Lorus
Therapeutics Inc.
|
||||||||
Interim
Consolidated Balance Sheets
|
||||||||
As
at
|
As
at
|
|||||||
(amounts
in 000's)
|
November 30,
2008
|
May 31,
2008
|
||||||
(Canadian
dollars)
|
(Unaudited)
|
|||||||
ASSETS
|
||||||||
Current
|
||||||||
Cash
and cash equivalents
|
$ | 6,030 | $ | 2,652 | ||||
Short
term investments (note 7)
|
3,185 | 6,784 | ||||||
Prepaid
expenses and other assets
|
805 | 721 | ||||||
Amount
held in escrow (note 1 (b))
|
- | 600 | ||||||
10,020 | 10,757 | |||||||
Long-term
|
||||||||
Fixed
assets
|
163 | 244 | ||||||
Goodwill
|
606 | 606 | ||||||
769 | 850 | |||||||
$ | 10,789 | $ | 11,607 | |||||
LIABILITIES
|
||||||||
Current
|
||||||||
Accounts
payable
|
$ | 402 | $ | 923 | ||||
Accrued
liabilities (note 10)
|
1,364 | 1,194 | ||||||
Deferred
gain on sale of shares (note 1
(b))
|
- | 600 | ||||||
Secured
convertible debentures (note
8)
|
13,510 | - | ||||||
15,276 | 2,717 | |||||||
Long-term
|
||||||||
Secured
convertible debentures (note
8)
|
- | 12,742 | ||||||
SHAREHOLDERS'
DEFICIENCY
|
||||||||
Share
Capital (note 5)
|
||||||||
Common
shares
|
161,951 | 158,743 | ||||||
Equity
portion of secured convertible
debentures
|
3,814 | 3,814 | ||||||
Stock
options (note 6(c))
|
4,111 | 4,961 | ||||||
Contributed
surplus
|
10,267 | 9,181 | ||||||
Warrants
|
417 | - | ||||||
Deficit
accumulated during development
stage
|
(185,047 | ) | (180,551 | ) | ||||
(4,487 | ) | (3,852 | ) | |||||
$ | 10,789 | $ | 11,607 |
Lorus
Therapeutics Inc.
|
||||||||||||||||||||
Interim
Consolidated Statements of Loss and Deficit
(unaudited)
|
||||||||||||||||||||
Period
|
||||||||||||||||||||
Three
|
Three
|
Six
|
Six
|
from
inception
|
||||||||||||||||
(amounts
in 000's except for per common share
data)
|
months
ended
|
months
ended
|
months
ended
|
months
ended
|
Sept. 5, 1986
to
|
|||||||||||||||
(Canadian
dollars)
|
Nov.
30,
2008
|
Nov.
30,
2007
|
Nov.
30,
2008
|
Nov.
30,
2007
|
Nov.
30,
2008
|
|||||||||||||||
REVENUE
(note 11)
|
$ | 39 | $ | 1 | $ | 42 | $ | 27 | $ | 898 | ||||||||||
EXPENSES
|
||||||||||||||||||||
Cost
of sales
|
- | - | - | 1 | 105 | |||||||||||||||
Research
and development
|
694 | 1,247 | 1,872 | 2,029 | 121,818 | |||||||||||||||
General
and administrative
|
920 | 1,103 | 1,761 | 1,839 | 56,972 | |||||||||||||||
Stock-based
compensation (note 6)
|
145 | 209 | 236 | 312 | 8,208 | |||||||||||||||
Depreciation
and amortization of fixed
assets
|
43 | 80 | 86 | 159 | 9,628 | |||||||||||||||
Operating
expenses
|
1,802 | 2,639 | 3,955 | 4,340 | 196,731 | |||||||||||||||
Interest
expense on convertible
debentures
|
201 | 271 | 418 | 541 | 3,679 | |||||||||||||||
Accretion
in carrying value of convertible
debentures
|
391 | 307 | 768 | 605 | 3,964 | |||||||||||||||
Amortization
of deferred financing charges
|
- | - | - | - | 412 | |||||||||||||||
Interest
income
|
(71 | ) | (175 | ) | (153 | ) | (315 | ) | (12,119 | ) | ||||||||||
Loss
from operation for the period
|
2,284 | 3,041 | 4,946 | 5,144 | 191,769 | |||||||||||||||
Gain
on sale of shares (note 1 (b))
|
- | (216 | ) | (450 | ) | (6,310 | ) | (6,749 | ) | |||||||||||
Net
loss (earnings) and other comprehensive loss (income) for the
period
|
2,284 | 2,825 | 4,496 | (1,166 | ) | 185,020 | ||||||||||||||
Deficit,
beginning of period as previously
reported
|
182,763 | 170,226 | 180,551 | 174,190 | - | |||||||||||||||
Change
in accounting policy
|
- | - | 27 | 27 | ||||||||||||||||
Deficit,
beginning of period as revised
|
182,763 | 170,226 | 180,551 | 174,217 | ||||||||||||||||
Deficit,
end of period
|
$ | 185,047 | $ | 173,051 | $ | 185,047 | $ | 173,051 | $ | 185,047 | ||||||||||
Basic
and diluted loss (earnings) per common
share
|
$ | 0.01 | $ | 0.01 | $ | 0.02 | $ | (0.01 | ) | |||||||||||
Weighted
average number of common shares
outstanding used in the calculation
of
|
||||||||||||||||||||
Basic
loss (earnings) per share
|
250,173 | 213,057 | 239,290 | 213,057 | ||||||||||||||||
Diluted
loss (earnings) per share (note
5(d))
|
250,173 | 227,266 | 239,290 | 227,266 |
Lorus
Therapeutics Inc.
|
||||||||||||||||||||
Interim
Consolidated Statements of Cash Flows
(unaudited)
|
||||||||||||||||||||
Period
|
||||||||||||||||||||
Three
|
Three
|
Six
|
Six
|
from
inception
|
||||||||||||||||
(amounts
in 000's)
|
months
ended
|
months
ended
|
months
ended
|
months
ended
|
Sept. 5, 1986
to
|
|||||||||||||||
(Canadian
Dollars)
|
Nov. 30,
2008
|
Nov. 30,
2007
|
Nov. 30,
2008
|
Nov. 30,
2007
|
Nov. 30,
2008
|
|||||||||||||||
Cash
flows from
operating activities:
|
||||||||||||||||||||
Earnings
(loss) for the period
|
$ | (2,284 | ) | (2,825 | ) | $ | (4,496 | ) | $ | 1,166 | $ | (185,020 | ) | |||||||
Items
not involving cash:
|
||||||||||||||||||||
Gain
on sale of shares
|
- | (216 | ) | (450 | ) | (6,310 | ) | (6,749 | ) | |||||||||||
Stock-based
compensation
|
145 | 209 | 236 | 312 | 8,208 | |||||||||||||||
Interest
on convertible debentures
|
201 | 271 | 418 | 541 | 3,679 | |||||||||||||||
Accretion
in carrying value of convertible
debentures
|
391 | 307 | 768 | 605 | 3,964 | |||||||||||||||
Amortization
of deferred financing charges
|
- | - | - | - | 412 | |||||||||||||||
Depreciation,
amortization and write-down of fixed assets and acquired patents and
licenses
|
43 | 80 | 86 | 159 | 22,189 | |||||||||||||||
Other
|
- | (39 | ) | - | (19 | ) | 455 | |||||||||||||
Change
in non-cash operating working
capital
|
(576 | ) | (324 | ) | (435 | ) | (1,339 | ) | 53 | |||||||||||
Cash
used in operating activities
|
(2,080 | ) | (2,537 | ) | (3,873 | ) | (4,885 | ) | (152,809 | ) | ||||||||||
Cash
flows from financing
activities:
|
||||||||||||||||||||
Issuance
of debentures, net of issuance
costs
|
- | - | - | - | 12,948 | |||||||||||||||
Issuance
(Repurchase) of warrants
|
- | - | 417 | (252 | ) | 37,570 | ||||||||||||||
Proceeds
on sale of shares, net of arrangement costs and guarantee (note
1)
|
- | 216 | 450 | 7,572 | 6,749 | |||||||||||||||
Issuance
of common shares, net of issuance costs (note
5)
|
- | - | 2,790 | - | 111,815 | |||||||||||||||
Cash
provided by financing
activities
|
- | 216 | 3,657 | 7,320 | 169,082 | |||||||||||||||
Cash
flows from investing
activities:
|
||||||||||||||||||||
Maturity
(purchase) of marketable securities and other investments,
net
|
910 | 3,877 | 3,599 | 1,137 | (3,205 | ) | ||||||||||||||
Business
acquisition, net of cash
received
|
- | - | - | - | (539 | ) | ||||||||||||||
Acquired
patents and licenses
|
- | - | - | - | (715 | ) | ||||||||||||||
Additions
to fixed assets
|
(2 | ) | - | (5 | ) | (39 | ) | (6,132 | ) | |||||||||||
Proceeds
on sale of fixed assets
|
- | - | - | - | 348 | |||||||||||||||
Cash
(used in) provided by
|
||||||||||||||||||||
investing
activities
|
908 | 3,877 | 3,594 | 1,098 | (10,243 | ) | ||||||||||||||
Increase
(decrease) in cash and cash equivalents
during the period
|
(1,172 | ) | 1,556 | 3,378 | 3,533 | 6,030 | ||||||||||||||
Cash
and cash equivalents, beginning of
period
|
7,202 | 3,382 | 2,652 | 1,405 | - | |||||||||||||||
Cash
and cash equivalents, end of
period
|
$ | 6,030 | $ | 4,938 | $ | 6,030 | $ | 4,938 | $ | 6,030 |
1.
|
Basis
of presentation
|
2.
|
Changes in
Accounting
policy
|
(i) | management is required to make an assessment of an entity’s ability to continue as a going concern; |
(ii)
|
in making its
assessment, management takes into account all available information about
the future, which is at least, but is not limited to, twelve months from
the balance sheet date;
|
(iii)
|
financial
statements must be prepared on a going concern basis unless management
either intends to liquidate the entity, to cease trading or cease
operations, or has no realistic alternative but to do
so;
|
(iv)
|
disclosure is
required of material uncertainties related to events or conditions that
may cast significant doubt upon the entity’s ability to continue as a
going concern; and
|
(v)
|
when
financial statements are not prepared on a going concern basis, that fact
should be disclosed, together with the basis on which the financial
statements are prepared and the reason the entity is not regarded as a
going concern.
|
3.
|
Capital
Risk Management
|
|
•
|
Maintain its
ability to continue as a going concern in order to provide returns to
shareholders and benefits to other
stakeholders;
|
|
•
|
Maintain a
flexible capital structure which optimizes the cost of capital at
acceptable risk;
|
|
•
|
Ensure
sufficient cash resources to fund its research and development activity,
to pursue partnership and collaboration opportunities and to maintain
ongoing operations.
|
4.
|
Financial
Instruments
|
November 30,
2008
|
May 31,
2008
|
|||||||
Financial
assets
|
||||||||
Cash
and cash equivalents, consisting of term deposits, and guaranteed
investment certificates, held for trading, measured at fair
value
|
$ | 6,030 | $ | 2,652 | ||||
Short-term
investments, held-to-maturity, recorded at amortized
cost
|
2,705 | 6,304 | ||||||
Short-term
investments, held-for-trading, recorded at fair
value
|
480 | 480 | ||||||
Amount
held in escrow, measured at amortized
cost
|
- | 600 | ||||||
Financial
liabilities
|
||||||||
Accounts
payable, measured at amortized
cost
|
402 | 923 | ||||||
Accrued
liabilities, measured at amortized
cost
|
1,364 | 1,194 | ||||||
Secured
convertible debentures, measured at amortized
cost
|
13,510 | 12,742 |
5.
|
Share
capital
|
Common
Shares
|
Warrants
|
|||||||||||||||
(amounts
and units in 000's)
|
Number | Amount | Number | Amount | ||||||||||||
Balance
at May 31, 2007
|
212,266 | $ | 157,714 | - | $ | - | ||||||||||
Interest
payments (b)
|
1,227 | 270 | - | - | ||||||||||||
Balance
at August 31, 2007
|
213,493 | $ | 157,984 | - | $ | - | ||||||||||
Interest
payments (b)
|
1,280 | 271 | - | - | ||||||||||||
Balance
at November 30, 2007
|
214,773 | $ | 158,255 | - | $ | - | ||||||||||
Interest
payments (b)
|
1,452 | 258 | - | - | ||||||||||||
Balance
at February 29, 2008
|
216,225 | $ | 158,513 | - | $ | - | ||||||||||
Interest
payments (b)
|
1,424 | 230 | - | - | ||||||||||||
Balance
at May 31, 2008
|
217,649 | $ | 158,743 | - | $ | - | ||||||||||
Interest
payments (b)
|
2,038 | 217 | - | - | ||||||||||||
Issuance of
units (c)
|
28,539 | 2,790 | 14,269 | 417 | ||||||||||||
Balance
at August 31, 2008
|
248,226 | $ | 161,750 | 14,269 | $ | 417 | ||||||||||
Interest
payments (b)
|
2,989 | 201 | - | - | ||||||||||||
Balance
at November 30, 2008
|
251,215 | 161,951 | 14,269 | $ | 417 |
(b)
|
Interest
payments
|
(c)
|
Equity
issuances
|
(d)
|
Earnings/Loss
per share
|
(e)
|
Continuity of
contributed surplus
|
Six months
ended November 30,
2008
|
Six months
ended November 30, 2007
|
|||||||
Balance,
beginning of year
|
$ | 9,181 | $ | 8,525 | ||||
Forfeiture of
stock options
|
1,086 | 605 | ||||||
Balance, end
of period
|
$ | 10,267 | $ | 9,130 |
6.
|
Stock-based
compensation
|
Six
months
ended
|
Six months
ended
|
|||||||||||||||
November 30,
2008
|
November 30,
2007
|
|||||||||||||||
Weighted
|
Weighted
|
|||||||||||||||
Average
|
average
|
|||||||||||||||
Options
|
exercise
|
Options
|
exercise
|
|||||||||||||
(in
thousands)
|
price
|
(in
thousands)
|
price
|
|||||||||||||
Outstanding,
beginning of
year
|
16,438 | $ | 0.45 | 12,988 | $ | 0.59 | ||||||||||
Granted
|
5,124 | 0.10 | 2,699 | 0.22 | ||||||||||||
Exercised
|
- | - | - | - | ||||||||||||
Forfeited
|
(3,246 | ) | 0.66 | (1,675 | ) | 0.77 | ||||||||||
Outstanding,
end of period
|
18,316 | $ | 0.32 | 14,012 | $ | 0.50 |
(b)
|
Fair value
assumptions
|
Three
months
ended
Nov 30, 2008 |
Six
months
ended
Nov 30, 2008 |
Three
months
ended
Nov 30, 2007 |
Six
months
ended
Nov 30, 2007 |
|||||||||||||
Risk free
interest rate
|
2.0 | % | 2.0-4.75 | % | 4.75 | % | 4.75 | % | ||||||||
Expected
dividend yield
|
0 | % | 0 | % | 0 | % | 0 | % | ||||||||
Expected
volatility
|
80 | % | 80 | % | 80 | % | 80 | % | ||||||||
Expected life
of options
|
5
years
|
5
years
|
5
years
|
5
years
|
||||||||||||
Weighted
average fair value of options granted or modified in the
period
|
$ | 0.05 | $ | 0.07 | $ | 0.15 | $ | 0.15 |
(c)
|
Continuity of
stock
options
|
Six months
ended November 30,
2008
|
Six months
ended Nov 30,
2007
|
|||||||
Balance,
beginning of the year
|
$ | 4,961 | $ | 4,898 | ||||
Stock option
expense
|
236 | 312 | ||||||
Forfeiture of
stock options
|
(1,086 | ) | (605 | ) | ||||
Balance, end
of period
|
$ | 4,111 | $ | 4,605 |
As at November
30, 2008
|
||||||||||||||||
(amounts in
000’s)
|
Less
than
one
year
maturities
|
Greater
than
one
year
maturities
|
Total
|
Yield to
maturity
|
||||||||||||
Corporate
instruments (including
guaranteed investment
certificates,
medium-term notes and fixed-term notes) |
2,705 | 480 | 3,185 | 2.77 - 3.70 | % | |||||||||||
$ | 2,705 | $ | 480 | $ | 3,185 |
As at May 31,
2008
|
||||||||||||||||
(amounts in
000’s)
|
Less
than
one
year
maturities
|
Greater
than
one
year
maturities
|
Total
|
Yield to
maturity
|
||||||||||||
Corporate
instruments (including
guaranteed investment certificates,
medium-term notes and fixed-term
notes)
|
6,304 | 480 | 6,784 | 3.89 - 4.6 | % | |||||||||||
$ | 6,304 | $ | 480 | $ | 6,784 |
8.
|
Secured
convertible debentures
|
9.
|
Related
party transaction
|
10.
|
Indemnification
on Arrangement
|
|
(i)
|
prior to, at
or after the effective time of the Arrangement ("Effective Time") and
directly or indirectly relating to any of the assets of Old Lorus
transferred to New Lorus pursuant to the Arrangement (including losses for
income, sales, excise and other taxes arising in connection with the
transfer of any such asset) or conduct of the business prior to the
Effective Time;
|
|
(ii)
|
prior to, at
or after the Effective Time as a result of any and all interests, rights,
liabilities and other matters relating to the assets transferred by Old
Lorus to New Lorus pursuant to the Arrangement;
and
|
|
(iii)
|
prior to or
at the Effective Time and directly or indirectly relating to, with certain
exceptions, any of the activities of Old Lorus or the
Arrangement.
|
11.
|
Revenue
|