Document and Entity Information
Document and Entity Information | 6 Months Ended |
Jun. 30, 2015shares | |
DocumentAndEntityInformationAbstract | |
Entity Registrant Name | Tribute Pharmaceuticals Canada Inc. |
Entity Central Index Key | 1,159,019 |
Document Type | 10-Q |
Document Period End Date | Jun. 30, 2015 |
Amendment Flag | true |
Amendment Description | This Amendment No. 1 on Form 10-Q/A (this Amendment No. 1) to the Quarterly Report on Form 10-Q of Tribute Pharmaceuticals Canada Inc. (Tribute or the Company) for the quarterly period ended June 30, 2015 as originally filed with the U.S. Securities and Exchange Commission on August 14, 2015 (the Original Report) is being filed in connection with the preparation by the Company of audited financial statements as at and for the six month period ended June 30, 2015 (the Audited Financial Statements) and the related notes to the Audited Financial Statements as a result of a filing obligation under Canadian securities laws relating to the 2014 acquisition of certain products from Novartis. This Amendment No. 1 reflects the fact that the Audited Financial Statements have now been audited by McGovern, Hurley, Cunningham, LLP. Accordingly, we hereby amend and replace in its entirety Part I Item 1 (Financial Statements) and Part II - Item 6 (Exhibits) of the Original Report. Part I Item 1 (Financial Statements) now contains both the unaudited interim financial statements as at June 30, 2015 and for the three and six month periods ended June 30, 2015 that were included with the Original Report (the Unaudited Financial Statements), as well as the Audited Financial Statements as at and for the six month period ended June 30, 2015. Other than the financial information contained in Unaudited Financial Statements that is not contained in the Audited Financial Statements (which consists of financial information relating to the three month period ended June 30, 2015), the Audited Financial Statements replace and supersede the Unaudited Financial Statements. In accordance with applicable SEC rules, this Amendment No. 1 also includes new certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, as amended, from our Chief Executive Officer and Chief Financial Officer dated as of the filing date of this Amendment No. 1. Accordingly, the Registrant hereby amends Part II - Item 6 of the Original Report to reflect the filing of the new certifications. Except as described above, this Amendment No. 1 does not amend, update or change any other items or disclosures in the Original Report and does not purport to reflect any information or events subsequent to the filing thereof. As such, this Amendment No. 1 speaks only as of the date the Original Report was filed, and the Company has not undertaken herein to amend, supplement or update any information contained in the Original Report to give effect to any subsequent events and any forward-looking statements represent managements views as of the Original Report date and should not be assumed to be accurate as of any date thereafter. Accordingly, this Amendment No. 1 should be read in conjunction with the Companys filings made with the SEC subsequent to the filing of the Original Report, including any amendment to those filings. |
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 | 125,050,578 |
Document Fiscal Period Focus | Q2 |
Document Fiscal Year Focus | 2,015 |
CONDENSED INTERIM CONSOLIDATED
CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS (Unaudited) - CAD | Jun. 30, 2015 | Dec. 31, 2014 |
Current | ||
Cash and cash equivalents | CAD 17,600,421 | CAD 3,505,791 |
Accounts receivable, net of allowance of $nil (December 31, 2014 - $nil) (Note 17(d)), net of allowance of $456,000 (December 31, 2014 - $nil) | 5,599,905 | 2,145,319 |
Inventories (Note 3), (Note 4) | 2,921,625 | 1,037,387 |
Taxes recoverable | 214,566 | 130,623 |
Loan receivable | 15,814 | 15,814 |
Prepaid expenses and other receivables (Note 4) | 748,125 | 187,279 |
Current portion of debt issuance costs, net (Note 7) | 1,213,435 | 128,134 |
Total current assets | 28,313,891 | 7,150,347 |
Property, plant and equipment, net (Note 5) | 1,296,316 | 1,012,285 |
Intangible assets, net (Note 6) | 80,525,023 | 40,958,870 |
Goodwill (Note 6) | 7,532,265 | 3,599,077 |
Debt issuance costs, net (Note 7) | 325,808 | 359,161 |
Total assets | 117,993,303 | 53,079,740 |
Current | ||
Accounts payable and accrued liabilities | 8,793,456 | 4,344,606 |
Amounts payable and contingent consideration (Note 2) | 12,439,132 | |
Current portion of long term debt (Note 7) | 1,653,802 | CAD 1,319,030 |
Promissory convertible note (Note 2) | 5,000,000 | |
Debentures (Note 7) | 12,500,000 | |
Warrant liability (Note 8(c)) | 9,575,408 | CAD 3,107,880 |
Other current liability | 24,850 | |
Total current liabilities | 49,986,648 | CAD 8,771,516 |
Deferred tax liability | 7,594,370 | |
Long term debt (Note 7) | 14,507,306 | CAD 13,967,493 |
Total liabilities | CAD 72,088,324 | CAD 22,739,009 |
Contingencies and commitments (Notes 2, 7 and 11) | ||
Capital Stock | ||
AUTHORIZED Unlimited Non-voting, convertible redeemable and retractable preferred shares with no par value Unlimited Common shares with no par value ISSUED (Note 8(a)) Common shares 125,050,578 (December 31, 2014 - 94,476,238) | CAD 71,098,839 | CAD 41,182,630 |
Additional paid-in capital options (Note 8(b)) | 3,737,453 | 2,713,605 |
Warrants (Note 8(c)) | 5,002,711 | CAD 6,347,349 |
Accumulated other comprehensive loss (Note 18) | (24,850) | |
Deficit | (33,909,174) | CAD (19,902,853) |
Total shareholders' equity | 45,904,979 | 30,340,731 |
Total liabilities and shareholders' equity | 117,993,303 | 53,079,740 |
Audited | ||
Current | ||
Cash and cash equivalents | 17,600,421 | 3,505,791 |
Accounts receivable, net of allowance of $nil (December 31, 2014 - $nil) (Note 17(d)), net of allowance of $456,000 (December 31, 2014 - $nil) | 5,040,110 | 2,145,319 |
Inventories (Note 3), (Note 4) | 3,167,758 | 1,037,387 |
Taxes recoverable | 239,905 | 130,623 |
Loan receivable | 15,814 | 15,814 |
Prepaid expenses and other receivables (Note 4) | 418,097 | 187,279 |
Current portion of debt issuance costs, net (Note 7) | 137,626 | CAD 128,134 |
Debenture issuance costs (Note 9) | 1,075,809 | |
Total current assets | 27,695,540 | CAD 7,150,347 |
Property, plant and equipment, net (Note 5) | 1,002,973 | 1,012,285 |
Intangible assets, net (Note 6) | 80,525,928 | 40,958,870 |
Goodwill (Note 6) | 7,649,149 | 3,599,077 |
Debt issuance costs, net (Note 7) | 326,310 | 359,161 |
Total assets | 117,199,900 | 53,079,740 |
Current | ||
Accounts payable and accrued liabilities | 8,862,996 | CAD 4,344,606 |
Amounts payable and contingent consideration (Note 2) | 11,932,000 | |
Current portion of long term debt (Note 7) | 1,653,802 | CAD 1,319,030 |
Promissory convertible note (Note 2) | 5,000,000 | |
Debentures (Note 7) | 12,500,000 | |
Warrant liability (Note 8(c)) | 9,575,408 | CAD 3,107,880 |
Other current liability | 24,850 | |
Total current liabilities | 49,549,056 | CAD 8,771,516 |
Deferred tax liability | 7,174,190 | |
Long term debt (Note 7) | 14,507,306 | CAD 13,967,493 |
Total liabilities | CAD 71,230,552 | CAD 22,739,009 |
Contingencies and commitments (Notes 2, 7 and 11) | ||
Capital Stock | ||
AUTHORIZED Unlimited Non-voting, convertible redeemable and retractable preferred shares with no par value Unlimited Common shares with no par value ISSUED (Note 8(a)) Common shares 125,050,578 (December 31, 2014 - 94,476,238) | CAD 71,098,839 | CAD 41,182,630 |
Additional paid-in capital options (Note 8(b)) | 3,737,454 | 2,713,605 |
Warrants (Note 8(c)) | 5,002,711 | CAD 6,347,349 |
Accumulated other comprehensive loss (Note 18) | (24,850) | |
Deficit | (33,844,806) | CAD (19,902,853) |
Total shareholders' equity | 45,969,348 | 30,340,731 |
Total liabilities and shareholders' equity | CAD 117,199,900 | CAD 53,079,740 |
CONDENSED INTERIM CONSOLIDATED3
CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - CAD | Jun. 30, 2015 | Dec. 31, 2014 |
Accounts receivable, net of allowance | ||
Shareholders Equity | ||
Common Shares Issued | 125,050,578 | 94,476,238 |
Audited | ||
Accounts receivable, net of allowance | CAD 456,000 | |
Shareholders Equity | ||
Common Shares Issued | 125,050,578 | 94,476,238 |
CONDENSED INTERIM CONSOLIDATED4
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS, COMPREHENSIVE LOSS AND DEFICIT (Unaudited) - CAD | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | Dec. 31, 2014 | |
Revenues | |||||
Licensed domestic product net sales | CAD 2,067,152 | CAD 2,463,309 | CAD 4,588,232 | CAD 4,739,693 | |
Other domestic product sales | 3,390,865 | 1,220,104 | 5,992,487 | 1,954,882 | |
International product sales | CAD 971,467 | CAD 357,872 | CAD 1,441,062 | 821,849 | |
Royalty and licensing revenues | 18,414 | ||||
Total revenues (Notes 12 and 15) | CAD 6,429,484 | CAD 4,041,285 | CAD 12,021,781 | 7,534,838 | |
Cost of Sales | |||||
Licensor sales and distribution fees | 1,542,811 | 1,636,895 | 2,994,875 | 3,049,938 | |
Cost of products sold | 779,846 | 350,600 | 1,355,092 | 696,464 | |
Expired products | 2,873 | 13,356 | 2,873 | 13,356 | |
Total Cost of Sales | 2,325,530 | 2,000,851 | 4,352,840 | 3,759,758 | |
Gross profit | 4,103,954 | 2,040,434 | 7,668,941 | 3,775,080 | |
Expenses | |||||
Selling, general and administrative (Notes 8(b), 13 and 16) | 4,136,253 | 2,409,678 | 7,462,175 | 5,632,339 | |
Amortization of assets | 888,612 | 296,574 | 1,510,235 | 586,926 | |
Total operating expenses | 5,024,865 | 2,706,252 | 8,972,410 | 6,219,265 | |
Loss from operations | CAD (920,911) | (665,818) | CAD (1,303,469) | (2,444,185) | |
Non-operating income (expenses) | |||||
(Loss) gain on derivative liability (Note (8(c)) | (196,800) | 3,200 | |||
Change in warrant liability (Note 8c) | CAD (6,181,889) | CAD (3,205,975) | CAD (8,877,489) | CAD (4,617,749) | |
Unrealized foreign currency exchange gain (loss) on debt | 337,273 | (1,096,183) | |||
Accretion expense (Note 7) | (73,463) | CAD (34,409) | (147,462) | CAD (65,526) | |
Restructuring costs (Note 2) | (1,132,398) | (1,132,398) | |||
Transaction costs | (254,044) | (254,044) | |||
Interest income | 802 | CAD 166 | 927 | CAD 538 | |
Interest expense | (595,000) | (298,006) | (1,190,975) | (565,298) | |
Loss before tax | (8,819,630) | CAD (4,400,842) | (14,001,093) | CAD (7,689,020) | |
Deferred income tax recovery (Note 14) | (5,228) | (5,228) | |||
Net loss for the period | (8,824,858) | CAD (4,486,784) | (14,006,321) | CAD (7,689,020) | |
Unrealized gain (loss) on derivative instrument, net of tax (Note 18) | (24,850) | (85,942) | 18,550 | (189,430) | |
Net loss and comprehensive loss for the period | (8,849,708) | (4,486,784) | (13,987,771) | (7,878,450) | |
Deficit, beginning of period | (25,084,316) | (17,584,089) | (19,902,853) | (14,295,911) | CAD (14,295,911) |
Deficit, end of period | CAD (33,909,174) | CAD (21,984,931) | CAD (33,909,174) | CAD (21,984,931) | CAD (19,902,853) |
Loss per share (Note 9) - Basic and diluted | CAD (0.08) | CAD (0.09) | CAD (0.14) | CAD (.15) | |
Loss per share - Basic | (0.15) | ||||
Loss per share - Diluted | CAD (0.15) | ||||
Weighted Average Number of Common Shares - Basic | 108,800,996 | 51,581,238 | 102,776,669 | 51,501,128 | |
Weighted Average Number of Common Shares - Diluted | 108,800,996 | 51,581,238 | 102,776,669 | 51,501,128 | |
Audited | |||||
Revenues | |||||
Licensed domestic product net sales | CAD 4,588,232 | ||||
Other domestic product sales | 5,992,487 | ||||
International product sales | CAD 1,441,062 | ||||
Royalty and licensing revenues | |||||
Total revenues (Notes 12 and 15) | CAD 12,021,781 | ||||
Cost of Sales | |||||
Licensor sales and distribution fees | 2,988,117 | ||||
Cost of products sold | 1,378,750 | ||||
Expired products | 2,873 | ||||
Total Cost of Sales | 4,369,740 | ||||
Gross profit | 7,652,041 | ||||
Expenses | |||||
Selling, general and administrative (Notes 8(b), 13 and 16) | 7,565,611 | ||||
Amortization of assets | 1,510,235 | ||||
Total operating expenses | 9,075,846 | ||||
Loss from operations | CAD (1,423,805) | ||||
Non-operating income (expenses) | |||||
(Loss) gain on derivative liability (Note (8(c)) | |||||
Change in warrant liability (Note 8c) | CAD (8,877,489) | ||||
Unrealized foreign currency exchange gain (loss) on debt | (1,096,183) | ||||
Accretion expense (Note 7) | (147,462) | ||||
Restructuring costs (Note 2) | (625,266) | ||||
Transaction costs | (576,472) | ||||
Interest income | 927 | ||||
Interest expense | (1,190,975) | ||||
Loss before tax | (13,936,725) | ||||
Deferred income tax recovery (Note 14) | 5,228 | ||||
Net loss for the period | (13,941,953) | ||||
Unrealized gain (loss) on derivative instrument, net of tax (Note 18) | 18,550 | ||||
Net loss and comprehensive loss for the period | CAD (13,923,403) | ||||
Loss per share (Note 9) - Basic and diluted | CAD (.14) | ||||
Loss per share - Basic | (0.14) | ||||
Loss per share - Diluted | CAD (0.14) | ||||
Weighted Average Number of Common Shares - Basic | 102,776,669 | ||||
Weighted Average Number of Common Shares - Diluted | 102,776,669 |
CONDENSED INTERIM CONSOLIDATED5
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - CAD | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Cash flows from (used in) operating activities | ||
Net loss | CAD (14,006,321) | CAD (7,689,020) |
Items not affecting cash: | ||
Tax payable (recovery) | ||
Amortization | 1,540,453 | CAD 598,789 |
Changes in warrant liability (Note 8(c)) | 8,877,489 | 4,617,749 |
Share-based compensation (Note 8(b)) | 1,030,689 | 217,076 |
Accretion expense | CAD 147,462 | 65,526 |
Paid-in common shares for services | 211,812 | |
Change in non-cash operating assets and liabilities (Note 10) | CAD (2,247,418) | (337,439) |
Cash flows (used in) operating activities | (4,657,646) | CAD (2,315,507) |
Cash flows from (used in) investing activities | ||
Acquisition, net of cash acquired | (8,411,645) | |
Additions to property, plant and equipment | (16,063) | CAD (6,525) |
Increase in intangible assets | (6,185,960) | (222,727) |
Cash flows (used in) investing activities | (14,613,668) | (229,252) |
Cash flows from (used in) financing activities | ||
Debt issuance costs (Note 7) | (1,125,756) | CAD (128,181) |
Options exercised | 8,204 | |
Debentures (Note 7) | 12,500,000 | |
(Repayment) advances of long term debt (Note 7) | (410,942) | CAD 2,211,000 |
Common shares issued (Note 8(a)) | 12,000,199 | |
Share issuance costs (Note 8 (a)) | (1,092,846) | |
Warrants exercised | 10,239,215 | |
Cash flows from financing activities | 32,118,074 | CAD 2,082,819 |
Changes in cash and cash equivalents | 12,846,760 | (461,940) |
Change in cash and cash equivalents due to changes in foreign exchange | 1,247,870 | (49,499) |
Cash and cash equivalents, beginning of period | 3,505,791 | 2,813,472 |
Cash and cash equivalents, end of period | 17,600,421 | CAD 2,302,033 |
Audited | ||
Cash flows from (used in) operating activities | ||
Net loss | (13,941,953) | |
Items not affecting cash: | ||
Tax payable (recovery) | 5,228 | |
Amortization | 1,540,453 | |
Changes in warrant liability (Note 8(c)) | 8,877,489 | |
Share-based compensation (Note 8(b)) | 1,030,686 | |
Accretion expense | CAD 147,462 | |
Paid-in common shares for services | ||
Change in non-cash operating assets and liabilities (Note 10) | CAD (2,070,294) | |
Cash flows (used in) operating activities | (4,410,928) | |
Cash flows from (used in) investing activities | ||
Acquisition, net of cash acquired | (8,657,460) | |
Additions to property, plant and equipment | (16,063) | |
Increase in intangible assets | (6,186,865) | |
Cash flows (used in) investing activities | (14,860,388) | |
Cash flows from (used in) financing activities | ||
Debt issuance costs (Note 7) | (1,125,756) | |
Options exercised | 8,205 | |
Debentures (Note 7) | 12,500,000 | |
(Repayment) advances of long term debt (Note 7) | (410,942) | |
Common shares issued (Note 8(a)) | 12,000,199 | |
Share issuance costs (Note 8 (a)) | (1,092,847) | |
Warrants exercised | 10,239,215 | |
Cash flows from financing activities | 32,118,074 | |
Changes in cash and cash equivalents | 12,846,758 | |
Change in cash and cash equivalents due to changes in foreign exchange | 1,247,872 | |
Cash and cash equivalents, beginning of period | 3,505,791 | |
Cash and cash equivalents, end of period | CAD 17,600,421 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY - CAD | Common Stock | Warrants | Additional Paid-In Capital Options | Accumulated Other Comprehensive Income | Deficit |
Beginning Balance, Shares at Dec. 31, 2013 | 51,081,238 | ||||
Beginning Balance, Amount at Dec. 31, 2013 | CAD 19,947,290 | CAD 0 | CAD 2,286,890 | CAD (38,156) | CAD (14,295,911) |
Units issued, Shares | 42,895,000 | ||||
Units issued, Amount | CAD 30,026,500 | ||||
Common shares issued for services, Shares | 500,000 | ||||
Common shares issued for services, Amount | CAD 211,812 | ||||
Options issued to employees and directors | 426,715 | ||||
Broker warrants – valuation allocation | (1,177,468) | 1,177,468 | |||
Common share purchase warrants – valuation | (5,169,881) | 5,169,881 | |||
Share issuance costs | CAD (2,655,623) | ||||
Unrealized loss on derivative instrument | 38,156 | ||||
Net loss for the period | (5,606,942) | ||||
Ending Balance, Shares at Dec. 31, 2014 | 94,476,238 | ||||
Ending Balance, Amount at Dec. 31, 2014 | CAD 4,118,263 | 6,347,349 | 2,713,605 | 0 | (19,902,853) |
Warrants exercised, Shares | 11,293,587 | ||||
Warrants exercised, Amount | CAD 8,377,924 | (968,005) | |||
Warrants exercised – valuation | CAD 3,373,467 | ||||
Options issued to employees and directors | 1,030,688 | ||||
Common shares issued in acquisition, Shares | 3,723,008 | ||||
Common shares issued in acquisition, Amount | CAD 5,000,000 | ||||
Common stock issued under private placement, Shares | 13,043,695 | ||||
Common stock issued under private placement, Amount | CAD 12,000,199 | 205,438 | |||
Share issuance costs | CAD (1,298,285) | ||||
Stock options exercised, Shares | 16,634 | ||||
Stock options exercised, Amount | CAD 15,043 | (6,839) | |||
Broker compensation options exercised, Shares | 1,909,419 | ||||
Broker compensation options exercised, Amount | CAD 1,219,817 | (582,071) | |||
Broker warrants exercised, Shares | 587,997 | ||||
Broker warrants exercised, Amount | CAD 529,197 | ||||
Broker warrants exercised – underlying warrants | CAD 698,847 | ||||
Unrealized loss on derivative instrument | (24,850) | ||||
Net loss for the period | (13,941,953) | ||||
Ending Balance, Shares at Jun. 30, 2015 | 125,050,578 | ||||
Ending Balance, Amount at Jun. 30, 2015 | CAD 71,098,839 | CAD 5,002,711 | CAD 3,737,454 | CAD (24,850) | CAD (33,844,806) |
1. DESCRIPTION OF BUSINESS AND
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | 6 Months Ended |
Jun. 30, 2015 | |
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | These unaudited condensed interim consolidated financial statements should be read in conjunction with the annual financial statements for Tribute Pharmaceuticals Canada Inc.s ("Tribute" or the "Company") most recently completed fiscal year ended December 31, 2014. These unaudited condensed interim consolidated 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 consolidated 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, 2014, except when disclosed below. The accompanying consolidated financial statements include the accounts of Tribute and its wholly-owned subsidiaries, Tribute Pharmaceuticals International Inc., Tribute Pharmaceuticals US, Inc. and Medical Futures Inc. (See Note 2). All intercompany balances and transactions have been eliminated upon consolidation. The unaudited condensed interim consolidated 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 June 30, 2015, and the results of its operations for the three and six month periods ended June 30, 2015 and 2014 and its cash flows for the three and six month periods ended June 30, 2015 and 2014. 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 consolidated 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, share based compensation, revenue recognition, intangible assets, goodwill 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. Proposed Merger Transaction On June 8, 2015, Tribute entered into an Agreement and Plan of Merger and Arrangement (the Transaction Agreement) with Pozen, Inc. (Pozen). Upon the completion of the transaction contemplated thereby, which is expected to occur in the fourth quarter of 2015, subject to satisfaction of various conditions, the combined company will be named Aralez Pharmaceuticals plc (Aralez). At closing, each common share of Tribute will be exchanged for 0.1455 Aralez ordinary shares. This transaction is subject to shareholder approval, as well as various regulatory approvals. |
Audited | |
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | Tribute Pharmaceuticals Canada Inc. (Tribute or the Company) is an emerging Canadian 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 with a particular interest in products for the treatment of neurology, pain, urology, dermatology and endocrinology/cardiology. In addition to developing and selling healthcare products in Canada, Tribute also sells products globally through a number of international partners. Tribute Pharmaceuticals current portfolio consists of ten marketed products in Canada, including: Cambia® (diclofenac potassium for oral solution), Bezalip® SR (bezafibrate), Soriatane® (acitretin), NeoVisc® (1.0% sodium hyaluronate solution), Uracyst® (sodium chondroitin sulfate solution 2%), Fiorinal®, Fiorinal® C, Visken®, Viskazide®, Collatamp® G, Durela®, Proferrin®, Iberogast®, MoviPrep®, Normacol®, Resultz®, Pegalax®, Balanse®, Balanse® Kids, Diaflor, Mutaflor®, and Purfem® in the Canadian market. Additionally, NeoVisc® and Uracyst® are commercially available and are sold globally through various international partnerships. Tribute also has the exclusive U.S. rights to Fibricor® and its related authorized generic. In addition, it has the exclusive U.S. rights to develop and commercialize Bezalip SR in the U.S. and has the exclusive right to sell bilastine, a product licensed from Faes Farma 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 pediatric presentations in Canada. Bilastine is subject to receiving Canadian regulatory approval. Tribute also has the Canadian rights to ibSium®, which was approved in Canada in June 2015 and two additional pipeline products including Octasa® and BedBugz, both of which are pending submission to Health Canada. The comparative statements of operations and comprehensive loss and cash flows for the six month period ended June 30, 2014 is unaudited. The comparative balance sheet as at December 31, 2014 is derived from the annual December 31, 2014 financial statements. The accompanying consolidated financial statements include the accounts of Tribute and its wholly-owned subsidiaries, Tribute Pharmaceuticals International Inc., Tribute Pharmaceuticals US, Inc. and Medical Futures Inc. (MFI) (See Note 2). All intercompany balances and transactions have been eliminated upon consolidation. Proposed Merger Transaction On June 8, 2015, Tribute entered into an Agreement and Plan of Merger and Arrangement (the Transaction Agreement) with Pozen, Inc. (Pozen). Upon the completion of the transaction contemplated thereby, which is expected to occur in the first quarter of 2016, subject to satisfaction of various conditions, the combined company will be named Aralez Pharmaceuticals plc (Aralez). At closing, each common share of Tribute will be exchanged for 0.1455 Aralez ordinary shares. This transaction is subject to shareholder approval, as well as various regulatory approvals. |
2. ACQUISITIONS AND GOODWILL
2. ACQUISITIONS AND GOODWILL | 6 Months Ended |
Jun. 30, 2015 | |
2. ACQUISITIONS AND GOODWILL | Fibricor Asset Acquisition On May 21, 2015, Tribute Pharmaceuticals International Inc., (a wholly owned subsidiary of Tribute) a Barbados corporation, acquired the U.S. rights to Fibricor® and its related authorized generic (the Product) from a wholly owned step-down subsidiary of Sun Pharmaceutical Industries Ltd. (Sun Pharma). Financial terms of the deal include the payment of US$10,000,000 as follows: US$5,000,000 ($6,100,500) paid on closing; US$2,000,000 ($2,494,800) payable 180 days from closing; and, US$3,000,000 ($3,742,200) payable 365 days from closing. As at June 30, 2015, US$5,000,000 ($6,237,000) has been accrued and included in amounts payable and contingent consideration on the condensed interim consolidated balance sheet. MFI Acquisition On June 16, 2015, Tribute entered into a share purchase agreement (the Share Purchase Agreement) with the shareholders of Medical Futures Inc. (MFI) pursuant to which Tribute acquired on such date (the MFI Acquisition) all of the outstanding shares of MFI (the MFI Shares). The consideration paid for the MFI Shares was comprised of (1) $8,492,868 in cash on closing, (2) $5,000,000 through the issuance of 3,723,008 Tribute common shares, (3) $5,000,000 in the form of a one-year term promissory note (the Note) bearing interest at 8% annually convertible in whole or in part at the holders option at any time during the term into 2,813,778 Tribute common shares at a conversion rate of $1.77 per Tribute common share (subject to adjustment in certain events), with a maturity date of June 16, 2016 (4) retention payments of $507,132, reported as amounts payable and contingent consideration on the condensed interim consolidated balance sheet, and (5) future contingent cash milestone payments totaling $5,695,000 that will be paid only upon obtaining certain consents. In addition, on the receipt of each regulatory approval for MFIs two pipeline products described below (or upon the occurrence of a change of control of Tribute), the vendors will receive a payment of $1,250,000 per product. The Company estimated the fair value of the contingent consideration by assigning an achievement probability to each potential milestone and discounting the associated cash payment to its present value using a risk adjusted rate of return. The Company evaluates its estimates of fair value of contingent consideration liabilities at the end of each reporting period until the liability is settled. Any changes in the fair value of contingent consideration liabilities are included in change in fair value of contingent consideration on the statements of operations and comprehensive loss. The liability for these amounts payable, are reported together as amounts payable and contingent consideration on the balance sheet. The Company has accrued $5,695,000 related to obtaining certain consents as an achievement probability of 100% was assigned to those contingent milestone payments. The contingent payments related to the two pipeline products are reliant on regulatory approval. As the achievement of regulatory approval cannot be reliably estimated by the Company, an achievement probability of 0% was assigned and therefore no accrual recorded on the Balance Sheet. The MFI Acquisition diversifies Tributes product portfolio in Canada through the addition of thirteen (13) marketed products (Durela ® , Proferrin ® , Iberogast ® , Moviprep ® , Normacol ® , Resultz ® , Pegalax ® , Balanse TM , Balanse TM Kids, Balanse TM , Diaflor TM , Mutaflor ® , Purfem ® , and Onypen ® ), one product recently approved by Health Canada but not launched (ibSuim) and two pipeline products, Octasa TM and BedBugz TM , both of which are pending submission to Health Canada. The Company recorded an accrual of $1,132,398 in acquisition and restructuring costs during the six month period ended June 30, 2015, on the condensed interim consolidated statement of operations and comprehensive loss. In connection with the MFI Acquisition, the Company acquired assets with a fair value of $36,677,236. Assets consisted of cash of $81,223, receivables of $1,757,912, inventory of $1,559,353, prepaids of $263,660, property, plant and equipment of $334,764, intangible assets of $28,652,850 and taxes recoverable of $94,286 and goodwill of $3,933,188. Liabilities were also assumed of $11,982,236 consisting of bank indebtedness of $1,937,475, accounts payable and accrued liabilities of $2,450,391 and a deferred tax liability of $7,594,370. The estimated fair value of the intangible assets was determined based on the use of the discounted cash flow models using an income approach for the acquired licenses. Estimated revenues were probability adjusted to take into account the stage of completion and the risks surrounding successful development and commercialization. The license agreement assets are classified as indefinite-lived intangible assets until the successful completion and commercialization or abandonment of the associated marketing and development efforts. The licensing asset and licensing agreements relate to product license agreements having estimated useful lives of 4 to 22 years. The Company believes that the fair values assigned to the assets acquired, the liabilities assumed and the contingent consideration liabilities were based on reasonable assumptions Pro Forma Results: For the Three Month Period Ended June 30 For the Six Month Period Ended June 30 2015 2014 2015 2014 Net revenues $ 9,010,789 $ 10,270,241 $ 16,888,960 $ 12,325,583 Net loss $ (8,863,655 ) $ (4,630,417 ) $ (14,499,053 ) $ (7,926,162 ) Loss per share $ (0.08 ) $ (0.09 ) $ (0.14 ) $ (0.15 ) |
Audited | |
2. ACQUISITIONS AND GOODWILL | Business Combination 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 acquisition, 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. The transaction was accounted for as a business combination. The fair value of the acquired identifiable net assets was $32,000,000, which was allocated between the product rights acquired (Visken ® ® The estimated fair value of the intangible assets was determined based on the use of the discounted cash flow models using an income approach for the acquired licenses. Estimated revenues were probability adjusted to take into account the stage of completion and the risks surrounding successful development and commercialization. The license agreement assets are classified as indefinite-lived intangible assets until the successful completion and commercialization or abandonment of the associated marketing and development efforts. The licensing asset and licensing agreements relate to product license agreements having estimated useful lives of 25 years. The Company believes that the fair values assigned to the assets acquired, the liabilities assumed and the contingent consideration liabilities were based on reasonable assumptions. Fibricor Asset Acquisition On May 21, 2015, Tribute Pharmaceuticals International Inc., (a wholly owned subsidiary of Tribute) a Barbados corporation, acquired the U.S. rights to Fibricor® and its related authorized generic (the Product) from a wholly owned step-down subsidiary of Sun Pharmaceutical Industries Ltd. (Sun Pharma). Financial terms of the deal include the payment of US$10,000,000 as follows: US$5,000,000 ($6,100,500) paid on closing; US$2,000,000 ($2,494,800) payable 180 days from closing; and, US$3,000,000 ($3,742,200) payable 365 days from closing. As at June 30, 2015, US$5,000,000 ($6,237,000) has been accrued and included in amounts payable and contingent consideration on the consolidated balance sheet. The transaction was accounted for as an asset acquisition. Costs incurred to complete the acquisition were $113,726, which were capitalized to the cost of the assets acquired. MFI Acquisition On June 16, 2015, Tribute entered into a share purchase agreement (the Share Purchase Agreement) with the shareholders of Medical Futures Inc. (MFI) pursuant to which Tribute acquired on such date (the MFI Acquisition) all of the outstanding shares of MFI (the MFI Shares). The consideration paid for the MFI Shares was comprised of (1) $8,492,868 in cash on closing, (2) $5,000,000 through the issuance of 3,723,008 Tribute common shares, (3) $5,000,000 in the form of a one-year term promissory note (the Note) bearing interest at 8% annually convertible in whole or in part at the holders option at any time during the term into 2,813,778 Tribute common shares at a conversion rate of $1.77 per Tribute common share (subject to adjustment in certain events), with a maturity date of June 16, 2016 (4) retention payments of $507,132, reported as accounts payable and accrued liabilities on the consolidated balance sheet, and (5) future contingent cash milestone payments totaling $5,695,000 that will be paid only upon obtaining certain consents. In addition, on the receipt of each regulatory approval for MFIs two pipeline products described below (or upon the occurrence of a change of control of Tribute), the vendors will receive a payment of $1,250,000 per product. The Company estimated the fair value of the contingent consideration by assigning an achievement probability to each potential milestone and discounting the associated cash payment to its present value using a risk adjusted rate of return. The Company evaluates its estimates of fair value of contingent consideration liabilities at the end of each reporting period until the liability is settled. Any changes in the fair value of contingent consideration liabilities are included in change in fair value of contingent consideration on the consolidated statements of operations and comprehensive loss. The liability for these amounts payable, are reported together as amounts payable and contingent consideration on the balance sheet. The Company has accrued $5,695,000 related to obtaining certain consents as an achievement probability of 100% was assigned to those contingent milestone payments. The contingent payments related to the two pipeline products are reliant on regulatory approval. As the achievement of regulatory approval cannot be reliably estimated by the Company, an achievement probability of 0% was assigned and therefore no accrual recorded on the balance sheet. The MFI Acquisition diversifies Tributes product portfolio in Canada through the addition of thirteen (13) marketed products. The Company recorded a charge of $625,266 in acquisition and restructuring costs during the six month period ended June 30, 2015, on the consolidated statement of operations and comprehensive loss. Pro Forma Results: The following unaudited pro forma combined financial information summarizes the results of operations for the periods indicated as if the MFI Acquisition had been completed as of January 1, 2014 after giving effect to certain adjustments. The unaudited pro forma information is provided for illustrative purposes only and is not indicative of the results of operations or financial condition that would have been achieved if the MFI Acquisition would have taken place as of January 1, 2014 and should not be taken as indicative of future results of operations or financial condition. Pro forma adjustments are tax-effected at the effective tax rate. For the Six Month Period Ended June 30 2015 2014 Net revenues $ 16,294,799 $ 15,951,616 Net loss $ (13,873,977 ) $ (4,542,220 ) Loss per share $ (0.13 ) $ (0.09 ) |
3. Inventories
3. Inventories | 6 Months Ended |
Jun. 30, 2015 | |
3. Inventories | June 30, 2015 December 31, 2014 Raw materials $ 372,871 $ 290,197 Finished goods 1,850,371 399,830 Packaging materials 157,001 70,870 Work in process 541,382 276,490 $ 2,921,625 $ 1,037,387 |
Audited | |
3. Inventories | June 30, 2015 December 31, 2014 Raw materials $ 372,871 $ 290,197 Finished goods 2,096,504 399,830 Packaging materials 157,001 70,870 Work in process 541,382 276,490 $ 3,167,758 $ 1,037,387 During the period ended June 30, 2015, the Company assessed its inventory and determined that $4,920 of its on-hand inventory would not be used prior to its potential useful life (December 31, 2014 - $53,099). Therefore, $4,920 (December 31, 2014 - $5,277) of packaging materials, $nil (December 31, 2014 - $26,241) of finished goods, $nil (December 31, 2014 - $21,581) of raw materials and were written off during the period. |
3a. SUMMARY OF SIGNIFICANT ACCO
3a. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2015 | |
Audited | |
3a. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a basis consistent with that of the prior period. a) CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash and all highly liquid investments purchased with an original maturity of three months or less at the date of purchase. Cash and cash equivalents are held with three major financial institutions in Canada. As at June 30, 2015 and December 31, 2014, the Company did not have any cash equivalents. b) ACCOUNTS RECEIVABLE The Company routinely assesses the recoverability of all material trade and other receivables to determine their collectability by considering factors such as historical experience, credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer's ability to pay. c) REVENUE RECOGNITION The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and collectability is reasonably assured. License fees which are comprised of initial fees and milestone payments are recognized upon achievement of the milestones provided the milestone is meaningful, and provided that collectability is reasonably assured and other revenue recognition criteria are met. Milestone payments are recognized into income upon the achievement of the specified milestones when the Company has no further involvement or obligation to perform services, as related to that specific element of the arrangement. Up-front fees and other amounts received in excess of revenue recognized are recorded as deferred revenues. Revenues from the sale of products, net of trade discounts, returns and allowances, are recognized when legal title to the goods has been passed to the customer and collectability is reasonably assured. Revenues associated with multiple-element arrangements are attributed to the various elements, if certain criteria are met, including whether the delivered element has standalone value to the customer and whether there is objective and reliable evidence of the fair value of the undelivered elements. Non-refundable up-front fees for the transfer of methods and technical know-how, not requiring the Company to perform additional research or development activities or other significant future performance obligations, are recognized upon delivery of the methods and technical know-how. Royalty revenue is recognized when the Company has fulfilled the terms in accordance with the contractual agreement and has no material future obligation, other than inconsequential and perfunctory support, as would be expected under such agreements and the amount of the royalty fee is determinable and collection is reasonably assured. A customer is obligated to pay for products sold to it within a specified number of days from the date that title to the products is transferred to the customer. The Companys standard terms typically range from 0.5% to 2% discount, 15 to 20 days net 30 from the date of invoice. The Company has a product returns policy on some of its products, which allows the customer to return pharmaceutical products that have expired, for full credit, provided the expired products are returned within twelve months from the expiration date. Transfer of title occurs and risk of ownership passes to a customer at the time of shipment or delivery, depending on the terms of the agreement with a particular customer. The sale price of the Companys products is substantially fixed or determinable at the date of sale based on purchase orders generated by a customer and accepted by the Company. A customers obligation to pay the Company for products sold to it is not contingent upon the resale of those products. The Company recognizes revenues for the sale of products from the date the title to the products is transferred to the customer. In connection with the Asset Purchase Agreement (Note 2), the Company entered into a transition services and supply agreement with Novartis to facilitate the seamless and efficient transfer of products to the Company. The agreement required that Novartis continue to manufacture and distribute products until the Company obtained the necessary marketing authorizations to allow it to take over these functions as principal. Novartis provided the Company with a monthly reconciliation of revenues, cost of goods, and marketing and selling expenses for which the Company then billed Novartis for the net amount receivable. The Company relied on the financial information provided by Novartis to estimate the amounts due under this agreement. Based on the terms of this arrangement and the guidance per ASC 605-45 regarding agency relationships, for the period of this arrangement the Company recorded revenues relating to the Asset Purchase Agreement on a net basis in the consolidated statement of operations, net of cost of goods and marketing and selling expenses. d) INVENTORIES Inventories are valued at the lower of cost and net realizable value with cost being determined on a first-in, first-out basis. Cost is determined to be purchase cost for raw materials and the production cost (materials, labor and indirect manufacturing cost) for work-in-process and finished goods. Throughout the manufacturing process, the related production costs are recorded within inventory. e) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost. The Company periodically evaluates whether current facts or circumstances indicate that the carrying value of such assets to be held and used may not be recoverable. The Company reviews its long-term assets, such as fixed assets to be held and used or disposed of, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected undiscounted cash flows is less than the carrying amount of the asset, an impairment loss is recognized in the amount by which the carrying amount of the asset exceeds its fair value. The basis of amortization and estimated useful lives of these assets are provided for as follows: Asset Classification Amortization Method Useful Life Building Straight-line 20 years Computer and office equipment Straight-line 5 years Leasehold improvements Straight-line over the lease term 5 years Manufacturing equipment Straight-line & activity based 5 to 10 years Warehouse equipment Straight-line 5 to 10 years Packaging equipment Activity based 5 to 10 years Activity based amortization is based on the number of uses for each asset in that category. f) GOODWILL AND INTANGIBLE ASSETS Goodwill represents the excess of acquisition cost over the fair value of the net assets of the acquired businesses. Goodwill has an indefinite useful life and is not amortized, but instead tested for impairment annually. Intangible assets include patents, product rights, a licensing asset and licensing agreements. Patents represent capitalized legal costs incurred in connection with applications for patents. In-process patents pending are not amortized. All patents subject to amortization are amortized on a straight line basis over an estimated useful life of up to 17 years. The Company regularly evaluates patents and applications for impairment or abandonment, at which point the Company charges the remaining net book value to expenses. The licensing asset represents amounts paid for exclusive Canadian licensing rights to develop, register, promote, manufacture, use, market, distribute and sell pharmaceutical products. The licensing agreements represent the fair value assigned to licensing agreements acquired. The licensing asset and licensing agreement are amortized over the remaining life of the agreement, upon product approval or over their estimated useful lives ranging from 4 years to 25 years. See Note 7. The Company evaluates the recoverability of amortizable intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If such review indicates that the carrying amount of intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. The Company has not recorded any impairment charge during the years presented. When assessing goodwill impairment, the Company assesses qualitative factors first to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, the Company determines it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, then the two-step impairment test is not performed. In the event that there are qualitative factors which indicate that the carrying amount is greater than the fair value of the reporting unit, then the two step impairment approach is performed. The first step, identifying a potential impairment, compares the fair value of the reporting unit with its carrying amount. If the carrying amount exceeds its fair value, the second step would need to be performed; otherwise, no further step is required. The second step, measuring the impairment loss, compares the implied fair value of the goodwill with the carrying amount of the goodwill. Any excess of the goodwill carrying amount over the applied fair value is recognized as an impairment loss, and the carrying value of goodwill is written down to fair value. As of December 31, 2014 and June 30, 2015, no impairment of goodwill has been identified. g) USE OF ESTIMATES The preparation of these consolidated financial statements has required management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent liabilities and the revenue and expenses recorded. On an ongoing basis, the Company evaluates its estimates, including those related to provision for doubtful accounts, inventories, accrued liabilities, accrued returns, discounts and rebates, derivative instruments, income taxes, stock based compensation, revenue recognition, goodwill, intangible assets, contingent consideration and the estimated useful lives of property, plant and equipment and intangible assets. 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 recorded in the consolidated statement of operations and comprehensive loss in the period in which they become known. Such adjustments could be material. h) DEFERRED INCOME TAXES The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, deferred tax assets and liabilities are determined based on the difference between the consolidated financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax results in deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company records net deferred tax assets to the extent management believe these assets will more likely than not be realized. In making such determination, all available positive and negative evidence is utilized, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In the event a determination is made that the Company would be able to realize deferred income tax assets in the future in excess of the net recorded amount, an adjustment to the valuation allowance would be made, which would reduce the provision for income taxes. Tax benefits from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold to be recognized. This interpretation also provides guidance on measurement, de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. i) STOCK-BASED CONSIDERATION The Company uses the fair value based method of accounting for all its stock-based compensation in accordance with FASB Accounting Standards Codification ("ASC") ASC 718 Compensation Stock Compensation. The estimated fair value of the options that are ultimately expected to vest based on performance related conditions, as well as the options that are expected to vest based on future service, is recorded over the options requisite service period and charged to stock-based compensation. In determining the amount of options that are expected to vest, the Company takes into account, voluntary termination behavior as well as trends of actual option forfeitures. Stock options and warrants which are indexed to a factor which is not a market, performance or service condition, in addition to the Companys share price, are classified as liabilities and re-measured at each reporting date based on the Black-Scholes option pricing model with a charge to operations, until the date of settlement. Some warrants have been reflected as a liability as they are indexed to a factor which is not a market performance or service condition. j) FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION Monetary assets and liabilities are translated into Canadian dollars, which is the functional currency of the Company, at the year-end exchange rate, while foreign currency revenues and expenses are translated at the exchange rate in effect on the date of the transaction. The resultant gains or losses are included in the consolidated statement of operations and comprehensive loss. Non-monetary items are translated at historical rates. k) RESEARCH AND DEVELOPMENT Research and development costs are expensed as incurred. The approved refundable portion of the tax credits are netted against the related expenses. Non-refundable investment tax credits are recorded in the period when reasonable assurance exists that the Company has complied with the terms and conditions required for approval of the tax credit and it is more likely than not that the Company will realize the benefits of these tax credits against the deferred taxes. Refundable investment tax credits are recorded in the period when reasonable assurance exists that the Company has complied with the terms and conditions required for approval of the tax credit and it is more likely than not that the Company will collect it. At June 30, 2015, the Company had no outstanding refundable tax credits (December 31, 2014 - nil). l) COMPREHENSIVE INCOME Comprehensive income is defined as the change in equity during a period related to transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. m) EARNINGS (LOSS) PER SHARE FASB ASC Section 260, Earnings (Loss) Per Share, requires presentation of both basic and diluted earnings (loss) per share (EPS) with a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue shares were exercised or converted into shares that would then share in the earnings. Basic earnings (loss) per share are computed based on the weighted average number of common shares outstanding each year. The diluted loss per share is not presented when the effect is anti-dilutive. n) ACQUISITIONS The accounting for acquisitions requires extensive use of estimates and judgments to measure the fair value of the identifiable tangible and intangible assets acquired, including license agreement assets and liabilities assumed. Additionally, the Company must determine whether an acquired entity is considered to be a business or a set of net assets, because the excess of the purchase price over the fair value of net assets acquired can only be recognized as goodwill in a business combination. o) CONTINGENT CONSIDERATION Contingent consideration liabilities represent future amounts the Company may be required to pay in conjunction with various business combinations. The ultimate amount of future payments is based on specified future criteria, such as sales performance and the achievement of certain future development, regulatory and sales milestones. The Company estimates the fair value of the contingent consideration liabilities related to sales performance using the income approach, which involves forecasting estimated future net cash flows and discounting the net cash flows to their present value using a risk-adjusted rate of return. The Company estimates the fair value of the contingent consideration liabilities related to the achievement of future development and regulatory milestones by assigning an achievement probability to each potential milestone and discounting the associated cash payment to its present value using a risk-adjusted rate of return. The Company evaluates its estimates of the fair value of contingent consideration liabilities on a periodic basis. Any changes in the fair value of contingent consideration liabilities are included in the Companys consolidated statements of operations. p) FAIR VALUE MEASUREMENTS The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risk. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Inputs that are generally unobservable and typically reflect managements estimate of assumptions that market participants would use in pricing the asset or liability. The Companys valuation techniques used to measure the fair value of money market funds and certain marketable equity securities were derived from quoted prices in active markets for identical assets or liabilities. The valuation techniques used to measure the fair value of all other financial instruments, all of which have counterparties with high credit ratings, were valued based on quoted market prices or model driven valuations using significant inputs derived from or corroborated by observable market data. In accordance with the fair value accounting requirements, companies may choose to measure eligible financial instruments and certain other items at fair value. The Company has not elected the fair value option for any eligible financial instruments. The carrying amounts of the Companys financial assets and liabilities including cash and cash equivalents, accounts receivable, loan receivable, accounts payable and accrued liabilities and debentures are approximate of their fair values due to the short maturity of these instruments. The fair value of the long term debt is estimated based on quoted market prices and interest rates. The Companys equity-linked financial instruments reflected as warrant liability on the balance sheet represent financial liabilities classified as Level 3 as per ASU 2009-05. As required by the guidance, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The fair value of the warrant liability which is not traded in an active market has been determined using the Black-Scholes option pricing model based on assumptions that are supported by observable market conditions. The estimated fair value of the contingent non-cash consideration was based on the Companys stock price. q) ACCOUNTING STANDARDS NOT YET ADOPTED In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606): Revenue from Contracts with Customers, which guidance in this update will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance when it becomes effective. ASU No. 2014-09 affects any entity that enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The core principal of ASU No. 2014-09 is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU No. 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, which will be the Companys fiscal year 2017 (or January 1, 2017), and entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. Early adoption is prohibited. The Company is currently in the process of evaluating the impact of adoption of ASU No. 2014-09 on its consolidated financial statements and related disclosures. |
4. Prepaid Expenses and Other R
4. Prepaid Expenses and Other Receivables | 6 Months Ended |
Jun. 30, 2015 | |
4. Prepaid Expenses and Other Receivables | June 30, 2015 December 31, 2014 Prepaid operating expenses $ 407,642 $ 180,304 Deposits 333,508 - Interest receivable on loan receivables 6,975 6,975 $ 748,125 $ 187,279 |
Audited | |
4. Prepaid Expenses and Other Receivables | June 30, 2015 December 31, 2014 Prepaid operating expenses and other receivables $ 400,948 $ 180,304 Other receivables 10,174 - Interest receivable on loan receivables 6,975 6,975 $ 418,097 $ 187,279 |
5. Property, Plant and Equipmen
5. Property, Plant and Equipment | 6 Months Ended |
Jun. 30, 2015 | |
5. Property, Plant and Equipment | June 30, 2015 Cost Accumulated Amortization Net Carrying Amount Land $ 90,000 $ - $ 90,000 Building 618,254 316,255 301,999 Leasehold improvements 303,703 5,697 298,006 Office equipment 97,848 54,791 43,057 Manufacturing equipment 1,103,525 630,036 473,489 Warehouse equipment 17,085 17,085 - Packaging equipment 111,270 69,280 41,990 Computer equipment 159,180 111,405 47,775 $ 2,500,865 $ 1,204,549 $ 1,296,316 December 31, 2014 Cost Accumulated Amortization Net Carrying Amount Land $ 90,000 $ - $ 90,000 Building 618,254 300,798 317,456 Leasehold improvements 10,359 4,662 5,697 Office equipment 61,308 52,124 9,184 Manufacturing equipment 1,103,525 602,667 500,858 Warehouse equipment 17,085 17,085 - Packaging equipment 111,270 62,744 48,526 Computer equipment 142,873 102,309 40,564 $ 2,154,674 $ 1,142,389 $ 1,012,285 |
Audited | |
5. Property, Plant and Equipment | June 30, 2015 Cost Accumulated Amortization Net Carrying Amount Land $ 90,000 $ - $ 90,000 Building 618,254 316,255 301,999 Leasehold improvements 10,359 5,697 4,662 Office equipment 97,848 54,791 43,057 Manufacturing equipment 1,103,525 630,036 473,489 Warehouse equipment 17,085 17,085 - Packaging equipment 111,270 69,280 41,990 Computer equipment 159,181 111,405 47,776 $ 2,207,522 $ 1,204,549 $ 1,002,973 December 31, 2014 Cost Accumulated Amortization Net Carrying Amount Land $ 90,000 $ - $ 90,000 Building 618,254 300,798 317,456 Leasehold improvements 10,359 4,662 5,697 Office equipment 61,308 52,124 9,184 Manufacturing equipment 1,103,525 602,667 500,858 Warehouse equipment 17,085 17,085 - Packaging equipment 111,270 62,744 48,526 Computer equipment 142,873 102,309 40,564 $ 2,154,674 $ 1,142,389 $ 1,012,285 During the period ended June 30, 2015, the Company disposed of $nil (2014 - $nil) in property, plant and equipment. During the period ended June 30, 2015, the Company recorded total amortization of tangible assets of $60,934 (2014 - $90,391), which was recorded as $8,628 (2014 - $5,333) to cost of goods sold, $21,594 (2014 - $6,528) to inventory and the remaining $27,032 (2014 - $24,074) was recorded to amortization expense on the consolidated statements of operations and comprehensive loss. |
6. Intangible Assets
6. Intangible Assets | 6 Months Ended |
Jun. 30, 2015 | |
6. Intangible Assets | June 30, 2015 Cost Accumulated Amortization Net Carrying Amount Patents $ 437,214 $ 71,573 $ 365,641 Licensing asset 1,005,820 212,770 793,050 Licensing agreements 51,236,326 3,023,989 48,212,337 Product rights 32,117,521 963,526 31,153,995 $ 84,796,881 $ 4,271,858 $ 80,525,023 December 31, 2014 Cost Accumulated Amortization Net Carrying Amount Patents $ 351,754 $ 53,242 $ 298,512 Licensing asset 1,005,820 174,084 831,736 Licensing agreements 10,377,325 2,345,049 8,032,276 Product rights 32,117,521 321,175 31,796,346 $ 43,852,420 $ 2,893,550 $ 40,958,870 Amortization expense of intangible assets for the three and six month periods ended June 30, 2015 was $784,445 and $1,373,153, respectively (2014 - $252,185 and $504,371, respectively). The Company has patents pending of $45,942 at June 30, 2015 (December 31, 2014 - $45,392) and licensing agreements of $373,325 (December 31, 2014 - $373,325) not currently being amortized. Goodwill Amount Balance at December 31, 2014 $ 3,599,077 MFI acquisition (Note 2) 3,933,188 Balance at June 30, 2015 $ 7,532,265 |
Audited | |
6. Intangible Assets | June 30, 2015 Cost Accumulated Amortization Net Carrying Amount Patents $ 437,214 $ 71,573 $ 365,641 Licensing asset 1,005,820 212,770 793,050 Licensing agreements 51,350,051 3,023,989 48,326,062 Product rights 32,000,000 958,825 31,041,175 $ 84,793,085 $ 4,267,157 $ 80,525,928 December 31, 2014 Cost Accumulated Amortization Net Carrying Amount Patents $ 351,754 $ 53,242 $ 298,512 Licensing asset 1,005,820 174,084 831,736 Licensing agreements 10,377,325 2,345,049 8,032,276 Product rights 32,117,521 321,175 31,796,346 $ 43,852,420 $ 2,893,550 $ 40,958,870 Amortization expense of intangible assets for the six month period ended June 30, 2015 was $1,373,153 (2014 - $504,371). The Company has patents pending of $45,942 at June 30, 2015 (December 31, 2014 - $45,392) and licensing agreements of $373,325 (December 31, 2014 - $373,325) not currently being amortized. The licensing asset consists of capitalized payments to third party licensors related to the achievement of regulatory approvals to commercialize products in specified markets and up-front payments associated with royalty obligations for products. The Company tests for impairment of definite-lived intangible assets when events or circumstances indicate that the carrying value of the assets may not be recoverable. No such triggering events were identified in 2015 and 2014, and therefore no impairment loss was recognized during those periods. Estimated future amortization expense of intangible assets at June 30, 2015 is as follows: Amount 2015 $ 3,217,724 2016 6,435,448 2017 6,435,253 2018 5,134,381 2019 4,787,854 Thereafter 54,101,410 $ 80,112,070 |
7. Long Term Debt and Debt Issu
7. Long Term Debt and Debt Issuance Costs | 6 Months Ended |
Jun. 30, 2015 | |
7. 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) 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. 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 ($21,205,800) (the Loan Commitment Amount). 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 ($17,463,600) (the "Loan") (comprised of US$8,000,000 ($8,592,600) 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 Loan accrues interest at an annual rate of 11.5% plus the LIBOR Rate (as defined in the Amended 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 Companys assets, the Loan shall be due and payable. 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. During the three and six month periods ended June 30, 2015, the Company accreted $73,463, and $147,462, respectively (2014 - $34,409 and $65,526, respectively) in non-cash accretion expense in connection with the long term loan, which is included in accretion expense on the condensed interim consolidated statements of operations, comprehensive loss and deficit. Legal fees and costs associated with the Loan Commitment Amount 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 six month periods ended June 30, 2015, the Company amortized $34,052 and $60,498, respectively (2014 $27,854 and $52,619, respectively) in non-cash interest expense, which is included in amortization expense on the condensed interim consolidated statements of operations, comprehensive loss and deficit. During the three and six month periods ended June 30, 2015, the Company paid US$339,089 ($410,942) and US$339,089 ($410,917), respectively in principal payments (year ended December 31, 2014 - $nil) and interest payments of US$950,250 ($1,172,414) (year ended December 31, 2014 US$1,090,500 ($1,207,262)) under the Credit Agreement and Amended Credit Agreement. The Company has estimated the following revenue-based principal and interest payments over the next four years ended December 31 based on the assumption that only the minimum revenue requirements will be met under the Amended Credit Agreement: Principal Payments Interest Payments 2015 US$780,546 ($973,654) US$923,990 ($1,152,585) 2016 US$1,451,997 ($1,811,221) US$1,706,676 ($2,128,908) 2017 US$1,663,839 ($2,075,473) US$1,492,457 ($1,861,691) 2018 US$9,764,529 ($12,180,273) US$1,432,759 ($1,787,224) Debenture Financing In connection with the completion of the acquisition of MFI, Tribute also completed a private placement of $12,500,000 principal amount of secured subordinated debentures (the "Debentures"). The Debentures are secured by a general security agreement from the Company constituting a lien on all the present and future property of the Company. The Debentures bear interest at a rate of 6.0% per annum payable quarterly in arrears and mature on June 16, 2016 (the "Maturity Date"). The Debentures can be redeemed, in full, at any time following the closing date and prior to the Maturity Date, by Tribute paying the principal amount plus any accrued and unpaid interest. Tribute will also pay a customary redemption fee upon a change of control and an exit fee upon repayment of the Debentures. In connection with the Debentures, the Company paid commissions to a syndicate of underwriters of $750,000. The Company also recorded $88,945 in debt issuance costs associated with syndicate fees, $250,000 in debt issuance costs and as an exit fee and $36,811 in debt issuance costs associated with legal fees. Total issuance costs associated with the Debentures were $1,125,756. During the three and six month periods ended June 30, 2015, the Company accreted $40,002, and $40,002, respectively (2014 - $nil and $nil, respectively) in non-cash accretion expense in connection with the Debenture financing, which is included in accretion expense on the condensed interim consolidated statements of operations, comprehensive loss and deficit. |
Audited | |
7. 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 pursuant to which SWK 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. 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 ($21,205,800) (the Loan Commitment Amount). 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 ($17,463,600) (the "Loan") (comprised of US$8,000,000 ($8,592,600) 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. In addition, an origination fee of US$120,000 ($124,172) was paid to SWK and treated as a discount to the carrying value of the Loan. Interest and principal under the Loan will be paid by a revenue based payment (Revenue Based Payment) that is charged on quarterly revenues of the Company, applied in the following priority (i) first, to the payment of all fees, costs, expenses and indemnities due and owing to SWK under the Amended Credit Amended Agreement, (ii) second, to the payment of all fees, costs, expenses and indemnities due and owing to the lenders under the Credit Agreement, (iii) third, to the payment of all accrued but unpaid interest until paid in full; and (iv) fourth, for each payment date on or after payment date in April 2015, to the payment of all principal under the Loan up to a maximum of US$1,000,000 ($1,247,400) in respect of any fiscal quarter. All amounts applied under the Revenue Based Payment will be made to each lender according to its pro-rata share of the Loan. The lenders will be entitled to certain additional payments in connection with repayments of the Loan, both on maturity and in connection with a prepayment or partial prepayment. Pursuant to the terms of the Amended Credit Agreement, the Company entered into a Guaranty and Collateral Agreement granting the lenders a security interest in substantially all of the Companys assets (the "Collateral"). The Amended Credit Agreement contains customary affirmative and negative covenants for credit facilities of its type, including but not limited to, limiting the Companys ability to pay dividends or make any distributions, incur additional indebtedness, grant additional liens, engage in any other line of business, make investments, merge, consolidate or sell all or substantially all of its assets and enter into transactions with related parties. The Amended Credit Agreement also contains certain financial covenants, including, but not limited to, certain minimum net sales requirements and a requirement to maintain at least $1,000,000 of unencumbered liquid assets at the end of each fiscal quarter. The Amended Credit Agreement includes customary events of default, including but not limited to, failure to pay principal, interest or fees when due, failure to comply with covenants, default under certain other indebtedness, certain insolvency or bankruptcy events, the occurrence of certain material judgments, the institution of any proceeding by a government agency or a change of control of the Company. The obligations under the Amended Credit Agreement to repay the Loan may be accelerated upon the occurrence of an event of default under the Amended Credit Agreement. A 4% agent fee on the above mentioned transaction was paid on the amounts borrowed above US$3,500,000 ($4,365,900) up to US$8,000,000 ($9,979,200). The Loan accrues interest at an annual rate of 11.5% plus LIBOR Rate (as defined in the Amended Credit Agreement), with 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 Companys assets, the Loan shall be due and payable. In connection with the Loan the Company issued to SWK 755,794 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$0.5954 ($0.7427), at any time prior to August 8, 2020. The grant date fair value of the warrants was $445,794, which was recorded as warrant liability, with an equal amount recorded as a discount to the carrying value of the Loan. In addition, an origination fee of US$120,000 ($124,172) was paid to SWK and treated as a discount to the carrying value of the loan. 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 ($0.539), at any time on or prior to February 4, 2021. Upon receipt of the additional US$6,000,000 ($6,724,800) of the Loan, the Company issued to SWK 740,000 common share purchase warrants with a grant date fair value of the warrants of $303,557. Each warrant entitles SWK to acquire one common share in the capital of the Company at an exercise price of US$0.70 ($0.8121), at any time on or prior to October 1, 2019. In addition, an origination fee of US$90,000 ($100,872) was paid to SWK and treated as a discount to the carrying value of the loan. 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 warrants issued to SWK was determined using the Black-Scholes model with the following weighted average assumptions: expected volatility of 123%, a risk-free interest rate of 1.90%, an expected life of 6.2 years, and no expected dividend yield. During the six month period ended June 30, 2015, the Company accreted $147,462 (2014 - $65,526) in non-cash accretion expense in connection with the long term loan, which is included in accretion expense on the consolidated statements of operations and comprehensive loss. During 2014, the Company incurred US$203,389 ($225,858) in financing fees and legal costs related to closing the Credit Agreement and recorded US$80,000 ($92,808) related to an exit fee payable to SWK upon the retirement of the Loan. These fees and costs were classified as debt issuance costs on the consolidated balance sheets. 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 six month period ended June 30, 2015, the Company amortized $60,498 (2014 $52,619) in non-cash interest expense, which is included in amortization expense on the consolidated statements of operations and comprehensive loss. During the six month period ended June 30, 2015, the Company paid US$339,089 ($410,917) in principal payments (year ended December 31, 2014 - $nil) and interest payments of US$950,250 ($1,172,414) (year ended December 31, 2014 US$1,090,500 ($1,207,262)) under the Credit Agreement and Amended Credit Agreement. The Company has estimated the following revenue-based principal and interest payments over the next four years ended December 31 based on the assumption that only the minimum revenue requirements will be met under the Amended Credit Agreement: Principal Payments Interest Payments 2015 US$780,546 ($973,654) US$923,990 ($1,152,585) 2016 US$1,451,997 ($1,811,221) US$1,706,676 ($2,128,908) 2017 US$1,663,839 ($2,075,473) US$1,492,457 ($1,861,691) 2018 US$9,764,529 ($12,180,273) US$1,432,759 ($1,787,224) Debenture Financing In connection with the completion of the acquisition of MFI, Tribute also completed a private placement of $12,500,000 principal amount of secured subordinated debentures (the "Debentures"). The Debentures are secured by a general security agreement from the Company constituting a lien on all the present and future property of the Company. The Debentures bear interest at a rate of 6.0% per annum payable quarterly in arrears and mature on June 16, 2016 (the "Maturity Date"). The Debentures can be redeemed, in full, at any time following the closing date and prior to the Maturity Date, by Tribute paying the principal amount plus any accrued and unpaid interest. Tribute will also pay a customary redemption fee upon a change of control and an exit fee upon repayment of the Debentures. In connection with the Debentures, the Company paid commissions to a syndicate of underwriters of $750,000. The Company also recorded $88,945 in debt issuance costs associated with syndicate fees, $250,000 in debt issuance costs and as an exit fee and $36,811 in debt issuance costs associated with legal fees. Total issuance costs associated with the Debentures were $1,115,811. During the six month period ended June 30, 2015, the Company accreted $40,002 (2014 - $nil) in non-cash accretion expense in connection with the Debenture financing, which is included in accretion expense on the consolidated statements of operations and comprehensive loss. |
8. Capital Stock
8. Capital Stock | 6 Months Ended |
Jun. 30, 2015 | |
8. Capital Stock | (a) Common Shares During the three and six month periods ended June 30, 2015, the Company completed a private placement in which 13,043,695 common shares were issued at a price of $0.92 per common share for gross proceeds of $12,000,199. In connection with the private placement, the Company paid cash commissions to a syndicate of underwriters of $840,014 and issued an aggregate of 456,529 non-transferable broker warrants. See Note 8(c). Each broker warrant entitles the holder to purchase one common share of the Company at an exercise price of $0.92 at any time on or before May 21, 2017. The Company also recorded $72,800 in debt issuance costs associated with syndicate fees. Total other issuance costs associated with the private placement were $180,033. On May 21, 2015, the Company issued 3,723,000 common shares in conjunction with the acquisition of MFI (See Note 2) with a fair value of $5,000,000 based on the current stock price. Additionally, 11,293,587 common shares of the Company were issued upon the exercise of 11,293,587 common share purchase warrants, 1,909,419 common shares of the Company were issued upon the exercise of 1,909,419 broker compensation options, 587,997 common shares were issued upon the exercise of 587,997 underlying broker warrants issued during the period and 16,634 common shares were issued upon the exercise of various share options, at an average exercise price of $0.51 for gross proceeds of $10,239,215. Common Shares Number of Shares Amount Balance, December 31, 2014 94,476,238 $ 41,182,630 Warrants exercised 11,293,587 8,377,924 Warrants exercised - valuation - 3,373,467 Common shares issued in acquisition (Note 2) 3,723,008 5,000,000 Common shares issued in private placement 13,043,695 12,000,199 Share issuance costs - (1,298,285 ) Share options exercised 16,634 15,043 Broker compensation options exercised 1,909,419 1,219,817 Broker warrants exercised underlying warrants 587,997 529,197 Fair value of broker warrants exercised - 698,847 Balance, June 30, 2015 125,050,578 $ 71,098,839 (b) Stock Based Compensation The Companys stock-based compensation program (the "Plan") includes share 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 six month periods ended June 30, 2015, there were 616,617 and 3,775,520 options, respectively, granted to officers, employees and consultants of the Company (2014 29,740 and 1,327,985, respectively). The exercise price of 2,925,520 of these options is $0.62, vesting quarterly one-eighth over two years on each of March 31, June 30, September 30 and December 31, in 2016 and 2017. Of these options 864,000 are time-based, while the remaining 2,311,520 are based 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 $0.51 using the Black-Scholes option pricing model, based on the following assumptions: expected dividend yield of 0%; expected volatility of 121%; expected risk free interest rate of 0.61%; and expected term of 5 years. During the six month period ended June 30, 2015, 200,000 options were granted with an exercise price of $0.62 and will fully vest on January 4, 2016 (Note 13). The grant date fair value of these options was estimated as $0.43 using the Black-Scholes option pricing model, based on the following assumptions: expected dividend yield of 0%; expected volatility of 121%; expected risk free interest rate of 0.87%; and expected term of 5 years. In addition, 600,000 options were granted based on achieving certain financial objectives, with an exercise price of $0.99 and will vest quarterly over three years on each of March 31, June 30, September 30 and December 31, in 2016, 2017 and 2018. The grant date fair value of these options was estimated as $0.75 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 1.07%; and expected term of 5 years. The remaining 50,000 options were granted with an exercise price of $0.62, with one quarter vesting over one year on each of April 29, July 29, October 29 in 2015 and January 29, 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 122%; expected risk free interest rate of 0.87%; and expected term of 5 years. For the three and six month periods ended June 30, 2015, the Company recorded $683,338 and $1,030,689, respectively (2014 $99,944 and $217,076, respectively) as additional paid in capital for options issued to directors, officers, employees and consultants based on continuous service. Included in this amount is $458,162 and $630,839 for options issued to consultants for services (Note 13). This expense was recorded as selling, general and administrative expense on the condensed interim consolidated statements of operations, comprehensive loss and deficit. Due to termination of employment and non-achievement of performance-based awards, 172,085 options were removed from the number of options issued during the six month period ended June 30, 2015 (year ended December 31, 2014 817,830). The activities in additional paid in-capital options are as follows: Amount Balance, December 31, 2014 $ 2,713,605 Expense recognized for options issued to employees 176,560 Expense recognized for options issued to consultants 171,759 Balance, March 31, 2015 3,061,924 Options exercised (6,840 ) Expense recognized for options issued to employees 224,207 Expense recognized for options issued to consultants 458,162 Balance, June 30, 2015 $ 3,737,453 The total number of options outstanding as at June 30, 2015 was 8,436,791 (December 31, 2014 4,834,991). (c) Warrants As at June 30, 2015, the following warrants were outstanding: Warrant Liability Expiration Date Number of Warrants Weighted Average Exercise Price Fair Value at June 30, 2015 Fair Value at December 31, 2014 May 11, 2017 750,000 US0.43($0.54) $ 1,032,847 $ 227,090 February 27, 2015 - US0.50($0.62) $ - $ 184,999 February 27, 2018 2,968,750 US0.60($0.75) $ 3,947,630 $ 1,310,414 March 5, 2015 - US0.50($0.62) $ - $ 56,691 March 5, 2018 843,750 US0.60($0.75) $ 1,120,046 $ 372,123 March 11, 2015 - US0.50($0.62) $ - $ 17,547 March 11, 2018 343,750 US0.60($0.75) $ 460,096 $ 102,089 August 8, 2018 755,794 US0.5954($0.7427) $ 1,228,439 $ 334,060 September 20, 2018 108,696 US0.55($0.69) $ 152,129 $ 36,442 February 4, 2021 347,222 US0.4320($0.5389) $ 578,222 $ 160,319 October 1, 2021 740,000 US0.70($0.87) $ 1,055,999 $ 306,106 6,857,962 US0.58($0.73) $ 9,575,408 $ 3,107,880 ASC 815 "Derivatives and Hedging" indicates that warrants with exercise prices denominated in a currency other than an entitys 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 consolidated 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 17(b)). As at June 30, 2015, the fair value of the aggregate warrant liability of $9,575,408 (December 31, 2014 - $3,107,880) was estimated using the Black-Scholes option pricing model based on the following weighted average assumptions: expected dividend yield of 0% (December 31, 2014 0%) expected volatility of 98% (December 31, 2014 88%) risk-free interest rate of 1.02% (December 31, 2014 1.22%) and expected term of 3.18 years (December 31, 2014 2.18 years). Warrants Equity Expiration Date Number of Warrants Weighted Average Exercise Price Grant Date Fair Value at June 30, 2015 July 15, 2016 17,455,350 $ 0.90 $ 4,201,876 July 15, 2016 1,307,706 $ 0.70 $ 478,620 July 15, 2016 366,713 $ 0.90 $ 116,777 May 21, 2017 456,529 $ 0.92 $ 205,438 19,586,298 $ 0.89 $ 5,002,711 During the six month period ended June 30, 2015 the Company issued 954,710 underlying warrants with an exercise price of $0.90, upon the exercise of 1,909,419 broker compensation options. The weighted average fair value of these warrants was estimated using the Black-Scholes option pricing model based on the following weighted average assumptions: expected dividend yield of 0%, expected volatility of 84%, risk-free interest rate of 0.45%, and expected term of 1.15 years. In connection with the private placement completed during the six month period ended June 30, 2015, the Company issued 456,529 non-transferable broker warrants, each exercisable into a common share of the Company, at an exercise price of $0.92 exercisable at any time on or prior to May 21, 2017. The fair value of the broker warrants at the date of grant was $205,438 and was estimated using the Black-Scholes option pricing model, based on the following assumptions: expected dividend yield of 0%; expected volatility of 92%; risk free interest rate of 0.67%; and expected term of 2 years. |
Audited | |
8. Capital Stock | a) Common Shares During the year ended December 31, 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 Companys 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 warrants valued at $1,177,468. See Note 10 (c). Each broker warrant 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 $403,636. During the year ended December 31, 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. During the six month period ended June 30, 2015, the Company completed a private placement in which 13,043,695 common shares were issued at a price of $0.92 per common share for gross proceeds of $12,000,199. In connection with the private placement, the Company paid cash commissions to a syndicate of underwriters of $840,014 and issued an aggregate of 456,529 non-transferable broker warrants. See Note 10(c). Each broker warrant entitles the holder to purchase one common share of the Company at an exercise price of $0.92 at any time on or before May 21, 2017. The Company also recorded $72,800 in debt issuance costs associated with syndicate fees. Total other issuance costs associated with the private placement were $180,033. On May 21, 2015, the Company issued 3,723,008 common shares in conjunction with the acquisition of MFI (See Note 2) with a fair value of $5,000,000 based on the current stock price. Additionally, 11,293,587 common shares of the Company were issued upon the exercise of 11,293,587 common share purchase warrants, 1,909,419 common shares of the Company were issued upon the exercise of 1,909,419 broker compensation options, 587,997 common shares were issued upon the exercise of 587,997 underlying broker warrants issued during the period and 16,634 common shares were issued upon the exercise of various share options, at an average exercise price of $0.51 for gross proceeds of $10,239,215. b) Stock Based Compensation The Companys 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 six month period ended June 30, 2015, there were 3,775,520 options granted to officers, employees and consultants of the Company (2014 1,327,985). The exercise price of 2,925,520 of these options is $0.62, vesting quarterly one-eighth over two years on each of March 31, June 30, September 30 and December 31, in 2016 and 2017. Of these options 540,000 are time-based, while the remaining 2,385,520 are based 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 $0.51 using the Black-Scholes option pricing model, based on the following assumptions: expected dividend yield of 0%; expected volatility of 121%; expected risk free interest rate of 0.61%; and expected term of 5 years. During the six month period ended June 30, 2015, 200,000 options were granted (2014 200,000) with an exercise price of $0.62 and will fully vest on January 4, 2016 (Note 15). The grant date fair value of these options was estimated as $0.43 using the Black-Scholes option pricing model, based on the following assumptions: expected dividend yield of 0%; expected volatility of 121%; expected risk free interest rate of 0.87%; and expected term of 5 years. (Note 15) In addition, 600,000 options were granted based on achieving certain financial objectives, with an exercise price of $0.99 and will vest quarterly over three years on each of March 31, June 30, September 30 and December 31, in 2016, 2017 and 2018. The grant date fair value of these options was estimated as $0.75 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 1.07%; and expected term of 5 years. The remaining 50,000 options were granted with an exercise price of $0.62, with one quarter vesting over one year on each of April 29, July 29, October 29 in 2015 and January 29, 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 122%; expected risk free interest rate of 0.87%; and expected term of 5 years. For the six month period ended June 30, 2015, the Company recorded $1,030,689 (2014 $217,076) as additional paid in capital for options issued to directors, officers, employees and consultants based on continuous service. Included in this amount is $630,839 for options issued to consultants for services. This expense was recorded as selling, general and administrative expense on the consolidated statements of operations, and comprehensive loss. Due to termination of employment and non-achievement of performance-based awards, 172,085 options were removed from the number of options issued during the six month period ended June 30, 2015 (year ended December 31, 2014 817,830). The activities in additional paid in-capital options are as follows: Amount Balance, December 31, 2014 $ 2,713,605 Options exercised (6,840 ) Expense recognized for options issued to employees 427,352 Expense recognized for options issued to consultants 603,337 Balance, June 30, 2015 $ 3,737,454 The total number of options outstanding as at June 30, 2015 was 8,436,791 (December 31, 2014 4,834,991). The weighted average grant date fair value of the options granted during the six month period ended June 30, 2015, was $0.55 (2014 - $0.34). 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 12,505,057 as at June 30, 2015 (December 31, 2014 9,447,624). The total remaining options available for granting under the plan at June 30, 2015 was 4,068,266 (December 31, 2014 4,612,634). The Company uses the Black-Scholes option-pricing model to estimate the grant date fair value of stock options with the following weighted average assumptions: 2015 2014 Risk-free interest rate 0.76 % 1.60 % Expected life 5 years 5 years Expected volatility 121 % 123 % Expected dividend yield 0 % 0 % The Companys computation of expected volatility for the periods ended June 30, 2015 and 2014 is based on the Companys market close price over the period equal to the expected life of the options. The Companys computation of expected life reflects actual historical exercise activity and assumptions regarding future exercise activity of unexercised, outstanding options. The Companys expected dividend yield is 0%, since there is no history of paying dividends and there are no plans to pay dividends. The Companys risk-free interest rate is the Canadian Treasury Bond rate for the period equal to the expected term. The total number of options outstanding as at June 30, 2015 was 8,436,791 (December 31, 2014 4,834,991). The activities in options outstanding are as noted below: Number of Options Weighted Average Exercise Price Balance, December 31, 2013 3,824,835 $ 0.60 Granted 1,827,986 0.45 Forfeited (817,830 ) 0.55 Balance, December 31, 2014 4,834,991 $ 0.60 Granted 3,775,520 0.58 Options exercised (16,635 ) 0.45 Forfeited (157,085 ) 0.49 Balance, June 30, 2015 8,436,791 $ 0.61 When employees or non-employees exercise their stock options, the capital stock is credited by the sum of the consideration paid together with the related portion previously credited to additional paid-in capital when stock-based compensation costs were recorded. As at June 30, 2015, the Company had 3,703,111 (2014 2,508,149) vested options. As at June 30, 2015, the number of unvested options expected to vest (including the impact of expected forfeitures) had been estimated at 4,733,680 (2014 2,601,181) with a weighted average contractual life of 3.9 years (2014 4.0 years) and exercise price of $0.64 (2014 - $0.45). As at June 30, 2015, the total fair value of future expense to be recorded in subsequent periods (assuming no forfeiture occurs) is $2,126,440 (2014 - $339,314). The weighted average time remaining for these options to vest is 2.79 years (2014 1.71 years). As at June 30, 2015, the aggregate intrinsic value of outstanding options was $11,604,910 (December 31, 2014 - $209,700) and the aggregate intrinsic value of exercisable options was $4,552,996 (December 31, 2014 - $80,848) based on the Companys closing common share price on the OTCQX under the trading symbol TBUFF of US$1.45 ($1.81) (December 31, 2014 - US$0.46 ($0.53)). The Company recognizes compensation expense for the fair values of stock options using the graded vesting method over the requisite service period for the entire award. The following table presents information relating to stock options outstanding and exercisable at June 30, 2015. Options Outstanding Options Exercisable Range of Exercise Price Number of Shares Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) $ 0.30 to $0.49 1,657,021 2.66 $ 0.41 1,126,892 $ 0.42 2.80 $ 0.50 to $0.69 5,669,770 3.23 0.60 2,066,219 0.58 1.94 $ 0.90 to $1.09 1,110,000 2.68 0.97 510,000 0.95 0.05 8,436,791 3.04 $ 0.61 3,703,111 $ 0.58 1.94 c) Warrants As at June 30, 2015, the following warrants were outstanding: Warrant Liability Expiration Date Number of Warrants Weighted Average Exercise Price Fair Value at June 30, 2015 Fair Value at December 31, 2014 May 11, 2017 750,000 US$0.43 ($0.54) $ 1,032,847 $ 227,090 February 27, 2015 - US$0.50 ($0.62) $ - $ 184,999 February 27, 2018 2,968,750 US$0.60 ($0.75) $ 3,947,630 $ 1,310,414 March 5, 2015 - US$0.50 ($0.62) $ - $ 56,691 March 5, 2018 843,750 US$0.60 ($0.75) $ 1,120,046 $ 372,123 March 11, 2015 - US$0.50 ($0.62) $ - $ 17,547 March 11, 2018 343,750 US$0.60 ($0.75) $ 460,096 $ 102,089 August 8, 2018 755,794 US$0.5954 ($0.7427) $ 1,228,439 $ 334,060 September 20, 2018 108,696 US$0.55 ($0.69) $ 152,129 $ 36,442 February 4, 2021 347,222 US$0.4320 ($0.5389) $ 578,222 $ 160,319 October 1, 2021 740,000 US$0.70 ($0.87) $ 1,055,999 $ 306,106 6,857,962 US$0.58 ($0.73) $ 9,575,408 $ 3,107,880 On May 11, 2012, the Company granted 750,000 warrants in connection with a loan agreement with MidCap Financial LLC, at an exercise price of US$0.56 ($0.70). Subsequently, the pro rata exercise price of the 750,000 warrants described above was adjusted due to the exercise rate of the 755,794 common share purchase warrants being issued to SWK during 2013. The effect of this pro rata change was a new warrant exercise price of US$0.43 ($0.54). The fair value of these warrants fluctuates based on the current stock price, volatility, the risk free interest rate, time remaining until expiry and changes in the exchange rate between the U.S. and Canadian dollar. The fair value of the warrant liability at the date of grant of the 750,000 warrants was $312,000 and was estimated using the Black-Scholes option pricing model, based on the following assumptions: expected dividend yield of 0%; expected volatility of 124%; risk free interest rate of 1.48%; and expected term of 5 years. In connection with the SWK Credit Agreement the Company issued to SWK 755,794 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$0.5954 ($0.7427), at any time prior to August 8, 2020. The fair value of the warrant liability at the date of grant was $445,012 and was estimated using the Black-Scholes option pricing model, based on the following assumptions: expected dividend yield of 0%; expected volatility of 128%; risk free interest rate of 2.14%; and expected term of 7 years. In connection with the private placement offerings completed during the year ended December 31, 2013, the Company granted an aggregate of 12,161,571 share purchase warrants to the participants each exercisable into one common share as follows: 6,026,438 at US$0.50 ($0.62) exercisable on or before March 11, 2015 and 6,026,437 at US$0.60 ($0.75) exercisable on or before March 11, 2018. The exercise price of the 12,052,875 warrants is denominated in U.S. dollars while the Companys functional and reporting currency is the Canadian dollar. As a result, the fair value of the warrants fluctuates based on the current stock price, volatility, the risk free interest rate, time remaining until expiry and changes in the exchange rate between the U.S. and Canadian dollar. The fair value of the warrant liability at the date of grant for these warrants was $1,896,679 and was estimated using the Black-Scholes option pricing model, based on the following weighted average assumptions: expected dividend yield of 0%; expected volatility of 117.4%; risk free interest rate of 1.16%; and expected term of 3.5 years. The remaining 108,696 share purchase warrants are exercisable on or before September 20, 2018 at US$0.55 ($0.68). The fair value of the warrant liability at the date of grant for these warrants was $22,810 and was estimated using the Black-Scholes option pricing model, based on the following weighted average assumptions: expected dividend yield of 0%; expected volatility of 130.0%; risk free interest rate of 1.89%; and expected term of 5 years. In connection with the additional US$2,000,000 ($2,211,000) loan from SWK described in Note 9, 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 ($0.5388), 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. In connection with the additional US$6,000,000 ($6,724,800) loan described in Note 9, the Company issued SWK 740,000 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$0.70 ($0.87), at any time on or prior to October 1, 2019. The fair value of the warrant liability at the date of grant was $303,557 and was estimated using the Black-Scholes option pricing model, based on the following assumptions: expected dividend yield of 0%; expected volatility of 122%; risk free interest rate of 1.56%; and expected term of 5 years. ASC 815 "Derivatives and Hedging" indicates that warrants with exercise prices denominated in a currency other than an entitys 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 consolidated 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 19(b)). As at June 30, 2015, the fair value of the aggregate warrant liability of $9,575,408 (December 31, 2014 - $3,107,880) was estimated using the Black-Scholes option pricing model based on the following weighted average assumptions: expected dividend yield of 0% (December 31, 2014 0%) expected volatility of 98% (December 31, 2014 88%) risk-free interest rate of 1.02% (December 31, 2014 1.22%) and expected term of 3.18 years (December 31, 2014 2.18 years). This model requires management to make estimates of the expected volatility of its common shares, the expected term of the warrants and interest rates. The risk free interest rate is based on the Canadian Treasury Bond rate. The Company has not paid dividends and does not expect to pay dividends in the foreseeable future. The expected term of the warrants is the contractual term of the warrants upon initial recognition. For the period ended June 30, 2015, the Company recorded a loss of $8,877,489 (2014 $4,617,749) as change in warrant liability on the consolidated statement of operations and comprehensive loss. Warrants Equity Expiration Date Number of Warrants Weighted Average Exercise Price Grant Date Fair Value at June 30, 2015 July 15, 2016 17,455,350 $ 0.90 $ 4,201,876 July 15, 2016 1,307,706 $ 0.70 $ 478,620 July 15, 2016 366,713 $ 0.90 $ 116,777 May 21, 2017 456,529 $ 0.92 $ 205,438 19,586,298 $ 0.89 $ 5,002,711 Warrants Equity Expiration Date Number of Warrants Weighted Average Exercise Price Grant Date Fair Value at December 31, 2014 July 15, 2016 21,447,500 $ 0.90 $ 5,169,881 July 15, 2016 3,217,125 $ 0.70 $ 1,177,468 24,664,625 $ 0.87 $ 6,347,349 In connection with the public offering completed during the year ended December 31, 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 warrants, 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. Each Unit consists of one common share of the Company and one-half of one common share purchase warrant with each whole warrant entitling the holder to acquire one common share of the Company at a price of $0.90. 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. During the six month period ended June 30, 2015 the Company issued 954,710 underlying warrants with an exercise price of $0.90, upon the exercise of 1,909,419 broker compensation options. The weighted average fair value of these warrants was estimated using the Black-Scholes option pricing model based on the following weighted average assumptions: expected dividend yield of 0%, expected volatility of 84%, risk-free interest rate of 0.45%, and expected term of 1.15 years. In connection with the private placement completed during the six month period ended June 30, 2015, the Company issued 456,529 non-transferable broker warrants, each exercisable into a common share of the Company, at an exercise price of $0.92 exercisable at any time on or prior to May 21, 2017. The fair value of the broker warrants at the date of grant was $205,438 and was estimated using the Black-Scholes option pricing model, based on the following assumptions: expected dividend yield of 0%; expected volatility of 92%; risk free interest rate of 0.67%; and expected term of 2 years. |
8a.Goodwill
8a.Goodwill | 6 Months Ended |
Jun. 30, 2015 | |
Audited | |
8a.Goodwill | The goodwill relates to the Companys acquisition of Tribute Pharmaceuticals Canada Ltd and Tribute Pharma Canada Inc. and an agreement with Theramed Corporation. The Company completes an annual quantitative goodwill assessment and concluded as at December 31, 2014 that there were no indications of impairment. During the period ended June 30, 2015 there were no events or circumstances that indicated that the carrying value of the goodwill may not be recoverable, therefore no impairment was recorded. Amount Balance at December 31, 2014 and 2013 $ 3,599,077 MFI acquisition (Note 2) 4,050,072 Balance at June 30, 2015 $ 7,649,149 |
9. Loss Per Share
9. Loss Per Share | 6 Months Ended |
Jun. 30, 2015 | |
9. 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 Companys shares at the average share price during the period. The diluted 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 shares equivalents because their inclusion would be anti-dilutive. Potentially dilutive securities, which were not included in diluted weighted average shares for the six month periods ended June 30, 2015 and 2014, consisted of outstanding common share options (8,436,791 and 5,139,070, respectively), outstanding warrant grants (26,444,260 and 14,014,587, respectively) and convertible debentures (2,824,858 and nil, respectively). The following table sets forth the computation of loss per share: For the Three Month Period Ended June 30 For the Six Month Period Ended June 30 Numerator: 2015 2014 2015 2014 Net loss available to common shareholders $ (8,824,850 ) $ (4,400,842 ) $ (14,006,313 ) $ (7,689,020 ) Denominator: Weighted average number of common shares 108,800,996 51,581,238 102,776,669 51,501,128 Effect of dilutive common shares - - - - Diluted weighted average number of common shares outstanding 108,800,996 51,581,238 102,776,669 51,501,128 Loss per share basic and diluted $ (0.08 ) $ (0.09 ) $ (0.14 ) $ (0.15 ) |
Audited | |
9. 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 Companys shares at the average share price during the period. The diluted loss per share is not computed when the effect of such calculation is anti-dilutive. In years 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 periods ended June 30, 2015 and 2014 consist of outstanding stock options (8,436,791 and 5,139,070, respectively) and outstanding warrant grants (26,444,260 and 14,014,587, respectively) and convertible debentures (2,813,778 and nil, respectively). The following table sets forth the computation of loss per share: June 30 2015 2014 Numerator: (unaudited) Net loss available to common shareholders $ (13,941,953 ) $ (7,689,020 ) Denominator: Weighted average number of common shares outstanding 102,776,669 51,501,128 Effect of dilutive common shares - - Diluted weighted average number of common shares outstanding 102,776,669 51,501,128 Loss per share basic and diluted $ (0.14 ) $ (0.15 ) |
10. Statement of Cash Flows
10. Statement of Cash Flows | 6 Months Ended |
Jun. 30, 2015 | |
Supplemental Cash Flow Elements [Abstract] | |
10. Statement of Cash Flows | Changes in non-cash balances related to operations are as follows: For the Six Months Ended June 30 2015 2014 Accounts receivable $ (1,696,674 ) $ (1,355,477 ) Inventories (324,885 ) (14,068 ) Prepaid expenses and other receivables (297,186 ) (26,869 ) Taxes recoverable 10,343 473,078 Accounts payable and accrued liabilities 60,984 585,897 $ (2,247,418 ) $ (337,439 ) Included in accounts payable and accrued liabilities at the end of the six month period ended June 30, 2015, is an amount related to patents and licenses of $8,893 (December 31, 2014 - $31,655) and an amount related to license fees of $186,663 (125,000) (December 31, 2014 - $nil). During the six month period ended June 30, 2015, there was $1,172,414 (2014 - $502,829) in interest paid and $nil in taxes paid (2014 $nil). During the six month period ended June 30, 2015, there was $100,500 (2014 - $65,526) of non-cash debt issuance costs (see Note 7) expensed as amortization of assets. During the six month period ended June 30, 2015, 954,710 warrants were issued and valued at $304,019 upon the exercise of 1,909,419 broker compensation options. During the three and six month periods ended June 30, 2015, broker warrants were issued and valued at $205,438 in regards to the private placement that was completed in May 2015 (Note 8(a)). |
11. Contingencies and Commitmen
11. Contingencies and Commitments | 6 Months Ended |
Jun. 30, 2015 | |
11. 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 Companys 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 is required to pay US$5,000,000 ($6,237,000) 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 ($7,484,400) 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 ($3,118,500) to US$20,000,000 ($24,948,000) 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 June 30, 2015, 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 ($368,337), 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 $3,540,187 (1,466,600 ($2,040,187) 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. The license agreement is also subject to certain minimum purchase obligations upon regulatory approval and commercial sales of product. On May 21, 2015, Tribute Pharmaceuticals International Inc. (a wholly owned subsidiary of Tribute) acquired the U.S. rights to Fibricor® and its related authorized generic from a wholly owned step-down subsidiary of Sun Pharmaceutical Industries Ltd. Financial terms of the deal include the payment of US$10,000,000 ($12,474,000) as follows: US$5,000,000 ($6,100,500) was paid on closing, US$2,000,000 ($2,494,800) is due on November 18, 2015, and US$3,000,000 ($3,742,200) is due on May 21, 2016. An aggregate of US$4,500,000 ($5,613,300) in one-time milestone payments are due upon the attainment of certain annual net sales targets, ranging from US$15,000,000 ($18,711,000) to US$50,000,000 ($62,370,000). Pursuant to the MFI Acquisition the following license and supply agreements have been acquired by the Company. MFI has supply agreements with various vendors that include purchase minimums. Pursuant to these agreements, the Company is required to purchase a total of up to $9,083,000 of products from these vendors during the following years ended December 31: 2015 $ 3,056,000 2016 $ 754,000 2017 $ 773,000 2018 $ 790,000 2019 and thereafter $ 3,710,000 $ 9,083,000 On November 26, 2008, MFI entered into an exclusive license and supply agreement with Norgine B.V. (Norgine), a Dutch pharmaceutical company, for the exclusive right to sell Moviprep in Canada. Payment for the licensing rights of $250,000 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 $300,000 are payable over time. Milestones are payable upon attainment of cumulative net sales targets, up to net sales of $10,000,000. On September 22, 2011, MFI entered into an exclusive distribution and supply agreement with Cipher Pharmaceuticals Inc. (Cipher), a Canadian pharmaceutical company, for the exclusive right to sell Durela in Canada. Payments for the licensing rights of $300,000 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 $750,000 are payable over time. Milestone payments are payable upon attainment of cumulative net sales targets, up to net sales of $20,000,000. Upon the receipt of regulatory approval for MFIs two pipeline products (or upon the occurrence of a change of control of the Company), the vendors will receive a payment of $1,250,000 per product. (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 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 may be entitled to an aggregate amount of $2,672,550 as of June 30, 2015 (December 31, 2014 - $247,200) or if a change of control occurs, a lump sum payment of up to an aggregate amount of $4,435,633 (based on current base salaries) (December 31, 2014 - $2,072,200). |
Audited | |
11. Contingencies and Commitments | The Company has royalty, licensing and manufacturing agreements that have remained in effect for the Company during the period ended June 30, 2015. 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 Companys 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 is required to pay US$5,000,000 ($6,237,000) 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 ($7,484,400) 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 ($3,118,500) to US$20,000,000 ($24,948,000) 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 June 30, 2015, 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 ($368,337), 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 $3,540,187 (1,466,600 ($2,040,187) 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. The license agreement is also subject to certain minimum purchase obligations upon regulatory approval and commercial sales of product. On May 21, 2015, Tribute Pharmaceuticals International Inc. (a wholly owned subsidiary of Tribute) acquired the U.S. rights to Fibricor® and its related authorized generic from a wholly owned step-down subsidiary of Sun Pharmaceutical Industries Ltd. (See Note 2) An aggregate of US$4,500,000 ($5,613,300) in one-time milestone payments are due upon the attainment of certain annual net sales targets, ranging from US$15,000,000 ($18,711,000) to US$50,000,000 ($62,370,000). Pursuant to the MFI Acquisition the following license and supply agreements have been acquired by the Company. MFI has supply agreements with various vendors that include purchase minimums. Pursuant to these agreements, the Company is required to purchase a total of up to $9,605,630 of products from these vendors during the following periods ended December 31: 2015 $ 3,810,788 2016 $ 833,045 2017 $ 867,684 2018 $ 840,974 2019 and thereafter $ 3,253,139 $ 9,605,630 On November 26, 2008, MFI entered into an exclusive license and supply agreement with Norgine B.V. (Norgine), a Dutch pharmaceutical company, for the exclusive right to sell MoviPrep in Canada. Payment for the licensing rights of $250,000 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 $300,000 are payable over time. Milestones are payable upon attainment of cumulative net sales targets, up to net sales of $10,000,000. On September 22, 2011, MFI entered into an exclusive distribution and supply agreement with Cipher Pharmaceuticals Inc. (Cipher), a Canadian pharmaceutical company, for the exclusive right to sell Durela in Canada. Payments for the licensing rights of $300,000 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 $750,000 are payable over time. Milestone payments are payable upon attainment of cumulative net sales targets, up to net sales of $20,000,000. Upon the receipt of regulatory approval for MFIs two pipeline products (or upon the occurrence of a change of control of the Company), the vendors will receive a payment of $1,250,000 per product. (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 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 may be entitled to an aggregate amount of $2,740,585 as of June 30, 2015 (December 31, 2014 - $247,200) or if a change of control occurs, a lump sum payment of up to an aggregate amount of $4,514,517 (based on current base salaries) (December 31, 2014 - $2,072,200). c) Lease Obligations The Company presently leases office and warehouse equipment under operating leases. For the six month period ended June 30, 2015, expenses related to these leases were $1,107 (2014 - $1,107). These amounts have been recorded as rent expense in selling, general and administrative expenses on the consolidated statements of operations and comprehensive (loss). On September 1, 2012, the Company entered into a five year operating lease for its head office. For the six month period ended June 30, 2015, expenses related to this lease were $52,000 (2014 - $48,000). As at June 30, 2015, minimum operating lease payments under these leases for the periods ending December 31 are as follows: Total 2015 2016 2017 Operating lease obligations $ 226,982 $ 53,107 $ 104,542 $ 69,333 |
12. Significant Customers
12. Significant Customers | 6 Months Ended |
Jun. 30, 2015 | |
12. Significant Customers | During the three month period ended June 30, 2015, the Company had three significant wholesale customers (2014 three) that represented 58.9% (2014 68.9%) of product sales. During the six month period ended June 30, 2015, the Company had two (2014 three) significant wholesale customers that represented 52.4% (2014 67.4%) of product sales. The Company believes that its relationship with these customers is satisfactory. |
Audited | |
12. Significant Customers | During the period ended June 30, 2015, the Company had three (2014 three) significant wholesale customers that represented 49.6% (2014 67.4%) of product sales. The Company believes that its relationship with these customers is satisfactory. |
12a. Changes in Non-Cash Operat
12a. Changes in Non-Cash Operating Assets and Liabilities | 6 Months Ended |
Jun. 30, 2015 | |
Audited | |
12a. Changes in Non-Cash Operating Assets and Liabilities | Changes in non-cash balances related to operations are as follows: June 30 2015 2014 (unaudited) Accounts receivable $ (1,679,859 ) (1,355,477 ) Inventories (331,643 ) (14,068 ) Prepaid expenses and other receivables 32,842 (26,869 ) Taxes recoverable (14,996 ) 473,078 Accounts payable and accrued liabilities (76,638 ) 585,897 $ (2,070,294 ) $ (337,439 ) Included in accounts payable and accrued liabilities at the end of the six month period ended June 30, 2015, is an amount related to patents and licenses of $8,893 (December 31, 2014 - $31,655) and an amounted related to license fees of $186,663 (150,000) (December 31, 2014 - $186,663 (150,000)l). During the six month period ended June 30, 2015, there was $1,172,414 (2014 - $502,869) in interest paid and $nil in taxes paid (2014 $nil). During the six month period ended June 30, 2015, there was $100,500 (2014 - $65,526) of non-cash debt issuance costs (see Note 9) expensed as amortization of assets. During the six month period ended June 30, 2015, 854,712 warrants were issued and valued at $304,019 upon the exercise of 1,90,419 broker compensation options. During the six month period ended June 30, 2015, broker warrants were issued and valued at $205,438 in regards to the private placement that was completed in May 2015 (Note 10(a)). |
13. Related Party Transactions
13. Related Party Transactions | 6 Months Ended |
Jun. 30, 2015 | |
13. Related Party Transactions | During the six month period ended June 30, 2015 the Company granted 200,000 (2014 - 200,000) share options to LMT Financial Inc. a company beneficially owned by a director and former interim officer of the Company, and his spouse for consulting services. For the three and six month periods ended June 30, 2015, the Company recorded $110,405 and $148,931, respectively (2014 - $20,222 and $36,444, respectively) as a non-cash expense. These amounts have been recorded as selling, general and administrative expense in the condensed interim consolidated statements of operations, comprehensive loss and deficit. |
Audited | |
13. Related Party Transactions | During the period ended June 30, 2015 the Company granted 200,000 (2014 - 200,000) share options to LMT Financial Inc. a company beneficially owned by a director and former interim officer of the Company, and his spouse for consulting services. For the period ended June 30, 2015, the Company recorded $148,931 (2014 - $36,444) as a non-cash expense. These amounts have been recorded as selling, general and administrative expense in the consolidated statements of operations, comprehensive loss and deficit. See Notes 10b and 13b |
14. Income Taxes
14. Income Taxes | 6 Months Ended |
Jun. 30, 2015 | |
14. Income Taxes | The Company has no taxable income under Canadian Federal and Provincial tax laws for the three and six month periods ended June 30, 2015 and 2014. The Company has non-capital loss carry-forwards at June 30, 2015 totaling approximately $15,586,000, which may be offset against future taxable income. If not utilized, the loss carry-forwards will expire between 2015 and 2035. The cumulative carry-forward pool of SR&ED expenditures as at June 30, 2015, 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 June 30, 2015 was $341,300. |
Audited | |
14. Income Taxes | Rate reconciliation: A reconciliation of income tax (benefit) expense computed at the statutory income tax rate included in the consolidated statements of operations and comprehensive loss follows: Income tax expense (benefit) is comprised of: 2015 2014 Income tax expense (benefit) at statutory rate at 26.5% (2014- 26.5%) $ (3,693,200 ) $ (1,485,800 ) Adjusted for: Change in valuation allowance 1,247,300 2,045,100 Share issue costs (363,600 ) (1,070,400 ) Non-deductible expenses 2,819,500 241,500 Other (10,000 ) 269,600 Deferred income tax (recovery) $ - $ - Deferred tax assets and liabilities reflect losses carry-forward, the cumulative carry-forward pool of scientific research and experimental development ("SR&ED") expenditures and the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their corresponding tax basis. Significant components of net deferred tax assets are listed below: Components of deferred income tax assets and liabilities: June 30, 2015 December 31, 2014 Benefit of net operating losses carry-forward $ 4,052,600 $ 3,438,300 Book values of property, plant and equipment and intangible assets in excess of tax bases 871,300 192,100 Benefit of SR&ED expenditures 476,600 476,600 Share issue costs 1,053,600 985,700 Non-refundable tax credits 341,300 341,300 License agreements (9,530,091 ) (2,030,000 ) Long-term debt 502,500 290,700 Valuation allowance (4,942,000 ) (3,694,700 ) $ (7,174,191 ) $ - A valuation allowance was provided against certain deferred tax assets at June 30, 2015 and December 31, 2014, because the realization of the asset remains not determinable. At June 30, 2015, the Company had non-capital losses carry-forward for income tax purposes in the amount of $15,292,800. The losses, which may be applied against future years taxable income, expire as follows: 2026 $ 231,900 2027 85,400 2028 53,700 2030 755,300 2031 1,994,900 2032 2,071,000 2033 4,348,300 2034 3,419,100 2035 2,333,200 $ 15,292,800 Tax years 2008 through 2014 remain open to examination by the taxing jurisdictions to which the Company is subject. The Company has not been notified by any taxing jurisdictions of any proposed or planned examination. The Company has non-refundable tax credits as at June 30, 2015 of $341,300 (December 31, 2014 - $341,300). The cumulative carry-forward pool of scientific research and experimental development (SR&ED) expenditures as at June 30, 2015 applicable to future years, with no expiry date, is $1,798,300 (December 31, 2014 - $1,798,300). The tax credits have a full valuation allowance on them as they do not meet the more-likely-than-not test. |
15. Segmented Information
15. Segmented Information | 6 Months Ended |
Jun. 30, 2015 | |
15. 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 and the U.S. The Company targets several therapeutic areas in Canada and the U.S., 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 Companys manufacturing assets are located in Canada. All direct sales take place in Canada and the U.S. Licensing arrangements have been obtained to distribute and sell the Companys products in various countries around the world. Revenue for the three and six month periods ended June 30, 2015 and 2014 includes products sold in Canada and international sales of products through licensing agreements. Revenue earned is as follows: For the Three Month Period Ended June 30 For the Six Month Period Ended June 30 2015 2014 2015 2014 Product sales: Domestic sales $ 5,448,148 $ 3,676,588 $ 10,557,658 $ 6,676,500 International sales 971,468 357,872 1,441,063 821,849 Other revenue 9,868 6,825 23,060 18,075 Total $ 6,429,484 $ 4,041,285 $ 12,021,781 $ 7,516,424 Royalty revenues $ - $ - $ - $ 18,414 Total revenues $ 6,429,484 $ 4,041,285 $ 12,021,781 $ 7,534,838 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 loss and deficit includes the Companys activity in these markets. |
Audited | |
15. 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 and the U.S. The Company targets several therapeutic areas in Canada and the U.S., 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 Companys manufacturing assets are located in Canada. All direct sales take place in Canada and the U.S. Licensing arrangements have been obtained to distribute and sell the Companys products in various countries around the world. Revenue for the periods ended June 30, 2015 and 2014 includes products sold in Canada and international sales of products through licensing agreements. Revenue earned is as follows: For the Six Month Period Ended June 30 2015 2014 Product sales: Domestic sales $ 10,557,658 $ 6,676,500 International sales 1,441,063 821,849 Other revenue 23,060 18,075 Total $ 12,021,781 $ 7,516,424 Royalty revenues $ - $ 18,414 Total revenues $ 12,021,781 $ 7,534,838 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 consolidated statements of operations, comprehensive loss and deficit includes the Companys activity in these markets. |
16. Foreign Currency Gain (Loss
16. Foreign Currency Gain (Loss) | 6 Months Ended |
Jun. 30, 2015 | |
16. 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 June 30, 2015, the Company held cash of $9,151,391 (US$7,060,322 and 247,534) in denominations other than in Canadian dollars (December 31, 2014 - $1,319,013 (US$1,135,304 and 1,387)); had accounts receivables of $907,613 (US$662,581 and 245,031) denominated in foreign currencies (December 31, 2014 - $319,764 (US$67,125 and 172,313); had accounts payable and accrued liabilities of $6,715,328 (US$6,459,127, 253,318 and Swiss Francs $2,882) denominated in foreign currencies (December 31, 2014 $32,857 (US$26,125 and 1,816)); warrant liability of $9,575,408 (US$7,676,296) (December 31, 2014 - $3,107,880 (US$2,682,994)); and long term debt of $17,463,600 (US$14,000,000) (December 31, 2014 - $16,241,400 (US$14,000,000)). For the three and six month period ended June 30, 2015, the Company had a foreign currency gain (loss) of $228,785 and ($950,724), respectively (2014 a gain (loss) of ($10,506) and $185,559, respectively). These amounts have been included in selling, general and administrative expenses in the condensed interim consolidated statements of operations, comprehensive loss and deficit. |
Audited | |
16. 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 June 30, 2015, the Company held cash of $9,151,391 (US$7,060,322 and 247,534) in denominations other than in Canadian dollars (December 31, 2014 - $1,319,013 (US$1,135,304 and 1,387)); had accounts receivables of $907,613 (US$662,581 and 245,031) denominated in foreign currencies (December 31, 2014 - $319,764 (US$67,125 and 172,313); had accounts payable and accrued liabilities of $6,715,328 (US$6,459,127, 253,318 and Swiss Francs $2,882) denominated in foreign currencies (December 31, 2014 $32,857 (US$26,125 and 1,816)); warrant liability of $9,575,408 (US$7,676,293) (December 31, 2014 - $3,107,880 (US$2,682,994)); and long term debt of $17,040,731 (US$13,661,000) (December 31, 2014 - $16,241,400 (US$14,000,000)). For the period ended June 30, 2015, the Company had a foreign currency (loss) of ($918,527) (2014 a gain of $185,559). These amounts have been included in selling, general and administrative expenses in the consolidated statements of operations, and comprehensive loss. |
17. Financial Instruments
17. Financial Instruments | 6 Months Ended |
Jun. 30, 2015 | |
17. 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 and debentures 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 issued warrants to purchase up to 6,857,962 common shares of the Company as disclosed in Note 8c. The warrants have a weighted average exercise price of US$0.58 ($0.73). The warrants expire at dates ranging from May 11, 2017 to October 1, 2021. The warrants are accounted for as derivative liabilities because the exercise price is denominated in a currency other than the Companys functional currency. The table below summarizes the fair value of the Companys financial liabilities measured at fair value: Fair Value at Fair Value Measurement Using June 30, 2015 Level 1 Level 2 Level 3 Derivative liability - Warrants $ 9,575,408 $ - $ - $ 9,575,408 Fair Value at Fair Value Measurement Using December 31, 2014 Level 1 Level 2 Level 3 Derivative liability - Warrants $ 3,107,880 $ - $ - $ 3,107,880 The table below sets forth a summary of changes in the fair value of the Companys Level 3 financial liabilities (warrant derivative liability) for the periods ended June 30, 2015 and December 31, 2014: Six Months Ended June 30, 2015 Year Ended December 31, 2014 Balance at beginning of period $ 3,107,880 $ 2,966,714 Additions (deletions) to derivative instruments (2,409,961 ) 424,471 Change in fair market value, recognized in earnings as Change in warrant liability 8,877,489 (283,305 ) Balance end of period $ 9,575,408 $ 3,107,880 The following is quantitative information about significant unobservable inputs (Level 3) for the Company as of June 30, 2015. Liability Category Fair Value Valuation Technique Unobservable Input Input Value Warrant Liability $ 9,575,408 Black-Scholes valuation model Volatility 98% The following represents the impact on fair value measurements to changes in unobservable inputs: Unobservable Inputs Increase in Inputs Increase in Valuation Decreases in Inputs Increase in Valuation Volatility Increase Decrease 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 June 30, 2015 and December 31, 2014. The following are the key weighted average assumptions used in connection with this computation: Six Months Ended June 30, 2015 Year Ended December 31, 2014 Number of shares underlying the warrants 6,857,962 14,754,587 Fair market value of the common share $ US1.03 ($1.28 ) $ US0.18 ($0.21 ) Exercise price $ US0.58 ($0.73 ) $ US0.55 ($0.64 ) Expected volatility 98% 88% Risk-free interest rate 1.02% 1.22% Expected dividend yield 0% 0% Expected warrant life (years) 3.18 2.18 (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 Companys 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 June 30, 2015, 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 common shares 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 Companys 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 $5,615,719 (December 31, 2014 - $2,161,133). This amount is the total of the following financial assets: accounts receivable and loan receivable. The Companys 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 12 discloses the significant customer details and the Company believes that the concentrations on the Companys customers are considered normal for the Company and its industry. As at June 30, 2015, the Company had two customers which made up 48.2% of the outstanding accounts receivable in comparison to two customers which made up 65.7% at December 31, 2014. As at June 30, 2015, 23.9% (December 31, 2014 12.2%) of the outstanding accounts receivable was related to product sales related to one wholesale account (December 31, 2014 one wholesale account) and 24.3% (December 31, 2014 53.5%) was related to an amount owing related to the product sales. (e) Foreign exchange risk The Company principally operates within Canada; however, a portion of the Companys revenues, expenses, and current assets and liabilities, are denominated in United States dollars and the EURO. The Companys 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 June 30, 2015, a 5% change in the foreign exchange rate would increase/decrease the long term debt balance by $700,000 and would increase/decrease both interest expense and net loss by approximately $59,500 for the six month period ended June 30, 2015. As at June 30, 2015, a 5% change in the foreign exchange rate would increase/decrease the warrant liability balance by $479,000 and would increase/decrease both changes in warrant liability and net loss by $479,000 for the six month period ended June 30, 2015. As at June 30, 2015, a 5% change in the foreign exchange rate would increase/decrease the accounts payable and accrued liabilities balance by $335,766 and would increase/decrease net loss by $335,766 for the six month period ended June 30, 2015. (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 June 30, 2015, the Company had an outstanding long term debt balance of US$13,660,991 ($17,040,620), 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 six month period ended June 30, 2015, a 1% increase in interest rates would increase interest expense and net loss by approximately $174,600. 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. |
Audited | |
17. 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 and debentures are a reasonable estimate of their fair values because of the short maturity of these instruments. Warrant liability and other current liability 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 liability 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 issued warrants to purchase up to 6,857,962 common shares of the Company as disclosed in Note 10c. The warrants have a weighted average exercise price of US$0.58 ($0.73). The warrants expire at dates ranging from May 11, 2017 to October 1, 2021. The warrants are accounted for as derivative liabilities because the exercise price is denominated in a currency other than the Companys functional currency. The table below summarizes the fair value of the Companys financial liabilities measured at fair value: Fair Value at Fair Value Measurement Using June 30, 2015 Level 1 Level 2 Level 3 Derivative liability - Warrants $ 9,575,408 $ - $ - $ 9,575,408 Fair Value at Fair Value Measurement Using December 31, 2014 Level 1 Level 2 Level 3 Derivative liability - Warrants $ 3,107,880 $ - $ - $ 3,107,880 Period Ended June 30, 2015 Year Ended December 31, 2014 Balance at beginning of period $ 3,107,880 $ 2,966,714 Additions (deletions) to derivative instruments (2,409,961 ) 424,471 Change in fair market value, recognized in earnings as Change in warrant liability 8,877,489 (283,305 ) Balance end of period $ 9,575,408 $ 3,107,880 The following is quantitative information about significant unobservable inputs (Level 3) for the Company as of June 30, 2015. Liability Category Fair Value Valuation Technique Unobservable Input Input Value Warrant Liability $ 9,575,408 Black-Scholes valuation model Volatility 98 % The following represents the impact on fair value measurements to changes in unobservable inputs: Unobservable Inputs Increase in Inputs Increase in Valuation Decreases in Inputs Increase in Valuation Volatility Increase Decrease 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 June 30, 2015 and December 31, 2014. The following are the key weighted average assumptions used in connection with this computation: Period Ended June 30, 2015 Year Ended December 31, 2014 Number of shares underlying the warrants 6,857,962 14,754,587 Fair market value of the common share $ US1.03 ($1.28 ) $ US0.18 ($0.21 ) Exercise price $ US0.58 ($0.73 ) $ US0.55 ($0.64 ) Expected volatility 98 % 88 % Risk-free interest rate 1.02 % 1.22 % Expected dividend yield 0 % 0 % Expected warrant life (years) 3.18 2.18 (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 Companys 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 June 30, 2015, 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 common shares 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 Companys 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 $5,055,924 (December 31, 2014 - $2,161,133). This amount is the total of the following financial assets: accounts receivable and loan receivable. The Companys 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 14 discloses the significant customer details and the Company believes that the concentrations on the Companys customers are considered normal for the Company and its industry. As at June 30, 2015, the Company had three customers which made up 71.5% of the outstanding accounts receivable in comparison to two customers which made up 65.7% at December 31, 2014. As at June 30, 2015, 26.6% (December 31, 2014 12.2%) of the outstanding accounts receivable was related to product sales related to two wholesale accounts (December 31, 2014 one wholesale account) and 44.9% (December 31, 2014 53.5%) was related to an amount owing related to the product sales. (e) Foreign exchange risk The Company principally operates within Canada; however, a portion of the Companys revenues, expenses, and current assets and liabilities, are denominated in United States dollars and the EURO. The Companys 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 June 30, 2015, a 5% change in the foreign exchange rate would increase/decrease the long term debt balance by $700,000 and would increase/decrease both interest expense and net loss by approximately $59,500 for the period ended June 30, 2015. As at June 30, 2015, a 5% change in the foreign exchange rate would increase/decrease the warrant liability balance by $479,000 and would increase/decrease both changes in warrant liability and net loss by $479,000 for the period ended June 30, 2015. As at June 30, 2015, a 5% change in the foreign exchange rate would increase/decrease the accounts payable and accrued liabilities balance by $335,766 and would increase/decrease net loss by $335,766 for the period ended June 30, 2015. (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 June 30, 2015, the Company had an outstanding long term debt balance of US$13,661,000 ($17,040,731), 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 period ended June 30, 2015, a 1% increase in interest rates would increase interest expense and net loss by approximately $85,200. 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. |
18. Derivative Financial Instru
18. Derivative Financial Instruments | 6 Months Ended |
Jun. 30, 2015 | |
18. 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 Companys 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 six month period ended June 30, 2015, 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$3,500,000 was $4,397,400 at July 23, 2015. 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 June 30, 2015 was a loss of $24,850 (December 31, 2014 $nil), and is reported in other current asset/liability in the accompanying balance sheets. During the six month period ended June 30, 2015, the Company had not settled any foreign exchange contracts (2014 - recognized a gain of $3,200). At June 30, 2015 and December 31, 2014, the notional principal and fair value of the Companys outstanding foreign currency derivative financial instruments were as follows: June 30, 2015 December 31, 2014 Notional Principal Fair Value Notional Principal Fair Value Foreign currency sold call options USD$ 3,500,000 $ (24,850 ) USD$ - $ - The notional principal amounts provide one measure of the transaction volume outstanding as of June 30, 2015 and December 31, 2014, and do not represent the amount of the Companys 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 June 30, 2015 and December 31, 2014. 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. |
Audited | |
18. 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 Companys 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 consolidated balance sheets at fair value. During the period ended June 30, 2015, 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$3,500,000 was $4,397,400 at July 23, 2015. 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 consolidated 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 June 30, 2015 was a loss of $24,850 (December 31, 2014 $nil), and is reported in other current asset/liability in the accompanying consolidated balance sheets. During the period ended June 30, 2015, the Company had not settled any foreign exchange contracts (June 30, 2014 - recognized a gain of $3,200). At June 30, 2015 and December 31, 2014, the notional principal and fair value of the Companys outstanding foreign currency derivative financial instruments were as follows: June 30, 2015 December 31, 2014 Notional Principal Fair Value Notional Principal Fair Value Foreign currency sold call options USD $ 3,500,000 $ (24,850 ) USD $ - $ - The notional principal amounts provide one measure of the transaction volume outstanding as of June 30, 2015 and December 31, 2014, and do not represent the amount of the Companys 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 June 30, 2015 and December 31, 2014. 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. |
19. Subsequent Events
19. Subsequent Events | 6 Months Ended |
Jun. 30, 2015 | |
19. Subsequent Events | Subsequent to June 30, 2015, the Company issued 930,125 common shares in connection with the exercise of 776,700 common share purchase warrants and 153,425 compensation options exercised at a weighted average exercise price of $0.88 per common share, for aggregate proceeds of $806,428. In addition, the Company issued 76,712 common share purchase warrants on the exercise of 153,425 compensation options. Each such warrant has an exercise price of $0.90 and an expiry date of July 15, 2016 (Note 8c)). |
Audited | |
19. Subsequent Events | Subsequent to June 30, 2015, the Company issued 1,235,214 common shares in connection with the exercise of 1,057,322 common share purchase warrants and 153,425 compensation options exercised at a weighted average exercise price of $0.87 per common share, for aggregate proceeds of $1,069,199. In addition, the Company issued 76,712 common share purchase warrants on the exercise of 153,425 compensation options. Each such warrant has an exercise price of $0.90 and an expiry date of July 15, 2016 (Note 10(c)). |
1. Basis of Presentation (Polic
1. Basis of Presentation (Policy) | 6 Months Ended |
Jun. 30, 2015 | |
Accounting Policies [Abstract] | |
Estimates | a) Estimates The preparation of these consolidated 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, share 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. |
3a. SUMMARY OF SIGNIFICANT AC30
3a. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policy) - Audited | 6 Months Ended |
Jun. 30, 2015 | |
CASH AND CASH EQUIVALENTS | Cash and cash equivalents include cash and all highly liquid investments purchased with an original maturity of three months or less at the date of purchase. Cash and cash equivalents are held with three major financial institutions in Canada. As at June 30, 2015 and December 31, 2014, the Company did not have any cash equivalents. |
ACCOUNTS RECEIVABLE | The Company routinely assesses the recoverability of all material trade and other receivables to determine their collectability by considering factors such as historical experience, credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer's ability to pay. |
REVENUE RECOGNITION | The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and collectability is reasonably assured. License fees which are comprised of initial fees and milestone payments are recognized upon achievement of the milestones provided the milestone is meaningful, and provided that collectability is reasonably assured and other revenue recognition criteria are met. Milestone payments are recognized into income upon the achievement of the specified milestones when the Company has no further involvement or obligation to perform services, as related to that specific element of the arrangement. Up-front fees and other amounts received in excess of revenue recognized are recorded as deferred revenues. Revenues from the sale of products, net of trade discounts, returns and allowances, are recognized when legal title to the goods has been passed to the customer and collectability is reasonably assured. Revenues associated with multiple-element arrangements are attributed to the various elements, if certain criteria are met, including whether the delivered element has standalone value to the customer and whether there is objective and reliable evidence of the fair value of the undelivered elements. Non-refundable up-front fees for the transfer of methods and technical know-how, not requiring the Company to perform additional research or development activities or other significant future performance obligations, are recognized upon delivery of the methods and technical know-how. Royalty revenue is recognized when the Company has fulfilled the terms in accordance with the contractual agreement and has no material future obligation, other than inconsequential and perfunctory support, as would be expected under such agreements and the amount of the royalty fee is determinable and collection is reasonably assured. A customer is obligated to pay for products sold to it within a specified number of days from the date that title to the products is transferred to the customer. The Companys standard terms typically range from 0.5% to 2% discount, 15 to 20 days net 30 from the date of invoice. The Company has a product returns policy on some of its products, which allows the customer to return pharmaceutical products that have expired, for full credit, provided the expired products are returned within twelve months from the expiration date. Transfer of title occurs and risk of ownership passes to a customer at the time of shipment or delivery, depending on the terms of the agreement with a particular customer. The sale price of the Companys products is substantially fixed or determinable at the date of sale based on purchase orders generated by a customer and accepted by the Company. A customers obligation to pay the Company for products sold to it is not contingent upon the resale of those products. The Company recognizes revenues for the sale of products from the date the title to the products is transferred to the customer. In connection with the Asset Purchase Agreement (Note 2), the Company entered into a transition services and supply agreement with Novartis to facilitate the seamless and efficient transfer of products to the Company. The agreement required that Novartis continue to manufacture and distribute products until the Company obtained the necessary marketing authorizations to allow it to take over these functions as principal. Novartis provided the Company with a monthly reconciliation of revenues, cost of goods, and marketing and selling expenses for which the Company then billed Novartis for the net amount receivable. The Company relied on the financial information provided by Novartis to estimate the amounts due under this agreement. Based on the terms of this arrangement and the guidance per ASC 605-45 regarding agency relationships, for the period of this arrangement the Company recorded revenues relating to the Asset Purchase Agreement on a net basis in the consolidated statement of operations, net of cost of goods and marketing and selling expenses. |
INVENTORIES | Inventories are valued at the lower of cost and net realizable value with cost being determined on a first-in, first-out basis. Cost is determined to be purchase cost for raw materials and the production cost (materials, labor and indirect manufacturing cost) for work-in-process and finished goods. Throughout the manufacturing process, the related production costs are recorded within inventory. |
PROPERTY, PLANT AND EQUIPMENT | Property, plant and equipment are stated at cost. The Company periodically evaluates whether current facts or circumstances indicate that the carrying value of such assets to be held and used may not be recoverable. The Company reviews its long-term assets, such as fixed assets to be held and used or disposed of, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected undiscounted cash flows is less than the carrying amount of the asset, an impairment loss is recognized in the amount by which the carrying amount of the asset exceeds its fair value. The basis of amortization and estimated useful lives of these assets are provided for as follows: Asset Classification Amortization Method Useful Life Building Straight-line 20 years Computer and office equipment Straight-line 5 years Leasehold improvements Straight-line over the lease term 5 years Manufacturing equipment Straight-line & activity based 5 to 10 years Warehouse equipment Straight-line 5 to 10 years Packaging equipment Activity based 5 to 10 years Activity based amortization is based on the number of uses for each asset in that category. |
GOODWILL AND INTANGIBLE ASSETS | Goodwill represents the excess of acquisition cost over the fair value of the net assets of the acquired businesses. Goodwill has an indefinite useful life and is not amortized, but instead tested for impairment annually. Intangible assets include patents, product rights, a licensing asset and licensing agreements. Patents represent capitalized legal costs incurred in connection with applications for patents. In-process patents pending are not amortized. All patents subject to amortization are amortized on a straight line basis over an estimated useful life of up to 17 years. The Company regularly evaluates patents and applications for impairment or abandonment, at which point the Company charges the remaining net book value to expenses. The licensing asset represents amounts paid for exclusive Canadian licensing rights to develop, register, promote, manufacture, use, market, distribute and sell pharmaceutical products. The licensing agreements represent the fair value assigned to licensing agreements acquired. The licensing asset and licensing agreement are amortized over the remaining life of the agreement, upon product approval or over their estimated useful lives ranging from 4 years to 25 years. See Note 7. The Company evaluates the recoverability of amortizable intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If such review indicates that the carrying amount of intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. The Company has not recorded any impairment charge during the years presented. When assessing goodwill impairment, the Company assesses qualitative factors first to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, the Company determines it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, then the two-step impairment test is not performed. In the event that there are qualitative factors which indicate that the carrying amount is greater than the fair value of the reporting unit, then the two step impairment approach is performed. The first step, identifying a potential impairment, compares the fair value of the reporting unit with its carrying amount. If the carrying amount exceeds its fair value, the second step would need to be performed; otherwise, no further step is required. The second step, measuring the impairment loss, compares the implied fair value of the goodwill with the carrying amount of the goodwill. Any excess of the goodwill carrying amount over the applied fair value is recognized as an impairment loss, and the carrying value of goodwill is written down to fair value. As of December 31, 2014 and June 30, 2015, no impairment of goodwill has been identified. |
USE OF ESTIMATES | The preparation of these consolidated financial statements has required management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent liabilities and the revenue and expenses recorded. On an ongoing basis, the Company evaluates its estimates, including those related to provision for doubtful accounts, inventories, accrued liabilities, accrued returns, discounts and rebates, derivative instruments, income taxes, stock based compensation, revenue recognition, goodwill, intangible assets, contingent consideration and the estimated useful lives of property, plant and equipment and intangible assets. 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 recorded in the consolidated statement of operations and comprehensive loss in the period in which they become known. Such adjustments could be material. |
DEFERRED INCOME TAXES | The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, deferred tax assets and liabilities are determined based on the difference between the consolidated financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax results in deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company records net deferred tax assets to the extent management believe these assets will more likely than not be realized. In making such determination, all available positive and negative evidence is utilized, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In the event a determination is made that the Company would be able to realize deferred income tax assets in the future in excess of the net recorded amount, an adjustment to the valuation allowance would be made, which would reduce the provision for income taxes. Tax benefits from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold to be recognized. This interpretation also provides guidance on measurement, de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. |
STOCK-BASED CONSIDERATION | The Company uses the fair value based method of accounting for all its stock-based compensation in accordance with FASB Accounting Standards Codification ("ASC") ASC 718 Compensation Stock Compensation. The estimated fair value of the options that are ultimately expected to vest based on performance related conditions, as well as the options that are expected to vest based on future service, is recorded over the options requisite service period and charged to stock-based compensation. In determining the amount of options that are expected to vest, the Company takes into account, voluntary termination behavior as well as trends of actual option forfeitures. Stock options and warrants which are indexed to a factor which is not a market, performance or service condition, in addition to the Companys share price, are classified as liabilities and re-measured at each reporting date based on the Black-Scholes option pricing model with a charge to operations, until the date of settlement. Some warrants have been reflected as a liability as they are indexed to a factor which is not a market performance or service condition. |
FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION | Monetary assets and liabilities are translated into Canadian dollars, which is the functional currency of the Company, at the year-end exchange rate, while foreign currency revenues and expenses are translated at the exchange rate in effect on the date of the transaction. The resultant gains or losses are included in the consolidated statement of operations and comprehensive loss. Non-monetary items are translated at historical rates. |
RESEARCH AND DEVELOPMENT | Research and development costs are expensed as incurred. The approved refundable portion of the tax credits are netted against the related expenses. Non-refundable investment tax credits are recorded in the period when reasonable assurance exists that the Company has complied with the terms and conditions required for approval of the tax credit and it is more likely than not that the Company will realize the benefits of these tax credits against the deferred taxes. Refundable investment tax credits are recorded in the period when reasonable assurance exists that the Company has complied with the terms and conditions required for approval of the tax credit and it is more likely than not that the Company will collect it. At June 30, 2015, the Company had no outstanding refundable tax credits (December 31, 2014 - nil). |
COMPREHENSIVE INCOME | Comprehensive income is defined as the change in equity during a period related to transactions and other events and circumstances from non-owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. |
EARNINGS (LOSS) PER SHARE | FASB ASC Section 260, Earnings (Loss) Per Share, requires presentation of both basic and diluted earnings (loss) per share (EPS) with a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue shares were exercised or converted into shares that would then share in the earnings. Basic earnings (loss) per share are computed based on the weighted average number of common shares outstanding each year. The diluted loss per share is not presented when the effect is anti-dilutive. |
ACQUISITIONS | The accounting for acquisitions requires extensive use of estimates and judgments to measure the fair value of the identifiable tangible and intangible assets acquired, including license agreement assets and liabilities assumed. Additionally, the Company must determine whether an acquired entity is considered to be a business or a set of net assets, because the excess of the purchase price over the fair value of net assets acquired can only be recognized as goodwill in a business combination. |
CONTINGENT CONSIDERATION | Contingent consideration liabilities represent future amounts the Company may be required to pay in conjunction with various business combinations. The ultimate amount of future payments is based on specified future criteria, such as sales performance and the achievement of certain future development, regulatory and sales milestones. The Company estimates the fair value of the contingent consideration liabilities related to sales performance using the income approach, which involves forecasting estimated future net cash flows and discounting the net cash flows to their present value using a risk-adjusted rate of return. The Company estimates the fair value of the contingent consideration liabilities related to the achievement of future development and regulatory milestones by assigning an achievement probability to each potential milestone and discounting the associated cash payment to its present value using a risk-adjusted rate of return. The Company evaluates its estimates of the fair value of contingent consideration liabilities on a periodic basis. Any changes in the fair value of contingent consideration liabilities are included in the Companys consolidated statements of operations. |
FAIR VALUE MEASUREMENTS | The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risk. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Inputs that are generally unobservable and typically reflect managements estimate of assumptions that market participants would use in pricing the asset or liability. The Companys valuation techniques used to measure the fair value of money market funds and certain marketable equity securities were derived from quoted prices in active markets for identical assets or liabilities. The valuation techniques used to measure the fair value of all other financial instruments, all of which have counterparties with high credit ratings, were valued based on quoted market prices or model driven valuations using significant inputs derived from or corroborated by observable market data. In accordance with the fair value accounting requirements, companies may choose to measure eligible financial instruments and certain other items at fair value. The Company has not elected the fair value option for any eligible financial instruments. The carrying amounts of the Companys financial assets and liabilities including cash and cash equivalents, accounts receivable, loan receivable, accounts payable and accrued liabilities and debentures are approximate of their fair values due to the short maturity of these instruments. The fair value of the long term debt is estimated based on quoted market prices and interest rates. The Companys equity-linked financial instruments reflected as warrant liability on the balance sheet represent financial liabilities classified as Level 3 as per ASU 2009-05. As required by the guidance, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The fair value of the warrant liability which is not traded in an active market has been determined using the Black-Scholes option pricing model based on assumptions that are supported by observable market conditions. The estimated fair value of the contingent non-cash consideration was based on the Companys stock price. |
ACCOUNTING STANDARDS NOT YET ADOPTED | In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606): Revenue from Contracts with Customers, which guidance in this update will supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance when it becomes effective. ASU No. 2014-09 affects any entity that enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The core principal of ASU No. 2014-09 is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU No. 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, which will be the Companys fiscal year 2017 (or January 1, 2017), and entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. Early adoption is prohibited. The Company is currently in the process of evaluating the impact of adoption of ASU No. 2014-09 on its consolidated financial statements and related disclosures. |
2. Acquisitions and Goodwill (T
2. Acquisitions and Goodwill (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Pro forma adjustments | For the Three Month Period Ended June 30 For the Six Month Period Ended June 30 2015 2014 2015 2014 Net revenues $ 9,010,789 $ 10,270,241 $ 16,888,960 $ 12,325,583 Net loss $ (8,863,655 ) $ (4,630,417 ) $ (14,499,053 ) $ (7,926,162 ) Loss per share $ (0.08 ) $ (0.09 ) $ (0.14 ) $ (0.15 ) |
Audited | |
Pro forma adjustments | For the Six Month Period Ended June 30 2015 2014 Net revenues $ 16,294,799 $ 15,951,616 Net loss $ (13,873,977 ) $ (4,542,220 ) Loss per share $ (0.13 ) $ (0.09 ) |
3. Inventories (Tables)
3. Inventories (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Schedule of Inventory | June 30, 2015 December 31, 2014 Raw materials $ 372,871 $ 290,197 Finished goods 1,850,371 399,830 Packaging materials 157,001 70,870 Work in process 541,382 276,490 $ 2,921,625 $ 1,037,387 |
Audited | |
Schedule of Inventory | June 30, 2015 December 31, 2014 Raw materials $ 372,871 $ 290,197 Finished goods 2,096,504 399,830 Packaging materials 157,001 70,870 Work in process 541,382 276,490 $ 3,167,758 $ 1,037,387 |
3a. SUMMARY OF SIGNIFICANT AC33
3a. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Audited | |
Basis of amortization and estimated useful lives of assets | Asset Classification Amortization Method Useful Life Building Straight-line 20 years Computer and office equipment Straight-line 5 years Leasehold improvements Straight-line over the lease term 5 years Manufacturing equipment Straight-line & activity based 5 to 10 years Warehouse equipment Straight-line 5 to 10 years Packaging equipment Activity based 5 to 10 years |
4. Prepaid Expenses and Other34
4. Prepaid Expenses and Other Receivables (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Schedule of Prepaid Expenses and Other Receivables | June 30, 2015 December 31, 2014 Prepaid operating expenses $ 407,642 $ 180,304 Deposits 333,508 - Interest receivable on loan receivables 6,975 6,975 $ 748,125 $ 187,279 |
Audited | |
Schedule of Prepaid Expenses and Other Receivables | June 30, 2015 December 31, 2014 Prepaid operating expenses and other receivables $ 400,948 $ 180,304 Other receivables 10,174 - Interest receivable on loan receivables 6,975 6,975 $ 418,097 $ 187,279 |
5. Property, Plant and Equipm35
5. Property, Plant and Equipment (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Schedule of Property, Plant and Equipment | June 30, 2015 Cost Accumulated Amortization Net Carrying Amount Land $ 90,000 $ - $ 90,000 Building 618,254 316,255 301,999 Leasehold improvements 303,703 5,697 298,006 Office equipment 97,848 54,791 43,057 Manufacturing equipment 1,103,525 630,036 473,489 Warehouse equipment 17,085 17,085 - Packaging equipment 111,270 69,280 41,990 Computer equipment 159,180 111,405 47,775 $ 2,500,865 $ 1,204,549 $ 1,296,316 December 31, 2014 Cost Accumulated Amortization Net Carrying Amount Land $ 90,000 $ - $ 90,000 Building 618,254 300,798 317,456 Leasehold improvements 10,359 4,662 5,697 Office equipment 61,308 52,124 9,184 Manufacturing equipment 1,103,525 602,667 500,858 Warehouse equipment 17,085 17,085 - Packaging equipment 111,270 62,744 48,526 Computer equipment 142,873 102,309 40,564 $ 2,154,674 $ 1,142,389 $ 1,012,285 |
Audited | |
Schedule of Property, Plant and Equipment | June 30, 2015 Cost Accumulated Amortization Net Carrying Amount Land $ 90,000 $ - $ 90,000 Building 618,254 316,255 301,999 Leasehold improvements 10,359 5,697 4,662 Office equipment 97,848 54,791 43,057 Manufacturing equipment 1,103,525 630,036 473,489 Warehouse equipment 17,085 17,085 - Packaging equipment 111,270 69,280 41,990 Computer equipment 159,181 111,405 47,776 $ 2,207,522 $ 1,204,549 $ 1,002,973 December 31, 2014 Cost Accumulated Amortization Net Carrying Amount Land $ 90,000 $ - $ 90,000 Building 618,254 300,798 317,456 Leasehold improvements 10,359 4,662 5,697 Office equipment 61,308 52,124 9,184 Manufacturing equipment 1,103,525 602,667 500,858 Warehouse equipment 17,085 17,085 - Packaging equipment 111,270 62,744 48,526 Computer equipment 142,873 102,309 40,564 $ 2,154,674 $ 1,142,389 $ 1,012,285 |
6. Intangible Assets (Tables)
6. Intangible Assets (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Schedule of Intangible Assets | June 30, 2015 Cost Accumulated Amortization Net Carrying Amount Patents $ 437,214 $ 71,573 $ 365,641 Licensing asset 1,005,820 212,770 793,050 Licensing agreements 51,236,326 3,023,989 48,212,337 Product rights 32,117,521 963,526 31,153,995 $ 84,796,881 $ 4,271,858 $ 80,525,023 December 31, 2014 Cost Accumulated Amortization Net Carrying Amount Patents $ 351,754 $ 53,242 $ 298,512 Licensing asset 1,005,820 174,084 831,736 Licensing agreements 10,377,325 2,345,049 8,032,276 Product rights 32,117,521 321,175 31,796,346 $ 43,852,420 $ 2,893,550 $ 40,958,870 |
Amortization expense of intangible assets | Goodwill Amount Balance at December 31, 2014 $ 3,599,077 MFI acquisition (Note 2) 3,933,188 Balance at June 30, 2015 $ 7,532,265 |
Audited | |
Schedule of Intangible Assets | June 30, 2015 Cost Accumulated Amortization Net Carrying Amount Patents $ 437,214 $ 71,573 $ 365,641 Licensing asset 1,005,820 212,770 793,050 Licensing agreements 51,350,051 3,023,989 48,326,062 Product rights 32,000,000 958,825 31,041,175 $ 84,793,085 $ 4,267,157 $ 80,525,928 December 31, 2014 Cost Accumulated Amortization Net Carrying Amount Patents $ 351,754 $ 53,242 $ 298,512 Licensing asset 1,005,820 174,084 831,736 Licensing agreements 10,377,325 2,345,049 8,032,276 Product rights 32,117,521 321,175 31,796,346 $ 43,852,420 $ 2,893,550 $ 40,958,870 |
Amortization expense of intangible assets | Amount 2015 $ 3,217,724 2016 6,435,448 2017 6,435,253 2018 5,134,381 2019 4,787,854 Thereafter 54,101,410 $ 80,112,070 |
7. Long Term Debt and Debt Is37
7. Long Term Debt and Debt Issuance Costs (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Schedule of payments for Long-term Debt | Principal Payments Interest Payments 2015 US$780,546 ($973,654) US$923,990 ($1,152,585) 2016 US$1,451,997 ($1,811,221) US$1,706,676 ($2,128,908) 2017 US$1,663,839 ($2,075,473) US$1,492,457 ($1,861,691) 2018 US$9,764,529 ($12,180,273) US$1,432,759 ($1,787,224) |
Audited | |
Schedule of payments for Long-term Debt | Principal Payments Interest Payments 2015 US$780,546 ($973,654) US$923,990 ($1,152,585) 2016 US$1,451,997 ($1,811,221) US$1,706,676 ($2,128,908) 2017 US$1,663,839 ($2,075,473) US$1,492,457 ($1,861,691) 2018 US$9,764,529 ($12,180,273) US$1,432,759 ($1,787,224) |
8. Capital Stock (Tables)
8. Capital Stock (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Schedule of Common Stock Outstanding | Common Shares Number of Shares Amount Balance, December 31, 2014 94,476,238 $ 41,182,630 Warrants exercised 11,293,587 8,377,924 Warrants exercised - valuation - 3,373,467 Common shares issued in acquisition (Note 2) 3,723,008 5,000,000 Common shares issued in private placement 13,043,695 12,000,199 Share issuance costs - (1,298,285 ) Share options exercised 16,634 15,043 Broker compensation options exercised 1,909,419 1,219,817 Broker warrants exercised underlying warrants 587,997 529,197 Fair value of broker warrants exercised - 698,847 Balance, June 30, 2015 125,050,578 $ 71,098,839 |
Schedule of Paid-in Capital Options | Amount Balance, December 31, 2014 $ 2,713,605 Expense recognized for options issued to employees 176,560 Expense recognized for options issued to consultants 171,759 Balance, March 31, 2015 3,061,924 Options exercised (6,840 ) Expense recognized for options issued to employees 224,207 Expense recognized for options issued to consultants 458,162 Balance, June 30, 2015 $ 3,737,453 |
Schedule of Warrant Liability | Expiration Date Number of Warrants Weighted Average Exercise Price Fair Value at June 30, 2015 Fair Value at December 31, 2014 May 11, 2017 750,000 US0.43($0.54) $ 1,032,847 $ 227,090 February 27, 2015 - US0.50($0.62) $ - $ 184,999 February 27, 2018 2,968,750 US0.60($0.75) $ 3,947,630 $ 1,310,414 March 5, 2015 - US0.50($0.62) $ - $ 56,691 March 5, 2018 843,750 US0.60($0.75) $ 1,120,046 $ 372,123 March 11, 2015 - US0.50($0.62) $ - $ 17,547 March 11, 2018 343,750 US0.60($0.75) $ 460,096 $ 102,089 August 8, 2018 755,794 US0.5954($0.7427) $ 1,228,439 $ 334,060 September 20, 2018 108,696 US0.55($0.69) $ 152,129 $ 36,442 February 4, 2021 347,222 US0.4320($0.5389) $ 578,222 $ 160,319 October 1, 2021 740,000 US0.70($0.87) $ 1,055,999 $ 306,106 6,857,962 US0.58($0.73) $ 9,575,408 $ 3,107,880 |
Schedule of Warrants - Equity | Expiration Date Number of Warrants Weighted Average Exercise Price Grant Date Fair Value at June 30, 2015 July 15, 2016 17,455,350 $ 0.90 $ 4,201,876 July 15, 2016 1,307,706 $ 0.70 $ 478,620 July 15, 2016 366,713 $ 0.90 $ 116,777 May 21, 2017 456,529 $ 0.92 $ 205,438 19,586,298 $ 0.89 $ 5,002,711 |
Audited | |
Schedule of Paid-in Capital Options | Amount Balance, December 31, 2014 $ 2,713,605 Options exercised (6,840 ) Expense recognized for options issued to employees 427,352 Expense recognized for options issued to consultants 603,337 Balance, June 30, 2015 $ 3,737,454 |
Fair value assumptions of stock options | 2015 2014 Risk-free interest rate 0.76 % 1.60 % Expected life 5 years 5 years Expected volatility 121 % 123 % Expected dividend yield 0 % 0 % |
Schedule of stock options | Number of Options Weighted Average Exercise Price Balance, December 31, 2013 3,824,835 $ 0.60 Granted 1,827,986 0.45 Forfeited (817,830 ) 0.55 Balance, December 31, 2014 4,834,991 $ 0.60 Granted 3,775,520 0.58 Options exercised (16,635 ) 0.45 Forfeited (157,085 ) 0.49 Balance, June 30, 2015 8,436,791 $ 0.61 |
Schedule of stock options outstanding | Options Outstanding Options Exercisable Range of Exercise Price Number of Shares Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) $ 0.30 to $0.49 1,657,021 2.66 $ 0.41 1,126,892 $ 0.42 2.80 $ 0.50 to $0.69 5,669,770 3.23 0.60 2,066,219 0.58 1.94 $ 0.90 to $1.09 1,110,000 2.68 0.97 510,000 0.95 0.05 8,436,791 3.04 $ 0.61 3,703,111 $ 0.58 1.94 |
Schedule of Warrant Liability | Expiration Date Number of Warrants Weighted Average Exercise Price Fair Value at June 30, 2015 Fair Value at December 31, 2014 May 11, 2017 750,000 US$0.43 ($0.54) $ 1,032,847 $ 227,090 February 27, 2015 - US$0.50 ($0.62) $ - $ 184,999 February 27, 2018 2,968,750 US$0.60 ($0.75) $ 3,947,630 $ 1,310,414 March 5, 2015 - US$0.50 ($0.62) $ - $ 56,691 March 5, 2018 843,750 US$0.60 ($0.75) $ 1,120,046 $ 372,123 March 11, 2015 - US$0.50 ($0.62) $ - $ 17,547 March 11, 2018 343,750 US$0.60 ($0.75) $ 460,096 $ 102,089 August 8, 2018 755,794 US$0.5954 ($0.7427) $ 1,228,439 $ 334,060 September 20, 2018 108,696 US$0.55 ($0.69) $ 152,129 $ 36,442 February 4, 2021 347,222 US$0.4320 ($0.5389) $ 578,222 $ 160,319 October 1, 2021 740,000 US$0.70 ($0.87) $ 1,055,999 $ 306,106 6,857,962 US$0.58 ($0.73) $ 9,575,408 $ 3,107,880 |
Schedule of Warrants - Equity | Expiration Date Number of Warrants Weighted Average Exercise Price Grant Date Fair Value at June 30, 2015 July 15, 2016 17,455,350 $ 0.90 $ 4,201,876 July 15, 2016 1,307,706 $ 0.70 $ 478,620 July 15, 2016 366,713 $ 0.90 $ 116,777 May 21, 2017 456,529 $ 0.92 $ 205,438 19,586,298 $ 0.89 $ 5,002,711 Expiration Date Number of Warrants Weighted Average Exercise Price Grant Date Fair Value at December 31, 2014 July 15, 2016 21,447,500 $ 0.90 $ 5,169,881 July 15, 2016 3,217,125 $ 0.70 $ 1,177,468 24,664,625 $ 0.87 $ 6,347,349 |
8a.Goodwill (Tables)
8a.Goodwill (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Audited | |
Goodwill | Amount Balance at December 31, 2014 and 2013 $ 3,599,077 MFI acquisition (Note 2) 4,050,072 Balance at June 30, 2015 $ 7,649,149 |
9. Earnings (Loss) Per Share (T
9. Earnings (Loss) Per Share (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Schedule of Computation of earnings (loss) per share | For the Three Month Period Ended June 30 For the Six Month Period Ended June 30 Numerator: 2015 2014 2015 2014 Net income (loss) available to common shareholders $ (8,824,850 ) $ (4,400,842 ) $ (14,006,313 ) $ (7,689,020 ) Denominator: Weighted average number of common shares 108,800,996 51,581,238 102,776,669 51,501,128 Effect of dilutive common shares - - - - Diluted weighted average number of common shares outstanding 108,800,996 51,581,238 102,776,669 51,501,128 Income (loss) per share basic and diluted $ (0.08 ) $ (0.09 ) $ (0.14 ) $ (0.15 ) |
Audited | |
Schedule of Computation of earnings (loss) per share | June 30 2015 2014 Numerator: (unaudited) Net loss available to common shareholders $ (13,941,953 ) $ (7,689,020 ) Denominator: Weighted average number of common shares outstanding 102,776,669 51,501,128 Effect of dilutive common shares - - Diluted weighted average number of common shares outstanding 102,776,669 51,501,128 Loss per share basic and diluted $ (0.14 ) $ (0.15 ) |
10. Statement of Cash Flows (Ta
10. Statement of Cash Flows (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Supplemental Cash Flow Elements [Abstract] | |
Changes in non-cash balances related to operations | For the Six Months Ended June 30 2015 2014 Accounts receivable $ (1,696,674 ) $ (1,355,477 ) Inventories (324,885 ) (14,068 ) Prepaid expenses and other receivables (297,186 ) (26,869 ) Taxes recoverable 10,343 473,078 Accounts payable and accrued liabilities 60,984 585,897 $ (2,247,418 ) $ (337,439 ) |
11. Contingencies and Commitm42
11. Contingencies and Commitments (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Schedule of purchase commitments | MFI has supply agreements with various vendors that include purchase minimums. Pursuant to these agreements, the Company is required to purchase a total of up to $9,083,000 of products from these vendors during the following years ended December 31: 2015 $ 3,056,000 2016 $ 754,000 2017 $ 773,000 2018 $ 790,000 2019 and thereafter $ 3,710,000 $ 9,083,000 |
Audited | |
Schedule of purchase commitments | 2015 $ 3,810,788 2016 $ 833,045 2017 $ 867,684 2018 $ 840,974 2019 and thereafter $ 3,253,139 $ 9,605,630 |
Operation lease obligations | Total 2015 2016 2017 Operating lease obligations $ 226,982 $ 53,107 $ 104,542 $ 69,333 |
12a. Changes in Non-Cash Oper43
12a. Changes in Non-Cash Operating Assets and Liabilities (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Audited | |
Changes in non-cash balances related to operations | June 30 2015 2014 (unaudited) Accounts receivable $ (1,679,859 ) (1,355,477 ) Inventories (331,643 ) (14,068 ) Prepaid expenses and other receivables 32,842 (26,869 ) Taxes recoverable (14,996 ) 473,078 Accounts payable and accrued liabilities (76,638 ) 585,897 $ (2,070,294 ) $ (337,439 ) |
14. Income Taxes (Tables)
14. Income Taxes (Tables) - Audited | 6 Months Ended |
Jun. 30, 2015 | |
Income tax expense (Benefit) | 2015 2014 Income tax expense (benefit) at statutory rate at 26.5% (2014- 26.5%) $ (3,693,200 ) $ (1,485,800 ) Adjusted for: Change in valuation allowance 1,247,300 2,045,100 Share issue costs (363,600 ) (1,070,400 ) Non-deductible expenses 2,819,500 241,500 Other (10,000 ) 269,600 Deferred income tax (recovery) $ - $ - |
Deferred income tax assets and liabilities | June 30, 2015 December 31, 2014 Benefit of net operating losses carry-forward $ 4,052,600 $ 3,438,300 Book values of property, plant and equipment and intangible assets in excess of tax bases 871,300 192,100 Benefit of SR&ED expenditures 476,600 476,600 Share issue costs 1,053,600 985,700 Non-refundable tax credits 341,300 341,300 License agreements (9,530,091 ) (2,030,000 ) Long-term debt 502,500 290,700 Valuation allowance (4,942,000 ) (3,694,700 ) $ (7,174,191 ) $ - |
Non-capital losses carry-forward | 2026 $ 231,900 2027 85,400 2028 53,700 2030 755,300 2031 1,994,900 2032 2,071,000 2033 4,348,300 2034 3,419,100 2035 2,333,200 $ 15,292,800 |
15. Segmented Information (Tabl
15. Segmented Information (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Schedule of Segment Reporting | For the Three Month Period Ended June 30 For the Six Month Period Ended June 30 2015 2014 2015 2014 Product sales: Domestic sales $ 5,448,148 $ 3,676,588 $ 10,557,658 $ 6,676,500 International sales 971,468 357,872 1,441,063 821,849 Other revenue 9,868 6,825 23,060 18,075 Total $ 6,429,484 $ 4,041,285 $ 12,021,781 $ 7,516,424 Royalty revenues $ - $ - $ - $ 18,414 Total revenues $ 6,429,484 $ 4,041,285 $ 12,021,781 $ 7,534,838 |
Audited | |
Schedule of Segment Reporting | For the Six Month Period Ended June 30 2015 2014 Product sales: Domestic sales $ 10,557,658 $ 6,676,500 International sales 1,441,063 821,849 Other revenue 23,060 18,075 Total $ 12,021,781 $ 7,516,424 Royalty revenues $ - $ 18,414 Total revenues $ 12,021,781 $ 7,534,838 |
17. Financial Instruments (Tabl
17. Financial Instruments (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Company's financial liabilities measured at fair value | Fair Value at Fair Value Measurement Using June 30, 2015 Level 1 Level 2 Level 3 Derivative liability - Warrants $ 9,575,408 $ - $ - $ 9,575,408 Fair Value at Fair Value Measurement Using December 31, 2014 Level 1 Level 2 Level 3 Derivative liability - Warrants $ 3,107,880 $ - $ - $ 3,107,880 |
Company's Level 3 financial liabilities | Six Months Ended June 30, 2015 Year Ended December 31, 2014 Balance at beginning of period $ 3,107,880 $ 2,966,714 Additions (deletions) to derivative instruments (2,409,961 ) 424,471 Change in fair market value, recognized in earnings as Change in warrant liability 8,877,489 (283,305 ) Balance end of period $ 9,575,408 $ 3,107,880 The following is quantitative information about significant unobservable inputs (Level 3) for the Company as of June 30, 2015. Liability Category Fair Value Valuation Technique Unobservable Input Input Value Warrant Liability $ 9,575,408 Black-Scholes valuation model Volatility 98 % The following represents the impact on fair value measurements to changes in unobservable inputs: Unobservable Inputs Increase in Inputs Increase in Valuation Decreases in Inputs Increase in Valuation Volatility Increase Decrease |
Assumptions used in valuation of warrants | Six Months Ended June 30, 2015 Year Ended December 31, 2014 Number of shares underlying the warrants 6,857,962 14,754,587 Fair market value of the common share $ US1.03 ($1.28 ) $ US0.18 ($0.21 ) Exercise price $ US0.58 ($0.73 ) $ US0.55 ($0.64 ) Expected volatility 98% 88% Risk-free interest rate 1.02% 1.22% Expected dividend yield 0% 0% Expected warrant life (years) 3.18 2.18 |
Audited | |
Company's financial liabilities measured at fair value | Fair Value at Fair Value Measurement Using June 30, 2015 Level 1 Level 2 Level 3 Derivative liability - Warrants $ 9,575,408 $ - $ - $ 9,575,408 Fair Value at Fair Value Measurement Using December 31, 2014 Level 1 Level 2 Level 3 Derivative liability - Warrants $ 3,107,880 $ - $ - $ 3,107,880 |
Company's Level 3 financial liabilities | Period Ended June 30, 2015 Year Ended December 31, 2014 Balance at beginning of period $ 3,107,880 $ 2,966,714 Additions (deletions) to derivative instruments (2,409,961 ) 424,471 Change in fair market value, recognized in earnings as Change in warrant liability 8,877,489 (283,305 ) Balance end of period $ 9,575,408 $ 3,107,880 The following is quantitative information about significant unobservable inputs (Level 3) for the Company as of June 30, 2015. Liability Category Fair Value Valuation Technique Unobservable Input Input Value Warrant Liability $ 9,575,408 Black-Scholes valuation model Volatility 98 % The following represents the impact on fair value measurements to changes in unobservable inputs: Unobservable Inputs Increase in Inputs Increase in Valuation Decreases in Inputs Increase in Valuation Volatility Increase Decrease |
Assumptions used in valuation of warrants | Period Ended June 30, 2015 Year Ended December 31, 2014 Number of shares underlying the warrants 6,857,962 14,754,587 Fair market value of the common share $ US1.03 ($1.28 ) $ US0.18 ($0.21 ) Exercise price $ US0.58 ($0.73 ) $ US0.55 ($0.64 ) Expected volatility 98 % 88 % Risk-free interest rate 1.02 % 1.22 % Expected dividend yield 0 % 0 % Expected warrant life (years) 3.18 2.18 |
18. Derivative Financial Inst47
18. Derivative Financial Instruments (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Notional principal and fair value of the Company's outstanding foreign currency derivative financial instruments | June 30, 2015 December 31, 2014 Notional Principal Fair Value Notional Principal Fair Value Foreign currency sold call options USD$ 3,500,000 $ (24,850 ) USD$ - $ - |
Audited | |
Notional principal and fair value of the Company's outstanding foreign currency derivative financial instruments | June 30, 2015 December 31, 2014 Notional Principal Fair Value Notional Principal Fair Value Foreign currency sold call options USD $ 3,500,000 $ (24,850 ) USD $ - $ - |
2. Acquisitions and Goodwill (D
2. Acquisitions and Goodwill (Details) - CAD | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Net revenues | CAD 9,010,789 | CAD 10,270,241 | CAD 16,888,960 | CAD 12,325,583 |
Net loss | CAD (8,863,655) | CAD (4,630,417) | CAD (14,499,053) | CAD (7,926,162) |
Loss per share | CAD (0.08) | CAD (0.09) | CAD (0.14) | CAD (0.15) |
Audited | ||||
Net revenues | CAD 16,294,799 | CAD 15,951,616 | ||
Net loss | CAD (13,873,977) | CAD (4,542,220) | ||
Loss per share | CAD (.13) | CAD (.09) |
2. Acquisitions and Goodwill 49
2. Acquisitions and Goodwill (Details Narrative) | 6 Months Ended |
Jun. 30, 2015CAD | |
Acquisition and restructuring costs | CAD 1,132,398 |
Audited | |
Acquisition and restructuring costs | CAD 625,266 |
3. Inventories (Details)
3. Inventories (Details) - CAD | Jun. 30, 2015 | Dec. 31, 2014 |
Raw materials | CAD 372,871 | CAD 290,197 |
Finished goods | 1,850,371 | 399,830 |
Packaging materials | 157,001 | 70,870 |
Work in process | 541,382 | 276,490 |
Inventories | 2,921,625 | 1,037,387 |
Audited | ||
Raw materials | 372,871 | 290,197 |
Finished goods | 2,096,504 | 399,830 |
Packaging materials | 157,001 | 70,870 |
Work in process | 541,382 | 276,490 |
Inventories | CAD 3,167,758 | CAD 1,037,387 |
3a. SUMMARY OF SIGNIFICANT AC51
3a. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Audited | 6 Months Ended |
Jun. 30, 2015 | |
Amortization Method | Straight-line |
Useful Life, minimum | 20 years |
Computer and office equipment | |
Amortization Method | Straight-line |
Useful Life, minimum | 5 years |
Leasehold Improvements | |
Amortization Method | Straight-line over the lease term |
Useful Life, minimum | 5 years |
Manufacturing Equipment | |
Amortization Method | Straight-line & activity based |
Useful Life, minimum | 5 years |
Useful Life, maximum | 10 years |
Warehouse Equipment | |
Amortization Method | Straight-line |
Useful Life, minimum | 5 years |
Useful Life, maximum | 10 years |
Packaging Equipment | |
Amortization Method | Activity based |
Useful Life, minimum | 5 years |
Useful Life, maximum | 10 years |
4. Prepaid Expenses and Other52
4. Prepaid Expenses and Other Receivables (Details) - CAD | Jun. 30, 2015 | Dec. 31, 2014 |
Prepaid operating expenses and other receivables | CAD 407,642 | CAD 180,304 |
Deposits | 333,508 | |
Interest receivable on loan receivables | 6,975 | CAD 6,975 |
Prepaid expenses and other receivables | 748,125 | 187,279 |
Audited | ||
Prepaid operating expenses and other receivables | 400,948 | CAD 180,304 |
Other receivables | 10,174 | |
Interest receivable on loan receivables | 6,975 | CAD 6,975 |
Prepaid expenses and other receivables | CAD 418,097 | CAD 187,279 |
5. Property, Plant and Equipm53
5. Property, Plant and Equipment (Details) - CAD | Jun. 30, 2015 | Dec. 31, 2014 |
Cost | CAD 2,500,865 | CAD 2,154,674 |
Accumulated Amortization | 1,204,549 | 1,142,389 |
Net Carrying Amount | 1,296,316 | 1,012,285 |
Audited | ||
Cost | 2,207,522 | 2,154,674 |
Accumulated Amortization | 1,204,549 | 1,142,389 |
Net Carrying Amount | 1,002,973 | 1,012,285 |
Land | ||
Cost | CAD 90,000 | CAD 90,000 |
Accumulated Amortization | ||
Net Carrying Amount | CAD 90,000 | CAD 90,000 |
Land | Audited | ||
Cost | CAD 90,000 | CAD 90,000 |
Accumulated Amortization | ||
Net Carrying Amount | CAD 90,000 | CAD 90,000 |
Building | ||
Cost | 618,254 | 618,254 |
Accumulated Amortization | 316,255 | 300,798 |
Net Carrying Amount | 301,999 | 317,456 |
Building | Audited | ||
Cost | 618,254 | 618,254 |
Accumulated Amortization | 316,255 | 300,798 |
Net Carrying Amount | 301,999 | 317,456 |
Leasehold Improvements | ||
Cost | 303,703 | 10,359 |
Accumulated Amortization | 5,697 | 4,662 |
Net Carrying Amount | 298,006 | 5,697 |
Leasehold Improvements | Audited | ||
Cost | 10,359 | 10,359 |
Accumulated Amortization | 5,697 | 4,662 |
Net Carrying Amount | 4,662 | 5,697 |
Office Equipment | ||
Cost | 97,848 | 61,308 |
Accumulated Amortization | 54,791 | 52,124 |
Net Carrying Amount | 43,057 | 9,184 |
Office Equipment | Audited | ||
Cost | 97,848 | 61,308 |
Accumulated Amortization | 54,791 | 52,124 |
Net Carrying Amount | 43,057 | 9,184 |
Manufacturing equipment | ||
Cost | 1,103,525 | 1,103,525 |
Accumulated Amortization | 630,036 | 602,667 |
Net Carrying Amount | 473,489 | 500,858 |
Manufacturing equipment | Audited | ||
Cost | 1,103,525 | 1,103,525 |
Accumulated Amortization | 630,036 | 602,667 |
Net Carrying Amount | 473,489 | 500,858 |
Warehouse equipment | ||
Cost | 17,085 | 17,085 |
Accumulated Amortization | CAD 17,085 | CAD 17,085 |
Net Carrying Amount | ||
Warehouse equipment | Audited | ||
Cost | CAD 17,085 | CAD 17,085 |
Accumulated Amortization | CAD 17,085 | CAD 17,085 |
Net Carrying Amount | ||
Packaging equipment | ||
Cost | CAD 111,270 | CAD 111,270 |
Accumulated Amortization | 69,280 | 62,744 |
Net Carrying Amount | 41,990 | 48,526 |
Packaging equipment | Audited | ||
Cost | 111,270 | 111,270 |
Accumulated Amortization | 69,280 | 62,744 |
Net Carrying Amount | 41,990 | 48,526 |
Computer equipment | ||
Cost | 159,180 | 142,873 |
Accumulated Amortization | 111,405 | 102,309 |
Net Carrying Amount | 47,775 | 40,564 |
Computer equipment | Audited | ||
Cost | 159,181 | 142,873 |
Accumulated Amortization | 111,405 | 102,309 |
Net Carrying Amount | CAD 47,776 | CAD 40,564 |
6. Intangible Assets and Goodwi
6. Intangible Assets and Goodwill (Details) - CAD | Jun. 30, 2015 | Dec. 31, 2014 |
Cost | CAD 84,796,881 | CAD 43,852,420 |
Accumulated Amortization | 4,271,858 | 2,893,550 |
Net Carrying Amount | 80,525,023 | 40,958,870 |
Audited | ||
Cost | 84,793,085 | 43,852,420 |
Accumulated Amortization | 4,267,157 | 2,893,550 |
Net Carrying Amount | 80,525,928 | 40,958,870 |
Patents | ||
Cost | 437,214 | 351,754 |
Accumulated Amortization | 71,573 | 53,242 |
Net Carrying Amount | 365,641 | 298,512 |
Patents | Audited | ||
Cost | 437,214 | 351,754 |
Accumulated Amortization | 71,573 | 53,242 |
Net Carrying Amount | 365,641 | 298,512 |
Licensing asset | ||
Cost | 1,005,820 | 1,005,820 |
Accumulated Amortization | 212,770 | 174,084 |
Net Carrying Amount | 793,050 | 831,736 |
Licensing asset | Audited | ||
Cost | 1,005,820 | 1,005,820 |
Accumulated Amortization | 212,770 | 174,084 |
Net Carrying Amount | 793,050 | 831,736 |
Licensing agreements | ||
Cost | 51,236,326 | 10,377,325 |
Accumulated Amortization | 3,023,989 | 2,345,049 |
Net Carrying Amount | 48,212,337 | 8,032,276 |
Licensing agreements | Audited | ||
Cost | 51,350,051 | 10,377,325 |
Accumulated Amortization | 3,023,989 | 2,345,049 |
Net Carrying Amount | 48,326,062 | 8,032,276 |
Product rights | ||
Cost | 32,117,521 | 32,117,521 |
Accumulated Amortization | 963,526 | 321,175 |
Net Carrying Amount | 31,153,995 | 31,796,346 |
Product rights | Audited | ||
Cost | 32,000,000 | 32,117,521 |
Accumulated Amortization | 958,825 | 321,175 |
Net Carrying Amount | CAD 31,041,175 | CAD 31,796,346 |
6. Intangible Assets and Good55
6. Intangible Assets and Goodwill (Details 1) | 6 Months Ended |
Jun. 30, 2015CAD | |
Intangible Assets And Goodwill Details 1 | |
Balance at December 31, 2014 | CAD 3,599,077 |
MFI acquisition (Note 2) | 3,933,188 |
Balance at June 30, 2015 | CAD 7,532,265 |
6. Intangible Assets and Good56
6. Intangible Assets and Goodwill (Details 2) - Audited | 6 Months Ended |
Jun. 30, 2015CAD | |
2,015 | CAD 3,217,724 |
2,016 | 6,435,448 |
2,017 | 6,435,253 |
2,018 | 5,134,381 |
2,019 | 4,787,854 |
Thereafter | 54,101,410 |
Total | CAD 80,112,070 |
6. Intangible Assets and Good57
6. Intangible Assets and Goodwill (Details Narrative) - CAD | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | Dec. 31, 2014 | |
Amortization expense of intangible assets | CAD 784,445 | CAD 252,185 | CAD 1,373,153 | CAD 504,371 | |
Patents | |||||
Intangible assets pending not amortized | 45,942 | 45,942 | CAD 45,392 | ||
Licensing agreements | |||||
Intangible assets pending not amortized | CAD 373,325 | CAD 373,325 | CAD 373,325 |
7. Long Term Debt and Debt Is58
7. Long Term Debt and Debt Issuance Costs (Details) | Jun. 30, 2015CAD |
Debt Disclosure [Abstract] | |
Principle Payments - 2015 | CAD 973,654 |
Principle Payments - 2016 | 1,811,221 |
Principle Payments - 2017 | 2,075,473 |
Principle Payments - 2018 | 12,180,273 |
Interest Payments - 2015 | 1,152,585 |
Interest Payments - 2016 | 2,128,908 |
Interest Payments - 2017 | 1,861,691 |
Interest Payments - 2018 | CAD 1,787,224 |
7. Long Term Debt and Debt Is59
7. Long Term Debt and Debt Issuance Costs (Details Narrative) - CAD | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | Dec. 31, 2014 | |
Debt Disclosure [Abstract] | |||||
Non-cash accretion expense | CAD 73,463 | CAD 34,409 | CAD 147,462 | CAD 65,526 | |
Non-cash interest expense | 34,052 | CAD 27,854 | 60,498 | CAD 52,619 | |
Principal payments | CAD 410,917 | 410,917 | CAD 0 | ||
Interest payments | CAD 1,172,414 | CAD 1,207,262 |
8. Capital Stock (Details)
8. Capital Stock (Details) | 6 Months Ended |
Jun. 30, 2015CADshares | |
Equity [Abstract] | |
Begining balance, number of shares | shares | 94,476,238 |
Begining balance, amount | CAD 41,182,630 |
Warrants exercised, number of shares | shares | 11,293,587 |
Warrants exercised, amount | CAD 8,377,924 |
Warrants exercised - valuation | CAD 3,373,467 |
Common shares issued in acquisition (Note 2), number of shares | shares | 3,723,008 |
Common shares issued in acquisition (Note 2), amount | CAD 5,000,000 |
Common shares issued in private placement, number of shares | shares | 13,043,695 |
Common shares issued in private placement, amount | CAD 12,000,199 |
Share issuance costs | CAD (1,298,285) |
Share options exercised, number of shares | shares | 16,634 |
Share options exercised, amount | CAD 15,043 |
Broker compensation options exercised, number of shares | shares | 1,909,419 |
Broker compensation options exercised, amount | CAD 1,219,817 |
Broker warrants exercised - underlying warrants, number of shares | shares | 587,997 |
Broker warrants exercised - underlying warrants, amount | CAD 529,197 |
Fair value of warrants exercised, amount | CAD 698,847 |
Ending balance, number of shares | shares | 125,050,578 |
Ending balance, amount | CAD 71,098,839 |
8. Capital Stock (Details 1)
8. Capital Stock (Details 1) - CAD | 3 Months Ended | |
Jun. 30, 2015 | Mar. 31, 2015 | |
Paid-in Capital Options, Beginning | CAD 3,061,924 | CAD 2,713,605 |
Options exercised | (6,840) | |
Expense recognized for options issued to employees | 224,207 | 176,560 |
Expense recognized for options issued to consultants | 458,162 | 171,759 |
Paid-in Capital Options, Ending | 3,737,453 | 3,061,924 |
Audited | ||
Paid-in Capital Options, Beginning | 2,713,605 | 2,713,605 |
Options exercised | (6,840) | |
Expense recognized for options issued to employees | 427,352 | |
Expense recognized for options issued to consultants | 603,337 | |
Paid-in Capital Options, Ending | CAD 3,737,454 | CAD 2,713,605 |
8. Capital Stock (Details 2)
8. Capital Stock (Details 2) - CAD | 6 Months Ended | |
Jun. 30, 2015 | Dec. 31, 2014 | |
Number of Warrants | 6,857,962 | |
Weighted Average Exercise Price | CAD 0.73 | |
Fair Value | CAD 9,575,408 | CAD 3,107,880 |
Warrant 1 | ||
Expiration Date | May 11, 2017 | |
Number of Warrants | 750,000 | |
Weighted Average Exercise Price | CAD 0.54 | |
Fair Value | CAD 1,032,847 | 227,090 |
Warrant 2 | ||
Expiration Date | Feb. 27, 2015 | |
Number of Warrants | ||
Weighted Average Exercise Price | CAD 0.62 | |
Fair Value | 184,999 | |
Warrant 3 | ||
Expiration Date | Feb. 27, 2018 | |
Number of Warrants | 2,968,750 | |
Weighted Average Exercise Price | CAD 0.75 | |
Fair Value | CAD 3,947,630 | 1,310,414 |
Warrant 4 | ||
Expiration Date | Mar. 5, 2015 | |
Number of Warrants | ||
Weighted Average Exercise Price | CAD 0.62 | |
Fair Value | 56,691 | |
Warrant 5 | ||
Expiration Date | Mar. 5, 2018 | |
Number of Warrants | 843,750 | |
Weighted Average Exercise Price | CAD 0.75 | |
Fair Value | CAD 1,120,046 | 372,123 |
Warrant 6 | ||
Expiration Date | Mar. 11, 2015 | |
Number of Warrants | ||
Weighted Average Exercise Price | CAD 0.62 | |
Fair Value | 17,547 | |
Warrant 7 | ||
Expiration Date | Mar. 11, 2018 | |
Number of Warrants | 343,750 | |
Weighted Average Exercise Price | CAD 0.75 | |
Fair Value | CAD 460,096 | 102,089 |
Warrant 8 | ||
Expiration Date | Aug. 8, 2018 | |
Number of Warrants | 755,794 | |
Weighted Average Exercise Price | CAD 0.7427 | |
Fair Value | CAD 1,228,439 | 334,060 |
Warrant 9 | ||
Expiration Date | Sep. 20, 2018 | |
Number of Warrants | 108,696 | |
Weighted Average Exercise Price | CAD 0.69 | |
Fair Value | CAD 152,129 | 36,442 |
Warrant 10 | ||
Expiration Date | Feb. 4, 2021 | |
Number of Warrants | 347,222 | |
Weighted Average Exercise Price | CAD 0.5389 | |
Fair Value | CAD 578,222 | 160,319 |
Warrant 11 | ||
Expiration Date | Oct. 1, 2021 | |
Number of Warrants | 740,000 | |
Weighted Average Exercise Price | CAD 0.87 | |
Fair Value | CAD 1,055,999 | CAD 306,106 |
Warrant Equity 1 | ||
Expiration Date | Jul. 15, 2016 | |
Number of Warrants | 17,455,350 | |
Weighted Average Exercise Price | CAD 0.90 | |
Fair Value | CAD 4,201,876 | |
Warrant Equity 2 | ||
Expiration Date | Jul. 15, 2016 | |
Number of Warrants | 1,307,706 | |
Weighted Average Exercise Price | CAD 0.70 | |
Fair Value | CAD 478,620 | |
Warrant Equity 3 | ||
Expiration Date | Jul. 15, 2016 | |
Number of Warrants | 366,713 | |
Weighted Average Exercise Price | CAD 0.90 | |
Fair Value | CAD 116,777 | |
Warrant Equity 4 | ||
Expiration Date | May 21, 2017 | |
Number of Warrants | 456,529 | |
Weighted Average Exercise Price | CAD 0.92 | |
Fair Value | CAD 205,438 | |
Warrant Equity 5 | Audited | ||
Expiration Date | Jul. 15, 2016 | |
Number of Warrants | 21,447,500 | |
Weighted Average Exercise Price | CAD .90 | |
Fair Value | CAD 5,169,881 | |
Warrant Equity 6 | Audited | ||
Expiration Date | Jul. 15, 2016 | |
Number of Warrants | 3,217,125 | |
Weighted Average Exercise Price | CAD .70 | |
Fair Value | CAD 1,177,468 | |
Warrant Equity | ||
Number of Warrants | 19,586,298 | |
Weighted Average Exercise Price | CAD 0.89 | |
Fair Value | CAD 5,002,711 | |
Warrant Equity | Audited | ||
Number of Warrants | 24,664,625 | |
Weighted Average Exercise Price | CAD .87 | |
Fair Value | CAD 6,347,349 |
8. Capital Stock (Details 3)
8. Capital Stock (Details 3) | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Risk-free interest rate | 0.87% | |
Expected volatility | 121.00% | |
Expected dividend yield | 0.00% | |
Audited | ||
Risk-free interest rate | 0.76% | 1.60% |
Expected life | 5 years | 5 years |
Expected volatility | 121.00% | 123.00% |
Expected dividend yield | 0.00% | 0.00% |
8. Capital Stock (Details 4)
8. Capital Stock (Details 4) - CAD / shares | 6 Months Ended | 12 Months Ended |
Jun. 30, 2015 | Dec. 31, 2014 | |
Beginning Balance, Options Outstanding | 4,834,991 | |
Ending Balance, Options Outstanding | 8,436,791 | 4,834,991 |
Audited | ||
Beginning Balance, Options Outstanding | 4,834,991 | 3,824,835 |
Granted | 3,775,520 | 1,827,986 |
Exercised | (16,635) | |
Forfeited | (157,085) | (817,830) |
Ending Balance, Options Outstanding | 8,436,791 | 4,834,991 |
Weighted Average Exercise Price Outstanding, Beginning | CAD .60 | CAD .60 |
Weighted Average Exercise Price Granted | .58 | .45 |
Weighted Average Exercise Price Exercised | .45 | |
Weighted Average Exercise Price Forfeited | .49 | .55 |
Weighted Average Exercise Price Outstanding, Ending | CAD .61 | CAD .60 |
8. Capital Stock (Details 5)
8. Capital Stock (Details 5) - CAD / shares | 6 Months Ended | ||
Jun. 30, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | |
Options outstanding, shares | 8,436,791 | 4,834,991 | |
Audited | |||
Options outstanding, shares | 8,436,791 | 4,834,991 | 3,824,835 |
Options outstanding, weighted average remaining contractual life | 3 years 14 days | ||
Options outstanding, weighted average exercise price | CAD .61 | CAD .60 | CAD .60 |
Options exercisable, shares | 3,703,111 | ||
Options exercisable, weighted average remaining contractual life | 1 year 11 months 8 days | ||
Options exercisable, weighted average exercise price | CAD .58 | ||
Price Range 1 | Audited | |||
Range Exercise Prices Options Outstanding Minimum | .30 | ||
Range Exercise Prices Options Outstanding Maximum | CAD .49 | ||
Options outstanding, shares | 1,657,021 | ||
Options outstanding, weighted average remaining contractual life | 2 years 7 months 28 days | ||
Options outstanding, weighted average exercise price | CAD .41 | ||
Options exercisable, shares | 1,126,892 | ||
Options exercisable, weighted average remaining contractual life | 2 years 9 months 18 days | ||
Options exercisable, weighted average exercise price | CAD .42 | ||
Price Range 2 | Audited | |||
Range Exercise Prices Options Outstanding Minimum | .50 | ||
Range Exercise Prices Options Outstanding Maximum | CAD .69 | ||
Options outstanding, shares | 5,669,770 | ||
Options outstanding, weighted average remaining contractual life | 3 years 2 months 23 days | ||
Options outstanding, weighted average exercise price | CAD .60 | ||
Options exercisable, shares | 2,066,219 | ||
Options exercisable, weighted average remaining contractual life | 1 year 11 months 8 days | ||
Options exercisable, weighted average exercise price | CAD .58 | ||
Price Range 3 | Audited | |||
Range Exercise Prices Options Outstanding Minimum | .90 | ||
Range Exercise Prices Options Outstanding Maximum | CAD 1.09 | ||
Options outstanding, shares | 1,110,000 | ||
Options outstanding, weighted average remaining contractual life | 2 years 8 months 5 days | ||
Options outstanding, weighted average exercise price | CAD .97 | ||
Options exercisable, shares | 510,000 | ||
Options exercisable, weighted average remaining contractual life | 18 days | ||
Options exercisable, weighted average exercise price | CAD .95 |
8. Capital Stock (Details Narra
8. Capital Stock (Details Narrative) - CAD | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | Dec. 31, 2014 | |
Private placement common shares issued | 13,043,695 | 13,043,695 | |||
Private placement common shares exercise price | CAD 0.92 | CAD 0.92 | |||
Gross prceeds from common shares Private placement | CAD 12,000,199 | CAD 12,000,199 | |||
Common shares issued for services to consultants | CAD 459,131 | CAD 630,839 | |||
Options granted to officers and employees and consultants | 616,617 | 29,740 | 3,775,520 | 1,327,985 | 1,298,245 |
Additional paid in capital for options issued to directors, officers, employees | CAD 683,338 | CAD 99,944 | CAD 1,030,689 | CAD 217,076 | |
Options issued | 200,000 | ||||
Exercise price of options | CAD 0.62 | ||||
Fair value of options | CAD 0.43 | ||||
Expected dividend yield | 0.00% | ||||
Expected volatility | 121.00% | ||||
Risk free interest rate | 0.87% | ||||
Expected term | 5 years | ||||
Number of options outstanding | 8,436,791 | 8,436,791 | 4,834,991 | ||
Weighted average grant date fair value | CAD 0.75 | CAD 0.52 | CAD 0.55 | CAD 0.34 | |
Common shares outstanding | 12,505,057 | 12,505,057 | 9,447,624 | ||
Compensation expense for options issued | CAD 117,133 | ||||
Number of options issued terminated | 172,085 | 817,830 | |||
Warrant [Member] | |||||
Expected dividend yield | 0.00% | 0.00% | |||
Expected volatility | 98.00% | 88.00% | |||
Risk free interest rate | 1.02% | 1.22% | |||
Expected term | 3 years 2 months 5 days | 2 years 2 months 5 days | |||
Fair value of the warrant liability | CAD 9,575,408 | CAD 9,575,408 | CAD 3,107,880 | ||
Warrant 1 [Member] | |||||
Broker compensation options issued | 1,909,419 | ||||
Options issued | 954,710 | ||||
Exercise price of options | CAD 0.90 | ||||
Expected dividend yield | 0.00% | ||||
Expected volatility | 84.00% | ||||
Risk free interest rate | 0.45% | ||||
Expected term | 1 year 1 month 24 days | ||||
Warrant 1 [Member] | |||||
Broker compensation options issued | 456,529 | ||||
Exercise price of options | CAD 0.92 | ||||
Fair value of options | CAD 205,438 | ||||
Expected dividend yield | 0.00% | ||||
Expected volatility | 92.00% | ||||
Risk free interest rate | 0.67% | ||||
Expected term | 2 years |
8a.Goodwill (Details)
8a.Goodwill (Details) | 6 Months Ended |
Jun. 30, 2015CAD | |
Balance at December 31, 2014 | CAD 3,599,077 |
MFI acquisition (Note 2) | 3,933,188 |
Balance at June 30, 2015 | 7,532,265 |
Audited | |
Balance at December 31, 2014 | 3,599,077 |
MFI acquisition (Note 2) | 4,050,072 |
Balance at June 30, 2015 | CAD 7,649,149 |
9. Loss Per Share (Details)
9. Loss Per Share (Details) - CAD | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Numerator: | ||||
Net income (loss) available to common shareholders | CAD (8,824,850) | CAD (4,400,842) | CAD (14,006,313) | CAD (7,689,020) |
Denominator: | ||||
Weighted average number of common shares | 108,800,996 | 51,581,238 | 102,776,669 | 51,501,128 |
Effect of dilutive common shares | ||||
Diluted weighted average number of common shares outstanding | 108,800,996 | 51,581,238 | 102,776,669 | 51,501,128 |
Income (loss) per share - basic and diluted | CAD (0.08) | CAD (0.09) | CAD (0.14) | CAD (.15) |
Audited | ||||
Numerator: | ||||
Net income (loss) available to common shareholders | CAD (13,941,953) | |||
Denominator: | ||||
Weighted average number of common shares | 102,776,669 | |||
Effect of dilutive common shares | ||||
Diluted weighted average number of common shares outstanding | 102,776,669 | |||
Income (loss) per share - basic and diluted | CAD (.14) |
9. Loss Per Share (Details Narr
9. Loss Per Share (Details Narrative) - shares | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Options | ||
Antidilutive securities excluded from earnings | 8,436,791 | 5,139,070 |
Warrant [Member] | ||
Antidilutive securities excluded from earnings | 26,444,260 | 14,014,587 |
Convertible Debenture | Audited | ||
Antidilutive securities excluded from earnings | 2,813,778 | 0 |
10. Statement of Cash Flows (De
10. Statement of Cash Flows (Details) - CAD | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Notes to Financial Statements | ||
Accounts receivable | CAD (1,696,674) | CAD (1,355,477) |
Inventories | (324,885) | (14,068) |
Prepaid expenses and other receivables | (297,186) | (26,869) |
Taxes recoverable | 10,343 | 473,078 |
Accounts payable and accrued liabilities | 60,984 | 585,897 |
Changes in non-cash balances related to operations | CAD (2,247,418) | CAD (337,439) |
10. Statement of Cash Flows (71
10. Statement of Cash Flows (Details Narrative) - CAD | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | Dec. 31, 2014 | |
Accounts payable and accrued liabilities | CAD 60,984 | CAD 585,897 | |
Interest paid | CAD 1,172,414 | CAD 502,829 | |
Taxes paid | |||
Non-cash debt issuance costs | CAD 100,500 | CAD 65,526 | |
Warrants issued | 954,710 | ||
Warrants were issued, value | CAD 304,019 | ||
Broker compensation option | 1,909,419 | ||
Private placement | 205,438 | ||
Patents and licenses | |||
Accounts payable and accrued liabilities | 8,893 | CAD 31,655 | |
Amount related to license fees | CAD 186,663 |
11. Contingencies and Commitm72
11. Contingencies and Commitments (Details) | Jun. 30, 2015CAD |
2,015 | CAD 3,056,000 |
2,016 | 754,000 |
2,017 | 773,000 |
2,018 | 790,000 |
2019 and thereafter | 3,710,000 |
Total | 9,083,000 |
Audited | |
2,015 | 3,810,788 |
2,016 | 833,045 |
2,017 | 867,684 |
2,018 | 840,974 |
2019 and thereafter | 3,253,139 |
Total | CAD 9,605,630 |
11. Contingencies and Commitm73
11. Contingencies and Commitments (Details 1) - Audited | Jun. 30, 2015CAD |
2,015 | CAD 53,107 |
2,016 | 104,542 |
2,017 | 69,333 |
Total | CAD 226,982 |
11. Contingencies and Commitm74
11. Contingencies and Commitments (Details Narrative) - CAD | Jun. 30, 2015 | Dec. 31, 2014 |
Contingencies And Commitments Details Narrative | ||
Executive termination under initial agreement | CAD 2,672,550 | CAD 247,200 |
Remuneration to executive | CAD 4,435,633 | CAD 2,072,200 |
12. Significant Customers (Deta
12. Significant Customers (Details Narrative) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Risk percentage | 58.90% | 68.90% | 52.40% | 67.40% |
Major customer | ||||
Concentration Risk, Customer | 3 | 3 | 2 | 3 |
12a. Changes in Non-Cash Oper76
12a. Changes in Non-Cash Operating Assets and Liabilities (Details) - CAD | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Accounts receivable | CAD (1,696,674) | CAD (1,355,477) |
Inventories | (324,885) | (14,068) |
Prepaid expenses and other receivables | (26,869) | |
Taxes recoverable | 10,343 | 473,078 |
Accounts payable and accrued liabilities | 60,984 | 585,897 |
Total | CAD (337,439) | |
Audited | ||
Accounts receivable | (1,679,859) | |
Inventories | (331,643) | |
Prepaid expenses and other receivables | 32,842 | |
Taxes recoverable | (14,996) | |
Accounts payable and accrued liabilities | (76,638) | |
Total | CAD (2,070,294) |
13. Related Party Transactions
13. Related Party Transactions (Details Narrative) - CAD | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Notes to Financial Statements | ||||
Stock options granted to LMT | 200,000 | 200,000 | ||
Non-cash expense | CAD 110,405 | CAD 20,222 | CAD 148,931 | CAD 36,444 |
14. Income Taxes (Details)
14. Income Taxes (Details) - Audited - CAD | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Income tax expense (benefit) at statutory rate at 26.5% (2014- 26.5%) | CAD (3,693,200) | CAD (1,485,800) |
Adjusted for: | ||
Change in valuation allowance | 1,247,300 | 2,045,100 |
Share issue costs | (363,600) | (1,070,400) |
Non-deductible expenses | 2,819,500 | 241,500 |
Other | CAD (10,000) | CAD 269,600 |
Deferred income tax (recovery) |
14. Income Taxes (Details 1)
14. Income Taxes (Details 1) - CAD | Jun. 30, 2015 | Dec. 31, 2014 |
Benefit of net operating losses carry-forward | CAD 15,586,000 | |
Audited | ||
Benefit of net operating losses carry-forward | 4,052,600 | CAD 3,438,300 |
Book values of property, plant and equipment and intangible assets in excess of tax bases | 871,300 | 192,100 |
Benefit of SR&ED expenditures | 476,600 | 476,600 |
Share issue costs | 1,053,600 | 985,700 |
Non-refundable tax credits | 341,300 | 341,300 |
License agreements | (9,530,091) | (2,030,000) |
Long-term debt | 502,500 | 290,700 |
Valuation allowance | (4,942,000) | CAD (3,694,700) |
Total | CAD (7,174,191) |
14. Income Taxes (Details 2)
14. Income Taxes (Details 2) - Audited | Jun. 30, 2015CAD |
2,026 | CAD 231,900 |
2,027 | 85,400 |
2,028 | 53,700 |
2,030 | 755,300 |
2,031 | 1,994,900 |
2,032 | 2,071,000 |
2,033 | 4,348,300 |
2,034 | 3,419,100 |
2,035 | 2,333,200 |
Total | CAD 15,292,800 |
14. Income Taxes (Details Narra
14. Income Taxes (Details Narrative) | 6 Months Ended |
Jun. 30, 2015CAD | |
Non-capital loss carry-forwards | CAD 15,586,000 |
Carry-forward expenditures offset against future taxable income | 1,798,300 |
Tax credits, non-refundable | CAD 341,300 |
Minimum [Member] | |
Loss Carryforwards Expiration Dates | Dec. 31, 2015 |
Maximum [Member] | |
Loss Carryforwards Expiration Dates | Dec. 31, 2035 |
15. Segmented Information (Deta
15. Segmented Information (Details) - CAD | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Product sales: | ||||
Domestic sales | CAD 5,448,148 | CAD 3,676,588 | CAD 10,557,658 | CAD 6,676,500 |
International sales | 971,468 | 357,872 | 1,441,063 | 821,849 |
Other revenue | 9,868 | 6,825 | 23,060 | 18,075 |
Total | CAD 6,429,484 | CAD 4,041,285 | CAD 12,021,781 | 7,516,424 |
Royalty revenues | 18,414 | |||
Total revenues | CAD 6,429,484 | CAD 4,041,285 | CAD 12,021,781 | CAD 7,534,838 |
16. Foreign Currency Gain (Lo83
16. Foreign Currency Gain (Loss) (Details Narrative) - CAD | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Cash in hand | CAD 9,151,391 | CAD 9,151,391 | CAD 1,319,013 | ||
Accounts receivables | 907,613 | 907,613 | 319,764 | ||
Accounts payable and accrued liabilities | 6,715,328 | 6,715,328 | 32,857 | ||
Warrant liability | 9,575,408 | 9,575,408 | 3,107,880 | CAD 3,107,880 | CAD 2,966,714 |
Long term debt | 17,463,600 | 17,463,600 | 16,241,400 | ||
Foreign currency gain (loss) | CAD 228,785 | (950,724) | (10,506) | ||
Audited | |||||
Foreign currency gain (loss) | CAD (918,527) | CAD 185,559 |
17. Financial Instruments (Deta
17. Financial Instruments (Details) - CAD | Jun. 30, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Derivative liability - Warrants (Fair Value) | CAD 9,575,408 | CAD 3,107,880 | CAD 3,107,880 | CAD 2,966,714 |
Level 1 | ||||
Derivative liability - Warrants (Fair Value) | ||||
Level 2 | ||||
Derivative liability - Warrants (Fair Value) | ||||
Level 3 | ||||
Derivative liability - Warrants (Fair Value) | CAD 9,575,408 | CAD 3,107,880 |
17. Financial Instruments (De85
17. Financial Instruments (Details 1) - CAD | 6 Months Ended | 12 Months Ended |
Jun. 30, 2015 | Dec. 31, 2013 | |
Financial Instruments Details 1 | ||
Derivative liability - Warrants, beginning | CAD 3,107,880 | CAD 2,966,714 |
Additions (deletions) to derivative instruments | (2,409,961) | 424,471 |
Change in fair market value, recognized in earnings as Change in warrant liability | 8,877,489 | (283,305) |
Derivative liability - Warrants, ending | CAD 9,575,408 | CAD 3,107,880 |
17. Financial Instruments (De86
17. Financial Instruments (Details 2) | 6 Months Ended |
Jun. 30, 2015CAD | |
Financial Instruments Details - Warrant Liability Valuation | |
Warrant Liability, Fair Value | CAD 9,575,408 |
Valuation Technique | Black-Scholes valuation model |
Volatility | 98.00% |
17. Financial Instruments (De87
17. Financial Instruments (Details 3) - CAD / shares | 6 Months Ended | 12 Months Ended |
Jun. 30, 2015 | Dec. 31, 2014 | |
Expected volatility | 98.00% | |
Expected dividend yield | 0.00% | |
Expected warrant life (years) | 5 years | |
Warrant [Member] | ||
Number of shares underlying the warrants | 6,857,962 | 14,754,587 |
Fair market value of the stock | CAD 1.28 | CAD 0.21 |
Exercise price | CAD 0.73 | CAD 0.64 |
Expected volatility | 98.00% | 88.00% |
Risk-free interest rate | 1.02% | 1.22% |
Expected dividend yield | 0.00% | 0.00% |
Expected warrant life (years) | 3 years 2 months 5 days | 2 years 2 months 5 days |
17. Financial Instruments (De88
17. Financial Instruments (Details Narrative) - CAD | 6 Months Ended | 12 Months Ended |
Jun. 30, 2015 | Dec. 31, 2014 | |
Notes to Financial Statements | ||
Concentration of credit risk and major customers | CAD 5,615,719 | CAD 2,161,133 |
Concentration of credit risk account receivable | 67.10% | 65.70% |
Concentration of credit risk account receivable related to product sale two wholesale accounts | 28.50% | 23.90% |
Concentration of credit risk account receivable related to product sale one wholesale accounts | 24.30% | 53.50% |
18. Derivative Financial Inst89
18. Derivative Financial Instruments (Details) - CAD | Jun. 30, 2015 | Dec. 31, 2014 |
Notional Principal | ||
Foreign currency sold - call options | CAD 3,500,000 | |
Fair Value | ||
Foreign currency sold - call options | CAD (24,850) |
18. Derivative Financial Inst90
18. Derivative Financial Instruments (Details Narrative) - CAD | 6 Months Ended | 12 Months Ended |
Jun. 30, 2015 | Dec. 31, 2014 | |
Derivative Financial Instruments Details Narrative | ||
Fair value of the foreign currency call option loss | CAD 24,850 | CAD 0 |
19. Subsequent Events (Details
19. Subsequent Events (Details Narrative) | 6 Months Ended |
Jun. 30, 2015CADCAD / sharesshares | |
Proceeds from issuence of common shares | CAD | CAD 12,000,199 |
Subsequent Event [Member] | |
Common shares issued | 930,125 |
Common share purchase warrants | 776,700 |
Compensation options exercised | 153,425 |
Weighted average exercise price | CAD / shares | CAD 0.88 |
Proceeds from issuence of common shares | CAD | CAD 806,428 |