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CONDENSED CONSOLIDATED INTERIM FINANCIAL
(Expressed in United States dollars)
FOR THE THREE AND NINE MONTHS ENDED JUNE
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF
(Expressed in United States dollars)
| June 30, 2017 | September 30, 2016 | |||||||
| ASSETS | ||||||||
| Current | ||||||||
| Cash | $ | 7,329,497 | $ | 8,985,095 | ||||
| Receivables | 13,861 | 15,882 | ||||||
| Prepaids (Note 4) | 713,863 | 1,018,232 | ||||||
| 8,057,221 | 10,019,209 | |||||||
| Equipment (Note 5) | 106,844 | 127,730 | ||||||
| Intangible assets (Note 6) | 241,900 | 255,623 | ||||||
| Total assets | $ | 8,405,965 | $ | 10,402,562 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY) | ||||||||
| Current | ||||||||
| Accounts payable and accrued liabilities | $ | 2,047,591 | $ | 3,538,761 | ||||
| Current portion of long-term debt (Note 7) | 1,338,815 | - | ||||||
| Derivative liability (Note 8) | 715 | - | ||||||
| Income tax payable | 91,191 | 91,191 | ||||||
| 3,478,312 | 3,629,952 | |||||||
| Long-term debt (Note 7) | 6,503,304 | - | ||||||
| Derivative liabilities (Note 8) | 602,526 | 7,309,467 | ||||||
| Total liabilities | 10,584,142 | 10,939,419 | ||||||
| Shareholders' equity (deficiency) | ||||||||
| Share capital (Note 9) | 25,980,117 | 25,974,742 | ||||||
| Reserves (Note 10) | 4,712,532 | 3,805,514 | ||||||
| Accumulated other comprehensive loss | (2,076,479 | ) | (2,076,479 | ) | ||||
| Deficit | (30,794,347 | ) | (28,240,634 | ) | ||||
| (2,178,177 | ) | (536,857 | ) | |||||
| Total liabilities and shareholders' equity (deficiency) | $ | 8,405,965 | $ | 10,402,562 |
Nature and continuance of operations (Note
Commitments (Note 16)
| On behalf of the Board on August 11, 2017 | |||
| "David R. Parkinson" | Director | "Franklin Berger" | Director |
The accompanying notes are an integral part
of these condensed consolidated interim financial statements.
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND
COMPREHENSIVE INCOME (LOSS)
(Expressed in United States dollars)
| Three months ended June 30, 2017 | Three months ended June 30, 2016 | Nine months ended June 30, 2017 | Nine months ended June 30, 2016 | |||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| Research and development, net of recoveries (Note 17) | $ | 2,920,181 | $ | 3,362,948 | $ | 4,560,449 | $ | 9,108,402 | ||||||||
| Financing costs | 249,818 | - | 561,294 | 937,845 | ||||||||||||
| General and administration (Note 17) | 1,302,314 | 1,305,780 | 4,035,626 | 4,407,245 | ||||||||||||
| Total operating expenses | (4,472,313 | ) | (4,668,728 | ) | (9,157,369 | ) | (14,453,492 | ) | ||||||||
| Foreign exchange | (15,570 | ) | (10,682 | ) | (8,586 | ) | 77,024 | |||||||||
| Gain on derivative liability (Note 8) | 8,192,368 | 867,734 | 6,706,226 | 5,533,529 | ||||||||||||
| Net income (loss) for the period before taxes | 3,704,485 | (3,811,676 | ) | (2,459,729 | ) | (8,842,939 | ) | |||||||||
| Income tax expense | (112,081 | ) | (54,081 | ) | (93,984 | ) | (60,081 | ) | ||||||||
| Net income (loss) for the period | 3,592,404 | (3,865,757 | ) | (2,553,713 | ) | (8,903,020 | ) | |||||||||
| OTHER COMPREHENSIVE INCOME (LOSS) | ||||||||||||||||
| Cumulative translation adjustment | - | - | - | (337,763 | ) | |||||||||||
| Comprehensive income (loss) for the period | $ | 3,592,404 | $ | (3,865,757 | ) | $ | (2,553,713 | ) | $ | (9,240,783 | ) | |||||
| Income (loss) per common shares | ||||||||||||||||
| Basic (Note 18) | $ | 0.12 | $ | (0.13 | ) | $ | (0.09 | ) | $ | (0.34 | ) | |||||
| Diluted (Note 18) | $ | 0.12 | $ | (0.13 | ) | $ | (0.09 | ) | $ | (0.34 | ) | |||||
| Weighted average number of common shares outstanding | ||||||||||||||||
| Basic (Note 18) | 29,099,197 | 29,080,966 | 29,097,658 | 26,167,480 | ||||||||||||
| Diluted (Note 18) | 30,993,139 | 29,080,966 | 29,097,658 | 26,167,480 |
The accompanying notes are an integral part
of these condensed consolidated interim financial statements.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF
(Expressed in United States dollars)
FOR THE NINE MONTHS ENDED JUNE 30
| 2017 | 2016 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Loss for the period | $ | (2,553,713 | ) | $ | (8,903,020 | ) | ||
| Items not affecting cash: | ||||||||
| Amortization | 34,609 | 49,601 | ||||||
| Gain on derivative liability | (6,706,226 | ) | (5,533,529 | ) | ||||
| Finance expense | 561,294 | 910,101 | ||||||
| Product development and relocation grant | (5,192,799 | ) | - | |||||
| Unrealized foreign exchange | (8,691 | ) | (139,018 | ) | ||||
| Share-based payments (Note 10) | 700,677 | 810,607 | ||||||
| Changes in non-cash working capital items: | ||||||||
| Receivables | 2,761 | 34,157 | ||||||
| Prepaid expenses | 304,369 | 804,703 | ||||||
| Accounts payable and accrued liabilities | (1,479,887 | ) | 58,895 | |||||
| Net cash used in operating activities | (14,337,606 | ) | (11,907,503 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Acquisition of equipment | - | (9,983 | ) | |||||
| Net cash used in investing activities | - | (9,983 | ) | |||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Product development and relocation grant | 5,192,799 | 3,786,667 | ||||||
| Proceeds on private placement | - | 19,999,992 | ||||||
| Proceeds on loan advance | 8,000,000 | - | ||||||
| Financing costs | (220,898 | ) | (1,080,219 | ) | ||||
| Interest paid | (289,500 | ) | - | |||||
| Options exercised | 2,939 | 36,465 | ||||||
| Warrants exercised | - | 1,194 | ||||||
| Net cash provided by financing activities | 12,685,340 | 22,744,099 | ||||||
| Effect of foreign exchange on cash | (3,332 | ) | (27,087 | ) | ||||
| Change in cash for the period | (1,655,598 | ) | 10,799,526 | |||||
| Cash, beginning of period | 8,985,095 | 1,579,288 | ||||||
| Cash, end of period | $ | 7,329,497 | $ | 12,378,814 |
Supplemental Cash Flow Information (Note
The accompanying notes are an integral part
of these condensed consolidated interim financial statements.
CONDENSED CONSOLIDATED INTERIM STATEMENT OF
CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)
(Expressed in United States dollars)
| Reserves | ||||||||||||||||||||||||||||
| Number of shares | Share capital | Share-based payments | Warrants | Cumulative translation adjustment | Deficit | Total | ||||||||||||||||||||||
| Balance, September 30, 2015 (Note 2) | 22,629,271 | $ | 19,419,004 | $ | 2,355,196 | $ | 45,824 | $ | (1,738,716 | ) | $ | (15,625,796 | ) | $ | 4,455,512 | |||||||||||||
| Private placement | 6,212,118 | 6,581,815 | - | - | - | - | 6,581,815 | |||||||||||||||||||||
| Issuance costs | - | (170,091 | ) | - | - | - | - | (170,091 | ) | |||||||||||||||||||
| Options exercised | 254,724 | 142,386 | (105,921 | ) | - | - | - | 36,465 | ||||||||||||||||||||
| Warrants exercised | 776 | 1,628 | - | (434 | ) | - | - | 1,194 | ||||||||||||||||||||
| Share-based payments | - | - | 810,607 | - | - | - | 810,607 | |||||||||||||||||||||
| Foreign currency adjustment | - | - | - | - | (54,574 | ) | - | (54,574 | ) | |||||||||||||||||||
| Effect of functional currency change | - | - | - | 263,903 | (283,189 | ) | 524,950 | 505,664 | ||||||||||||||||||||
| Loss for the period | - | - | - | - | - | (8,903,020 | ) | (8,903,020 | ) | |||||||||||||||||||
| Balance, June 30, 2016 | 29,096,889 | $ | 25,974,742 | $ | 3,059,882 | $ | 309,293 | $ | (2,076,479 | ) | $ | (24,003,866 | ) | $ | 3,263,572 | |||||||||||||
| Share-based payments | - | - | 436,339 | - | - | - | 436,339 | |||||||||||||||||||||
| Loss for the period | - | - | - | - | - | (4,236,768 | ) | (4,236,768 | ) | |||||||||||||||||||
| Balance, September 30, 2016 | 29,096,889 | $ | 25,974,742 | $ | 3,496,221 | $ | 309,293 | $ | (2,076,479 | ) | $ | (28,240,634 | ) | $ | (536,857 | ) | ||||||||||||
| Options exercised | 5,000 | 5,375 | (2,436 | ) | - | - | - | 2,939 | ||||||||||||||||||||
| Warrants issued on long-term debt | - | - | - | 208,777 | - | - | 208,777 | |||||||||||||||||||||
| Share-based payments | - | - | 700,677 | - | - | - | 700,677 | |||||||||||||||||||||
| Loss for the period | - | - | - | - | - | (2,553,713 | ) | (2,553,713 | ) | |||||||||||||||||||
| Balance, June 30, 2017 | 29,101,889 | $ | 25,980,117 | $ | 4,194,462 | $ | 518,070 | $ | (2,076,479 | ) | $ | (30,794,347 | ) | $ | (2,178,177 | ) |
The accompanying notes are an integral part
of these condensed consolidated interim financial statements.
Nature of Operations
ESSA Pharma Inc. (the "Company")
was incorporated under the laws of the Province of British Columbia on January 6, 2009. The Company's head office address
is Suite 720 - 999 West Broadway, Vancouver, BC, V5Z 1K5. The registered and records office address is the 26th Floor
at 595 Burrard Street, Three Bentall Centre, Vancouver, BC, V7X 1L3. The Company is listed on the NASDAQ Capital Market ("NASDAQ")
under the symbol "EPIX", and on the Toronto Stock Exchange ("TSX") under the symbol "EPI".
The Company is focused on the development
of small molecule drugs for the treatment of prostate cancer. The Company has acquired a license to certain patents (the "NTD
Technology") which were the joint property of the British Columbia Cancer Agency and the University of British Columbia.
As at June 30, 2017, no products are in commercial production or use.
Change in Presentation Currency
The Company has retroactively changed
its presentation currency to the United States dollar ("US$") from the Canadian dollar ("C$"). The change
is detailed in Note 2.
These financial statements have been
prepared in accordance with International Financial Reporting Standards ("IFRS") assuming the Company will continue
on a going-concern basis. The Company has incurred losses and negative operating cash flows since inception. The Company incurred
a net loss of $2,553,713 during the nine months ended June 30, 2017 and has an accumulated deficit of $30,794,347. The ability
of the Company to continue as a going concern in the long-term depends upon its ability to develop profitable operations and to
continue to raise adequate financing. As at June 30, 2017, the Company has not advanced its research into a commercially
viable product. The Company's continuation as a going concern is dependent upon the successful development of its NTD Technology
to a commercial standard. Management has forecasted that the Company's current working capital will not be sufficient to
execute its planned expenditures for the coming year. These matters indicate the existence of material uncertainties that raises
substantial doubt about the Company's ability to continue as a going concern.
During the period ended June 30,
2017, the Company drew down $8,000,000 on a term credit loan facility agreement. The term credit loan facility is subject to certain
covenants which, if triggered, could affect the timing of repayment (Note 7). During the period ended June 30, 2017, the Company
also received $5,192,799, a portion of the third and final tranche of Cancer Prevention Research Institute of Texas ("CPRIT")
funding of $5,422,000 (Note 16). Management continues to seek sources of additional financing which would assure continuation of
the Company's operations and research programs. However, there is no certainty that such financing will be provided or provided
on favorable terms. Management believes that it will complete one or more of these arrangements in sufficient time to continue
to execute its planned expenditures without interruption.
Statement of Compliance
These condensed consolidated interim
financial statements, including comparatives, have been prepared in accordance with International Accounting Standards ("IAS")
34 Interim Financial Reporting' ("IAS 34") using accounting policies consistent with International Financial
Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB") and Interpretations
of the International Financial Reporting Interpretations Committee ("IFRIC").
Statement of Compliance (cont'd...)
The condensed consolidated interim
financial statements do not include all the information and disclosures required in the annual consolidated financial statements
and should be read in conjunction with the Company's annual consolidated financial statements for the year ended September
Basis of Presentation
The condensed consolidated interim
financial statements have been prepared on a historical cost basis except for certain financial assets measured at fair value.
In addition, these condensed consolidated interim financial statements have been prepared using the accrual basis of accounting,
except for cash flow information.
All amounts expressed in these condensed
consolidated interim financial statements and the accompanying notes are expressed in United States dollars, except per share data
and where otherwise indicated. References to "$" are to United States dollars and references to "C$" are
to Canadian dollars.
Basis of Consolidation
The condensed consolidated interim
financial statements comprise the accounts of ESSA Pharma Inc., the parent company, and its wholly-owned subsidiary, ESSA Pharmaceuticals
Corp., after the elimination of all material intercompany balances and transactions.
Subsidiaries are all entities over
which the Company has exposure to variable returns from its involvement and has the ability to use power over the investee to affect
its returns. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when
assessing whether the Company controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred
to the Company until the date on which control ceases.
The accounts of subsidiaries are
prepared for the same reporting period as the parent company, using consistent accounting policies. Inter-company transactions,
balances and unrealized gains or losses on transactions are eliminated upon consolidation.
Functional and Presentation Currency
currency of an entity is the currency of the primary economic environment in which the entity operates. From inception to January
1, 2016, the functional currency of the Company has been the Canadian dollar and its subsidiary's the United States dollar.
The functional currency determinations were conducted through an analysis of the consideration factors identified in IAS 21, The
Effects of Changes in Foreign Exchange Rates. The financing completed in January 2016 and changes to the Company's operations
have resulted in a change to the currency in which the Company's management conducts its operating, capital and financing
decisions. Consequently, the functional currency of the Company became the US$ effective January 1, 2016.