Full Press Release Details
(formerly, Unilock Capital Corp.)
Consolidated Financial Statements
Years ended February 28, 2023 and 2022
(Expressed in Canadian Dollars)
(formerly, Unilock Capital Corp.)
| Page | |
| Independent Auditor's Report | 1 |
| Consolidated Statements of Financial Position | 4 |
| Consolidated Statements of Operations and Comprehensive Loss | 5 |
| Consolidated Statements of Changes in Equity (Deficit) | 6 |
| Consolidated Statements of Cash Flows | 8 |
| Notes to the Consolidated Financial Statements | 9 |
To the Shareholders of Small Pharma Inc. (formerly, Unilock Capital Corp.):
We have audited the consolidated financial statements of Small Pharma Inc. (formerly, Unilock Capital Corp.) and its subsidiaries (the "Company"), which comprise the consolidated statements of financial position as at February 28, 2023 and February 28, 2022, and the consolidated statements of operations and comprehensive loss, changes in equity (deficit) and cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at February 28, 2023 and February 28, 2022, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards.
We conducted our audits in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audits of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. We have determined that there are no key audit matters to communicate in our report.
Management is responsible for the other information. The other information comprises Management's Discussion and Analysis.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audits of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audits or otherwise appears to be materially misstated. We obtained Management's Discussion and Analysis prior to the date of this auditor's report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
| MNP LLP | |
| 1 Adelaide Street East, Suite 1900, Toronto ON, M5C 2V9 | 1.877.251.2922 T: 416.596.1711 F: 416.596.7894 |
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the 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.
In preparing the consolidated financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design 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.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
| 1 Adelaide Street East, Suite 1900, Toronto, Ontario, M5C 2V9 | |
| 1.877.251.2922 T: 416.596.1711 F: 416.596.7894 MNP.ca |
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audits and significant audit findings, including any significant deficiencies in internal control that we identify during our audits.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
The engagement partner on the audit resulting in this independent auditor's report is Ajmer Singh Sran.
| /s/ MNP LLP | |
| Toronto, Ontario | Chartered Professional Accountants Licensed Public Accountants |
| June 28, 2023 |
| 1 Adelaide Street East, Suite 1900, Toronto, Ontario, M5C 2V9 | |
| 1.877.251.2922 T: 416.596.1711 F: 416.596.7894 MNP.ca |
(formerly, Unilock Capital Corp.)
Consolidated Statements of Financial Position
(Expressed in Canadian dollars)
| February 28, | February 28, | |||||
| 2023 $ | 2022 $ | |||||
| ASSETS | ||||||
| Current assets | ||||||
| Cash | 18,536,958 | 40,656,069 | ||||
| Trade and other receivables (Note 13) | 800,173 | 1,213,906 | ||||
| Prepaid expenses (Note 9) | 987,114 | 1,142,118 | ||||
| Total current assets | 20,324,245 | 43,012,093 | ||||
| Non-current assets | ||||||
| Property and equipment (Note 4) | 54,341 | 61,789 | ||||
| Right-of-use asset (Note 4) | 605,233 | - | ||||
| Restricted cash (Note 5) | - | 2,500,000 | ||||
| Total non-current assets | 659,574 | 2,561,789 | ||||
| Total assets | 20,983,819 | 45,573,882 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) | ||||||
| Current liabilities | ||||||
| Accounts payable and accrued liabilities (Note 9 & 13) | 3,217,785 | 4,497,271 | ||||
| Lease liabilities (Note 6) | 303,650 | - | ||||
| Total current liabilities | 3,521,435 | 4,497,271 | ||||
| Non-current liabilities | ||||||
| Lease liabilities (Note 6) | 305,903 | - | ||||
| Total non-current liabilities | 305,903 | - | ||||
| Total liabilities | 3,827,338 | 4,497,271 | ||||
| Shareholders' equity (deficit) | ||||||
| Share capital (Note 10) | 69,722,807 | 69,970,184 | ||||
| Share-based payment reserve (Note 11 & 12) | 4,117,212 | 3,009,042 | ||||
| Accumulated other comprehensive loss | (2,043,011 | ) | (193,657 | ) | ||
| Deficit | (54,640,527 | ) | (31,708,958 | ) | ||
| Total shareholders' equity (deficit) | 17,156,481 | 41,076,611 | ||||
| Total liabilities and shareholders' equity (deficit) | 20,983,819 | 45,573,882 |
Commitments (Note 14)
Subsequent events (Note 17)
Approved and authorized for issuance on behalf of the board of directors on June 28, 2023:
| /s/ Michael Wolfe | /s/ George Tziras | |
| Michael Wolfe, Director | George Tziras, Director |
The accompanying notes are an integral part of these consolidated financial statements
(formerly, Unilock Capital Corp.)
Consolidated Statements of Operations and Comprehensive Loss
(Expressed in Canadian dollars)
| Year ended February 28, | Year ended February 28, | |||||
| 2023 $ | 2022 $ | |||||
| Revenue | - | - | ||||
| Expenses | ||||||
| Investor and public relations | 1,240,507 | 2,196,210 | ||||
| Consulting fees | 482,239 | 120,083 | ||||
| Depreciation | 48,441 | 20,486 | ||||
| Directors' fees | 344,739 | 185,832 | ||||
| Foreign exchange loss | 41,341 | 184,713 | ||||
| Office and miscellaneous | 863,929 | 263,516 | ||||
| Professional fees | 2,897,993 | 2,482,712 | ||||
| Occupancy costs | 199,032 | 153,015 | ||||
| Research and development | 11,382,096 | 4,828,057 | ||||
| Salaries and benefits (Note 9) | 5,875,166 | 6,806,694 | ||||
| Share-based payment expense (Note 12) | 1,188,611 | 703,845 | ||||
| Transfer agent and filing fees | 178,336 | 191,803 | ||||
| Total expenses | 24,742,430 | 18,136,966 | ||||
| Loss before other items | (24,742,430 | ) | (18,136,966 | ) | ||
| Other items | ||||||
| Accretion discounts on notes payable (Note 7) | - | (372,759 | ) | |||
| Loss on change in fair value of derivative liabilities (Note 8) | - | (1,930,416 | ) | |||
| Interest income (expense) (Note 6 & 7) | 21,021 | (60,973 | ) | |||
| Listing costs (Note 3) | - | (2,419,736 | ) | |||
| Total other items | 21,021 | (4,783,884 | ) | |||
| Net loss for the year before income taxes | (24,721,409 | ) | (22,920,850 | ) | ||
| Income tax recovery (Note 16) | 1,885,196 | 655,166 | ||||
| Net loss for the year | (22,836,213 | ) | (22,265,684 | ) | ||
| Other comprehensive income (loss) | ||||||
| Foreign currency translation loss | (1,849,354 | ) | (12,973 | ) | ||
| Comprehensive loss for the year | (24,685,567 | ) | (22,278,657 | ) | ||
| Net loss per share, basic and diluted (Note 10 (e)) | (0.07 | ) | (0.07 | ) | ||
| Weighted average shares outstanding (Note 10 (e)) | 321,470,166 | 311,599,658 |
The accompanying notes are an integral part of these consolidated financial statements
(formerly, Unilock Capital Corp.)
Consolidated Statements of Changes in Equity (Deficit)
(Expressed in Canadian dollars)
| Accumulated | ||||||||||||||||||
| Share-based | other | Total | ||||||||||||||||
| Share capital | payment | comprehensive | shareholders' | |||||||||||||||
| Number of | Amount | reserve | loss | Deficit | equity (deficit) | |||||||||||||
| shares | $ | $ | $ | $ | $ | |||||||||||||
| Balance, March 1, 2022 | 319,625,487 | 69,970,184 | 3,009,042 | (193,657 | ) | (31,708,958 | ) | 41,076,611 | ||||||||||
| Shares issued pursuant to exercise of stock options | 3,725,000 | 140,307 | (80,441 | ) | - | - | 59,866 | |||||||||||
| Purchase of shares through normal course issuer bid for cancellation (Note 10 (b)) | (1,788,000 | ) | (387,684 | ) | - | - | (95,356 | ) | (483,040 | ) | ||||||||
| Share-based payment expense | - | - | 1,188,611 | - | - | 1,188,611 | ||||||||||||
| Foreign currency translation loss | - | - | - | (1,849,354 | ) | - | (1,849,354 | ) | ||||||||||
| Net loss for the year | - | - | - | - | (22,836,213 | ) | (22,836,213 | ) | ||||||||||
| Balance, February 28, 2023 | 321,562,487 | 69,722,807 | 4,117,212 | (2,043,011 | ) | (54,640,527 | ) | 17,156,481 |
The accompanying notes are an integral part of these consolidated financial statements
(formerly, Unilock Capital Corp.)
Consolidated Statements of Changes in Equity (Deficit)
(Expressed in Canadian dollars)
| Accumulated | Total | |||||||||||||||||
| Share-based | other | shareholders' | ||||||||||||||||
| Share capital | payment | comprehensive | equity | |||||||||||||||
| Number of | Amount | reserve | loss | Deficit | (deficit) | |||||||||||||
| shares | $ | $ | $ | $ | $ | |||||||||||||
| Balance, February 28, 2021 | 228,621,500 | 3,244,312 | 609,564 | (180,684 | ) | (9,443,274 | ) | (5,770,082 | ) | |||||||||
| Shares issued pursuant to exercise of stock options | 15,121,400 | 463,464 | (372,120 | ) | - | - | 91,344 | |||||||||||
| Shares issued for conversion of notes payable and accrued interest and settlement of derivative liabilities | 14,161,576 | 13,188,591 | - | - | - | 13,188,591 | ||||||||||||
| Shares of the Company pursuant to closing of the Qualifying Transaction (Note 3) | 1,304,344 | 1,252,170 | - | - | - | 1,252,170 | ||||||||||||
| Shares issued for cash | 60,416,667 | 58,000,000 | - | - | - | 58,000,000 | ||||||||||||
| Share issuance costs | - | (4,200,618 | ) | - | - | - | (4,200,618 | ) | ||||||||||
| Fair value of brokers' warrants issued | - | (1,977,735 | ) | 1,977,735 | - | - | - | |||||||||||
| Revaluation of stock options upon closing of the Qualifying Transaction | - | - | 90,018 | - | - | 90,018 | ||||||||||||
| Share-based payment expense | - | - | 703,845 | - | - | 703,845 | ||||||||||||
| Foreign currency translation loss | - | - | - | (12,973 | ) | - | (12,973 | ) | ||||||||||
| Net loss for the year | - | - | - | - | (22,265,684 | ) | (22,265,684 | ) | ||||||||||
| Balance, February 28, 2022 | 319,625,487 | 69,970,184 | 3,009,042 | (193,657 | ) | (31,708,958 | ) | 41,076,611 |
The accompanying notes are an integral part of these consolidated financial statements
(formerly, Unilock Capital Corp.)
Consolidated Statements of Cash Flows
(Expressed in Canadian dollars)
| Year ended | Year ended | |||||
| February 28, | February 28, | |||||
| 2023 | 2022 | |||||
| $ | $ | |||||
| Operating activities | ||||||
| Net loss for the year | (22,836,213 | ) | (22,265,684 | ) | ||
| Items not involving cash: | ||||||
| Depreciation | 48,441 | 20,486 | ||||
| Foreign exchange loss | 41,341 | 184,713 | ||||
| Share-based payment expense (Note 12) | 1,188,611 | 703,845 | ||||
| Listing costs (Note 3) | - | 1,210,013 | ||||
| Interest expense accrued | - | 92,959 | ||||
| Accretion of interest on lease liabilities (Note 6) | 2,565 | - | ||||
| Loss on change in fair value of derivative liabilities (Note 8) | - | 1,930,416 | ||||
| Accretion of discounts on notes payable (Note 7) | - | 372,759 | ||||
| Changes in non-cash operating working capital: Trade and other receivables | 350,249 | (763,696 | ) | |||
| Prepaid expenses | 117,464 | (852,659 | ) | |||
| Accounts payable and accrued liabilities | (1,123,181 | ) | 3,131,852 | |||
| Net cash used in operating activities | (22,210,723 | ) | (16,234,996 | ) | ||
| Investing activities | ||||||
| Restricted cash (Note 5) | 2,500,000 | (2,500,000 | ) | |||
| Cash acquired in reverse acquisition (Note 3) | - | 109,146 | ||||
| Acquisition of property and equipment | (18,603 | ) | (12,957 | ) | ||
| Expenses capitalized for right-of-use asset | (10,846 | ) | - | |||
| Net cash provided by (used in) investing activities | 2,470,551 | (2,403,811 | ) | |||
| Financing activities | ||||||
| Net proceeds from issuance of common shares, after issue costs | - | 53,799,382 | ||||
| Purchase of shares through normal course issuer bid for cancellation (Note 10 (b) & (c)) | (483,040 | ) | - | |||
| Proceeds from exercise of stock options (Note 10 (c)) | 59,866 | 91,344 | ||||
| Lease liabilities rent paid (Note 6) | (13,236 | ) | - | |||
| Net cash (used in) provided by financing activities | (436,410 | ) | 53,890,726 | |||
| Effect of exchange rate changes on cash | (1,942,529 | ) | (373,807 | ) | ||
| Change in cash | (22,119,111 | ) | 34,878,112 | |||
| Cash, beginning of year | 40,656,069 | 5,777,957 | ||||
| Cash, end of year | 18,536,958 | 40,656,069 | ||||
| Non-cash investing and financing activities: | ||||||
| Prepaid expenses acquired in reverse acquisition (Note 3) | - | 38,533 | ||||
| Accounts payable and accrued liabilities assumed in reverse acquisition (Note 3) | - | 15,504 | ||||
| Shares issued for conversion of notes payable and accrued interest (Notes 7 & 8) | - | 13,188,591 |
The accompanying notes are an integral part of these consolidated financial statements
(formerly, Unilock Capital Corp.)
Notes to the Consolidated Financial Statements
For the years ended February 28, 2023 and 2022
(Expressed in Canadian dollars)
1. Nature of Operations and Continuance of Business
Small Pharma Inc. (formerly, Unilock Capital Corp.) (the "Company" or "Small Pharma Inc.") was incorporated under the Business Corporations Act (British Columbia) (the "BCBCA") on January 23, 2018. Small Pharma Inc is a biotechnology company focused on developing short-duration psychedelic-assisted therapies for the treatment of mental health conditions. The Company's head office is located at 6-8 Bonhill Street, 3rd Floor, London, UK.
Effective April 29, 2021, the Company completed its acquisition of all of the issued outstanding ordinary shares of Small Pharma Ltd which constituted the Company's qualifying transaction under TSX Venture Exchange ("TSXV") Policy 2.4 - Capital Pool Companies. This transaction constituted a reverse acquisition of the Company by Small Pharma Ltd, with Small Pharma Ltd being identified as the accounting acquirer. As a result, these consolidated financial statements are a continuation of Small Pharma Ltd. The Company's results of operations are included from April 29, 2021, onwards, except for capital which has been retroactively adjusted to reflect the capital of the Company. Refer to Note 3.
On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, leading to an economic downturn. The impact on the Company has not been significant, but management continues to monitor the situation.
2. Significant Accounting Policies
(a) Statement of Compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board, and Interpretations of the International Financial Reporting Interpretations Committee issued and outstanding as of February 28, 2023.
These consolidated financial statements were authorized for issuance by the board of directors on June 28, 2023.
These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, including Small Pharma Ltd, a company incorporated in the UK on February 4, 2015, Small Pharma (US) Inc., a company incorporated in the State of Delaware, USA on July 5, 2022 that does not currently have significant assets and is not currently conducting active business operations and an amalgamated entity ("Amalco") between 1292589 B.C. Ltd. ("Subco") and Small Pharma Financing Inc. ("Finco") until Amalco's dissolution on October 7, 2021. Refer to Note 3.
Subsidiaries are those entities over which the Company has control. Control exists when the company has the power, directly or indirectly, to govern the financial and operating policies of an entity and be exposed to the variable returns from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date control commences until the date that control ceases.
All intercompany transactions have been eliminated on consolidation.
(b) Basis of Presentation
These consolidated financial statements have been prepared on a historical cost basis except for certain financial instruments and equity instruments which are measured at fair value. All monetary references expressed in these notes are in Canadian dollars unless otherwise indicated.
(formerly, Unilock Capital Corp.)
Notes to the Consolidated Financial Statements
For the years ended February 28, 2023 and 2022
(Expressed in Canadian dollars)
2. Significant Accounting Policies (continued)
(c) Use of Estimates and Judgments
The preparation of these consolidated financial statements in conformity with International Financial Reporting Standards ("IFRS") requires the Company's management to make judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected.
Significant areas requiring the use of estimates include:
Income taxes, research and development expenditures tax credits and recoverability of potential deferred tax assets
In assessing the probability of realizing any income tax assets recognized, management makes estimates related to expectations of future taxable income, applicable tax planning opportunities, expected timing of reversals of existing temporary differences and the likelihood that tax positions taken will be sustained upon examination by applicable tax authorities. In preparing income tax claims submitted to the tax authorities in relation to research and development expenditure, management makes estimates of the percentage of time spent by employees on qualifying research and development projects. Estimates of future taxable income are based on forecasted cash flows from operations and the application of existing tax laws in each jurisdiction. Examination by applicable tax authorities is supported based on individual facts and circumstances of the relevant tax position examined in the light of all available evidence. Where applicable tax laws and regulations are either unclear or subject to ongoing varying interpretations, it is reasonably possible that changes in these estimates can occur that materially affect the amounts of income tax assets recognized. Also, future changes in tax laws could limit the Company from realizing the tax benefits from the deferred tax assets. The Company reassesses unrecognized income tax assets at each reporting period.
Share-based payments
Management determines the charge for share-based payments using market-based valuation techniques. The fair value of the market-based share awards are determined at the date of grant using generally accepted valuation techniques, which is dependent on the terms and condition of the grant. Assumptions are made and judgment used in applying valuation techniques. These assumptions and judgments include estimating the future volatility of the stock price, expected dividend yield, future forfeiture rates and future equity instrument exercise behaviors and corporate performance. Such judgments and assumptions are inherently uncertain. Changes in these assumptions affect the fair value estimates.
Derivative liabilities
The Company makes estimates and assumptions relating to the fair value measurement and disclosure of its derivative liabilities. The fair values are determined using a variety of valuation techniques. The inputs to these models are derived from observable market data where possible, but where observable market data is not available, management's judgment is required to establish fair values.
The consolidated financial statements are prepared on a going concern basis, which assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business. Management's assessment of going concern involves significant judgment based on historical experience, progress made in clinical trials and other factors, including reasonable expectations of future events based on the circumstances that existed at the reporting date.
(formerly, Unilock Capital Corp.)
Notes to the Consolidated Financial Statements
For the years ended February 28, 2023 and 2022
(Expressed in Canadian dollars)
2. Significant Accounting Policies (continued)