INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2015 AND 2014
(UNAUDITED)
96 Skyway Avenue
Toronto, Ontario M9W 4Y9
www.trilliumtherapeutics.com
TRILLIUM THERAPEUTICS INC. |
Interim Condensed Consolidated Statements of Financial Position |
Amounts in Canadian Dollars |
(Unaudited) |
As at | As at | ||||||||
Note | September 30, 2015 | December 31, 2014 | |||||||
$ | $ | ||||||||
ASSETS | |||||||||
Current | |||||||||
Cash | 89,082,852 | 26,165,056 | |||||||
Amounts receivable | 4 | 816,515 | 344,416 | ||||||
Prepaid expenses | 544,525 | 1,008,225 | |||||||
Total current assets | 90,443,892 | 27,517,697 | |||||||
Property and equipment | 5 | 701,654 | 235,402 | ||||||
Intangible assets | 6 | 178,422 | 432,933 | ||||||
Other assets | 116,450 | - | |||||||
Total non-current assets | 996,526 | 668,335 | |||||||
Total assets | 91,440,418 | 28,186,032 | |||||||
LIABILITIES | |||||||||
Current | |||||||||
Accounts payable and accrued liabilities | 7 | 3,060,159 | 3,248,984 | ||||||
Other current liabilities | 8 | 293,799 | 279,461 | ||||||
Total current liabilities | 3,353,958 | 3,528,445 | |||||||
Loan payable | 8 | 288,549 | 283,352 | ||||||
Deferred lease inducement | 8 | 300,084 | - | ||||||
Long-term liability | 8 | 56,804 | 69,941 | ||||||
Total non-current liabilities | 645,437 | 353,293 | |||||||
Total liabilities | 3,999,395 | 3,881,738 | |||||||
EQUITY | |||||||||
Common shares | 9 | 100,913,389 | 49,505,792 | ||||||
Series I preferred shares | 9 | 9,409,284 | 10,076,151 | ||||||
Series II preferred shares | 9 | 24,369,384 | - | ||||||
Warrants | 9 | 7,221,695 | 9,283,332 | ||||||
Contributed surplus | 9 | 7,828,163 | 5,995,055 | ||||||
Deficit | (62,300,892 | ) | (50,556,036 | ) | |||||
Total equity | 87,441,023 | 24,304,294 | |||||||
Total liabilities and equity | 91,440,418 | 28,186,032 | |||||||
Commitments and contingencies[note 13] |
Approved by the Board and authorized for issue on November 10, 2015.
(signed) Luke Beshar, Director | (signed) Henry Friesen, Director |
See accompanying notes to the interim condensed consolidated financial statements
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TRILLIUM THERAPEUTICS INC. |
Interim Condensed Consolidated Statements of Loss and Comprehensive Loss |
Amounts in Canadian Dollars |
(Unaudited) |
Three months ended | Three months ended | Nine months ended | Nine months ended | ||||||||||||
Note | September 30, 2015 | September 30, 2014 | September 30, 2015 | September 30, 2014 | |||||||||||
$ | $ | $ | $ | ||||||||||||
EXPENSES | |||||||||||||||
Research and development | 10 | 4,954,811 | 2,089,977 | 13,684,508 | 6,760,861 | ||||||||||
General and administrative | 11 | 721,549 | 500,072 | 2,292,806 | 2,137,614 | ||||||||||
Operating expenses | 5,676,360 | 2,590,049 | 15,977,314 | 8,898,475 | |||||||||||
Finance income | 12 | (4,192,147 | ) | (92,517 | ) | (4,295,832 | ) | (291,382 | ) | ||||||
Finance costs | 12 | 21,766 | 28,995 | 63,374 | 59,865 | ||||||||||
Net finance income | (4,170,381 | ) | (63,522 | ) | (4,232,458 | ) | (231,517 | ) | |||||||
Net loss and comprehensive loss for the period | 1,505,979 | 2,526,527 | 11,744,856 | 8,666,958 | |||||||||||
Basic and diluted loss percommon share | 9(c) | 0.21 | 0.60 | 1.84 | 2.08 |
See accompanying notes to the interim condensed consolidated financial statements
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TRILLIUM THERAPEUTICS INC. |
Interim Condensed Consolidated Statements of Changes in Equity |
Amounts in Canadian Dollars |
(Unaudited) |
Common shares | Series I preferred shares | Series II preferred shares | Warrants | Contributed | |||||||||||||||||||||||||||||
Number | Amount | Number | Amount | Number | Amount | Number | Amount | surplus | Deficit | Total | |||||||||||||||||||||||
# | $ | # | $ | # | $ | # | $ | $ | $ | $ | |||||||||||||||||||||||
(note 9) | (note 9) | (note 9) | (note 9) | (note 9) | |||||||||||||||||||||||||||||
Balance, December 31, 2014 | 4,427,244 | 49,505,792 | 69,504,689 | 10,076,151 | - | - | 138,724,781 | 9,283,332 | 5,995,055 | (50,556,036 | ) | 24,304,294 | |||||||||||||||||||||
Net loss and comprehensiveloss for the period | - | - | - | - | - | - | - | - | - | (11,744,856 | ) | (11,744,856 | ) | ||||||||||||||||||||
Transactions with ownersof the Company, recognizeddirectly in equity | |||||||||||||||||||||||||||||||||
Share units issued, net of issue costs | 1,750,754 | 39,592,240 | - | - | 1,077,605 | 24,369,384 | - | - | - | - | 63,961,624 | ||||||||||||||||||||||
Exercise of warrants | 1,008,928 | 11,057,295 | - | - | - | - | (30,268,151 | ) | (2,061,637 | ) | - | - | 8,995,658 | ||||||||||||||||||||
Exercise of stock options | 6,666 | 91,195 | - | - | - | - | - | - | (41,200 | ) | - | 49,995 | |||||||||||||||||||||
Conversion of preferred shares | 153,333 | 666,867 | (4,600,000 | ) | (666,867 | ) | - | - | - | - | - | - | - | ||||||||||||||||||||
Share-based compensation | - | - | - | - | - | - | - | - | 1,874,308 | - | 1,874,308 | ||||||||||||||||||||||
Total transactions withowners of the Company | 2,919,681 | 51,407,597 | (4,600,000 | ) | (666,867 | ) | 1,077,605 | 24,369,384 | (30,268,151 | ) | (2,061,637 | ) | 1,833,108 | - | 74,881,585 | ||||||||||||||||||
Balance, September 30,2015 | 7,346,925 | 100,913,389 | 64,904,689 | 9,409,284 | 1,077,605 | 24,369,384 | 108,456,630 | 7,221,695 | 7,828,163 | (62,300,892 | ) | 87,441,023 |
Common shares | Series I preferred shares | Warrants | Contributed | ||||||||||||||||||||||||
Number | Amount | Number | Amount | Number | Amount | surplus | Deficit | Total | |||||||||||||||||||
# | $ | # | $ | # | $ | $ | $ | $ | |||||||||||||||||||
Balance, December 31, 2013 | 4,058,408 | 47,191,303 | 77,895,165 | 11,292,525 | 142,230,123 | 9,818,179 | 3,280,656 | (37,674,216 | ) | 33,908,447 | |||||||||||||||||
Net loss and comprehensiveloss for the period | - | - | - | - | - | - | - | (8,666,958 | ) | (8,666,958 | ) | ||||||||||||||||
Transactions with ownersof the Company, recognizeddirectly in equity | |||||||||||||||||||||||||||
Exercise of warrants | 86,540 | 1,065,015 | - | - | (2,596,251 | ) | (118,202 | ) | - | - | 946,813 | ||||||||||||||||
Exercise of stock options | 2,614 | 33,100 | - | - | - | - | (13,500 | ) | - | 19,600 | |||||||||||||||||
Conversion of preferred shares | 119,016 | 517,615 | (3,570,476 | ) | (517,615 | ) | - | - | - | - | - | ||||||||||||||||
Expiry of warrants | - | - | - | - | (909,091 | ) | (416,645 | ) | 416,645 | - | - | ||||||||||||||||
Share-based compensation | - | - | - | - | - | - | 1,992,471 | - | 1,992,471 | ||||||||||||||||||
Total transactions withowners of the Company | 208,170 | 1,615,730 | (3,570,476 | ) | (517,615 | ) | (3,505,342 | ) | (534,847 | ) | 2,395,616 | - | 2,958,884 | ||||||||||||||
Balance, September 30,2014 | 4,266,578 | 48,807,033 | 74,324,689 | 10,774,910 | 138,724,781 | 9,283,332 | 5,676,272 | (46,341,174 | ) | 28,200,373 |
See accompanying notes to the interim condensed consolidated financial statements
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TRILLIUM THERAPEUTICS INC. |
Interim Condensed Consolidated Statements of Cash Flows |
Amounts in Canadian Dollars |
(Unaudited) |
Nine months ended | Nine months ended | ||||||||
Note | September 30, 2015 | September 30, 2014 | |||||||
$ | $ | ||||||||
OPERATING ACTIVITIES | |||||||||
Net loss for the period | (11,744,856 | ) | (8,666,958 | ) | |||||
Adjustments for items not affecting cash | |||||||||
Share-based compensation | 9 | 1,874,308 | 1,992,471 | ||||||
Interest accretion | 8,12 | 55,490 | 54,169 | ||||||
Amortization of intangible assets | 6 | 254,511 | 525,939 | ||||||
Impairment of intangible assets | 6 | - | 429,763 | ||||||
Depreciation of property and equipment | 5 | 85,881 | 31,779 | ||||||
Deferred lease inducement | 57,684 | - | |||||||
Unrealized gain on cash | (3,982,986 | ) | - | ||||||
(13,399,968 | ) | (5,632,837 | ) | ||||||
Changes in non-cash working capital balances | |||||||||
Amounts receivable | (472,099 | ) | (41,073 | ) | |||||
Prepaid expenses | 463,700 | (625,111 | ) | ||||||
Accounts payable and accrued liabilities | (188,825 | ) | 688,901 | ||||||
Other current liabilities | 14,338 | 201,094 | |||||||
Increase in other assets | (116,450 | ) | - | ||||||
Cash used in operating activities | (13,699,304 | ) | (5,409,026 | ) | |||||
INVESTING ACTIVITIES | |||||||||
Purchase of property and equipment | 5 | (522,133 | ) | (144,196 | ) | ||||
Net change in marketable securities | - | 21,108 | |||||||
Cash used in investing activities | (522,133 | ) | (123,088 | ) | |||||
FINANCING ACTIVITIES | |||||||||
Change in loan payable | 8 | (37,487 | ) | (86,274 | ) | ||||
Receipt of deferred lease inducement | 8 | 212,400 | - | ||||||
Change in long-term liability | 8 | (25,943 | ) | (50,153 | ) | ||||
Issue of share capital, net of issuance costs | 9 | 73,007,277 | 966,413 | ||||||
Cash provided by financing activities | 73,156,247 | 829,986 | |||||||
Impact of foreign exchange rate on cash | 3,982,986 | - | |||||||
Net increase (decrease) in cash during the period | 62,917,796 | (4,702,128 | ) | ||||||
Cash, beginning of period | 26,165,056 | 32,456,506 | |||||||
Cash, end of period | 89,082,852 | 27,754,378 | |||||||
Supplemental cash flow information | |||||||||
Preferred shares converted to common shares (note 9) | 666,867 | 517,615 |
See accompanying notes to the interim condensed consolidated financial statements
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TRILLIUM THERAPEUTICS INC. |
Notes to the Interim Condensed Consolidated Financial Statements |
For the three and nine months ended September 30, 2015 and 2014 |
Amounts in Canadian Dollars |
(Unaudited) |
1. | Corporate information |
Trillium Therapeutics Inc. (the “Company” or “Trillium”) is a Canadian public immuno-oncology company developing innovative therapies for the treatment of cancer. The Company was incorporated under the laws of the Province of Alberta on March 31, 2004 with nominal share capital and filed Articles of Continuance to change its jurisdiction to Ontario on November 7, 2013. On June 1, 2014, the Company amalgamated with its wholly-owned subsidiary Trillium Therapeutics Inc. (“Trillium Privateco”) and changed its name from Stem Cell Therapeutics Corp. to Trillium Therapeutics Inc. | |
The Company’s head office is located at 96 Skyway Avenue, Toronto, Ontario, M9W 4Y9 and is listed on the Toronto Stock Exchange under the symbol TR and on the NASDAQ Stock Exchange under the symbol TRIL. | |
2. | Basis of presentation |
(a) | Statement of compliance |
These unaudited interim condensed consolidated financial statements have been prepared in compliance with International Accounting Standard 34Interim Financial Reporting(“IAS 34”). The notes presented in these unaudited interim condensed consolidated financial statements include only significant events and transactions occurring since the Company’s last fiscal year end and are not fully inclusive of all matters required to be disclosed in its annual audited consolidated financial statements. | |
The policies applied in these unaudited interim condensed consolidated financial statements are based on International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The Board of Directors approved the unaudited interim condensed consolidated financial statements on November 10, 2015. Any subsequent changes to IFRS or their interpretation, that are given effect in the Company’s annual audited consolidated financial statements for the year ending December 31, 2015, could result in a restatement of these unaudited interim condensed consolidated financial statements. | |
(b) | Basis of measurement |
These unaudited interim condensed consolidated financial statements have been prepared on the historical cost basis, except for held-for-trading financial assets, which are measured at fair value. | |
(c) | Functional and presentation currency |
These unaudited interim condensed consolidated financial statements are presented in Canadian dollars, which is the Company’s functional currency. | |
(d) | Use of significant estimates and assumptions |
The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, revenue and expenses and the related disclosures of contingent assets and liabilities and the determination of the Company’s ability to continue as a going concern. Actual results could differ materially from these estimates and assumptions. The Company reviews its estimates and underlying assumptions on an ongoing basis. Revisions are recognized in the period in which the estimates are revised and may impact future periods. | |
The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements, have been set out in Note 2 of the Company’s annual audited consolidated financial statements for the year ended December 31, 2014. |
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TRILLIUM THERAPEUTICS INC. |
Notes to the Interim Condensed Consolidated Financial Statements |
For the three and nine months ended September 30, 2015 and 2014 |
Amounts in Canadian Dollars |
(Unaudited) |
3. | Significant accounting policies |
The Company’s significant accounting policies were outlined in the Company’s annual audited consolidated financial statements for the year ended December 31, 2014 and have been applied consistently to all periods presented in these unaudited interim condensed consolidated financial statements. In the opinion of management, all adjustments considered necessary for fair presentation have been included in these unaudited interim condensed consolidated financial statements. These unaudited interim condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements for the year ended December 31, 2014. |
(a) | Basis of consolidation |
These unaudited interim condensed consolidated financial statements include the accounts of the Company and its wholly- owned subsidiaries, Trillium Privateco to the date of its amalgamation with the Company on June 1, 2014, Stem Cell Therapeutics Inc. to the date of its dissolution on September 17, 2014, and Trillium Therapeutics USA Inc. from the date of incorporation on March 26, 2015. | |
(b) | New standards and interpretations not yet effective |
IFRS 9Financial Instruments | |
In October 2010, the IASB published amendments to IFRS 9Financial Instruments(“IFRS 9”), which provides added guidance on the classification and measurement of financial liabilities. In July 2014, the IASB issued its final version of IFRS 9, which completes the classification and measurement, impairment and hedge accounting phases of the IASB’s project to replace IAS 39. The final standard is mandatorily effective for annual periods beginning on or after January 1, 2018, with earlier application permitted. The Company is currently monitoring the developments of this standard and assessing the impact that the adoption of this standard may have on the unaudited interim condensed consolidated financial statements. | |
IFRS 15Revenue from Contracts with Customers | |
In May 2014, the IASB issued IFRS 15Revenue from Contracts with Customers(“IFRS 15”), which covers principles for reporting about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. IFRS 15 is effective for annual periods beginning on or after January 1, 2018. Entities will transition following either a full or modified retrospective approach. The Company is reviewing the standard to determine the impact on the unaudited interim condensed consolidated financial statements. | |
Other accounting standards or amendments to existing accounting standards that have been issued, but have future effective dates, are either not applicable or are not expected to have a significant impact on the Company’s unaudited interim condensed consolidated financial statements. The Company assesses the impact of adoption of future standards on its unaudited interim condensed consolidated financial statements, but does not anticipate significant changes in 2015. |
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TRILLIUM THERAPEUTICS INC. |
Notes to the Interim Condensed Consolidated Financial Statements |
For the three and nine months ended September 30, 2015 and 2014 |
Amounts in Canadian Dollars |
(Unaudited) |
4. | Amounts receivable |
September 30, | December 31, | ||||||
2015 | 2014 | ||||||
$ | $ | ||||||
Government programs receivable | 655,154 | 344,416 | |||||
Other amounts receivable | 161,361 | - | |||||
816,515 | 344,416 |
5. | Property and equipment |
Computer | Office | ||||||||||||
Lab | equipment | equipment and | |||||||||||
equipment | and software | leaseholds | Total | ||||||||||
$ | $ | $ | $ | ||||||||||
Cost | |||||||||||||
Balance, December 31, 2013 | 111,025 | 18,111 | 9,381 | 138,517 | |||||||||
Additions | 141,051 | 21,917 | 10,635 | 173,603 | |||||||||
Balance, December 31, 2014 | 252,076 | 40,028 | 20,016 | 312,120 | |||||||||
Additions | 435,119 | 53,940 | 63,074 | 552,133 | |||||||||
Balance, September 30, 2015 | 687,195 | 93,968 | 83,090 | 864,253 | |||||||||
Accumulated depreciation | |||||||||||||
Balance, December 31, 2013 | 14,723 | 14,004 | 783 | 29,510 | |||||||||
Depreciation | 33,366 | 9,554 | 4,288 | 47,208 | |||||||||
Balance, December 31, 2014 | 48,089 | 23,558 | 5,071 | 76,718 | |||||||||
Depreciation | 63,232 | 18,795 | 3,854 | 85,881 | |||||||||
Balance September 30, 2015 | 111,321 | 42,353 | 8,925 | 162,599 | |||||||||
Net carrying amounts | |||||||||||||
December 31, 2014 | 203,987 | 16,470 | 14,945 | 235,402 | |||||||||
September 30, 2015 | 575,874 | 51,615 | 74,165 | 701,654 |
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TRILLIUM THERAPEUTICS INC. |
Notes to the Interim Condensed Consolidated Financial Statements |
For the three and nine months ended September 30, 2015 and 2014 |
Amounts in Canadian Dollars |
(Unaudited) |
6. | Intangible assets |
Total | ||||
$ | ||||
Cost | ||||
Balance, December 31, 2013 | 2,103,751 | |||
Disposals | (1,085,714 | ) | ||
Balance, December 31, 2014 and September 30, 2015 | 1,018,037 | |||
Accumulated amortization | ||||
Balance, December 31, 2013 | 630,279 | |||
Amortization | 610,776 | |||
Disposals | (655,951 | ) | ||
Balance, December 31, 2014 | 585,104 | |||
Amortization | 254,511 | |||
Balance, September 30, 2015 | 839,615 | |||
Net carrying amounts | ||||
December 31, 2014 | 432,933 | |||
September 30, 2015 | 178,422 |
As at September 30, 2015, intangible assets were comprised of licensed patent rights related to the SIRPαFc program acquired in 2013 in the amount of $1,018,037. | |
The Company returned rights related to tigecycline and recorded an impairment loss of $429,763 in the second quarter of 2014. | |
7. | Accounts payable and accrued liabilities |
September 30, | December 31, | ||||||
2015 | 2014 | ||||||
$ | $ | ||||||
Trade and other payables | 1,369,602 | 1,604,533 | |||||
Accrued liabilities | 1,502,710 | 1,585,823 | |||||
Due to related parties (note 14) | 187,847 | 58,628 | |||||
3,060,159 | 3,248,984 |
Amounts due to related parties represent expense reimbursements, accrued vacation payable and directors’ fees payable.
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TRILLIUM THERAPEUTICS INC. |
Notes to the Interim Condensed Consolidated Financial Statements |
For the three and nine months ended September 30, 2015 and 2014 |
Amounts in Canadian Dollars |
(Unaudited) |
8. | Non-current liabilities |
(a) | Trillium is indebted to the Federal Economic Development Agency for Southern Ontario under a non-interest bearing contribution agreement and is making monthly repayments of $9,586 through November 2019. As at September 30, 2015, the balance repayable is $469,693. The loan payable was discounted using an estimated market interest rate of 15%. Interest expense accretes on the discounted loan amount until it reaches its face value at maturity. |
(b) | As at September 30, 2015, the Company has a deferred lease inducement of $300,084 for a new facility lease. The inducement benefit will be recognized over the expected term of the lease. |
(c) | The Company has a long-term liability of $56,804 related to certain discontinued technologies. This liability has been discounted using an estimated market interest rate of 15% and interest expense is accreting. |
The current portions of the loan payable and long-term liability are included in other current liabilities in the unaudited interim condensed consolidated statements of financial position. |
9. | Share capital |
(a) | Authorized |
The authorized share capital of the Company consists of an unlimited number of common shares, Class B shares and First Preferred Shares, in each case without nominal or par value. Common shares are voting and may receive dividends as declared at the discretion of the Board of Directors. Class B shares are non-voting and convertible to common shares at the holder’s discretion, on a one-for-one basis. Upon dissolution or wind-up of the Company, Class B shares participate rateably with the common shares in the distribution of the Company’s assets. Preferred shares have voting rights as decided upon by the Board of Directors at the time of grant. Upon dissolution or wind-up of the Company, First Preferred Shares are entitled to priority over common and Class B shares. | |
The Company has Series I First Preferred Shares that are non-voting, may receive dividends as declared at the discretion of the Board of Directors, and are convertible to common shares at the holder’s discretion, on the basis of 30 Series I First Preferred Shares for one common share. | |
The Company has Series II First Preferred Shares that are non-voting, may receive dividends as declared at the discretion of the Board of Directors, and are convertible to common shares at the holder’s discretion, on the basis of one Series II First Preferred Share for one common share. | |
Holders may not convert Series I or Series II Non-Voting Convertible First Preferred Shares into common shares if, after giving effect to the exercise of conversion, the holder and its joint actors would have beneficial ownership or direction or control over common shares in excess of 4.99% of the then outstanding common shares. This limit may be raised at the option of the holder on 61 days’ prior written notice: (i) up to 9.99%, (ii) up to 19.99%, subject to clearance of a personal information form submitted by the holder to the Toronto Stock Exchange, and (iii) above 19.99%, subject to approval by the Toronto Stock Exchange and shareholder approval. | |
(b) | Share capital issued – nine months ended September 30, 2015 |
On April 7, 2015, the Company completed an underwritten public offering of common shares and non-voting convertible preferred shares in the United States. In the offering, Trillium sold 1,750,754 common shares and 1,077,605 Series II Non- Voting Convertible First Preferred Shares at a price of U.S. $19.50 per share, including 228,359 common shares sold pursuant to the full exercise of the underwriters’ option to purchase additional common shares. The gross proceeds to Trillium from this offering were $68,875,067 (U.S. $55,153,000) before deducting offering expenses of $4,913,443. | |
During the nine months ended September 30, 2015, 1,008,928 common shares were issued on the exercise of 30,268,151 warrants for proceeds of $8,995,658 and 6,666 stock options were exercised for proceeds of $49,995. | |
During the nine months ended September 30, 2015, 4,600,000 Series I First Preferred Shares were converted into 153,333 common shares. |
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TRILLIUM THERAPEUTICS INC. |
Notes to the Interim Condensed Consolidated Financial Statements |
For the three and nine months ended September 30, 2015 and 2014 |
Amounts in Canadian Dollars |
(Unaudited) |
9. | Share capital (continued) |
Share capital issued – year ended December 31, 2014 | |
On November 14, 2014, the Company consolidated its outstanding common shares issuing one post-consolidated share for each 30 pre-consolidated shares. All references in these unaudited interim condensed consolidated financial statements and notes to the number of common shares, deferred share units and stock options have been adjusted to the post-consolidation amounts. | |
During the year ended December 31, 2014, 2,596,251 warrants were exercised for 86,540 common shares and for proceeds of $946,813 and 2,614 stock options were exercised for proceeds of $19,600. Also, 909,091 warrants issued in March 2011 expired unexercised. | |
During the year ended December 31, 2014, 8,390,476 Series I First Preferred Shares were converted into 279,682 common shares. |
(c) | Weighted average number of common shares |
The weighted average number of common shares outstanding for the purposes of calculating earnings per share have been adjusted for 2014 to the post-consolidated numbers. The weighted average number of common shares outstanding for the three and nine months ended September 30, 2015 and September 30, 2014 were 7,345,519 and 6,379,237, and 4,230,161 and 4,160,562, respectively. The Company has not adjusted its weighted average number of common shares outstanding in the calculation of diluted loss per share, as any adjustment would be antidilutive. | |
(d) | Warrants |
All warrants were exercisable on issuance. As a result of the November 14, 2014 common share consolidation, the ratio of the number of warrants exercisable for one common share was adjusted from one warrant for each common share to thirty warrants for each common share. The number of warrants outstanding was not adjusted. | |
The following table shows the number of warrants outstanding, the exercise prices, and the number of common shares issuable on exercise of the warrants and the exercise price per common share for 30 warrants as at September 30, 2015: |
Number of | Exercise | ||||
common shares | price per | ||||
Number of | Exercise | issuable | common share | ||
Expiry dates | warrants | price | on exercise | (30 warrants) | |
December 13, 2015 | 2,234,784 | $0.21 | 74,493 | $6.30 | |
March 15, 2018 | 9,219,270 | $0.40 | 307,309 | $12.00 | |
March 27, 2018 | 420,000 | $0.40 | 14,000 | $12.00 | |
December 13, 2018 | 96,582,576 | $0.28 | 3,219,419 | $8.40 | |
108,456,630 | 3,615,221 |
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TRILLIUM THERAPEUTICS INC. |
Notes to the Interim Condensed Consolidated Financial Statements |
For the three and nine months ended September 30, 2015 and 2014 |
Amounts in Canadian Dollars |
(Unaudited) |
9. | Share capital (continued) |
Changes in the number of warrants outstanding during the nine months ended September 30 were as follows: |
2015 | 2014 | ||||||||||||
Weighted | Weighted | ||||||||||||
average | average | ||||||||||||
Number of | exercise | Number of | exercise | ||||||||||
warrants | price | warrants | price | ||||||||||
Balance, beginning of period | 138,724,781 | $ | 0.29 | 142,230,123 | $ | 0.30 | |||||||
Exercised | (30,268,151 | ) | 0.30 | (2,596,251 | ) | 0.36 | |||||||
Expired | - | - | (909,091 | ) | 1.60 | ||||||||
Balance, end of period | 108,456,630 | $ | 0.29 | 138,724,781 | $ | 0.29 |
(e) | Stock option plan |
The Company has a 10% rolling stock option plan, or the 2014 Stock Option Plan, which was approved by the Company’s shareholders at its annual general meeting held on May 27, 2014. Pursuant to the 2014 Stock Option Plan, the Company may grant stock options to purchase up to an aggregate of 10% of the Company’s issued and outstanding common shares plus 10% of the total number of common shares into which the outstanding First Preferred Shares may be converted. Options granted under the 2014 Stock Option plan are equity-settled, have a vesting period of four years and have a maximum term of ten years. As at September 30, 2015, the Company was entitled to issue an additional 312,454 stock options under the 2014 Stock Option Plan. | |
Changes in the number of options outstanding during the nine months ended September 30 were as follows: |
2015 | 2014 | ||||||||||||
Weighted | Weighted | ||||||||||||
average | average | ||||||||||||
Number of | exercise | Number of | exercise | ||||||||||
options | price | options | price | ||||||||||
Balance, beginning of period | 590,141 | $ | 9.76 | 97,372 | $ | 9.94 | |||||||
Granted | 126,500 | 25.00 | 499,883 | 9.78 | |||||||||
Exercised | (6,666 | ) | 7.50 | (2,614 | ) | 7.50 | |||||||
Cancelled/forfeited | (3,000 | ) | 30.00 | (3,833 | ) | 10.59 | |||||||
Balance, end of period | 706,975 | $ | 12.42 | 590,808 | $ | 9.81 | |||||||
Options exercisable, end of period | 333,927 | $ | 10.94 | 220,137 | $ | 10.25 |
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TRILLIUM THERAPEUTICS INC. |
Notes to the Interim Condensed Consolidated Financial Statements |
For the three and nine months ended September 30, 2015 and 2014 |
Amounts in Canadian Dollars |
(Unaudited) |
9. | Share capital (continued) |
The following table reflects stock options outstanding and exercisable as at September 30, 2015: |
Stock options outstanding | Stock options exercisable | ||||
Weighted average | |||||
remaining | |||||
Number | contractual life | Weighted average | Number | Weighted average | |
Exercise prices | outstanding | (in years) | exercise price | exercisable | exercise price |
$7.50 | 74,841 | 7.5 | $7.50 | 49,903 | $7.50 |
$8.34 | 215,758 | 8.7 | $8.34 | 107,878 | $8.34 |
$10.35 | 264,127 | 8.6 | $10.35 | 132,064 | $10.35 |
$15.30 | 6,666 | 8.3 | $15.30 | 3,333 | $15.30 |
$18.90 | 13,332 | 8.4 | $18.90 | 6,666 | $18.90 |
$23.44 | 85,000 | 9.5 | $23.44 | 28,332 | $23.44 |
$28.05 | 29,000 | 9.7 | $28.05 | - | $28.05 |
$28.52 | 12,500 | 9.7 | $28.52 | - | $28.52 |
$30.00 | 5,751 | 0.8 | $30.00 | 5,751 | $30.00 |
706,975 | 8.6 | $12.42 | 333,927 | $10.94 |
Share-based compensation expense was determined based on the fair value of the options at the date of measurement using the Black-Scholes option pricing model with the weighted average assumptions for the nine months ended September 30 as follows:
2015 | 2014 | ||||||
Expected option life | 6 years | 7 years | |||||
Risk-free interest rate | 1.5% | 2.0% | |||||
Dividend yield | 0% | 0% | |||||
Expected volatility | 85% | 75% |
The Black-Scholes option pricing model was developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which significantly differs from the Company’s stock option awards. This model also requires highly subjective assumptions, including future stock price volatility and average option life, which significantly affect the calculated values.
The risk-free interest rate is based on the implied yield on a Government of Canada zero-coupon issue with a remaining term equal to the expected term of the option. Expected volatility was determined using a combination of historical volatilities of a peer group of biotechnology companies and the Company’s own historical volatility. The life of the options is estimated considering the vesting period at the grant date, the life of the option and the average length of time similar grants have remained outstanding in the past. The forfeiture rate is an estimate based on historical evidence and future expectations. The dividend yield was excluded from the calculation since it is the present policy of the Company to retain all earnings to finance operations and future growth.
For the nine months ended September 30, 2015, the Company issued 126,500 stock options with a fair value of $2,254,067 and a weighted average grant date fair value of $17.82. For the nine months ended September 30, 2014, the Company issued 499,883 stock options with a fair value of $3,427,955 and a weighted average grant date fair value of $6.86.
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TRILLIUM THERAPEUTICS INC. |
Notes to the Interim Condensed Consolidated Financial Statements |
For the three and nine months ended September 30, 2015 and 2014 |
Amounts in Canadian Dollars |
(Unaudited) |
9. | Share capital (continued) |
(f) | Deferred Share Unit Plan |
The shareholders of the Company approved the 2014 Deferred Share Unit Plan (the “2014 DSU Plan”) on May 27, 2014. The 2014 DSU Plan is intended to promote a greater alignment of long-term interests between non-executive directors and executive officers of the Company and its shareholders through the issuance of deferred share units (“DSUs”). Since the value of a DSU increases or decreases with the market price of the common shares, DSUs reflect a philosophy of aligning the interests of directors and executive officers with those of the shareholders by tying compensation to share price performance. The Board of Directors intends to use DSUs issued under the 2014 DSU Plan, as well as stock options issued under the 2014 Stock Option Plan, as part of the Company’s overall director and executive officer compensation program. A total of 28,777 units were issued during the year ended December 31, 2014 and 10,597 units were issued during the nine months ended September 30, 2015 for payment of directors’ fees. 39,374 units were outstanding as at September 30, 2015. The Company has reserved for issuance up to 66,667 common shares under the 2014 DSU Plan. | |
(g) | Shareholder Rights Plan |
On October 17, 2013, the Company’s shareholders adopted a shareholder rights plan (the “2013 Rights Plan”) and approved certain amendments on May 27, 2014 (the “Rights Plan Amendment”, which together with the 2013 Rights Plan may be referred to as the “Rights Plan”). The Rights Plan is designed to provide adequate time for the Board of Directors and the shareholders to assess an unsolicited takeover bid for the Company, to provide the Board of Directors with sufficient time to explore and develop alternatives for maximizing shareholder value if a takeover bid is made, and to provide shareholders with an equal opportunity to participate in a takeover bid and receive full and fair value for their common shares. The Rights Plan will expire at the close of the Company’s annual meeting of shareholders in 2016. | |
The rights issued under the Rights Plan initially attach to and trade with the common shares and no separate certificates will be issued unless an event triggering these rights occurs. The rights will become exercisable only when a person, including any party related to it, acquires or attempts to acquire 20% or more of the outstanding common shares without complying with the “Permitted Bid” provisions of the Rights Plan or without approval of the Board of Directors. Should such an acquisition occur or be announced, each right would, upon exercise, entitle a rights holder, other than the acquiring person and related persons, to purchase common shares at an approximate 50% discount to the market price at the time. | |
Under the Rights Plan, a Permitted Bid is a bid made to all holders of the common shares and which is open for acceptance for not less than 60 days. If at the end of 60 days at least 50% of the outstanding common shares, other than those owned by the offeror and certain related parties have been tendered, the offeror may take up and pay for the common shares but must extend the bid for a further 10 days to allow other shareholders to tender. The issuance of common shares upon the exercise of the rights is subject to receipt of certain regulatory approvals. |
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TRILLIUM THERAPEUTICS INC. |
Notes to the Interim Condensed Consolidated Financial Statements |
For the three and nine months ended September 30, 2015 and 2014 |
Amounts in Canadian Dollars |
(Unaudited) |
10. | Research and development |
Components of research and development expenses for the three months ended September 30 were as follows: |
2015 | 2014 | ||||||
$ | $ | ||||||
Research and development programs excluding the below items | 3,319,494 | 1,419,374 | |||||
Salaries, fees and short-term benefits | 1,258,570 | 543,665 | |||||
Share-based compensation | 361,341 | 244,552 | |||||
Amortization of intangible assets | 84,837 | 84,837 | |||||
Depreciation of property and equipment | 51,735 | 11,649 | |||||
Investment tax credits | (121,166 | ) | (214,100 | ) | |||
4,954,811 | 2,089,977 |
Components of research and development expenses for the nine months ended September 30 were as follows:
2015 | 2014 | ||||||
$ | $ | ||||||
Research and development programs excluding the below items | 9,319,256 | 3,242,449 | |||||
Salaries, fees and short-term benefits | 2,976,237 | 1,593,041 | |||||
Share-based compensation | 1,421,320 | 1,367,829 | |||||
Amortization of intangible assets | 254,511 | 525,939 | |||||
Impairment of intangible assets | - | 429,763 | |||||
Depreciation of property and equipment | 85,881 | 31,779 | |||||
Investment tax credits | (372,697 | ) | (429,939 | ) | |||
13,684,508 | 6,760,861 |
11. | General and administrative |
Components of general and administrative expenses for the three months ended September 30 were as follows: |
2015 | 2014 | ||||||
$ | $ | ||||||
General and administrative expenses excluding the below items | 328,218 | 253,427 | |||||
Salaries, fees and short-term benefits | 347,722 | 185,282 | |||||
Share-based compensation | 45,609 | 61,363 | |||||
721,549 | 500,072 |
Components of general and administrative expenses for the nine months ended September 30 were as follows:
2015 | 2014 | ||||||
$ | $ | ||||||
General and administrative expenses excluding the below items | 1,061,057 | 1,017,064 | |||||
Salaries, fees and short-term benefits | 778,761 | 495,908 | |||||
DSU units issued for director compensation | 300,000 | 240,000 | |||||
Share-based compensation | 152,988 | 384,642 | |||||
2,292,806 | 2,137,614 |
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TRILLIUM THERAPEUTICS INC. |
Notes to the Interim Condensed Consolidated Financial Statements |
For the three and nine months ended September 30, 2015 and 2014 |
Amounts in Canadian Dollars |
(Unaudited) |
12. | Finance income and finance costs |
Finance income for the three months ended September 30 was as follows: |
2015 | 2014 | ||||||
$ | $ | ||||||
Interest income | 172,896 | 92,517 | |||||
Net foreign currency gain | 4,019,251 | - | |||||
4,192,147 | 92,517 |
Finance income for the nine months ended September 30 was as follows:
2015 | 2014 | ||||||
$ | $ | ||||||
Interest income | 352,558 | 285,058 | |||||
Net foreign currency gain | 3,943,274 | 6,324 | |||||
4,295,832 | 291,382 |
Finance costs for the three months ended September 30 were as follows:
2015 | 2014 | ||||||
$ | $ | ||||||
Bank charges | 3,556 | 1,782 | |||||
Accreted interest | 18,210 | 15,031 | |||||
Net foreign currency loss | - | 12,182 | |||||
21,766 | 28,995 |
Finance costs for the nine months ended September 30 were as follows:
2015 | 2014 | ||||||
$ | $ | ||||||
Bank charges | 7,884 | 5,696 | |||||
Accreted interest | 55,490 | 54,169 | |||||
63,374 | 59,865 |
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TRILLIUM THERAPEUTICS INC. |
Notes to the Interim Condensed Consolidated Financial Statements |
For the three and nine months ended September 30, 2015 and 2014 |
Amounts in Canadian Dollars |
(Unaudited) |
13. | Commitments and contingencies |
As at September 30, 2015 and in the normal course of business, the Company had obligations to make future payments, representing research and development contracts and other commitments that are known and committed in the amount of $3,840,000 over the next 12 months, $2,246,000 from 12 to 24 months, $1,172,000 from 24 to 36 months, and $35,000 thereafter. The Company also has minimum lease payments relating to operating lease commitments in the amount of $232,000 over the next 12 months, $1,030,000 from 12 to 60 months, and $1,475,000 thereafter. | |
The Company enters into research, development and license agreements in the ordinary course of business where the Company receives research services and rights to proprietary technologies. Milestone and royalty payments that may become due under various agreements are dependent on, among other factors, clinical trials, regulatory approvals and ultimately the successful development of a new drug, the outcome and timing of which is uncertain. Under the license agreement for SIRPαFc, the Company has future contingent milestones payable of $35,000 related to successful patent grants, $100,000, $200,000 and $300,000 on the first patient dosed in phase I, II and III trials respectively, and regulatory milestones on their first achievement totalling $5,000,000. | |
The Company entered into two agreements with Catalent Pharma Solutions in August 2014 pursuant to which Trillium acquired the right to use a proprietary expression system for the manufacture of two SIRPαFc constructs. Consideration for each license includes potential pre-marketing approval milestones of up to U.S. $875,000 and aggregate sales milestone payments of up to U.S. $28.8 million. | |
The Company periodically enters into research and license agreements with third parties that include indemnification provisions customary in the industry. These guarantees generally require the Company to compensate the other party for certain damages and costs incurred as a result of claims arising from research and development activities undertaken by or on behalf of the Company. In some cases, the maximum potential amount of future payments that could be required under these indemnification provisions could be unlimited. These indemnification provisions generally survive termination of the underlying agreement. The nature of the indemnification obligations prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay. Historically, the Company has not made any indemnification payments under such agreements and no amount has been accrued in the unaudited interim condensed consolidated financial statements with respect to these indemnification obligations. |
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TRILLIUM THERAPEUTICS INC. |
Notes to the Interim Condensed Consolidated Financial Statements |
For the three and nine months ended September 30, 2015 and 2014 |
Amounts in Canadian Dollars |
(Unaudited) |
14. | Related parties |
For the nine months ended September 30, 2015 and 2014, the key management personnel of the Company were the Board of Directors, Chief Executive Officer, Chief Medical Officer, Chief Scientific Officer, Chief Financial Officer and the Chief Development Officer. | |
Compensation for key management personnel of the Company for the three months ended September 30 was as follows: |
2015 | 2014 | ||||||
$ | $ | ||||||
Salaries, fees and short-term benefits | 683,092 | 379,320 | |||||
Share-based compensation | 290,866 | 305,244 | |||||
973,958 | 684,564 |
Compensation for key management personnel of the Company for the nine months ended September 30 was as follows:
2015 | 2014 | ||||||
$ | $ | ||||||
Salaries, fees and short-term benefits | 2,115,164 | 1,340,397 | |||||
Share-based compensation | 1,714,347 | 1,971,926 | |||||
3,829,511 | 3,312,323 |
Executive officers and directors participate in the 2014 Stock Option Plan and the 2014 DSU Plan, and officers participate in the Company’s benefit plans. Directors receive annual fees for their services. As at September 30, 2015, the key management personnel controlled less than 1% of the voting shares of the Company. | |
| |
Outstanding balances with related parties at the period end represent expense reimbursements, accrued vacation payable and directors’ fees payable. These balances are unsecured, interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. For the nine months ended September 30, 2015 and 2014, $0 and $7,916, respectively, was paid to a former director for consulting fees. | |
| |
15. | Financial instruments |
| |
Currency risk | |
| |
The Company is exposed to currency risk related to the fluctuation of foreign exchange rates and the degree of volatility of those rates. Currency risk results mainly from the Company’s expenses and working capital denominated in currencies other than the Canadian dollar, which are primarily in U.S. dollars. As at September 30, 2015 and December 31, 2014, the Company held U.S. dollar cash in the amount of U.S. $46,475,915 and U.S. $142,558 and had U.S. dollar denominated accounts payable and accrued liabilities in the amount of U.S. $1,044,561 and U.S. $1,910,430, respectively. Therefore, a 1% change in the foreign exchange rate would have a net impact on finance costs as at September 30, 2015 and December 31, 2014 of $454,314 and $17,679, respectively. | |
| |
U. S. dollar expenses for the nine months ended September 30, 2015 and 2014 were approximately U.S. $6,500,000 and U. S. $1,400,000, respectively. Varying the U.S. exchange rate for the nine months ended September 30, 2015 and 2014 to reflect a 5% strengthening of the Canadian dollar would have decreased the net loss by approximately $325,000 and $70,000, respectively, assuming that all other variables remained constant. |
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