in thousands of US dollars) |
| Years Ended December 31, | ||||||||||||
| 2019 | 2018 | 2017 | ||||||||||
| $ | $ | $ | ||||||||||
| Cash flows from operating activities | ||||||||||||
| Net (loss) income for the year | (6,042 | ) | 4,187 | (16,796 | ) | |||||||
| Items not affecting cash and cash equivalents: | ||||||||||||
| Change in fair value of warrant liability (note 17) | (4,518 | ) | (263 | ) | (2,222 | ) | ||||||
| Transaction costs of warrants issued, expensed as finance cost | 550 | - | - | |||||||||
| Provision for restructuring and other costs (note 16) | 511 | (136 | ) | 3,083 | ||||||||
| Impairment of right of use asset (note 5(a)) | 22 | - | - | |||||||||
| Impairment of prepaid asset (note 10) | 169 | - | - | |||||||||
| Recapture of inventory previously written off | - | - | (643 | ) | ||||||||
| Depreciation and amortization (notes 5,12 and 13) | 315 | 58 | 94 | |||||||||
| Deferred income taxes (note 22) | - | 3,479 | (3,479 | ) | ||||||||
| Share-based compensation costs (note 20) | 793 | 570 | 182 | |||||||||
| Employee future benefits (note 18) | 262 | 316 | 246 | |||||||||
| Amortization of deferred revenues (note 6) | (74 | ) | (609 | ) | (458 | ) | ||||||
| Foreign exchange gain on items denominated in foreign currencies | (87 | ) | (652 | ) | (553 | ) | ||||||
| Loss (gain) on disposal of property, plant and equipment | 10 | (9 | ) | (136 | ) | |||||||
| Other non-cash items | (126 | ) | 35 | (19 | ) | |||||||
| Interest accretion on lease liabilities (note 5) | (66 | ) | - | - | ||||||||
| Changes in operating assets and liabilities (note 21) | (2,444 | ) | (151 | ) | (2,212 | ) | ||||||
| Net cash (used in) provided by operating activities | (10,725 | ) | 6,825 | (22,913 | ) | |||||||
| Cash flows from financing activities | ||||||||||||
| Proceeds from issuances of common shares and warrants (note 19) | 4,988 | - | 8,038 | |||||||||
| Transaction costs | (795 | ) | - | (250 | ) | |||||||
| Proceeds from exercise of warrants, stock options and deferred share units | 314 | - | 242 | |||||||||
| Payments on lease liabilities (note 5) | (614 | ) | - | - | ||||||||
| Net cash provided by financing activities | 3,893 | - | 8,030 | |||||||||
| Cash flows from investing activities | ||||||||||||
| Purchase of property, plant and equipment (note 12) | - | (9 | ) | (4 | ) | |||||||
| Proceeds for disposals of property, plant and equipment (note 12) | - | 24 | 161 | |||||||||
| Cash provided by (used in) restricted cash equivalents | 50 | (50 | ) | 150 | ||||||||
| Net cash provided by (used in) investing activities | 50 | (35 | ) | 307 | ||||||||
| Effect of exchange rate changes on cash and cash equivalents | 108 | (58 | ) | 357 | ||||||||
| Net change in cash and cash equivalents | (6,674 | ) | 6,732 | (14,219 | ) | |||||||
| Cash and cash equivalents - beginning of year (note 7) | 14,512 | 7,780 | 21,999 | |||||||||
| Cash and cash equivalents - end of year (note 7) | 7,838 | 14,512 | 7,780 |
The accompanying notes are an integral part
of these consolidated financial statements.
| Aeterna Zentaris Inc. |
| Notes to Consolidated Financial Statements |
| As at December 31, 2019 and December 31, 2019 and for the years ended December 31, 2019, 2018 and 2017 |
| (tabular amounts in thousands of US dollars, except share/option/warrant/DSU and per share/option/warrant/DSU data and as otherwise noted) |
Aeterna Zentaris Inc. ("Aeterna
Zentaris" or the "Company") has incurred significant expenses in its efforts to develop and co-promote products.
Consequently, the Company has incurred operating losses and negative cash flow from operations historically and in each of the
last several years except for the year ended December 31, 2018 when the Company earned revenue from the sale of a license for
the adult indication of Macrilen (macimorelin) in the United States and Canada (note 6(a)). As at December 31, 2019, the
Company had an accumulated deficit of $316,891. The Company also had a net loss of $6,042 for the year ended December 31,
2019, and negative cash flow from operations of $10,725.
Management has evaluated whether material uncertainties
exist relating to events or conditions that may cast substantial doubt about the Company's ability to continue as a going
concern and has considered the following in making that critical judgment.
The ability of the Company to realize its assets
and meet its obligations as they come due is dependent on earning sufficient revenues under the License Agreement, developing opportunities
for Macrilen (macimorelin) in the rest of the world, realizing other monetizing transactions, and raising additional sources
of funding, the outcome of which cannot be predicted at this time. The revenue provided under the License Agreement was $45 for
the year ended December 31, 2019 and as at December 31, 2019, the Company had cash of $7,838. In September 2019, the Company closed
an equity financing which provided $4,193 in net cash proceeds. On February 21, 2020, the Company closed an equity financing for
approximately $3,920 in net cash proceeds.
A significant portion of the Company's
cash is held in AEZS Germany, the Company's principle operating subsidiary. AEZS Germany is the counter-party to the License
Agreement described above with Novo, and as such, for generating future revenue earned under the License Agreement. As such, management
considers the cash resources available to AEZS Germany in executing its obligations under the License Agreement. In the event
the current and medium term liabilities of AEZS Germany exceeds the fair values ascribed to its assets, under German solvency
laws, it may no longer be possible for AEZS Germany's operations to continue or for AEZS Germany to transfer cash to
Aeterna Zentaris Inc or its U.S. subsidiary. This imposes additional and material uncertainties on the Company when evaluating
liquidity and the going concern assumption.
The Company has some discretion to manage its
planned research and development costs, administrative expenses and capital expenditures in order to manage its cash liquidity,
particularly in AEZS Germany. Furthermore, AEZS Germany is focused on opportunities to either license or sell the European or worldwide
rights to Macrilen (macimorelin) to third parties. As of the date of issuance of these consolidated financial statements,