Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended |
Sep. 30, 2014 | |
Document And Entity Information | ' |
Entity Registrant Name | 'Tribute Pharmaceuticals Canada Inc. |
Entity Central Index Key | '0001159019 |
Document Type | '10-Q |
Document Period End Date | 30-Sep-14 |
Amendment Flag | 'false |
Current Fiscal Year End Date | '--12-31 |
Is Entity a Well-known Seasoned Issuer? | 'No |
Is Entity a Voluntary Filer? | 'No |
Is Entity's Reporting Status Current? | 'Yes |
Entity Filer Category | 'Smaller Reporting Company |
Entity Common Stock, Shares Outstanding | 94,476,238 |
Document Fiscal Period Focus | 'Q3 |
Document Fiscal Year Focus | '2014 |
CONDENSED_INTERIM_BALANCE_SHEE
CONDENSED INTERIM BALANCE SHEETS (Unaudited) (CAD) | Sep. 30, 2014 | Dec. 31, 2013 |
ASSETS | ' | ' |
Cash and cash equivalents | 28,725,849 | 2,813,472 |
Accounts receivable, net of allowance of $nil (2013 - $nil) (Note 16d) | 1,922,835 | 591,766 |
Inventories (Note 2) | 857,206 | 1,044,831 |
Taxes recoverable | 47,481 | 651,791 |
Loan receivable | 15,814 | 15,814 |
Prepaid expenses and other receivables (Note 3) | 232,461 | 165,886 |
Current portion of debt issuance costs, net (Note 6) | 121,992 | 91,100 |
Other current asset (Note 17) | 13,158 | 0 |
Total current assets | 31,936,796 | 5,374,660 |
Property, plant and equipment, net (Note 4) | 1,026,008 | 1,089,919 |
Intangible assets, net (Note 5) | 9,378,881 | 9,717,173 |
Goodwill | 3,599,077 | 3,599,077 |
Debt issuance costs, net (Note 6) | 286,925 | 253,712 |
Total assets | 46,227,687 | 20,034,541 |
Current | ' | ' |
Accounts payable and accrued liabilities | 3,340,542 | 3,284,756 |
Current portion of long term debt (Note 6) | 737,263 | 204,700 |
Warrant liability (Note 7 c) | 3,250,811 | 2,966,714 |
Other current liability (Note 17) | 0 | 38,156 |
Total current liabilities | 7,328,616 | 6,494,326 |
Long term debt (Note 6) | 7,645,299 | 5,640,102 |
Total liabilities | 14,973,915 | 12,134,428 |
Contingencies and commitments (Notes 6 and 10) | ' | ' |
SHAREHOLDERS' EQUITY | ' | ' |
AUTHORIZED Unlimited Non-voting, convertible redeemable and retractable preferred shares with no par value Unlimited Common shares with no par value ISSUED (Note 7 a) Common shares 94,476,238 (2013 - 51,081,238) | 41,189,440 | 19,947,290 |
Additional paid-in capital options (Note 7b) | 2,646,881 | 2,286,890 |
Warrants (Note 7 c) | 6,347,349 | 0 |
Accumulated other comprehensive loss (Note 17) | 13,158 | -38,156 |
Deficit | -18,943,056 | -14,295,911 |
Total shareholders' equity | 31,253,772 | 7,900,113 |
Total liabilities and shareholders' equity | 46,227,687 | 20,034,541 |
CONDENSED_INTERIM_BALANCE_SHEE1
CONDENSED INTERIM BALANCE SHEETS (Parenthetical) | Sep. 30, 2014 | Dec. 31, 2013 | ||
Shareholders Equity | ' | ' | ||
Common Shares Authorized | ' | [1] | ' | [1] |
Common Shares Issued | 94,476,238 | 51,081,238 | ||
[1] | Unlimited |
CONDENSED_INTERIM_STATEMENTS_O
CONDENSED INTERIM STATEMENTS OF OPERATIONS, COMPREHENSIVE (LOSS) AND DEFICIT (Unaudited) (CAD) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Revenues | ' | ' | ' | ' |
Licensed domestic product net sales | 2,381,710 | 2,242,333 | 7,121,403 | 6,378,621 |
Other domestic product sales | 991,053 | 790,362 | 2,945,936 | 2,618,710 |
International product sales | 496,153 | 347,551 | 1,318,002 | 1,037,103 |
Royalty and licensing revenues | 0 | 99,884 | 18,414 | 197,924 |
Total revenues (Notes 11 and 14) | 3,868,916 | 3,480,130 | 11,403,755 | 10,232,358 |
Cost of Sales | ' | ' | ' | ' |
Licensor sales and distribution fees | 1,525,103 | 1,501,243 | 4,457,240 | 4,262,968 |
Cost of products sold | 438,104 | 389,105 | 1,252,370 | 1,212,448 |
Expired products | 25,228 | 20,253 | 38,584 | 20,253 |
Total Cost of Sales | 1,988,435 | 1,910,601 | 5,748,194 | 5,495,669 |
Gross profit | 1,880,481 | 1,569,529 | 5,655,561 | 4,736,689 |
Expenses | ' | ' | ' | ' |
Selling, general and administrative (Notes 7b, 12 and 15) | 2,529,534 | 2,224,457 | 8,161,873 | 7,681,179 |
Amortization of assets | 296,723 | 313,635 | 883,649 | 977,693 |
Total operating expenses | 2,826,257 | 2,538,092 | 9,045,522 | 8,658,872 |
Loss from operations | -945,776 | -968,563 | -3,389,961 | -3,922,183 |
Non-operating income (expenses) | ' | ' | ' | ' |
(Loss) on derivative instrument (Note 17) | -184,113 | 0 | -180,913 | 0 |
Change in warrant liability (Note 7c) | 4,454,565 | -660,325 | -163,184 | -1,510,800 |
Accretion expense (Note 6) | -36,738 | -20,895 | -102,264 | -68,123 |
Loss on disposal of intangible asset | ' | -161,200 | 0 | -161,200 |
Loss on extinguishment of loan | ' | -620,835 | 0 | -620,835 |
Interest income | 57,550 | 268 | 58,088 | 2,235 |
Interest expense | -303,613 | -152,026 | -868,911 | -320,029 |
Income (loss) before tax | 3,041,875 | -2,583,576 | -4,647,145 | -6,600,935 |
Deferred income tax recovery (Note 13) | 0 | 0 | 0 | 314,900 |
Net income (loss) for the period | 3,041,875 | -2,583,576 | -4,647,145 | -6,286,035 |
Unrealized gain on derivative instrument, net of tax (Note 17) | 13,158 | 0 | 13,158 | 0 |
Net income (loss) and comprehensive income (loss) for the period | 3,055,033 | -2,583,576 | -4,633,987 | -6,286,035 |
Deficit, beginning of period | -21,984,931 | -11,426,015 | -14,295,911 | -7,723,556 |
Deficit, end of period | -18,943,056 | -14,009,591 | -18,943,056 | -14,009,591 |
Earnings (loss) per share (Note 8) – Basic and diluted | 0.03 | -0.05 | -0.07 | -0.13 |
Weighted Average Number of Common Shares – Basic | 87,948,738 | 50,985,538 | 64,283,839 | 48,525,136 |
Weighted Average Number of Common Shares - Diluted | 88,392,327 | 50,985,538 | 64,283,839 | 48,525,136 |
CONDENSED_INTERIM_STATEMENTS_O1
CONDENSED INTERIM STATEMENTS OF CASH FLOWS (Unaudited) (CAD) | 9 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2013 | |
Cash flows from (used in) operating activities | ' | ' |
Net (loss) | -4,647,145 | -6,286,035 |
Items not affecting cash: | ' | ' |
Deferred income tax (recovery) | 0 | -314,900 |
Amortization | 909,311 | 995,758 |
Changes in warrant liability (Note 7c) | 163,183 | 1,510,800 |
Loss on extinguishment of loan | 0 | 620,835 |
Loss on disposal of intangible asset | 0 | 161,200 |
Stock-based compensation (Note 7b) | 359,992 | 428,482 |
Accretion expense | 102,264 | 68,123 |
Paid-in common shares for services (Note 7a) | 211,812 | 0 |
Change in non-cash operating assets and liabilities (Note 9) | -736,585 | -2,629,186 |
Cash flows (used in) operating activities | -3,637,168 | -5,444,922 |
Cash flows from (used in) investing activities | ' | ' |
Additions to property, plant and equipment | -6,525 | -25,562 |
Payment of contingent liability | 0 | -460,000 |
Increase in intangible assets | -231,620 | -13,180 |
Cash flows (used in) investing activities | -238,145 | -498,742 |
Cash flows from (used in) financing activities | ' | ' |
Financing costs deferred | -128,181 | -305,227 |
Long term debt issued (Note 6) | 2,211,000 | 6,084,437 |
Units issued | 30,026,500 | 4,713,787 |
Long term debt repayment | 0 | -3,386,630 |
Debt extinguishment costs | 0 | -348,420 |
Share issuance costs | -2,648,813 | -433,871 |
Cash flows from financing activities | 29,460,506 | 6,324,076 |
Changes in cash and cash equivalents | 25,585,193 | 380,412 |
Change in cash and cash equivalents due to changes in foreign exchange | 327,184 | 84,954 |
Cash and cash equivalents, beginning of period | 2,813,472 | 2,283,868 |
Cash and cash equivalents, end of period | 28,725,849 | 2,749,234 |
1_Basis_of_Presentation
1. Basis of Presentation | 9 Months Ended | ||
Sep. 30, 2014 | |||
Accounting Policies [Abstract] | ' | ||
1. Basis of Presentation | ' | ||
These unaudited condensed interim financial statements should be read in conjunction with the audited financial statements for Tribute Pharmaceuticals Canada Inc.’s ("Tribute" or the "Company") most recently completed fiscal year ended December 31, 2013. These unaudited condensed interim financial statements do not include all disclosures required in annual financial statements, but rather are prepared in accordance with recommendations for interim financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). These unaudited condensed interim financial statements have been prepared using the same accounting policies and methods as those used by the Company in the annual audited financial statements for the year ended December 31, 2013, except when disclosed below. | |||
The unaudited condensed interim financial statements contain all adjustments (consisting of only normal recurring adjustments) which are necessary to present fairly the financial position of the Company as at September 30, 2014, and the results of its operations for the three and nine month periods ended September 30, 2014 and 2013 and its cash flows for the nine month periods ended September 30, 2014 and 2013. Note disclosures have been presented for material updates to the information previously reported in the annual audited financial statements. | |||
a) | Estimates | ||
The preparation of these financial statements has required management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of the revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including those related to provision for doubtful accounts, accrued liabilities, income taxes, stock based compensation, revenue recognition, intangible assets and derivative financial instruments. The Company bases its estimates on historical experiences and on various other assumptions believed to be reasonable under the circumstances. Actual results could differ from those estimates. As adjustments become necessary, they are reported in earnings in the period in which they become known. | |||
2_Inventories
2. Inventories | 9 Months Ended | ||||||
Sep. 30, 2014 | |||||||
Inventory Disclosure [Abstract] | ' | ||||||
2. Inventories | ' | ||||||
September 30, | December 31, | ||||||
2014 | 2013 | ||||||
Raw materials | $ | 256,492 | $ | 236,444 | |||
Finished goods | 330,779 | 418,635 | |||||
Packaging materials | 54,042 | 56,007 | |||||
Work in process | 215,893 | 333,745 | |||||
$ | 857,206 | $ | 1,044,831 |
3_Prepaid_Expenses_and_Other_R
3. Prepaid Expenses and Other Receivables | 9 Months Ended | |||||
Sep. 30, 2014 | ||||||
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ' | |||||
3. Prepaid Expenses and Other Receivables | ' | |||||
September 30, | December 31, | |||||
2014 | 2013 | |||||
Prepaid operating expenses | $ | 225,711 | $ | 140,986 | ||
Deposits | - | 18,825 | ||||
Interest receivable on loan receivables | 6,750 | 6,075 | ||||
$ | 232,461 | $ | 165,886 |
4_Property_Plant_and_Equipment
4. Property, Plant and Equipment | 9 Months Ended | |||||||||
Sep. 30, 2014 | ||||||||||
Property, Plant and Equipment [Abstract] | ' | |||||||||
4. Property, Plant and Equipment | ' | |||||||||
30-Sep-14 | ||||||||||
Accumulated | Net Carrying | |||||||||
Cost | Amortization | Amount | ||||||||
Land | $ | 90,000 | $ | - | $ | 90,000 | ||||
Building | 618,254 | 293,070 | 325,184 | |||||||
Leasehold improvements | 10,359 | 4,144 | 6,215 | |||||||
Office equipment | 61,308 | 51,224 | 10,084 | |||||||
Manufacturing equipment | 1,103,525 | 598,204 | 505,321 | |||||||
Warehouse equipment | 17,085 | 17,085 | - | |||||||
Packaging equipment | 111,270 | 60,314 | 50,956 | |||||||
Computer equipment | 136,639 | 98,391 | 38,248 | |||||||
$ | 2,148,440 | $ | 1,122,432 | $ | 1,026,008 | |||||
31-Dec-13 | ||||||||||
Accumulated | Net Carrying | |||||||||
Cost | Amortization | Amount | ||||||||
Land | $ | 90,000 | $ | - | $ | 90,000 | ||||
Building | 618,254 | 269,886 | 348,368 | |||||||
Leasehold improvements | 10,359 | 2,590 | 7,769 | |||||||
Office equipment | 61,308 | 48,299 | 13,009 | |||||||
Manufacturing equipment | 1,103,525 | 576,862 | 526,663 | |||||||
Warehouse equipment | 17,085 | 16,737 | 348 | |||||||
Packaging equipment | 111,270 | 51,700 | 59,570 | |||||||
Computer equipment | 130,114 | 85,922 | 44,192 | |||||||
$ | 2,141,915 | $ | 1,051,996 | $ | 1,089,919 | |||||
5_Intangible_Assets
5. Intangible Assets | 9 Months Ended | |||||||||
Sep. 30, 2014 | ||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ' | |||||||||
5. Intangible Assets | ' | |||||||||
30-Sep-14 | ||||||||||
Accumulated | Net Carrying | |||||||||
Cost | Amortization | Amount | ||||||||
Patents | $ | 313,743 | $ | 48,188 | $ | 265,555 | ||||
Licensing asset | 1,005,820 | 154,742 | 851,078 | |||||||
Licensing agreements | 10,377,325 | 2,115,077 | 8,262,248 | |||||||
$ | 11,696,888 | $ | 2,318,007 | $ | 9,378,881 | |||||
31-Dec-13 | ||||||||||
Accumulated | Net Carrying | |||||||||
Cost | Amortization | Amount | ||||||||
Patents | $ | 268,786 | $ | 39,562 | $ | 229,224 | ||||
Licensing asset | 1,005,820 | 96,713 | 909,107 | |||||||
Licensing agreements | 10,004,000 | 1,425,158 | 8,578,842 | |||||||
$ | 11,278,606 | $ | 1,561,433 | $ | 9,717,173 | |||||
Amortization expense of intangible assets for the three and nine month periods ended September 30, 2014 was $252,203 and $756,574, respectively (2013 - $260,852 and $785,966, respectively). | ||||||||||
The Company has patents pending of $156,909 at September 30, 2014 (December 31, 2013 - $112,902) and licensing agreements of $373,325 (December 31, 2013 - $nil) not currently being amortized. | ||||||||||
6_Long_Term_Debt_and_Debt_Issu
6. Long Term Debt and Debt Issuance Costs | 9 Months Ended | |||
Sep. 30, 2014 | ||||
Debt Disclosure [Abstract] | ' | |||
6. Long Term Debt and Debt Issuance Costs | ' | |||
On August 8, 2013, SWK Funding LLC ("SWK"), a wholly-owned subsidiary of SWK Holdings Corporation, entered into a credit agreement (the "Credit Agreement") with the Company and SWK pursuant thereto, provided to the Company a term loan in the principal amount of US$6,000,000 ($6,381,600) (the "Loan") which was increased, as per the terms of the Credit Agreement, by an additional US$2,000,000 ($2,211,000) at the Company's request on February 4, 2014. SWK served as the agent under the Credit Agreement. The Loan matures on August 8, 2018. Subsequent to September 30, 2014 the Company entered into an amendment to the Credit Agreement (the "Amended Credit Agreement"). See Note 18. | ||||
The Loan accrues interest at an annual rate of 11.5% plus the Libor Rate (as defined in the Credit Agreement), with the Libor Rate being subject to a minimum floor of 2%, such that the minimum interest rate is 13.5%. In the event of a change of control, a merger or a sale of all or substantially all of the Company’s assets, the Loan shall be due and payable. | ||||
Upon receipt of the additional US$2,000,000 ($2,211,000) of the Loan, the Company issued to SWK 347,222 common share purchase warrants with a grant date fair value of the warrants of $120,914. Each warrant entitles SWK to acquire one common share in the capital of the Company at an exercise price of US$0.432 ($0.4612), at any time on or prior to February 4, 2021. | ||||
The discount to the carrying value of the Loan is being amortized as a non-cash interest expense over the term of the Loan using the effective interest rate method. The grant date fair value of the 347,222 warrants issued to SWK was determined using the Black-Scholes model with the following assumptions: expected volatility of 117%, a risk-free interest rate of 1.85%, an expected life of seven years, and no expected dividend yield. | ||||
During the three and nine month periods ended September 30, 2014, the Company accreted $36,738 and $102,264, respectively (2013 - $20,895 and $68,123, respectively) in non-cash accretion expense in connection with the long term loans, which is included in accretion expense on the condensed interim statements of operations, comprehensive income (loss) and deficit. | ||||
During the nine month period ended September 30, 2014, the Company also incurred US$116,169 ($128,425) in legal costs related to the additional US$2,000,000 ($2,211,000) Loan. These fees and costs were classified as debt issuance costs on the balance sheet. These assets are being amortized as a non-cash interest expense over the term of the outstanding Loan using the effective interest rate method. During the three and nine month periods ended September 30, 2014, the Company amortized $29,682 and $82,301, respectively (2013 – $31,263 and $137,092, respectively) in non-cash interest expense, which is included in amortization expense on the condensed interim statements of operations, comprehensive income (loss) and deficit. | ||||
During the nine month period ended September 30, 2014, the Company made no principal payments (year ended December 31, 2013 - US$3,281,250 ($3,386,630)) and interest payments of US$747,000 ($803,393) (year ended December 31, 2013 – US$409,653 ($422,341)) under the previous MidCap Financial LLC loan agreement (now repaid) and SWK loan agreements. The Company has estimated the following revenue-based principal and interest payments over the next five years ended December 31 based on the assumption that only the minimum revenue requirements will be met under the Credit Agreement: | ||||
Principal Payments | Interest Payments | |||
2014 | US$52,035 ($58,321) | US$274,965 ($308,181) | ||
2015 | US$721,460 ($808,612) | US$1,041,040 ($1,166,798) | ||
2016 | US$872,654 ($978,071) | US$934,846 ($1,047,775) | ||
2017 | US$1,001,370 ($1,122,335) | US$806,130 ($903,511) | ||
2018 | US$5,352,481 ($5,999,061) | US$417,053 ($467,433) |
7_Capital_Stock
7. Capital Stock | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
Equity [Abstract] | ' | ||||||||||||||||
7. Capital Stock | ' | ||||||||||||||||
(a) | Common Shares | ||||||||||||||||
During the three and nine month periods ended September 30, 2014, the Company completed a public offering in which 42,895,000 units ("Units") were issued at a price of $0.70 per Unit for gross proceeds of $30,026,500. Each Unit consisted of one common share of the Company’s stock and one-half of one common share purchase warrant. Each whole warrant entitles the holder to acquire one common share of the Company at a price per share of $0.90 at any time on or before July 15, 2016. As part of the public offering, the Company issued 21,447,500 common share purchase warrants to the purchasers. | |||||||||||||||||
In connection with the public offering, the Company paid cash commissions to the syndicate of underwriters of $2,251,988 and issued an aggregate of 3,217,125 non-transferable broker units. See Note 7 (c). Each broker unit entitles the holder to purchase one Unit at an exercise price of $0.70 at any time on or before July 15, 2016. Total other issuance costs associated with the public offering were $396,826. | |||||||||||||||||
During the nine month period ended September 30, 2014, the Company issued 500,000 common shares to a consultant for services and recorded $211,812 as paid-in common shares based on the fair market value of the common shares at the date of issuance. | |||||||||||||||||
Common Shares | Number of Shares | ||||||||||||||||
Amount | |||||||||||||||||
Balance, December 31, 2013 | 51,081,238 | $ | 19,947,290 | ||||||||||||||
Common shares for services issued | 500,000 | 211,812 | |||||||||||||||
Units issued | 42,895,000 | 30,026,500 | |||||||||||||||
Share issuance costs | - | -2,648,813 | |||||||||||||||
Common share purchase warrants – valuation | - | -5,169,881 | |||||||||||||||
Broker warrants - valuation | - | -1,177,468 | |||||||||||||||
Balance, September 30, 2014 | 94,476,238 | $ | 41,189,440 | ||||||||||||||
(b) | Stock Based Compensation | ||||||||||||||||
The Company’s stock-based compensation program ("Plan") includes stock options in which some options vest based on continuous service, while others vest based on performance conditions such as profitability and sales goals. For those equity awards that vest based on continuous service, compensation expense is recorded over the service period from the date of grant. For performance-based awards, compensation expense is recorded over the remaining service period when the Company determines that achievement is probable. | |||||||||||||||||
During the three and nine month periods ended September 30, 2014, there were 500,000 and 1,827,985 options, respectively, granted to officers, employees and consultants of the Company (2013 – 167,000 and 1,173,250, respectively). The exercise price of 1,107,985 of these options is $0.40, with one-eighth vesting quarterly over two years on each of March 31, June 30, September 30 and December 31, in 2015 and 2016, upon achieving certain financial objectives. Since stock-based compensation is recognized only for those awards that are ultimately expected to vest, the Company has applied an estimated forfeiture rate (based on historical experience and projected employee turnover) to unvested awards for the purpose of calculating compensation expense. The grant date fair value of these options was estimated as $0.33 using the Black-Scholes option pricing model, based on the following assumptions: expected dividend yield of 0%; expected volatility of 123%; expected risk free interest rate of 1.61%; and expected term of 5 years. | |||||||||||||||||
In addition, during the nine month period ended September 30, 2014, 200,000 options were granted with an exercise price of $0.42 and will fully vest on January 3, 2015 (Note 12). The grant date fair value of these options was estimated as $0.39 using the Black-Scholes option pricing model, based on the following assumptions: expected dividend yield of 0%; expected volatility of 123%; expected risk free interest rate of 1.69%; and expected term of 5 years. | |||||||||||||||||
In addition, during the nine month period ended September 30, 2014, 20,000 options were granted with an exercise price of $0.61, with 10,000 vesting on November 30, 2014 and the remaining 10,000 vesting over two years on each of March 31, June 30, September 30 and December 31, in 2015 and 2016. The grant date fair value of these options was estimated as $0.52 using the Black-Scholes option pricing model, based on the following assumptions: expected dividend yield of 0%; expected volatility of 123%; expected risk free interest rate of 1.50%; and expected term of 5 years. | |||||||||||||||||
During the three and nine month periods ended September 30, 2014, 500,000 options were granted to a consultant for services with an exercise price of $0.57. Of these options, 50% will vest on or before February 15, 2015, the remaining 50% will vest one-eighth quarterly over two years, starting in the first quarter following the achievement of certain financial objectives. The grant date fair value of these options was estimated as $0.47 using the Black-Scholes option pricing model, based on the following assumptions: expected dividend yield of 0%; expected volatility of 122%; expected risk free interest rate of 1.56%; and expected term of 5 years. | |||||||||||||||||
For the three and nine month periods ended September 30, 2014, the Company recorded $142,915 and $359,990, respectively (2013 – $138,513 and $428,482, respectively) as additional paid in capital for options issued to directors, officers, employees and consultants based on continuous service. Included in this amount is $48,794 and $85,238, respectively for options issued to consultants for services (Note 12). This expense was recorded as selling, general and administrative expense on the condensed interim statements of operations, comprehensive income (loss) and deficit. Due to termination of employment and non-achievement of performance-based awards, 13,750 options were removed from the number of options issued during the nine month period ended September 30, 2014 (year ended December 31, 2013 – 560,917). | |||||||||||||||||
The activities in additional paid in-capital options are as follows: | |||||||||||||||||
Amount | |||||||||||||||||
Balance, December 31, 2013 | $ | 2,286,890 | |||||||||||||||
Expense recognized for options issued to employees | 100,910 | ||||||||||||||||
Expense recognized for options issued to consultants | 16,222 | ||||||||||||||||
Balance, March 31, 2014 | 2,404,022 | ||||||||||||||||
Expense recognized for options issued to employees | 79,722 | ||||||||||||||||
Expense recognized for options issued to consultants | 20,222 | ||||||||||||||||
Balance, June 30, 2014 | 2,503,966 | ||||||||||||||||
Expense recognized for options issued to employees | 94,121 | ||||||||||||||||
Expense recognized for options issued to consultants | 48,794 | ||||||||||||||||
Balance, September 30, 2014 | $ | 2,646,881 | |||||||||||||||
The total number of options outstanding as at September 30, 2014 was 5,639,070 (December 31, 2013 – 3,824,835). The weighted average grant date fair value of the options granted during the three and nine month periods ended September 30, 2014, was $0.47 and $0.38, respectively (2013 - $0.46 and $0.48, respectively). | |||||||||||||||||
The maximum number of options that may be issued under the Plan is floating at an amount equivalent to 10% of the issued and outstanding common shares, or 9,447,624 as at September 30, 2014 (December 31, 2013 – 5,108,124). | |||||||||||||||||
(c) | Warrants | ||||||||||||||||
As at September 30, 2014, the following warrants were outstanding: | |||||||||||||||||
Warrant Liability | |||||||||||||||||
Number of | Weighted Average | Fair Value at | Fair Value at | ||||||||||||||
Expiration Date | Warrants | Exercise Price | 30-Sep-14 | 31-Dec-13 | |||||||||||||
11-May-17 | 750,000 | US$0.43 ($0.48) | $ | 230,324 | $ | 223,356 | |||||||||||
27-Feb-15 | 4,429,688 | US$0.50 ($0.56) | $ | 451,796 | $ | 518,256 | |||||||||||
27-Feb-18 | 4,429,687 | US$0.60 ($0.67) | $ | 1,375,248 | $ | 1,286,216 | |||||||||||
5-Mar-15 | 1,253,000 | US$0.50 ($0.56) | $ | 130,606 | $ | 146,596 | |||||||||||
5-Mar-18 | 1,253,000 | US$0.60 ($0.67) | $ | 390,413 | $ | 363,825 | |||||||||||
11-Mar-15 | 343,750 | US$0.50 ($0.56) | $ | 36,216 | $ | 49,723 | |||||||||||
11-Mar-18 | 343,750 | US$0.60 ($0.67) | $ | 107,106 | $ | 99,812 | |||||||||||
8-Aug-18 | 755,794 | US$0.5954 ($0.6673) | $ | 327,825 | $ | 245,982 | |||||||||||
20-Sep-18 | 108,696 | US$0.55 ($0.62) | $ | 44,832 | $ | 32,948 | |||||||||||
4-Feb-21 | 347,222 | US$0.4320 ($0.4842) | $ | 156,445 | $ | - | |||||||||||
14,014,587 | US$0.54 ($0.61) | $ | 3,250,811 | $ | 2,966,714 | ||||||||||||
In connection with the additional US$2,000,000 ($2,211,000) loan described in Note 6, the Company issued SWK 347,222 common share purchase warrants with each warrant entitling SWK to acquire one common share in the capital of the Company at an exercise price of US$0.432 ($0.4842), at any time on or prior to February 4, 2021. The fair value of the warrant liability at the date of grant was $120,914 and was estimated using the Black-Scholes option pricing model, based on the following assumptions: expected dividend yield of 0%; expected volatility of 117%; risk free interest rate of 1.85%; and expected term of 7 years. | |||||||||||||||||
ASC 815 "Derivatives and Hedging" indicates that warrants with exercise prices denominated in a currency other than an entity’s functional currency should not be classified as equity. As a result, these warrants have been treated as derivatives and recorded as liabilities carried at their fair value, with period-to-period changes in the fair value recorded as a gain or loss in the condensed interim statements of operations, comprehensive income (loss) and deficit. The Company treated the compensation warrants as a liability upon their issuance. The warrant liability is classified as Level 3 within the fair value hierarchy (see Note 16(a)). | |||||||||||||||||
As at September 30, 2014, the fair value of the aggregate warrant liability of $3,250,811 (December 31, 2013 - $2,966,714) was estimated using the Black-Scholes option pricing model based on the following weighted average assumptions: expected dividend yield of 0% (December 31, 2013 – 0%) expected volatility of 97% (December 31, 2013 – 114%) risk-free interest rate of 1.45% (December 31, 2013 – 1.58%) and expected term of 2.29 years (December 31, 2013 – 2.94 years). | |||||||||||||||||
Warrants – Equity | |||||||||||||||||
Grant Date | |||||||||||||||||
Number of | Weighted Average | Fair Value at | |||||||||||||||
Expiration Date | Warrants | Exercise Price | 30-Sep-14 | ||||||||||||||
15-Jul-16 | 21,447,500 | $0.90 | $ | 5,169,881 | |||||||||||||
15-Jul-16 | 3,217,125 | $0.70 | $ | 1,177,468 | |||||||||||||
24,664,625 | $0.90 | $ | 6,347,349 | ||||||||||||||
In connection with the public offering completed during the nine month period ended September 30, 2014, the Company issued 21,447,500 share purchase warrants to the purchasers, each exercisable into one common share of the Company at $0.90, exercisable at any time on or prior to July 15, 2016. In addition, the Company granted 3,217,125 non-transferable broker units, each exercisable into a Unit of the Company, at an exercise price of $0.70 exercisable at any time on or prior to July 15, 2016. The fair value of the warrants and broker warrants at the date of grant was $6,347,349 and was estimated using the Black-Scholes option pricing model, based on the following assumptions: expected dividend yield of 0%; expected volatility of 99%; risk free interest rate of 1.12%; and expected term of 2 years. | |||||||||||||||||
8_Earnings_Loss_Per_Share
8. Earnings (Loss) Per Share | 9 Months Ended | ||||||||||||
Sep. 30, 2014 | |||||||||||||
Earnings Per Share [Abstract] | ' | ||||||||||||
8. Earnings (Loss) Per Share | ' | ||||||||||||
The treasury stock method assumes that proceeds received upon the exercise of all warrants and options outstanding in the period is used to repurchase the Company’s shares at the average share price during the period. The diluted earnings (loss) per share is not computed when the effect of such calculation is anti-dilutive. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. Potentially dilutive securities, which were not included in diluted weighted average shares for the nine month period ended September 30, 2014 and the three and nine month periods ended September 30, 2013, consisted of outstanding stock options (4,320,752) and outstanding warrant grants (38,679,212 and 13,667,365, respectively). | |||||||||||||
The following table sets forth the computation of earnings (loss) per share: | |||||||||||||
For the Three Month Period | For the Nine Month Period | ||||||||||||
Ended September 30 | Ended September 30 | ||||||||||||
Numerator: | 2014 | 2013 | 2014 | 2013 | |||||||||
Net income (loss) available to common shareholders | $ | 3,041,875 | $ | -2,583,576 | $ | -4,647,145 | $ | -6,286,035 | |||||
Denominator: | |||||||||||||
Weighted average number of common shares | 87,948,738 | 50,985,538 | 64,283,839 | 48,525,136 | |||||||||
Effect of dilutive common shares | 443,589 | - | - | - | |||||||||
Diluted weighted average number of common shares outstanding | 88,392,327 | 50,985,538 | 64,283,839 | 48,525,136 | |||||||||
Income (loss) per share – basic and diluted | $ | 0.03 | $ | -0.05 | $ | -0.07 | $ | -0.13 | |||||
9_Statement_of_Cash_Flows
9. Statement of Cash Flows | 9 Months Ended | ||||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||||
Supplemental Cash Flow Elements [Abstract] | ' | ||||||||||||||||||
9. Statement of Cash Flows | ' | ||||||||||||||||||
Changes in non-cash balances related to operations are as follows: | |||||||||||||||||||
For the Nine Months Ended | |||||||||||||||||||
30-Sep | |||||||||||||||||||
2014 | 2013 | ||||||||||||||||||
Accounts receivable | $ | -1,331,069 | $ | -103,781 | |||||||||||||||
Inventories | 187,625 | -141,943 | |||||||||||||||||
Prepaid expenses and other receivables | -66,575 | -284,271 | |||||||||||||||||
Taxes recoverable | 604,310 | -283,926 | |||||||||||||||||
Accounts payable and accrued liabilities | -130,876 | -1,815,265 | |||||||||||||||||
$ | -736,585 | $ | -2,629,186 | ||||||||||||||||
Included in accounts payable and accrued liabilities at the end of the nine month period ended September 30, 2014, is an amount related to patents and licenses of $8,893 (December 31, 2013 - $14,365) and an amount related to license fees of $186,663 (€125,000) (December 31, 2013 - $nil). | |||||||||||||||||||
During the nine month period ended September 30, 2014, there was $803,396 (2013 - $320,029) in interest paid and $nil in taxes paid (2013 – $nil). | |||||||||||||||||||
During the nine month period ended September 30, 2014, there was $82,301 (2013 - $137,092) of non-cash debt issuance costs (see Note 6) expensed as amortization of assets. | |||||||||||||||||||
During the nine month period ended September 30, 2014, 347,222 warrants were issued and valued at $120,914 in regards to the additional USD$2,000,000 ($2,211,000) advanced under the Credit Agreement (see Note 6). | |||||||||||||||||||
During the three and nine month periods ended September 30, 2014, broker warrants were issued and valued at $1,177,468 in regards to the public offering that was completed (Note 7a). |
10_Contingencies_and_Commitmen
10. Contingencies and Commitments | 9 Months Ended | ||
Sep. 30, 2014 | |||
Commitments and Contingencies Disclosure [Abstract] | ' | ||
10. Contingencies and Commitments | ' | ||
The Company has royalty, licensing and manufacturing agreements that have remained in effect for the Company during the quarter. In addition, there were no material changes to the lease agreements during the period. | |||
(a) | License Agreements | ||
On December 1, 2011, the Company acquired 100% of the outstanding shares of Tribute Pharmaceuticals Canada Ltd. and Tribute Pharma Canada Inc. Included in this transaction were the following license agreements: | |||
On June 30, 2008, Tribute signed a Sales, Marketing and Distribution Agreement with Actavis Group PTC ehf (“Actavis”) to perform certain sales, marketing, distribution, finance and other general management services in Canada in connection with the importation, marketing, sales and distribution of Bezalip® SR and Soriatane® (the “Actavis Products”). On January 1, 2010, a first amendment was signed with Actavis to grant the Company the right and obligation to more actively market and promote the Actavis Products in Canada. On March 31, 2011, a second amendment was signed with Actavis that extended the term of the agreement, modified the terms of the agreement and increased the Company’s responsibilities to include the day-to-day management of regulatory affairs, pharmacovigilance and medical information relating to the Actavis Products. The Company pays Actavis a sales and distribution fee up to an annual base-line net sales forecast plus an incremental fee for incremental net sales above the base-line. On May 4, 2011, the Company signed a Product Development and Profit Share Agreement with Actavis to develop, obtain regulatory approval of and market Bezalip SR in the U.S. The Company shall pay US$5,000,000 ($5,604,000) to Actavis within 30 days of receipt of the regulatory approval to market Bezalip SR in the U.S. | |||
On November 9, 2010, the Company signed a license agreement with Nautilus Neurosciences, Inc. (“Nautilus”) for the exclusive rights to develop, register, promote, manufacture, use, market, distribute and sell Cambia® in Canada. On August 11, 2011, the Company and Nautilus executed the first amendment to the license agreement and on September 30, 2012 executed the second amendment to the license agreement. Aggregate payments of US$1,000,000 ($1,005,820) were issued under this agreement, which included an upfront payment to Nautilus upon the execution of the agreement and an amount payable upon the first commercial sale of the product. These payments have been included in intangible assets and will be amortized over the life of the license agreement, as amended. Up to US$6,000,000 ($6,724,800) in additional one-time performance based sales milestones, based on a maximum of six different sales tiers, are payable over time, due upon achieving annual net sales ranging from US$2,500,000 ($2,802,000) to US$20,000,000 ($22,416,000) in the first year of the achievement of the applicable milestone. Royalty rates are tiered and payable at rates ranging from 22.5% to 25.0% of net sales. | |||
On December 30, 2011, the Company signed a license agreement with Apricus Bioscience, Inc. to commercialize MycoVa in Canada. As of September 30, 2014, this product has not been filed with Health Canada and to-date no upfront payments have been paid. Within 10 days of execution of a manufacturing agreement, the Company shall pay an up-front license fee of $200,000. Upon Health Canada approval of MycoVa, the Company shall pay $400,000. Sales milestones payments of $250,000 each are based on the achievement of aggregate net sales in increments of $5,000,000. Royalties are payable at rates ranging from 20% to 25% of net sales. | |||
On May 13, 2014, the Company entered into an exclusive license and supply agreement with Faes Farma, S.A. (“Faes”), a Spanish pharmaceutical company, for the exclusive right to sell bilastine, a product for the treatment of allergic rhinitis and chronic idiopathic urticaria (hives) in Canada. The exclusive license is inclusive of prescription and non-prescription rights for bilastine, as well as adult and paediatric presentations in Canada. Sales of bilastine are subject to receiving regulatory approval from Health Canada. Payment for the licensing rights is based on an initial fee of €250,000 ($373,325) divided into two equal payments, one on signing €125,000 (($186,663) paid) and the second payment due before December 31, 2014 (€125,000 ($176,913) accrued at September 30, 2014). These payments have been included in intangible assets and will be amortized over the life of the license agreement. Any remaining milestone payments based on the achievement of specific events, including regulatory and sales milestones of up to $3,575,679 (€1,466,600 ($2,075,679) and $1,500,000) are payable over time, beginning with an approval for bilastine from Health Canada. Thereafter, milestones are payable upon attainment of cumulative net sales targets, up to net sales of $60,000,000. | |||
(b) | Executive Termination Agreements | ||
The Company currently has employment agreements with the provision of termination and change of control benefits with officers and executives of the Company. The agreements for the officers and executives provide that in the event that any of their employment is terminated during the initial term (i) by the Company for any reason other than just cause or death; (ii) by the Company because of disability; (iii) by the officer or executive for good reason; or (iv) following a change of control, the officers and executives shall be entitled to the balance of the remuneration owing for the remainder of the initial term of up to an aggregate amount of $912,116 as of September 30, 2014 (December 31, 2013 - $792,200) or if a change of control occurs subsequent to the initial term, while the officers or executives are employed on an indefinite basis, a lump sum payment of up to an aggregate amount of $2,079,616 (based on current base salaries). | |||
11_Significant_Customers
11. Significant Customers | 9 Months Ended | ||
Sep. 30, 2014 | |||
Risks and Uncertainties [Abstract] | ' | ||
11. Significant Customers | ' | ||
During the three month period ended September 30, 2014, the Company had three significant wholesale customers (2013 – two) that represented 68.7% (2013 – 58.7%) of product sales. | |||
During the nine month period ended September 30, 2014, the Company had three (2013 – two) significant wholesale customers that represented 67.4% (2013 – 57.9%) of product sales. | |||
The Company believes that its relationship with these customers is satisfactory. | |||
12_Related_Party_Transactions
12. Related Party Transactions | 9 Months Ended |
Sep. 30, 2014 | |
Related Party Transactions [Abstract] | ' |
12. Related Party Transactions | ' |
During the three and nine month periods ended September 30, 2014 the Company granted nil and 200,000 stock options, respectively, to LMT Financial Inc. ("LMT"), a company beneficially owned by a director and former interim officer of the Company, and his spouse for consulting services. For the three and nine month periods ended September 30, 2014, the Company recorded $20,444 and $56,889, respectively as a non-cash expense. During the three and nine month periods ended September 30, 2013 the Company recorded and paid to LMT an aggregate of $6,000 and $42,000, respectively. These amounts have been recorded as selling, general and administrative expense in the condensed interim statements of operations, comprehensive income (loss) and deficit. |
13_Income_Taxes
13. Income Taxes | 9 Months Ended |
Sep. 30, 2014 | |
Income Tax Disclosure [Abstract] | ' |
13. Income Taxes | ' |
The Company has no taxable income under Canadian Federal and Provincial tax laws for the three and nine month periods ended September 30, 2014 and 2013. The Company has non-capital loss carry-forwards at September 30, 2014 totaling approximately $14,903,600, which may be offset against future taxable income. If not utilized, the loss carry-forwards will expire between 2014 and 2034. The cumulative carry-forward pool of SR&ED expenditures as at September 30, 2014, that may be offset against future taxable income, with no expiry date, is $1,798,300. | |
The non-refundable portion of the tax credits as at September 30, 2014 was $341,300. |
14_Segmented_Information
14. Segmented Information | 9 Months Ended | ||||||||||||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||||||||||||
Segment Reporting [Abstract] | ' | ||||||||||||||||||||||||||
14. Segmented Information | ' | ||||||||||||||||||||||||||
The Company is a specialty pharmaceutical company with a primary focus on the acquisition, licensing, development and promotion of healthcare products in Canada. The Company targets several therapeutic areas in Canada, but has a particular interest in products for the treatment of pain, dermatology and endocrinology/cardiology. The Company also sells Uracyst® and NeoVisc® internationally through a number of strategic partnerships. Currently, all of the Company’s manufacturing assets are located in Canada. All direct sales take place in Canada. Licensing arrangements have been obtained to distribute and sell the Company’s products in various countries around the world. | |||||||||||||||||||||||||||
Revenue for the three and nine month periods ended September 30, 2014 and 2013 includes products sold in Canada and international sales of products through licensing agreements. Revenue earned is as follows: | |||||||||||||||||||||||||||
For the Three | For the Nine | ||||||||||||||||||||||||||
Month Period | Month Period | ||||||||||||||||||||||||||
Ended September 30 | Ended September 30 | ||||||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||||
Product sales: | |||||||||||||||||||||||||||
Domestic sales | $ | 3,363,814 | $ | 3,022,993 | $ | 10,040,314 | $ | 8,964,777 | |||||||||||||||||||
International sales | 496,152 | 347,551 | 1,318,002 | 1,037,103 | |||||||||||||||||||||||
Other revenue | 8,950 | 9,702 | 27,025 | 32,554 | |||||||||||||||||||||||
Total | $ | 3,868,916 | $ | 3,380,246 | $ | 11,385,341 | $ | 10,034,434 | |||||||||||||||||||
Royalty revenues | $ | - | $ | 99,884 | $ | 18,414 | $ | 197,924 | |||||||||||||||||||
Total revenues | $ | 3,868,916 | $ | 3,480,130 | $ | 11,403,755 | $ | 10,232,358 | |||||||||||||||||||
The Company currently sells its own products and is in-licensing other products in Canada. In addition, revenues include products which the Company out-licenses throughout most countries in Europe, the Caribbean, Austria, Germany, Italy, Lebanon, Kuwait, Malaysia, Portugal, Romania, Spain, South Korea, Turkey, Egypt, Hong Kong and the United Arab Emirates. The operations reflected in the condensed interim statements of operations, comprehensive income (loss) and deficit includes the Company’s activity in these markets. |
15_Foreign_Currency_Gain_Loss
15. Foreign Currency Gain (Loss) | 9 Months Ended |
Sep. 30, 2014 | |
Foreign Currency [Abstract] | ' |
15. Foreign Currency Gain (Loss) | ' |
The Company enters into foreign currency transactions in the normal course of business. Expenses incurred in currencies other than Canadian dollars are therefore subject to gains or losses due to fluctuations in these currencies. As at September 30, 2014, the Company held cash of $5,117,679 (US$4,079,427 and €385,400) in denominations other than in Canadian dollars (December 31, 2013 - $1,211,602 (US$1,134,686 and €747)); had accounts receivables of $361,354 (US$64,475 and €204,260) denominated in foreign currencies (December 31, 2013 - $258,027 (US$51,395 and €138,964); had accounts payable and accrued liabilities of $41,772 (US$21,755 and €12,286) denominated in foreign currencies (December 31, 2013 – $115,373 (US$72,693 and €25,969)); warrant liability of $3,250,811 (US$2,900,438) (December 31, 2013 - $2,966,714 (US$2,789,315)); and long term debt of $8,966,400 (US$8,000,000) (December 31, 2013 - $6,381,600 (US$6,000,000)). For the three and nine month periods ended September 30, 2014, the Company had a foreign currency loss of $228,065 and $238,572, respectively (2013 – gain of $20,060 and loss of $76,204, respectively). These amounts have been included in selling, general and administrative expenses in the condensed interim statements of operations, comprehensive income (loss) and deficit. | |
16_Financial_Instruments
16. Financial Instruments | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Investments, All Other Investments [Abstract] | ' | ||||||||
16. Financial Instruments | ' | ||||||||
(a) | Financial assets and liabilities – fair values | ||||||||
The carrying amounts of cash and cash equivalents, accounts receivable, certain other current assets, accounts payables and accrued liabilities are a reasonable estimate of their fair values because of the short maturity of these instruments. | |||||||||
Warrant liability and other current asset/liabilities are financial assets/liabilities where fluctuations in market rates will affect the fair value of these financial instruments. The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: | |||||||||
Level 1: quoted prices in active markets for identical assets or liabilities. | |||||||||
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly. | |||||||||
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data. | |||||||||
Cash equivalents and other current asset/liabilities are classified as Level 2 financial instruments within the fair value hierarchy. | |||||||||
(b) | Derivative liability – warrant liability | ||||||||
In connection with various financing arrangements, the Company has granted warrants to purchase up to 14,014,587 common shares of the Company as disclosed in Note 7c. The warrants have a weighted average exercise price of US$0.54 ($0.61). The warrants expire at dates ranging from February 27, 2015 to February 4, 2021. The warrants are accounted for as derivative liabilities because the exercise price is denominated in a currency other than the Company’s functional currency. | |||||||||
The table below summarizes the fair value of the Company’s financial liabilities measured at fair value: | |||||||||
Fair Value at | Fair Value Measurement Using | ||||||||
30-Sep-14 | Level 1 | Level 2 | Level 3 | ||||||
Derivative liability - Warrants | $ | 3,250,811 | $ | - | $ | - | $ | 3,250,811 | |
Fair Value at | Fair Value Measurement Using | ||||||||
31-Dec-13 | Level 1 | Level 2 | Level 3 | ||||||
Derivative liability - Warrants | $ | 2,966,714 | $ | - | $ | - | $ | 2,966,714 | |
The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities (warrant derivative liability) for the periods ended September 30, 2014 and December 31, 2013: | |||||||||
30-Sep-14 | 31-Dec-13 | ||||||||
Balance at beginning of period | $ | 2,966,714 | $ | 202,213 | |||||
Additions to derivative instruments | 120,914 | 2,365,284 | |||||||
Change in fair market value, recognized in earnings as Change in warrant liability | 163,183 | 399,217 | |||||||
Balance at end of period | $ | 3,250,811 | $ | 2,966,714 | |||||
These instruments were valued using pricing models that incorporate the price of a common share (as quoted on the relevant over-the-counter trading market in the U.S.), volatility, risk free rate, dividend rate and estimated life. The Company computed the value of the warrants using the Black-Scholes model. There were no transfers of assets or liabilities between Level 1, Level 2, or Level 3 during the periods ended September 30, 2014 and December 31, 2013. | |||||||||
The following are the key weighted average assumptions used in connection with this computation: | |||||||||
30-Sep-14 | 31-Dec-13 | ||||||||
Number of shares underlying the warrants | 14,014,587 | 13,667,365 | |||||||
Fair market value of the stock | US$0.46 ($0.52) | US$0.36($0.38) | |||||||
Exercise price | US$0.54 ($0.61) | US$0.55 ($0.58) | |||||||
Expected volatility | 97% | 114% | |||||||
Risk-free interest rate | 1.45% | 1.58% | |||||||
Expected dividend yield | 0% | 0% | |||||||
Expected warrant life (years) | 2.29 | 2.94 | |||||||
(c) | Liquidity risk | ||||||||
The Company generates sufficient cash from operating and financing activities to fund its operations and fulfill its obligations as they become due. The Company has sufficient funds available through its cash, cash equivalents, and financing arrangements, should its cash requirements exceed cash generated from operations to cover financial liability obligations. The Company’s investment policy is to invest excess cash resources into highly liquid short-term investments purchased with an original maturity of three months or less with tier one financial institutions. As at September 30, 2014, there were no restrictions on the flow of these funds nor have any of these funds been committed in any way, except as outlined in the detailed notes. | |||||||||
In the normal course of business, management considers various alternatives to ensure that the Company can meet some of its operating cash flow requirements through financing activities, such as private placements of our common stock, preferred stock offerings and offerings of debt and convertible debt instruments as well as through merger or acquisition opportunities. Management may also consider strategic alternatives, including strategic investments and divestitures. As future operations may be financed out of funds generated from financing activities, the Company’s ability to do so is dependent on, among other factors, the overall state of capital markets and investor appetite for investments in the pharmaceutical industry and our securities in particular. Should the Company elect to satisfy its cash commitments through the issuance of securities, by way of either private placement or public offering or otherwise, there can be no assurance that its efforts to obtain such additional funding will be successful, or achieved on terms favorable to the Company or its existing shareholders. If adequate funds are not available on terms favorable to the Company, it may have to reduce substantially or eliminate expenditures such as promotion, marketing or production of its current or proposed products, or obtain funds through other sources such as divestiture or monetization of certain assets or sublicensing (where permitted) of certain rights to certain of its technologies or products. | |||||||||
(d) | Concentration of credit risk and major customers | ||||||||
The Company considers its maximum credit risk to be $1,938,649 (December 31, 2013 - $607,580). This amount is the total of the following financial assets: accounts receivable and loan receivable. The Company’s cash and cash equivalents are held through various high grade financial institutions. | |||||||||
The Company is exposed to credit risk from its customers and continually monitors its customers’ credit. It establishes the provision for doubtful accounts based upon the credit risk applicable to each customer. In line with other pharmaceutical companies, the Company sells its products through a small number of wholesalers and retail pharmacy chains in addition to hospitals, pharmacies, physicians and other groups. Note 11 discloses the significant customer details and the Company believes that the concentrations on the Company’s customers are considered normal for the Company and its industry. | |||||||||
As at September 30, 2014, the Company had three customers which made up 68.2% of the outstanding accounts receivable in comparison to three customers which made up 38.4% at December 31, 2013. As at September 30, 2014, all outstanding accounts receivable related to product sales were related to three wholesale accounts. As at December 31, 2013 all outstanding accounts receivables were related to product sales, of which $63,722 or 10.8% was related to one wholesale account and $163,220 or 27.6% was related to two international customers. | |||||||||
(e) | Foreign exchange risk | ||||||||
The Company principally operates within Canada; however, a portion of the Company’s revenues, expenses, and current assets and liabilities, are denominated in United States dollars and the EURO. The Company’s long term debt is repayable in U.S. dollars, which exposes the Company to foreign exchange risk due to changes in the value of the Canadian dollar. As at September 30, 2014, a 5% change in the foreign exchange rate would increase/decrease the long term debt balance by $400,000 and would increase/decrease both interest expense and net loss by approximately $43,300 for the nine month period ended September 30, 2014. As at September 30, 2014, a 5% change in the foreign exchange rate would increase/decrease the warrant liability balance by $145,000 and would increase/decrease both changes in warrant liability and net loss by $145,000 for the nine month period ended September 30, 2014. | |||||||||
(f) | Interest rate risk | ||||||||
The Company is exposed to interest rate fluctuations on its cash and cash equivalents as well as its long term debt. At September 30, 2014, the Company had an outstanding long term debt balance of US$8,000,000 ($8,966,400), which bears interest annually at a rate of 11.5% plus the Libor Rate with the Libor Rate being subject to a minimum floor of 2%, such that that minimum interest rate is 13.5%, which may expose the Company to market risk due to changes in interest rates. For the nine month period ended September 30, 2014, a 1% increase in interest rates would increase interest expense and net loss by approximately $89,700. However, based on current LIBOR interest rates, which are currently under the minimum floor set at 2% and based on historical movements in LIBOR rates, the Company believes a near-term change in interest rates would not have a material adverse effect on the financial position or results of operations. | |||||||||
17_Derivative_Financial_Instru
17. Derivative Financial Instruments | 9 Months Ended | ||||||||||
Sep. 30, 2014 | |||||||||||
Derivative Financial Instruments | ' | ||||||||||
17. Derivative Financial Instruments | ' | ||||||||||
The Company enters into foreign currency contracts with financial institutions to reduce the risk that its cash flows and earnings will be adversely affected by foreign currency exchange rate fluctuations. In accordance with the Company’s current foreign exchange rate risk management policy, this program is not designated for trading or speculative purposes. | |||||||||||
The Company recognizes derivative instruments as either assets or liabilities in the accompanying balance sheets at fair value. | |||||||||||
During the three and nine month periods ended September 30, 2014, the Company entered into foreign currency call options designated as cash flow hedges to hedge certain forecasted expenses related to its loan obligation denominated in United States Dollars. The notional principal of the foreign currency call option to purchase US$306,000 was $330,052 at October 31, 2014. | |||||||||||
The Company initially reports any gain or loss on the effective portion of the cash flow hedge as a component of other comprehensive income and subsequently reclassifies to the statements of operations when the hedged transaction occurs. | |||||||||||
Valuation techniques used to measure fair value are intended to maximize the use of observable inputs and minimize the use of unobservable inputs. | |||||||||||
The Company has determined the foreign currency call option to be Level 2. The fair value of the foreign currency call option at September 30, 2014 was a gain of $13,158 (December 31, 2013 – a loss of $38,156), and is reported in other current asset/liability in the accompanying balance sheets. During the three month period ended September 30, 2014, the Company recognized a loss on the settled foreign exchange contract of $184,113 (2013 $nil). For the nine month periods ended September 30, 2014, the Company recognized a loss on the settled foreign exchange contract of $180,913 (2013 - $nil). | |||||||||||
At September 30, 2014 and December 31, 2013, the notional principal and fair value of the Company’s outstanding foreign currency derivative financial instruments were as follows: | |||||||||||
30-Sep-14 | 31-Dec-13 | ||||||||||
Notional | Fair Value | Notional Principal | Fair Value | ||||||||
Principal | |||||||||||
Foreign currency sold – call options | USD$ | 306,000 | $ | 13,158 | USD$ | 5,000,000 | $ | -38,156 | |||
The notional principal amounts provide one measure of the transaction volume outstanding as of September 30, 2014 and December 31, 2013, and do not represent the amount of the Company’s exposure to market loss. The estimates of fair value are based on applicable and commonly used pricing models using prevailing financial market information as of September 30, 2014 and December 31, 2013. The amounts ultimately realized upon settlement of these financial instruments, together with the gains and losses on the underlying exposures, will depend on actual market conditions during the remaining life of the instruments. | |||||||||||
18_Subsequent_Event
18. Subsequent Event | 9 Months Ended |
Sep. 30, 2014 | |
Subsequent Events [Abstract] | ' |
18. Subsequent Event | ' |
Amended Credit Agreement | |
On October 1, 2014 (the “Amendment Closing Date”), the Company entered into the First Amendment to the Credit Agreement and Guarantee (the “First Amendment”, and, together with the Credit Agreement, the “Amended Credit Agreement”) with SWK. The Amended Credit Agreement provides for a multi-draw term loan to the Company for up to a maximum amount of US$17,000,000 ($19,053,600). On the Amendment Closing Date, SWK advanced the Company an additional amount equal to US$6,000,000 ($6,724,800) pursuant to the terms of a promissory note executed on the Amendment Closing Date (the “October 2014 Note”). The October 2014 Note is for a total principal amount of US$14,000,000 ($15,691,200) (comprised of US$8,000,000 ($8,966,400) advanced under the Credit Agreement and the additional US$6,000,000 ($6,724,800) advanced on October 1, 2014) due and payable on December 31, 2018. The outstanding principal balance under the October 2014 Note shall bear interest at a rate per annum equal to the LIBOR Rate (subject to a minimum amount of two percent (2.0%)) plus eleven and one-half percent (11.5%), or a minimum interest rate of thirteen and one-half percent (13.5%). | |
In addition, on the Amendment Closing Date, the Company issued SWK a warrant (the “Amendment Warrant”) to purchase 740,000 common shares of the Company. The Amendment Warrant is exercisable for a period of five years from the Closing Date at an exercise price of US$0.70, subject to adjustment. SWK may exercise the Amendment Warrant on a cashless basis at any time. | |
Asset Purchase Agreement | |
On October 2, 2014, the Company entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Novartis AG and Novartis Pharma AG (collectively, “Novartis,” and together with the Company, the “Parties”) pursuant to which the Company acquired from Novartis the Canadian rights to manufacture, market, promote, distribute and sell Fiorinal®, Fiorinal® C, Visken® and Viskazide® for the relief of pain from headache and for the treatment of cardiovascular conditions (the “Products”), as well as certain other assets relating to the Products, including certain intellectual property, marketing authorizations and related data, medical, commercial and technical information, and the partial assignment of certain manufacturing and supply agreements and tenders with third parties (the “Acquired Assets”). The Company also assumed certain liabilities arising out of the Acquired Assets and the Licensed Assets (as described below) after the date hereof, including product liability claims or intellectual property infringement claims by third parties relating to the sale of the Products by the Company in Canada. In connection with the acquisition of the Acquired Assets, and pursuant to the terms of the Asset Purchase Agreement, the Company concurrently entered into a license agreement with Novartis AG, Novartis Pharma AG and Novartis Pharmaceuticals Canada Inc. (the “License Agreement”, and, together with the Asset Purchase Agreement, the “Agreements”). Pursuant to the terms of the License Agreement, the Novartis entities agreed to license to the Company certain assets relating to the Products, including certain intellectual property, marketing authorizations and related data, and medical, commercial and technical information (the “Licensed Assets”). The Company concurrently entered into a supply agreement with Novartis Pharma AG (the “Supply Agreement”), pursuant to which Novartis Pharma AG agreed to supply the Company with the requirements of Products for sale for a transition period until the Company is able to transfer the marketing authorizations to the Company. The consideration paid for the Acquired Assets and the Licensed Assets was $32,000,000 in cash. |
1_Basis_of_Presentation_Policy
1. Basis of Presentation (Policy) | 9 Months Ended |
Sep. 30, 2014 | |
Accounting Policies [Abstract] | ' |
Estimates | ' |
Estimates | |
The preparation of these financial statements has required management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of the revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates, including those related to provision for doubtful accounts, accrued liabilities, income taxes, stock based compensation, revenue recognition, intangible assets and derivative financial instruments. The Company bases its estimates on historical experiences and on various other assumptions believed to be reasonable under the circumstances. Actual results could differ from those estimates. As adjustments become necessary, they are reported in earnings in the period in which they become known. |
2_Inventories_Tables
2. Inventories (Tables) | 9 Months Ended | ||||||
Sep. 30, 2014 | |||||||
Inventory Disclosure [Abstract] | ' | ||||||
Schedule of Inventory | ' | ||||||
September 30, | December 31, | ||||||
2014 | 2013 | ||||||
Raw materials | $ | 256,492 | $ | 236,444 | |||
Finished goods | 330,779 | 418,635 | |||||
Packaging materials | 54,042 | 56,007 | |||||
Work in process | 215,893 | 333,745 | |||||
$ | 857,206 | $ | 1,044,831 |
3_Prepaid_Expenses_and_Other_R1
3. Prepaid Expenses and Other Receivables (Tables) | 9 Months Ended | |||||
Sep. 30, 2014 | ||||||
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ' | |||||
Schedule of Prepaid Expenses and Other Receivables | ' | |||||
September 30, | December 31, | |||||
2014 | 2013 | |||||
Prepaid operating expenses | $ | 225,711 | $ | 140,986 | ||
Deposits | - | 18,825 | ||||
Interest receivable on loan receivables | 6,750 | 6,075 | ||||
$ | 232,461 | $ | 165,886 |
4_Property_Plant_and_Equipment1
4. Property, Plant and Equipment (Tables) | 9 Months Ended | |||||||||
Sep. 30, 2014 | ||||||||||
Property, Plant and Equipment [Abstract] | ' | |||||||||
Schedule of Property, Plant and Equipment | ' | |||||||||
30-Sep-14 | ||||||||||
Accumulated | Net Carrying | |||||||||
Cost | Amortization | Amount | ||||||||
Land | $ | 90,000 | $ | - | $ | 90,000 | ||||
Building | 618,254 | 293,070 | 325,184 | |||||||
Leasehold improvements | 10,359 | 4,144 | 6,215 | |||||||
Office equipment | 61,308 | 51,224 | 10,084 | |||||||
Manufacturing equipment | 1,103,525 | 598,204 | 505,321 | |||||||
Warehouse equipment | 17,085 | 17,085 | - | |||||||
Packaging equipment | 111,270 | 60,314 | 50,956 | |||||||
Computer equipment | 136,639 | 98,391 | 38,248 | |||||||
$ | 2,148,440 | $ | 1,122,432 | $ | 1,026,008 | |||||
31-Dec-13 | ||||||||||
Accumulated | Net Carrying | |||||||||
Cost | Amortization | Amount | ||||||||
Land | $ | 90,000 | $ | - | $ | 90,000 | ||||
Building | 618,254 | 269,886 | 348,368 | |||||||
Leasehold improvements | 10,359 | 2,590 | 7,769 | |||||||
Office equipment | 61,308 | 48,299 | 13,009 | |||||||
Manufacturing equipment | 1,103,525 | 576,862 | 526,663 | |||||||
Warehouse equipment | 17,085 | 16,737 | 348 | |||||||
Packaging equipment | 111,270 | 51,700 | 59,570 | |||||||
Computer equipment | 130,114 | 85,922 | 44,192 | |||||||
$ | 2,141,915 | $ | 1,051,996 | $ | 1,089,919 | |||||
5_Intangible_Assets_Tables
5. Intangible Assets (Tables) | 9 Months Ended | |||||||||
Sep. 30, 2014 | ||||||||||
Intangible Assets Tables | ' | |||||||||
Schedule of Intangible Assets | ' | |||||||||
30-Sep-14 | ||||||||||
Accumulated | Net Carrying | |||||||||
Cost | Amortization | Amount | ||||||||
Patents | $ | 313,743 | $ | 48,188 | $ | 265,555 | ||||
Licensing asset | 1,005,820 | 154,742 | 851,078 | |||||||
Licensing agreements | 10,377,325 | 2,115,077 | 8,262,248 | |||||||
$ | 11,696,888 | $ | 2,318,007 | $ | 9,378,881 | |||||
31-Dec-13 | ||||||||||
Accumulated | Net Carrying | |||||||||
Cost | Amortization | Amount | ||||||||
Patents | $ | 268,786 | $ | 39,562 | $ | 229,224 | ||||
Licensing asset | 1,005,820 | 96,713 | 909,107 | |||||||
Licensing agreements | 10,004,000 | 1,425,158 | 8,578,842 | |||||||
$ | 11,278,606 | $ | 1,561,433 | $ | 9,717,173 | |||||
6_Long_Term_Debt_and_Debt_Issu1
6. Long Term Debt and Debt Issuance Costs (Tables) | 9 Months Ended | |||
Sep. 30, 2014 | ||||
Debt Disclosure [Abstract] | ' | |||
Schedule of payments for Long-term Debt | ' | |||
Principal Payments | Interest Payments | |||
2014 | US$52,035 ($58,321) | US$274,965 ($308,181) | ||
2015 | US$721,460 ($808,612) | US$1,041,040 ($1,166,798) | ||
2016 | US$872,654 ($978,071) | US$934,846 ($1,047,775) | ||
2017 | US$1,001,370 ($1,122,335) | US$806,130 ($903,511) | ||
2018 | US$5,352,481 ($5,999,061) | US$417,053 ($467,433) |
7_Capital_Stock_Tables
7. Capital Stock (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
Equity [Abstract] | ' | ||||||||||||||||
Schedule of Common Stock Outstanding | ' | ||||||||||||||||
Common Shares | Number of Shares | ||||||||||||||||
Amount | |||||||||||||||||
Balance, December 31, 2013 | 51,081,238 | $ | 19,947,290 | ||||||||||||||
Common shares for services issued | 500,000 | 211,812 | |||||||||||||||
Units issued | 42,895,000 | 30,026,500 | |||||||||||||||
Share issuance costs | - | -2,648,813 | |||||||||||||||
Common share purchase warrants – valuation | - | -5,169,881 | |||||||||||||||
Broker warrants - valuation | - | -1,177,468 | |||||||||||||||
Balance, September 30, 2014 | 94,476,238 | $ | 41,189,440 | ||||||||||||||
Schedule of Paid-in Capital Options | ' | ||||||||||||||||
Amount | |||||||||||||||||
Balance, December 31, 2013 | $ | 2,286,890 | |||||||||||||||
Expense recognized for options issued to employees | 100,910 | ||||||||||||||||
Expense recognized for options issued to consultants | 16,222 | ||||||||||||||||
Balance, March 31, 2014 | 2,404,022 | ||||||||||||||||
Expense recognized for options issued to employees | 79,722 | ||||||||||||||||
Expense recognized for options issued to consultants | 20,222 | ||||||||||||||||
Balance, June 30, 2014 | 2,503,966 | ||||||||||||||||
Expense recognized for options issued to employees | 94,121 | ||||||||||||||||
Expense recognized for options issued to consultants | 48,794 | ||||||||||||||||
Balance, September 30, 2014 | $ | 2,646,881 | |||||||||||||||
Schedule of warrants outstanding | ' | ||||||||||||||||
Warrant Liability | |||||||||||||||||
Number of | Weighted Average | Fair Value at | Fair Value at | ||||||||||||||
Expiration Date | Warrants | Exercise Price | 30-Sep-14 | 31-Dec-13 | |||||||||||||
11-May-17 | 750,000 | US$0.43 ($0.48) | $ | 230,324 | $ | 223,356 | |||||||||||
27-Feb-15 | 4,429,688 | US$0.50 ($0.56) | $ | 451,796 | $ | 518,256 | |||||||||||
27-Feb-18 | 4,429,687 | US$0.60 ($0.67) | $ | 1,375,248 | $ | 1,286,216 | |||||||||||
5-Mar-15 | 1,253,000 | US$0.50 ($0.56) | $ | 130,606 | $ | 146,596 | |||||||||||
5-Mar-18 | 1,253,000 | US$0.60 ($0.67) | $ | 390,413 | $ | 363,825 | |||||||||||
11-Mar-15 | 343,750 | US$0.50 ($0.56) | $ | 36,216 | $ | 49,723 | |||||||||||
11-Mar-18 | 343,750 | US$0.60 ($0.67) | $ | 107,106 | $ | 99,812 | |||||||||||
8-Aug-18 | 755,794 | US$0.5954 ($0.6673) | $ | 327,825 | $ | 245,982 | |||||||||||
20-Sep-18 | 108,696 | US$0.55 ($0.62) | $ | 44,832 | $ | 32,948 | |||||||||||
4-Feb-21 | 347,222 | US$0.4320 ($0.4842) | $ | 156,445 | $ | - | |||||||||||
14,014,587 | US$0.54 ($0.61) | $ | 3,250,811 | $ | 2,966,714 | ||||||||||||
Schedule of warrant by expiration date | ' | ||||||||||||||||
Warrants – Equity | |||||||||||||||||
Grant Date | |||||||||||||||||
Number of | Weighted Average | Fair Value at | |||||||||||||||
Expiration Date | Warrants | Exercise Price | 30-Sep-14 | ||||||||||||||
15-Jul-16 | 21,447,500 | $0.90 | $ | 5,169,881 | |||||||||||||
15-Jul-16 | 3,217,125 | $0.70 | $ | 1,177,468 | |||||||||||||
24,664,625 | $0.90 | $ | 6,347,349 | ||||||||||||||
8_Loss_Per_Share_Tables
8. Loss Per Share (Tables) | 9 Months Ended | ||||||||||||
Sep. 30, 2014 | |||||||||||||
Earnings Per Share [Abstract] | ' | ||||||||||||
Schedule of Computation of Earnings Per Share | ' | ||||||||||||
For the Three Month Period | For the Nine Month Period | ||||||||||||
Ended September 30 | Ended September 30 | ||||||||||||
Numerator: | 2014 | 2013 | 2014 | 2013 | |||||||||
Net income (loss) available to common shareholders | $ | 3,041,875 | $ | -2,583,576 | $ | -4,647,145 | $ | -6,286,035 | |||||
Denominator: | |||||||||||||
Weighted average number of common shares | 87,948,738 | 50,985,538 | 64,283,839 | 48,525,136 | |||||||||
Effect of dilutive common shares | 443,589 | - | - | - | |||||||||
Diluted weighted average number of common shares outstanding | 88,392,327 | 50,985,538 | 64,283,839 | 48,525,136 | |||||||||
Income (loss) per share – basic and diluted | $ | 0.03 | $ | -0.05 | $ | -0.07 | $ | -0.13 |
9_Statement_of_Cash_Flows_Tabl
9. Statement of Cash Flows (Tables) | 9 Months Ended | ||||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||||
Supplemental Cash Flow Elements [Abstract] | ' | ||||||||||||||||||
Changes in non-cash balances related to operations | ' | ||||||||||||||||||
Changes in non-cash balances related to operations are as follows: | |||||||||||||||||||
For the Nine Months Ended | |||||||||||||||||||
30-Sep | |||||||||||||||||||
2014 | 2013 | ||||||||||||||||||
Accounts receivable | $ | -1,331,069 | $ | -103,781 | |||||||||||||||
Inventories | 187,625 | -141,943 | |||||||||||||||||
Prepaid expenses and other receivables | -66,575 | -284,271 | |||||||||||||||||
Taxes recoverable | 604,310 | -283,926 | |||||||||||||||||
Accounts payable and accrued liabilities | -130,876 | -1,815,265 | |||||||||||||||||
$ | -736,585 | $ | -2,629,186 | ||||||||||||||||
14_Segmented_Information_Table
14. Segmented Information (Tables) | 9 Months Ended | ||||||||||||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||||||||||||
Segment Reporting [Abstract] | ' | ||||||||||||||||||||||||||
Schedule of Segment Reporting | ' | ||||||||||||||||||||||||||
For the Three | For the Nine | ||||||||||||||||||||||||||
Month Period | Month Period | ||||||||||||||||||||||||||
Ended September 30 | Ended September 30 | ||||||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||||
Product sales: | |||||||||||||||||||||||||||
Domestic sales | $ | 3,363,814 | $ | 3,022,993 | $ | 10,040,314 | $ | 8,964,777 | |||||||||||||||||||
International sales | 496,152 | 347,551 | 1,318,002 | 1,037,103 | |||||||||||||||||||||||
Other revenue | 8,950 | 9,702 | 27,025 | 32,554 | |||||||||||||||||||||||
Total | $ | 3,868,916 | $ | 3,380,246 | $ | 11,385,341 | $ | 10,034,434 | |||||||||||||||||||
Royalty revenues | $ | - | $ | 99,884 | $ | 18,414 | $ | 197,924 | |||||||||||||||||||
Total revenues | $ | 3,868,916 | $ | 3,480,130 | $ | 11,403,755 | $ | 10,232,358 | |||||||||||||||||||
16_Financial_Instruments_Table
16. Financial Instruments (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Derivative Financial Instruments | ' | ||||||||
Company's financial liabilities measured at fair value | ' | ||||||||
The table below summarizes the fair value of the Company’s financial liabilities measured at fair value: | |||||||||
Fair Value at | Fair Value Measurement Using | ||||||||
30-Sep-14 | Level 1 | Level 2 | Level 3 | ||||||
Derivative liability - Warrants | $ | 3,250,811 | $ | - | $ | - | $ | 3,250,811 | |
Fair Value at | Fair Value Measurement Using | ||||||||
31-Dec-13 | Level 1 | Level 2 | Level 3 | ||||||
Derivative liability - Warrants | $ | 2,966,714 | $ | - | $ | - | $ | 2,966,714 | |
Company's Level 3 financial liabilities | ' | ||||||||
30-Sep-14 | 31-Dec-13 | ||||||||
Balance at beginning of period | $ | 2,966,714 | $ | 202,213 | |||||
Additions to derivative instruments | 120,914 | 2,365,284 | |||||||
Change in fair market value, recognized in earnings as Change in warrant liability | 163,183 | 399,217 | |||||||
Balance at end of period | $ | 3,250,811 | $ | 2,966,714 | |||||
Assumptions used in valuation of warrants | ' | ||||||||
30-Sep-14 | 31-Dec-13 | ||||||||
Number of shares underlying the warrants | 14,014,587 | 13,667,365 | |||||||
Fair market value of the stock | US$0.46 ($0.52) | US$0.36($0.38) | |||||||
Exercise price | US$0.54 ($0.61) | US$0.55 ($0.58) | |||||||
Expected volatility | 97% | 114% | |||||||
Risk-free interest rate | 1.45% | 1.58% | |||||||
Expected dividend yield | 0% | 0% | |||||||
Expected warrant life (years) | 2.29 | 2.94 |
17_Derivative_Financial_Instru1
17. Derivative Financial Instruments (Tables) | 9 Months Ended | ||||||||||
Sep. 30, 2013 | |||||||||||
Derivative Financial Instruments Tables | ' | ||||||||||
Notional principal and fair value of the Company's outstanding foreign currency derivative financial instruments | ' | ||||||||||
30-Sep-14 | 31-Dec-13 | ||||||||||
Notional Principal | Fair Value | Notional Principal | Fair Value | ||||||||
Foreign currency sold – call options | USD$ | 306,000 | $ | 13,158 | USD$ | 5,000,000 | $ | -38,156 |
2_Inventories_Details
2. Inventories (Details) (CAD) | Sep. 30, 2014 | Dec. 31, 2013 |
Inventories Details | ' | ' |
Raw materials | 256,492 | 236,444 |
Finished goods | 330,779 | 418,635 |
Packaging materials | 54,042 | 56,007 |
Work in process | 215,893 | 333,745 |
Inventories | 857,206 | 1,044,831 |
3_Prepaid_Expenses_and_Other_R2
3. Prepaid Expenses and Other Receivables (Details) (CAD) | Sep. 30, 2014 | Dec. 31, 2013 |
Prepaid Expenses And Other Receivables Details | ' | ' |
Prepaid operating expenses | 225,711 | 140,986 |
Deposits | 0 | 18,825 |
Interest receivable on loan receivables | 6,750 | 6,075 |
Prepaid expenses and other receivables | 232,461 | 165,886 |
4_Property_Plant_and_Equipment2
4. Property, Plant and Equipment (Details) (CAD) | Sep. 30, 2014 | Dec. 31, 2013 |
Cost | 2,148,440 | 2,141,915 |
Accumulated Amortization | 1,122,432 | 1,051,996 |
Net Carrying Amount | 1,026,008 | 1,089,919 |
Land | ' | ' |
Cost | 90,000 | 90,000 |
Accumulated Amortization | 0 | 0 |
Net Carrying Amount | 90,000 | 90,000 |
Building | ' | ' |
Cost | 618,254 | 618,254 |
Accumulated Amortization | 293,070 | 269,886 |
Net Carrying Amount | 325,184 | 348,368 |
Leasehold Improvements | ' | ' |
Cost | 10,359 | 10,359 |
Accumulated Amortization | 4,144 | 2,590 |
Net Carrying Amount | 6,215 | 7,769 |
Office Equipment | ' | ' |
Cost | 61,308 | 61,308 |
Accumulated Amortization | 51,224 | 48,299 |
Net Carrying Amount | 10,084 | 13,009 |
Manufacturing equipment | ' | ' |
Cost | 1,103,525 | 1,103,525 |
Accumulated Amortization | 598,204 | 576,862 |
Net Carrying Amount | 505,321 | 526,663 |
Warehouse equipment | ' | ' |
Cost | 17,085 | 17,085 |
Accumulated Amortization | 17,085 | 16,737 |
Net Carrying Amount | 0 | 348 |
Packaging equipment | ' | ' |
Cost | 111,270 | 111,270 |
Accumulated Amortization | 60,314 | 51,700 |
Net Carrying Amount | 50,956 | 59,570 |
Computer equipment | ' | ' |
Cost | 136,639 | 130,114 |
Accumulated Amortization | 98,391 | 85,922 |
Net Carrying Amount | 38,248 | 44,192 |
5_Intangible_Assets_Details
5. Intangible Assets (Details) (CAD) | Sep. 30, 2014 | Dec. 31, 2013 |
Cost | 11,696,888 | 11,278,606 |
Accumulated Amortization | 2,318,007 | 1,561,433 |
Net Carrying Amount | 9,378,881 | 9,717,173 |
Patents | ' | ' |
Cost | 313,743 | 268,786 |
Accumulated Amortization | 48,188 | 39,562 |
Net Carrying Amount | 265,555 | 229,224 |
Licensing asset | ' | ' |
Cost | 1,005,820 | 1,005,820 |
Accumulated Amortization | 154,742 | 96,713 |
Net Carrying Amount | 851,078 | 909,107 |
Licensing agreements | ' | ' |
Cost | 10,377,325 | 10,004,000 |
Accumulated Amortization | 2,115,077 | 1,425,158 |
Net Carrying Amount | 8,262,248 | 8,578,842 |
5_Intangible_Assets_Details_Na
5. Intangible Assets (Details Narrative) (CAD) | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Dec. 31, 2013 | Sep. 30, 2014 | Dec. 31, 2013 | |
Patents | Patents | Licensing agreements | Licensing agreements | |||||
Amortization expense of intangible assets | 252,203 | 260,852 | 756,574 | 785,966 | ' | ' | ' | ' |
Intangible assets pending not amortized | ' | ' | ' | ' | 156,909 | 112,902 | 373,325 | 0 |
6_Long_Term_Debt_and_Debt_Issu2
6. Long Term Debt and Debt Issuance Costs (Details) (CAD) | Sep. 30, 2014 |
Debt Disclosure [Abstract] | ' |
Principle Payments - 2014 | 58,321 |
Principle Payments - 2015 | 808,612 |
Principle Payments - 2016 | 978,071 |
Principle Payments - 2017 | 1,122,335 |
Principle Payments - 2018 | 5,999,061 |
Interest Payments - 2014 | 308,181 |
Interest Payments - 2015 | 1,166,798 |
Interest Payments - 2016 | 1,047,775 |
Interest Payments - 2017 | 903,511 |
Interest Payments - 2018 | 467,433 |
6_Long_Term_Debt_and_Debt_Issu3
6. Long Term Debt and Debt Issuance Costs (Details Narrative) (CAD) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Debt Disclosure [Abstract] | ' | ' | ' | ' |
Non-cash accretion expense | 36,738 | 20,895 | 102,264 | 68,123 |
Legal Fees | ' | ' | 128,425 | ' |
Non-cash interest expense | 29,682 | 31,263 | 82,301 | 137,092 |
7_Capital_Stock_Details
7. Capital Stock (Details) (CAD) | 9 Months Ended |
Sep. 30, 2014 | |
Equity [Abstract] | ' |
Begining Balance, Number of Shares | 51,081,238 |
Begining Balance, Amount | 19,947,290 |
Common shares for services issued | 500,000 |
Common shares for services issued, value | 211,812 |
Units issued, Shares | 42,895,000 |
Units issued, Amount | 30,026,500 |
Share issuance costs | -2,648,813 |
Common share purchase warrants - valuation | -5,169,881 |
Broker warrants - valuation | -1,177,468 |
Ending Balance, Number of Shares | 94,476,238 |
Ending Balance, Amount | 41,189,440 |
7_Capital_Stock_Details_1
7. Capital Stock (Details 1) (CAD) | 3 Months Ended | ||
Sep. 30, 2014 | Jun. 30, 2014 | Mar. 31, 2014 | |
Equity [Abstract] | ' | ' | ' |
Paid-in Capital Options, Beginning | 2,503,966 | 2,404,022 | 2,286,890 |
Expense recognized for options issued to employees | 94,121 | 79,722 | 100,910 |
Expense recognized for options issued to consultants | 48,794 | 20,222 | 16,222 |
Paid-in Capital Options, Ending | 2,646,881 | 2,503,966 | 2,404,022 |
7_Capital_Stock_Details_2
7. Capital Stock (Details 2) (CAD) | 9 Months Ended | |
Sep. 30, 2014 | Dec. 31, 2013 | |
Weighted Average Exercise Price | 0.61 | ' |
Fair Value | 3,250,811 | 2,966,714 |
Warrant 1 | ' | ' |
Expiration Date | 11-May-17 | ' |
Number of Warrants | 750,000 | ' |
Weighted Average Exercise Price | 0.48 | ' |
Fair Value | 230,324 | 223,356 |
Warrant 2 | ' | ' |
Expiration Date | 27-Feb-15 | ' |
Number of Warrants | 4,429,688 | ' |
Weighted Average Exercise Price | 0.56 | ' |
Fair Value | 451,796 | 518,256 |
Warrant 3 | ' | ' |
Expiration Date | 27-Feb-18 | ' |
Number of Warrants | 4,429,687 | ' |
Weighted Average Exercise Price | 0.67 | ' |
Fair Value | 1,375,248 | 1,286,216 |
Warrant 4 | ' | ' |
Expiration Date | 5-Mar-15 | ' |
Number of Warrants | 1,253,000 | ' |
Weighted Average Exercise Price | 0.56 | ' |
Fair Value | 130,606 | 146,596 |
Warrant 5 | ' | ' |
Expiration Date | 5-Mar-18 | ' |
Number of Warrants | 1,253,000 | ' |
Weighted Average Exercise Price | 0.67 | ' |
Fair Value | 390,413 | 363,825 |
Warrant 6 | ' | ' |
Expiration Date | 11-Mar-15 | ' |
Number of Warrants | 343,750 | ' |
Weighted Average Exercise Price | 0.56 | ' |
Fair Value | 36,216 | 49,723 |
Warrant 7 | ' | ' |
Expiration Date | 11-Mar-18 | ' |
Number of Warrants | 343,750 | ' |
Weighted Average Exercise Price | 0.67 | ' |
Fair Value | 107,106 | 99,812 |
Warrant 8 | ' | ' |
Expiration Date | 8-Aug-18 | ' |
Number of Warrants | 755,794 | ' |
Weighted Average Exercise Price | 0.6673 | ' |
Fair Value | 327,825 | 245,982 |
Warrant 9 | ' | ' |
Expiration Date | 20-Sep-18 | ' |
Number of Warrants | 108,696 | ' |
Weighted Average Exercise Price | 0.62 | ' |
Fair Value | 44,832 | 32,948 |
Warrant 10 | ' | ' |
Expiration Date | 4-Feb-21 | ' |
Number of Warrants | 347,222 | ' |
Weighted Average Exercise Price | 0.4842 | ' |
Fair Value | 156,445 | ' |
7_Capital_Stock_Details_Narrat
7. Capital Stock (Details Narrative) (CAD) | 3 Months Ended | 9 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | Sep. 30, 2014 | Dec. 31, 2013 | |
Warrant [Member] | Warrant [Member] | ||||||
Public offering of common stock, units issued | ' | ' | 'During the three and nine month periods ended September 30, 2014, the Company completed a public offering in which 42,895,000 units ("Units") were issued at a price of $0.70 per Unit for gross proceeds of $30,026,500 | ' | ' | ' | ' |
Common shares issued for services to consultants | ' | ' | 211,812 | ' | ' | ' | ' |
Common shares issued for services to consultants, shares | ' | ' | 500,000 | ' | ' | ' | ' |
Options granted to officers and employees and consultants | 500,000 | 167,000 | 1,827,985 | 1,173,250 | ' | ' | ' |
Expected dividend yield | ' | ' | ' | ' | ' | 0.00% | 0.00% |
Expected volatility | ' | ' | ' | ' | ' | 123.00% | 123.00% |
Risk free interest rate | ' | ' | ' | ' | ' | 1.61% | 1.49% |
Number of options outstanding | 5,639,070 | ' | 5,639,070 | ' | 3,824,835 | ' | ' |
Weighted average grant date fair value | 0.47 | 0.46 | 0.38 | 0.48 | ' | ' | ' |
8_Loss_Per_Share_Details
8. Loss Per Share (Details) (CAD) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Numerator: | ' | ' | ' | ' |
Net income (loss) available to common shareholders | 3,041,875 | -2,583,576 | -4,647,145 | -6,286,035 |
Denominator: | ' | ' | ' | ' |
Weighted average number of common shares | 87,948,738 | 50,985,538 | 64,283,839 | 48,525,136 |
Effect of dilutive common shares | 443,589 | 0 | 0 | 0 |
Diluted weighted average number of common shares outstanding | 88,392,327 | 50,985,538 | 64,283,839 | 48,525,136 |
Income (loss) per share b basic and diluted | 0.03 | -0.05 | -0.07 | -0.13 |
8_Loss_Per_Share_Details_Narra
8. Loss Per Share (Details Narrative) | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Warrant [Member] | ' | ' | ' |
Antidilutive securities excluded from earnings | 13,667,365 | 38,679,212 | 13,667,365 |
Options | ' | ' | ' |
Antidilutive securities excluded from earnings | 4,320,752 | 0 | 4,320,752 |
9_Statement_of_Cash_Flows_Deta
9. Statement of Cash Flows (Details) (CAD) | 9 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2013 | |
Notes to Financial Statements | ' | ' |
Accounts receivable | -1,331,069 | -103,781 |
Inventories | 187,625 | -141,943 |
Prepaid expenses and other receivables | -66,575 | -284,271 |
Taxes recoverable | 604,310 | -283,926 |
Accounts payable and accrued liabilities | -130,876 | -1,815,265 |
Changes in non-cash balances related to operations | -736,585 | -2,629,186 |
9_Statement_of_Cash_Flows_Deta1
9. Statement of Cash Flows (Details Narrative) (CAD) | 9 Months Ended | 12 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Dec. 31, 2013 | Sep. 30, 2014 | Dec. 31, 2013 | |
Patents and licenses | Patents and licenses | License fees | License fees | |||
Accounts payable and accrued liabilities | -130,876 | -1,815,265 | 8,893 | 14,365 | 186,663 | 0 |
Interest paid | 803,396 | 320,029 | ' | ' | ' | ' |
Taxes paid | 0 | 0 | ' | ' | ' | ' |
Non-cash debt issuance costs | 82,301 | 137,092 | ' | ' | ' | ' |
Warrants issued, value | 1,298,382 | 0 | ' | ' | ' | ' |
10_Contingencies_and_Commitmen1
10. Contingencies and Commitments (Details Narrative) (CAD) | Sep. 30, 2014 | Dec. 31, 2013 |
Contingencies And Commitments Details Narrative | ' | ' |
Executive termination under initial agreement | 912,116 | 792,200 |
11_Significant_Customers_Detai
11. Significant Customers (Details Narrative) (Major customer) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Major customer | ' | ' | ' | ' |
Risk percentage | 68.70% | 58.70% | 67.40% | 57.90% |
Concentration Risk, Customer | 'Three wholesale customers | 'Two wholesale customers | 'Three wholesale customers | 'Two wholesale customers |
12_Related_Party_Transactions_
12. Related Party Transactions (Details Narrative) (CAD) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Notes to Financial Statements | ' | ' | ' | ' |
Non-cash expense | 20,444 | ' | 56,889 | ' |
Related Party, consulting services | ' | 6,000 | ' | 42,000 |
13_Income_Taxes_Details_Narrat
13. Income Taxes (Details Narrative) (CAD) | 9 Months Ended |
Sep. 30, 2014 | |
Non-capital loss carry-forwards | 14,903,600 |
Carry-forward expenditures offset against future taxable income | 1,798,300 |
Tax credits, non-refundable | 341,300 |
Minimum [Member] | ' |
Loss Carryforwards Expiration Dates | 31-Dec-14 |
Maximum [Member] | ' |
Loss Carryforwards Expiration Dates | 31-Dec-34 |
14_Segmented_Information_Detai
14. Segmented Information (Details) (CAD) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Jun. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Product sales: | ' | ' | ' | ' |
Domestic sales | 3,363,814 | 3,022,993 | 10,040,314 | 8,964,777 |
International sales | 496,152 | 347,551 | 1,318,002 | 1,037,103 |
Other revenue | 8,950 | 9,702 | 27,025 | 32,554 |
Total | 3,868,916 | 3,380,246 | 11,385,341 | 10,034,434 |
Royalty revenues | 0 | 99,884 | 18,414 | 197,924 |
Total revenues | 3,868,916 | 3,480,130 | 11,403,755 | 10,232,358 |
15_Foreign_Currency_Gain_Loss_
15. Foreign Currency Gain (Loss) (Details Narrative) (CAD) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Notes to Financial Statements | ' | ' | ' | ' |
Foreign currency gain /loss | -228,065 | 20,060 | -238,572 | -76,204 |
16_Financial_Instruments_Detai
16. Financial Instruments (Details) (CAD) | Sep. 30, 2014 | Jun. 30, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Derivative liability - Warrants (Fair Value) | 3,250,811 | 2,966,714 | 2,966,714 | 202,213 |
Level 1 | ' | ' | ' | ' |
Derivative liability - Warrants (Fair Value) | 0 | ' | 0 | ' |
Level 2 | ' | ' | ' | ' |
Derivative liability - Warrants (Fair Value) | 0 | ' | 0 | ' |
Level 3 | ' | ' | ' | ' |
Derivative liability - Warrants (Fair Value) | 3,250,811 | ' | 2,966,714 | ' |
16_Financial_Instruments_Detai1
16. Financial Instruments (Details 1) (CAD) | 3 Months Ended | 12 Months Ended |
Sep. 30, 2014 | Dec. 31, 2013 | |
Financial Instruments Details 1 | ' | ' |
Derivative liability - Warrants, beginning | 2,966,714 | 202,213 |
Additions to derivative instruments | 120,914 | 2,365,284 |
Change in fair market value, recognized in earnings as Change in warrant liability | 163,183 | 399,217 |
Derivative liability - Warrants, ending | 3,250,811 | 2,966,714 |
16_Financial_Instruments_Detai2
16. Financial Instruments (Details 2) (Warrant [Member], CAD) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2014 | Dec. 31, 2013 | |
Warrant [Member] | ' | ' |
Number of shares underlying the warrants | 14,014,587 | 13,667,365 |
Fair market value of the stock | 0.52 | 0.38 |
Exercise price | 0.61 | 0.58 |
Expected volatility | 97.00% | 114.00% |
Risk-free interest rate | 1.45% | 1.58% |
Expected dividend yield | 0.00% | 0.00% |
Expected warrant life (years) | '2 years 3 months 14 days | '2 years 11 months 8 days |
16_Financial_Instruments_Detai3
16. Financial Instruments (Details Narrative) (CAD) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2014 | Dec. 31, 2013 | |
Notes to Financial Statements | ' | ' |
Concentration of credit risk and major customers | 1,938,649 | 607,580 |
17_Derivative_Financial_Instru2
17. Derivative Financial Instruments (Details) (CAD) | Sep. 30, 2014 | Dec. 31, 2013 |
Fair Value | ' | ' |
Foreign currency sold - call options | 13,158 | -38,156 |
Notional Principal | ' | ' |
Foreign currency sold - call options | 306,000 | 5,000,000 |