EX-99.2 3 exh_992.htm EXHIBIT 99.2

Exhibit 99.2

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Interim Financial Statements of

(Unaudited)

 

neptune technologies & Bioressources inc.

 

Three-month and nine-month periods ended December 31, 2017 and November 30, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

neptune technologies & bioressources inc.

Consolidated Interim Financial Statements

(Unaudited)

 

Three-month and nine-month periods ended December 31, 2017 and November 30, 2016

 

 

 

Financial Statements  
Consolidated Interim Statements of Financial Position 1
Consolidated Interim Statements of Earnings and Comprehensive Income 2
Consolidated Interim Statements of Changes in Equity 3
Consolidated Interim Statements of Cash Flows 5
Notes to Consolidated Interim Financial Statements 6

 

 

Notice:

These interim financial statements have not been reviewed by the Corporation’s auditors.

 

 

 

 

 

 

 

neptune technologies & bioressources inc.

Consolidated Interim Statements of Financial Position

(Unaudited)

 

As at December 31, 2017 and March 31, 2017

 

    

December 31,

    

March 31,

 
    2017    2017 
Assets          
           
Current assets:          
Cash and cash equivalents  $26,175,895   $15,802,363 
Restricted short-term investment (note 8)   2,350,000    – 
Trade and other receivables   4,792,477    13,559,469 
Tax credits receivable   37,198    139,932 
Prepaid expenses   313,568    684,261 
Inventories (notes 4 and 5)   5,753,959    13,242,735 
    39,423,097    43,428,760 
           
Restricted short-term investment (note 8)   60,000    2,745,000 
Property, plant and equipment (note 6)   41,458,208    45,864,367 
Intangible assets (notes 4 and 7)   5,417,266    11,947,693 
Goodwill   6,750,626    6,750,626 
Tax credits recoverable   152,464    152,464 
Deferred tax assets   225,880    265,461 
Other assets (notes 10 and 16 (i) and (iii))   6,269,768    65,745 
Total assets  $99,757,309   $111,220,116 
           
Liabilities and Equity          
           
Current liabilities:          
Trade and other payables  $4,852,205   $9,993,019 
Loans and borrowings (note 8)   4,534,213    7,192,315 
Deferred revenues   92,024    549,675 
    9,478,442    17,735,009 
           
Deferred lease inducements   281,940    326,456 
Long-term payable   517,106    795,072 
Loans and borrowings (note 8)   1,143    15,739,229 
Unsecured convertible debentures   –    1,406,365 
Other financial liabilities (note 16 (ii) and (iii))   –    417,747 
Total liabilities   10,278,631    36,419,878 
           
Equity:          
Share capital (note 9)   128,298,273    127,201,343 
Warrants (note 9 (d))   648,820    648,820 
Contributed surplus   35,554,373    33,335,136 
Accumulated other comprehensive loss   (295,300)   (427,350)
Deficit   (74,727,488)   (97,010,523)
Total equity attributable to equity holders of the Corporation   89,478,678    63,747,426 
           
Non-controlling interest (note 10)   –    7,435,948 
Subsidiary warrants, options and other equity (note 10)   –    3,616,864 
Total equity attributable to non-controlling interest   –    11,052,812 
Total equity   89,478,678    74,800,238 
           
Commitments and contingencies (note 17)          
Total liabilities and equity  $99,757,309   $111,220,116 

 

See accompanying notes to unaudited consolidated interim financial statements.

 1 

 

NEPTUNE TECHNOLOGIES & BIORESSOURCES INC.

Consolidated Interim Statements of Earnings and Comprehensive Income

(Unaudited)

 

Three-month and nine-month periods ended December 31, 2017 and November 30, 2016

 

   

Three-month periods ended 

    

Nine-month periods ended 

 
    December 31,    November 30,    December 31,    November 30, 
    2017    2016    2017    2016 
                    
Revenue from sales  $6,810,500   $11,772,306   $19,655,984   $34,219,221 
Royalty revenues   504,164    368,325    984,413    769,276 
Total revenues   7,314,664    12,140,631    20,640,397    34,988,497 
                     
Cost of sales (note 5)   (5,299,684)   (8,687,765)   (14,054,719)   (25,425,075)
Other cost of sales – impairment loss on inventories (note 5)   –    –    (1,719,362)   – 
    (5,299,684)   (8,687,765)   (15,774,081)   (25,425,075)
Gross margin   2,014,980    3,452,866    4,866,316    9,563,422 
                     
Research and development expenses   (5,488,648)   (1,476,017)   (10,505,864)   (5,124,549)
Research tax credits and grants   36,251    32,772    145,937    98,315 
    (5,452,397)   (1,443,245)   (10,359,927)   (5,026,234)
                     
Selling, general and administrative expenses   (3,385,169)   (5,340,792)   (11,035,172)   (12,449,314)
Other income – royalty settlement   –    13,117,000    –    13,117,000 
Other income – net gain on sale of assets (note 4)   (147,397)   –    23,723,680    – 
Income (loss) from operating activities   (6,969,983)   9,785,829    7,194,897    5,204,874 
                     
Gain on loss of control of subsidiary (note 10)   8,783,613    –    8,783,613    – 
                     
Finance income (note 11)   99,606    238,770    146,671    97,700 
Finance costs (note 11)   (554,438)   (620,442)   (2,339,380)   (1,902,324)
Change in fair value of derivative assets and liabilities (note 16 (ii) and (iii))   35,629    (199,665)   345,340    (139,896)
   (419,203)   (581,337)   (1,847,369)   (1,944,520)
Income before income tax   1,394,427    9,204,492    14,131,141    3,260,354 
                     
Income tax (expense) recovery (note 13)   (52,778)   216,650    (39,581)   (82,876)
Net income   1,341,649    9,421,142    14,091,560    3,177,478 
                     
Other comprehensive income (loss) (that may be reclassified subsequently to net income)                    
Unrealized gain (loss) on available-for-sale investment (note 16 (i))  $141,230   $(38,960)  $99,835   $(112,010)
Net change in unrealized (losses) gains on derivatives designated as cash flow hedges (note 16 (iii))   

(4,967

)   11,622    32,215    25,544 
Total other comprehensive income (loss)   136,263    (27,338)   132,050    (86,466)
                     
Total comprehensive income  $1,477,912   $9,393,804   $14,223,610   $3,091,012 
                    
Net income attributable to:                    
Equity holders of the Corporation  $4,754,781   $10,684,747   $22,283,035   $7,336,839 
Non-controlling interest   (3,413,132)   (1,263,605)   (8,191,475)   (4,159,361)
Net income  $1,341,649   $9,421,142   $14,091,560   $3,177,478 
                    
Total comprehensive income attributable to:                    
Equity holders of the Corporation  $4,891,044   $10,657,409   $22,415,085   $7,250,373 
Non-controlling interest   (3,413,132)   (1,263,605)   (8,191,475)   (4,159,361)
Total comprehensive income  $1,477,912   $9,393,804   $14,223,610   $3,091,012 
                    
Basic and diluted income per share (note 14)  $0.06   $0.14   $0.28   $0.09 
                    
Basic weighted average number of common shares (note 14)   78,667,951    77,945,548    78,539,581    77,945,548 
Diluted weighted average number of common shares (note 14)   79,137,688    78,178,058    78,887,211    78,093,508 

 

See accompanying notes to unaudited consolidated interim financial statements.

 2 

 

NEPTUNE TECHNOLOGIES & BIORESSOURCES INC.

Consolidated Interim Statements of Changes in Equity

(Unaudited)

 

Nine-month periods ended December 31, 2017 and November 30, 2016

   Attributable to equity holders of the Corporation  Attributable to non-controlling interest   
   Share Capital        Accumulated
other
comprehensive
loss		                  
   Number  Dollars  Warrants  Contributed
surplus		  Available-
for-sale
investment		  Cash flow
hedges		  Deficit  Total  Subsidiary
warrants,
options
and other
equity		  Non-
controlling
interest		  Total  Total
equity
Balance at March 31, 2017   77,968,587   $127,201,343   $648,820   $33,335,136   $(420,052)  $(7,298)  $(97,010,523)  $63,747,426   $3,616,864   $7,435,948   $11,052,812   $74,800,238 
                                                             
Net income (loss) for the period   –    –    –    –    –    –    22,283,035    22,283,035    –    (8,191,475)   (8,191,475)   14,091,560 
Other comprehensive income for the period   –    –    –    –    99,835    32,215    –    132,050    –    –    –    132,050 
Total comprehensive income (loss) for the period   –    –    –    –    99,835    32,215    22,283,035    22,415,085    –    (8,191,475)   (8,191,475)   14,223,610 
                                                             
Transactions with equity holders recorded directly in equity                                                            
Contributions by and  distribution to equity holders                                                            
Share-based payment transactions (note 12)   –    –    –    781,085    –    –    –    781,085    660,611    –    660,611    1,441,696 
DSU released (note 12 (b))   55,944    80,000    –    (80,000)   –    –    –    –    –    –    –    – 
Share options exercised (note 12 (a))   66,000    168,860    –    (56,594)   –    –    –    112,266    –    –    –    112,266 
Liability settled in shares (note 9 (a))   630,681    848,070    –    –    –    –    –    848,070    –    –    –    848,070 
Loss of control of subsidiary (note 10)   –    –    –    –    –    –    –    –    (2,739,050)   505,077    (2,233,973)   (2,233,973)
Total contributions by and distribution to equity holders   752,625    1,096,930    –    644,491    –    –    –    1,741,421    (2,078,439)   505,077    (1,573,362)   168,059 
                                                             
Change in ownership interests in subsidiaries that do not result in a loss of control                                                            
Expiry of Acasti options and call-options (note 10 (i))   –    –    –    1,466,459    –    –    –    1,466,459    (1,466,459)   –    (1,466,459)   – 
Exercise of warrants (note 10 (ii))   –    –    –    155,720    –    –    –    155,720    (71,966)   300,496    228,530    384,250 
Fees related to past financing of Acasti (note 10 (iii))   –    –    –    (52,452)   –    –    –    (52,452)   –    (102,011)   (102,011)   (154,463)
Convertible debenture interest settled in shares (note 10 (iv))   –    –    –    5,019    –    –    –    5,019    –    51,965    51,965    56,984 
Total changes in ownership interest in subsidiaries   –    –    –    1,574,746    –    –    –    1,574,746    (1,538,425)   250,450    (1,287,975)   286,771 
                                                             
Total transactions with equity holders   752,625    1,096,930    –    2,219,237    –    –    –    3,316,167    (3,616,864)   755,527    (2,861,337)   454,830 
Balance at December 31, 2017   78,721,212   $128,298,273   $648,820   $35,554,373   $(320,217)  $24,917   $(74,727,488)  $89,478,678   $–   $–   $–   $89,478,678 

 

See accompanying notes to unaudited consolidated interim financial statements.

 3 

 

NEPTUNE TECHNOLOGIES & BIORESSOURCES INC.

Consolidated Interim Statements of Changes in Equity, Continued

(Unaudited)

 

Nine-month periods ended December 31, 2017 and November 30, 2016

   Attributable to equity holders of the Corporation  Attributable to non-controlling interest   
   Share Capital        Accumulated
other
comprehensive
income (loss)		                  
   Number  Dollars  Warrants  Contributed
surplus		  Available-
for-sale
investment		  Cash flow
hedges		  Deficit  Total  Subsidiary
warrants
and
options		  Non-
controlling
interest		  Total  Total
equity
Balance at February 29, 2016   77,968,587   $127,201,343   $648,820   $29,871,114   $(315,347)  $(37,049)  $(103,923,751)  $53,445,130   $5,548,482   $7,931,269   $13,479,751   $66,924,881 
                                                             
Net income (loss) for the period   –    –    –    –    –    –    7,336,839    7,336,839    –    (4,159,361)   (4,159,361)   3,177,478 
Other comprehensive income (loss) for the period   –    –    –    –    (112,010)   25,544    –    (86,466)   –    –    –    (86,466)
Total comprehensive income (loss) for the period   –    –    –    –    (112,010)   25,544    7,336,839    7,250,373    –    (4,159,361)   (4,159,361)   3,091,012 
                                                             
Transactions with equity holders recorded directly in equity                                                            
Contributions by and distribution to equity holders                                                            
Share-based payment transactions   –    –    –    984,786    –    –    –    984,786    429,856    –    429,856    1,414,642 
Total contributions by and distribution to equity holders   –    –    –    984,786    –    –    –    984,786    429,856    –    429,856    1,414,642 
                                                             
Change in ownership interests in subsidiaries that do not result in a loss of control                                                            
Expiry of Acasti options and call-options (note 10 (v))   –    –    –    2,715,532    –    –    –    2,715,532    (2,715,532)   –    (2,715,532)   – 
Total changes in ownership interest in subsidiaries   –    –    –    2,715,532    –    –    –    2,715,532    (2,715,532)   –    (2,715,532)   – 
                                                             
Total transactions with equity holders   –    –    –    3,700,318    –    –    –    3,700,318    (2,285,676)   –    (2,285,676)   1,414,642 
                                                             
Balance at November 30, 2016   77,968,587   $127,201,343   $648,820   $33,571,432   $(427,357)  $(11,505)  $(96,586,912)  $64,395,821   $3,262,806   $3,771,908   $7,034,714   $71,430,535 

 

See accompanying notes to unaudited consolidated interim financial statements.

 4 

 

neptune technologies & bioressources inc.

Consolidated Interim Statements of Cash Flows

(Unaudited)

 

Three-month and nine-month periods ended December 31, 2017 and November 30, 2016

    Three-month periods ended    Nine-month periods ended 
    December 31,    November 30,    December 31,    November 30, 
    2017    2016    2017    2016 
                     
Cash flows (used in) from operating activities:                    
Net income for the period  $1,341,649   $9,421,142   $14,091,560   $3,177,478 
Adjustments:                    
Depreciation of property, plant and equipment   671,232    621,095    2,030,591    1,841,649 
Amortization of intangible assets   180,723    275,089    743,333    648,399 
Stock-based compensation   528,736    469,950    1,441,696    1,414,642 
Impairment loss on inventories (note 5)   –    –    1,719,362    – 
Gain on loss of control of subsidiary (note 10)   (8,783,613)   –    (8,783,613)   – 
Recognition of deferred revenues   (319,769)   (32,985)   (540,029)   (364,404)
Amortization of deferred lease inducements   (14,839)   (14,839)   (44,516)   (44,517)
Net finance expense   419,203    581,337    1,847,369    1,944,520 
Realized foreign exchange gain (loss)   (156,698)   146,250    (372,005)   160,623 
Net gain on sale of assets, excluding transaction costs and severances (note 4)   (82,090)   –    (25,544,262)   – 
Charge on settlement of liability   –    –    90,385    – 
Income tax expense (recovery)   52,778    (216,650)   39,581    82,876 
    (6,162,688)   11,250,389    (13,280,548)   8,861,266 
Changes in operating assets and liabilities (note 15)   492,236    (11,525,745)   7,231,290    (6,593,182)
Income taxes paid   –    25,672    –    (318,695)
    (5,670,452)   (249,684)   (6,049,258)   1,949,389 
Cash flows (used in) from investing activities:                    
Maturity of short-term investments   12,000    4,787,056    519,000    17,999,146 
Acquisition of short-term investments   –    (4,725,908)   (184,000)   (15,116,531)
Proceeds on sale of assets (note 4)   –    –    43,075,587    – 
Interest received   99,606    4,291    146,671    27,934 
Acquisition of property, plant and equipment   (366,190)   (892,218)   (668,495)   (2,043,407)
Acquisition of intangible assets   (112,119)   (3,467)   (3,702,336)   (9,487)
Cash reduction related to loss of control of Acasti (note 10)   (2,666,122)   –    (2,666,122)   – 
    (3,032,825)   (830,246)   36,520,305    857,655 
Cash flows used in financing activities:                    
Variation of the bank line of credit   –    160,000    –    30,000 
Repayment of loans and borrowings   (2,818,113)   (1,323,971)   (19,020,830)   (5,257,041)
Increase in long-term debt, net of finance costs   –    (8,723)   –    3,666,311 
Interest paid   (123,998)   (501,901)   (794,942)   (1,562,021)
Penalty on debt reimbursement   –    –    (263,483)   – 
Settlement of derivative swap agreements   –    –    (58,999)   – 
Issuance of shares costs   –    –    (9,930)   – 
Proceeds from exercise of options   112,266    –    112,266    – 
Proceeds from Acasti warrants   384,250    –    384,250    – 
Payment of Acasti public offering transaction costs   –    –    (380,765)   – 
Payment of Acasti debt issuance transaction costs   –    –    (40,305)   – 
    (2,445,595)   (1,674,595)   (20,072,738)   (3,122,751)
Foreign exchange gain (loss) on cash and cash equivalents held in foreign currencies   147,065    83,176    (24,777)   (20,316)
Net (decrease) increase in cash and cash equivalents   (11,001,807)   (2,671,349)   10,373,532    (336,023)
Cash and cash equivalents beginning of periods   37,177,702    7,808,253    15,802,363    5,472,927 
Cash and cash equivalents end of periods  $26,175,895   $5,136,904   $26,175,895   $5,136,904 
                     
Cash and cash equivalents is comprised of:                    
Cash  $4,668,690   $5,136,904   $4,668,690   $5,136,904 
Cash equivalents   21,507,205    –    21,507,205    – 

 

See accompanying notes to unaudited consolidated interim financial statements.

 5 

 

NEPTUNE TECHNOLOGIES & BIORESSOURCES INC.

Notes to Consolidated Interim Financial Statements

(Unaudited)

 

Three-month and nine-month periods ended December 31, 2017 and November 30, 2016

 

 

1.Reporting entity:

 

Neptune Technologies & Bioressources Inc. (the "Corporation" or "Neptune") is incorporated under the Business Corporations Act (Québec) (formerly Part 1A of the Companies Act (Québec)). The Corporation is domiciled in Canada and its registered office is located at 545 Promenade du Centropolis, Laval, Québec, H7T 0A3. The consolidated financial statements of the Corporation comprise the Corporation and its main subsidiaries, Biodroga Nutraceuticals Inc. ("Biodroga") and Acasti Pharma Inc. ("Acasti") until the loss of control of the subsidiary on December 27, 2017. As at December 31, 2017, the investment in Acasti is presented in "Other assets" in the consolidated statement of financial position (refer to note 10). On August 7, 2017, Neptune exited bulk krill oil manufacturing and distribution activities (refer to note 4).

 

Beginning in fiscal 2017, the Corporation’s fiscal year ended on March 31. As a result, these financial statements and corresponding notes to financial statements include different three-month and nine-month periods: the three-month and nine-month periods ended December 31, 2017 and three-month and nine-month periods ended November 30, 2016. Financial information for the three-month and nine-month periods ended December 31, 2016 has not been included in these financial statements for the following reasons: (i) the three-month and nine-month periods ended November 30, 2016 provide a meaningful comparison for the three-month and nine-month periods ended December 31, 2017; (ii) there are no significant factors, seasonal or otherwise, that would impact the comparability of information if the results for the three-month and nine-month periods ended December 31, 2016 were presented in lieu of results for the three-month and nine-month periods ended November 30, 2016; and (iii) it was not practicable or cost justified to prepare this information.

 

Neptune is a wellness products company, with more than 50 years of combined experience in the industry. The Company formulates and provides turnkey solutions available in various unique delivery forms, offers specialty ingredients such as MaxSimil®, a patented ingredient that may enhance the absorption of lipid-based nutraceuticals, and a variety of other marine and seed oils. Neptune also sells premium krill oil directly to consumers through web sales at www.oceano3.com. Leveraging our scientific, technological and innovative expertise, Neptune is working to develop unique extractions and formulations in high potential growth segments such as medical and wellness cannabinoid-based products.

 

2.Basis of preparation:

 

(a)Statement of compliance:

 

These consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB"), on a basis consistent with those accounting policies followed by the Corporation in the most recent audited consolidated annual financial statements. These consolidated interim financial statements have been prepared under IFRS in accordance with IAS 34, Interim Financial Reporting. Certain information, in particular the accompanying notes, normally included in the consolidated annual financial statements prepared in accordance with IFRS, has been omitted or condensed. Accordingly, the consolidated interim financial statements do not include all of the information required for full annual consolidated financial statements, and therefore, should be read in conjunction with the audited consolidated financial statements and the notes thereto for the thirteen-month period ended March 31, 2017.

 

The consolidated interim financial statements were approved by the Board of Directors on February 14, 2018.

 

(b)Basis of measurement:

 

The consolidated financial statements have been prepared on the historical cost basis, except for the following:

 

·Share-based compensation transactions which are measured pursuant to IFRS 2, Share-based payment (note 12);
·Available for sale financial assets which are measured at fair value (note 16 (i));
·Derivative hedging financial instrument which is measured at fair value (note 16 (iii)); and
·Derivative warrant liabilities which were measured at fair value until deconsolidation of Acasti (note 16 (ii)).

 

Certain of the Corporation’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. In establishing fair value, the Corporation uses a fair value hierarchy based on levels as defined below:

 

·Level 1: defined as observable inputs such as quoted prices in active markets.
·Level 2: defined as inputs other than quoted prices in active markets that are either directly or indirectly observable.

 6 

 

NEPTUNE TECHNOLOGIES & BIORESSOURCES INC.

Notes to Consolidated Interim Financial Statements, Continued

(Unaudited)

 

Three-month and nine-month periods ended December 31, 2017 and November 30, 2016

 

 

2.Basis of preparation (continued):

 

(b)Basis of measurement (continued):

 

·Level 3: defined as inputs that are based on little or no little observable market data, therefore requiring entities to develop their own assumptions.

 

(c)Functional and presentation currency:

 

These consolidated interim financial statements are presented in Canadian dollars, which is the Corporation and its subsidiaries’ functional currency.

 

(d)Use of estimates and judgments:

 

The preparation of consolidated 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, liabilities, income and expenses. Actual results may differ from these estimates.

 

Estimates are based on management’s best knowledge of current events and actions that the Corporation may undertake in the future. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

 

Critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the consolidated financial statements include the following:

 

·Assessing the recognition of contingent liabilities, which requires judgment in evaluating whether there is a probable outflow of economic benefits that will be required to settle matters subject to litigation (note 17);
·Determining that the Corporation has de facto control over its subsidiary Acasti until December 27, 2017 (note 10); and
·Assessing the criteria for recognition of tax assets (note 13).

 

Assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year include the following:

 

·Estimating the recoverable amount of non-financial assets (note 4).

 

Also, the Corporation uses it best estimate to determine the net realizable values of inventories based on obsolescence and market conditions.

 

 7 

 

NEPTUNE TECHNOLOGIES & BIORESSOURCES INC.

Notes to Consolidated Interim Financial Statements, Continued

(Unaudited)

 

Three-month and nine-month periods ended December 31, 2017 and November 30, 2016

 

 

3.Significant accounting policies:

 

The accounting policies and basis of measurement applied in these consolidated interim financial statements are the same as those applied by the Corporation in its consolidated financial statements for the thirteen-month period ended March 31, 2017, except as disclosed below.

 

Change in accounting policies:

 

The following is an amendment to standards applied by the Corporation in the preparation of these consolidated interim financial statements.

 

Statement of Cash Flows:

 

In January 2016, the IASB amended IAS 7, Statement of Cash Flows, to require an entity to disclose the following changes in liabilities arising from financing activities (to the extent necessary): (i) changes from financing cash flows; (ii) changes arising from obtaining or losing control of subsidiaries or other businesses; (iii) the effect of changes in foreign exchange rates; (iv) changes in fair values; and (v) other changes. One way to fulfil the new disclosure requirement is to provide a reconciliation between the opening and closing balances in the statement of financial position for liabilities arising from financing activities. In addition, if an entity provides the required disclosure with disclosures of changes in other assets and liabilities, it must disclose the changes in liabilities arising from financing activities separately from changes in those other assets and liabilities. The amendments to IAS 7 are effective for annual periods beginning on or after January 1, 2017, with earlier adoption permitted. The Corporation adopted this amendment for the annual period beginning on April 1, 2017. The Corporation will be providing additional disclosure in relation to the changes in liabilities arising from financing activities in its annual consolidated financial statements for the year ending March 31, 2018.

 

New standards and interpretations not yet adopted:

 

A number of new standards, and amendments to standards and interpretations, are not yet effective for the three-month and nine-month periods ended December 31, 2017 and November 30, 2016, and have not been applied in preparing these consolidated interim financial statements.

 

(i)Financial instruments:

 

On July 24, 2014, the IASB issued the complete IFRS 9, Financial Instruments (IFRS 9 (2014)). It introduces new requirements for the classification and measurement of financial assets. Under IFRS 9 (2014), financial assets are classified and measured based on the business model in which they are held and the characteristics of their contractual cash flows. The standard also introduces additional changes relating to financial liabilities and amends the impairment model by introducing a new “expected credit loss” model for calculating impairment. The mandatory effective date of IFRS 9 is for annual periods beginning on or after January 1, 2018 and must be applied retrospectively with some exemptions. The Corporation intends to adopt IFRS 9 (2014) in its consolidated financial statements for the annual period beginning on April 1, 2018. The Corporation is currently assessing the extent of the impact of adoption of the standard.

 

(ii)Revenue:

 

On May 28, 2014, the IASB issued IFRS 15, Revenue from Contracts with Customers. IFRS 15 will replace IAS 18, Revenue, among other standards. The standard contains a single model that applies to contracts with customers and two approaches to recognizing revenue: at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognized. New estimates and judgmental thresholds have been introduced, which may affect the amount and/or timing of revenue recognized. The new standard applies to contracts with customers. The new standard is effective for fiscal years beginning on January 1, 2018, and is available for early adoption. The Corporation intends to adopt IFRS 15 in its consolidated financial statements for the annual period beginning on April 1, 2018. The Corporation is currently assessing the extent of the impact of adoption of the standard.

 

(iii)Leases:

 

In January 2016, the IASB issued IFRS 16, Leases, which will replace IAS 17, Leases. The standard will require all leases of more than 12 months to be reported on a company’s statement of financial position as assets and liabilities. The new standard is effective for fiscal years beginning on January 1, 2019, and is available for early adoption. The Corporation intends to adopt IFRS 16 in its consolidated financial statements for the annual period beginning on April 1, 2019. The Corporation is currently assessing the extent of the impact of adoption of the standard.

 8 

 

NEPTUNE TECHNOLOGIES & BIORESSOURCES INC.

Notes to Consolidated Interim Financial Statements, Continued

(Unaudited)

 

Three-month and nine-month periods ended December 31, 2017 and November 30, 2016

 

 

3.Significant accounting policies (continued):

 

(iv)Amendments to IFRS 2 – Classification and Measurement of Share-Based Payment Transactions:

 

On June 20, 2016, the IASB issued amendments to IFRS 2, Share-Based Payment, clarifying how to account for certain types of share-based payment transactions. The amendments apply for annual periods beginning on or after January 1, 2018. Earlier application is permitted. As a practical simplification, the amendments can be applied prospectively. Retrospective, or early, application is permitted if information is available without the use of hindsight. The amendments provide requirements on the accounting for: the effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments; share-based payment transactions with a net settlement feature for withholding tax obligations; and a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled. The Corporation intends to adopt the amendments to IFRS 2 in its consolidated financial statements for the annual period beginning on April 1, 2018. The Corporation is currently assessing the extent of the impact of adoption of the amendments to the standard.

 

(v)Income tax:

 

On June 7, 2017, the IASB issued IFRIC 23 – Uncertainty over Income Tax Treatments (the “Interpretation”). The Interpretation provides guidance on the accounting for current and deferred tax liabilities and assets in circumstances in which there is uncertainty over income tax treatments. The Interpretation is effective for annual periods beginning on or after January 1, 2019. Earlier application is permitted.

 

The Interpretation requires an entity to:

 

·Contemplate whether uncertain tax treatments should be considered separately, or together as a group, based on which approach provides better predictions of the resolution;
   
· Reflect an uncertainty in the amount of income tax payable (recoverable) if it is probable that it will pay (or recover) an amount for the uncertainty; and
   
·Measure a tax uncertainty based on the most likely amount or expected value depending on whichever method better predicts the amount payable (recoverable).

 

The Corporation intends to adopt the Interpretation in its consolidated financial statements for the annual period beginning on April 1, 2019. The extent of the impact of adoption of the Interpretation has not yet been determined.

 

4.Sale of assets:

 

On August 7, 2017, Neptune and Aker BioMarine Antarctic AS (“Aker BioMarine”) concluded an agreement whereby Aker BioMarine acquired Neptune’s intellectual property, list of customers and krill oil inventory for a cash consideration of $43,075,587 (US$34 million) paid at closing. Under this agreement, Neptune exits bulk krill oil manufacturing and distribution activities and Aker BioMarine becomes exclusive krill oil supplier to Neptune’s solutions business. An amount of $11,175,466 of such proceeds was used for debt reimbursement and to pay the penalty on early repayment of $263,483 concurrent with the sale transaction and an additional $2,391,673 was repaid on October 6, 2017.

 

The assets sold were included in the Nutraceutical segment. The disposal of the krill oil manufacturing and distribution activities allows the Corporation to accelerate its efforts to position the Corporation in attractive growth segments such as the Green Valley medical and wellness cannabis oil extraction project, in line with its growth strategy. The krill oil manufacturing and distribution sales were $0.9 million and $3.0 million respectively during the three-month and nine-month periods ended December 31, 2017 ($6.4 million and $16.6 million for the three-month and nine-month periods ended November 30, 2016) and the gross margin, excluding the impairment loss on inventories of $1.7 million, was nominal and $1.2 million respectively during the three-month and nine-month periods ended December 31, 2017 ($2.4 million and $4.8 million for the three-month and nine-month periods ended November 30, 2016).

 

The Sherbrooke facility was not part of the transaction and it will be used through the development of unique extractions targeted towards high potential growth segments such as the cannabis industry. A large number of our employees saw their employment end as part of this transaction. A small team of people continues to work on special projects including the medical and wellness cannabis project at the facility as well as activities relating to exiting the bulk krill oil business. As the Sherbrooke facility was not part of the transaction, it did not qualify as discontinued operations for accounting purposes. Furthermore, management assessed the recoverable amount of the Sherbrooke facility and no revaluation of the useful life and no impairment of the plant and related equipment were recorded for the three-month and nine-month periods ended December 31, 2017. Management will continue to reassess the recoverable amount and useful life as progress and development are made in the cannabis oil extraction project.

 9 

 

NEPTUNE TECHNOLOGIES & BIORESSOURCES INC.

Notes to Consolidated Interim Financial Statements, Continued

(Unaudited)

 

Three-month and nine-month periods ended December 31, 2017 and November 30, 2016

 

 

4.Sale of assets (continued):

 

The following table presents a reconciliation of the net gain on sale of assets for the nine-month period ended December 31, 2017 and the full impact of the sale transaction and concurrent debt reimbursements on the net income of the Corporation:

 

    August 7, 
    2017 
      
Total transaction proceeds  $43,075,587 
Inventory sold   (11,185,572)
Net intangible assets sold   (5,791,710)
Other write-off of asset, severance, transaction costs and costs for activities relating to exiting the bulk krill oil business (i) (ii)   (2,374,625)
Net gain on sale of assets as presented in the statement of earnings  $23,723,680 
      
Impairment loss on inventories – presented in cost of sales (note 5)   (1,719,362)
Penalty on reimbursement, loss on financing and discounted fees on debt reimbursed – presented in finance costs (note 11)   (920,429)
Total impact of the transaction on the net income before tax  $21,083,889 

 

(i)Including non-cash write-off of assets of $554,044, $1,142,036 of employee severance and $482,219 of transaction costs.
(ii)$147,397 of costs were recorded during the three-month period ended December 31, 2017 relating to other write-off of asset, transaction costs and costs for activities relating to exiting the bulk krill oil business (reprocessing of work in progress inventories).

 

5.Inventories:

 

    December 31,    March 31,  
    2017    2017 
           
Raw materials  $3,971,295   $5,539,437 
Work in progress   –    3,154,833 
Finished goods   1,023,754    3,807,455 
Supplies and spare parts   758,910    741,010 
   $5,753,959   $13,242,735 

 

For the three-month period ended December 31, 2017, the cost of sales of $5,299,684 ($8,687,765 for the three-month period ended November 30, 2016) was comprised of inventory costs of $5,166,907 ($8,600,071 for the three-month period ended November 30, 2016) which consisted of raw materials, consumables and changes in work in progress and finished goods and other costs of $132,777 ($87,694 for the three-month period ended November 30, 2016).

 

For the nine-month period ended December 31, 2017, the cost of sales of $15,774,081 ($25,425,075 for the nine-month period ended November 30, 2016) was comprised of inventory costs of $13,638,581 ($25,210,348 for the nine-month period ended November 30, 2016) which consisted of raw materials, consumables and changes in work in progress and finished goods, other costs of $416,138 ($214,727 for the nine-month period ended November 30, 2016) and impairment loss on inventories of $1,719,362 (nil for the nine-month period ended November 30, 2016).

 

Finished goods and work in progress inventories with a carrying value of $11,185,572 was sold to Aker BioMarine during the nine-month period ended December 31, 2017. Furthermore, the impairment loss on inventories of $1,719,362, was recorded for the nine-month period ended December 31, 2017 on raw materials after the sale of assets transaction and is all related to the nutraceutical segment. See note 4.

 10 

 

NEPTUNE TECHNOLOGIES & BIORESSOURCES INC.

Notes to Consolidated Interim Financial Statements, Continued

(Unaudited)

 

Three-month and nine-month periods ended December 31, 2017 and November 30, 2016

 

 

6.Property, plant and equipment:

 

         

Building

    

Laboratory,

    

Furniture

           
         and building    R&D and plant    and office    Computer      
    

Land

    

components

    

equipment

    

equipment

    

equipment

    

Total

 
Net carrying amounts:                              
March 31, 2017  $228,630   $20,394,915   $24,925,082   $193,053   $122,687   $45,864,367 
December 31, 2017   228,630    19,771,778    21,197,511    159,233    101,056    41,458,208 

 

A significant portion of the Corporation’s land and building and building components as well as the plant equipment relates to the Sherbrooke facility which used to manufacture bulk krill oil. This manufacturing operation has ceased with the sale of assets transaction. Refer to note 4.

 

The Corporation lost control of Acasti on December 27, 2017 (note 10). Acasti’s property and equipment amounted to $2,781,794 on loss of control are no longer consolidated.

 

7.Intangible assets:

 

    

Non-compete

    

Customer

         

License

           
    

agreements

    

relationship

    

Patents

    

agreements

    

Trademarks

    

Total

 
Net carrying amounts:                              
March 31, 2017  $235,000   $3,588,500   $624,019   $7,336,948   $163,226   $11,947,693 
December 31, 2017   136,000    3,281,600    –    1,999,666    –    5,417,266 

 

Intellectual property with a net carrying amount of $5,791,710 ($609,315 for patents, $5,015,325 for license agreements and $167,070 for trademarks) was sold to Aker BioMarine during the nine-month period ended December 31, 2017. Refer to note 4.

 11 

 

NEPTUNE TECHNOLOGIES & BIORESSOURCES INC.

Notes to Consolidated Interim Financial Statements, Continued

(Unaudited)

 

Three-month and nine-month periods ended December 31, 2017 and November 30, 2016

 

 

8.Loans and borrowings:

 

This note provides information about the contractual terms of the Corporation’s loans and borrowings, which are measured at amortized cost.

 

    December 31,

2017

    

March 31,

2017

 
           
Loans and borrowings:          
Secured loan from Investissement Québec (“IQ”), principal balance authorized of $12,500,000, bearing interest at 8%, reimbursed during the period.  $–   $8,347,506 
Loan, bearing interest at prime rate plus 2.5% (plus 3.25% before October 14, 2016), secured through a first-ranking mortgage on all movable assets of Biodroga, current and future, corporeal and incorporeal, and tangible and intangible, reimbursable in monthly principal payments of $89,286 until November 2018, with a final payment of $3,314,276 on December 2018. The interest risk of the loan is mitigated by an interest rate swap. The Corporation has reserved $2,350,000 of short-term investment as pledge for the loan. Amounts received are net of transaction costs of $197,789.    4,154,668    5,429,852 
Loan, principal amount of 2.1 million GBP ($3,822,000), bearing interest at 12%, reimbursed during the period.    –    3,562,814 
Balance of purchase price due to previous owners of Biodroga. An amount of $355,346 bearing interest at 5% until December 2018, reimbursable in quarterly principal payments of $93,750 from March 2016 to September 2018, with a final payment of $74,096 in December 2018. An amount of $2,501,016 bearing interest at 7% was reimbursed during the period. Payments under these agreements are only payable if covenants on the loan at prime plus 2.5% above are respected.   355,346    3,202,612 
Refundable contribution obtained from a federal program, principal balance authorized of $3,500,000, without collateral or interest, reimbursed during the period.   –    2,344,116 
Finance lease liabilities, interest rate from 6.25% to 7.13%, payable in monthly installments of $2,345, maturing in November 2018 and March 2019.   25,342    44,644 
           
    4,535,356    22,931,544 
Less current portion of loans and borrowings   4,534,213    7,192,315 
Loans and borrowings   $1,143   $15,739,229 

 

The Corporation has an authorized bank line of credit of $1,800,000 (expiring on August 31, 2018), of which $1,800,000 was available as at December 31, 2017.

 

Some of the proceeds resulting from the transaction with Aker BioMarine were used to completely reimburse the loan from IQ, the loan in GBP and the refundable contribution obtained from a federal program, and also to reduce balance of purchase price during the nine-month period ended December 31, 2017. See note 4.

 12 

 

NEPTUNE TECHNOLOGIES & BIORESSOURCES INC.

Notes to Consolidated Interim Financial Statements, Continued

(Unaudited)

 

Three-month and nine-month periods ended December 31, 2017 and November 30, 2016

 

 

9.Capital and other components of equity:

 

(a)Liability settled in shares:

 

On May 9, 2017, Neptune issued 630,681 common shares of the Corporation at a price of $1.35 per common share as final payment of a liability of $858,000 (US$625,000). Total issue costs related to this transaction amounted to $9,930 and were recorded against share capital.

 

(b)DSUs released:

 

On August 9, 2017 and August 16, 2017, Neptune respectively issued 34,965 and 20,979 common shares of the Corporation to members of the Board of Directors at a price of $1.43 per common share for past services.

 

(c)Share options exercised:

 

During the three-month period ended December 31, 2017, Neptune issued 66,000 common shares of the Corporation at a weighted average exercise price of $1.70 per common share for a total cash consideration of $112,266.

 

(d)Warrants:

 

The warrants of the Corporation are composed of the following as at December 31, 2017 and March 31, 2017:

 

         

December 31,
2017

         

March 31,
2017 

 
                     
    Number         Number      
    outstanding         outstanding      
    and exercisable    Amount    and exercisable    Amount 
                     
Warrants IQ financing (i)   750,000   $648,820    750,000   $648,820 

 

(i)Exercise price of $3.37 per share and expiring on December 12, 2019.

 

10.Non-controlling interests ("NCI"):

 

Before Acasti’s latest public financing which occurred on December 27, 2017, Neptune owned 33.96% of Acasti’s shares and had determined it had de facto control over and therefore consolidated Acasti. After the financing and as at December 31, 2017, the ownership interest of the Corporation in Acasti went down to 20.39% and 12.12% on a fully diluted basis (34.45% and 23.28% as at March 31, 2017). Therefore, management has determined that the Corporation lost the de facto control of the subsidiary.

 

On that date, the Corporation ceased consolidating Acasti and derecognized the assets and liabilities of its former subsidiary and the non-controlling interest in Acasti. The Corporation recognized its remaining non-controlling investment in Acasti at the fair value as at that date. The Corporation has 5,064,694 common shares of Acasti. The fair value of the investment in Acasti was determined to be $6,079,271 or $1.20 per share as at December 27, 2017. This investment was measured using a level 1 input. The difference between the fair value of the investment and the book value of Acasti’s net assets and related non-controlling interest was recognized in the statement of earnings as a gain on loss of control of $8,783,613. The Corporation ceased to consolidate Acasti’s results from that date. Acasti represents the Cardiovascular segment (note 18).

 13 

 

NEPTUNE TECHNOLOGIES & BIORESSOURCES INC.

Notes to Consolidated Interim Financial Statements, Continued

(Unaudited)

 

Three-month and nine-month periods ended December 31, 2017 and November 30, 2016

 

 

10.Non-controlling interests ("NCI") (continued):

 

The following table presents a reconciliation of the gain on loss of control for the three-month and nine-month periods ended December 31, 2017:

 

    December 27, 
    2017 
      
Investment in Acasti at fair value  $6,079,271 
Non-controlling interest   2,233,973 
Acasti’s assets before deconsolidation   (7,143,171)
Acasti’s liabilities before deconsolidation   7,613,540 
Gain on loss of control of Acasti  $8,783,613 

 

As at December 31, 2017, the investment in Acasti is presented in “Other assets” in the consolidated statement of financial position. The fair value of the investment remains unchanged from the date of loss of control. On January 22, 2018, Acasti issued additional overallotment shares pursuant to its December 27, 2017 financing, which brought the Corporation’s ownership interest to 19.78%. Following these events, the Corporation concluded it does not have significant influence over Acasti.

 

The loss of control is a non-cash transaction excluded from the consolidated statement of cash flows, except for the cash reduction related to the cash position of Acasti on the date of loss of control.

 

Prior to this transaction, changes in ownership interest in the subsidiary that did not result in a loss of control were accounted for as equity transactions. The differences between the considerations received and the non-controlling interest adjustments were recognized in equity.

 

During the nine-month period ended December 31, 2017, prior to the loss of control on December 27, 2017, the Corporation’s participation in Acasti changed as follows:

 

(i)Acasti options and call-options expired, which impacted the non-controlling interest for an amount of ($1,466,459);
(ii)Acasti issued shares resulting from the exercise of Series 2017 – Broker warrants, which impacted the non-controlling interest for an amount of $228,530;
(iii)Acasti settled financing fees related to past financing, which impacted the non-controlling interest for an amount of ($102,011);
(iv)Acasti issued shares to settle convertible debentures interest, which impacted the non-controlling interest for an amount of $51,965.

 

During the nine-month period ended November 30, 2016, the Corporation’s participation in Acasti changed as follows:

 

(v)Acasti options and call-options expired, which impacted the non-controlling interest for an amount of ($2,715,532).

 

11.Finance income and finance costs:

 

(a)Finance income :

 

    Three-month periods ended    Nine-month periods ended 
    December 31,    November 30,    December 31,    November 30, 
    2017    2016    2017    2016 
                     
Interest income  $99,606   $3,796   $146,671   $27,255 
Foreign exchange gain   –    234,974    –    70,445 
Finance income  $99,606   $238,770   $146,671   $97,700 

 

 14 

 

NEPTUNE TECHNOLOGIES & BIORESSOURCES INC.

Notes to Consolidated Interim Financial Statements, Continued

(Unaudited)

 

Three-month and nine-month periods ended December 31, 2017 and November 30, 2016

 

 

11.Finance income and finance costs (continued):

 

(b)Finance costs :

 

    Three-month periods ended    Nine-month periods ended 
    December 31,    November 30,    December 31,    November 30, 
    2017    2016    2017    2016 
Interest charges and other finance costs  $(97,725)  $(620,442)  $(972,413)  $(1,902,324)
Interest expense on unsecured convertible debentures   (92,047)   –    (275,140)   – 
Penalty on reimbursement, loss on financing and discounted fees on debt reimbursed (note 4)   (355,033)   –    (920,429)   – 
Foreign exchange loss   (9,633)   –    (171,398)   – 
Finance costs  $(554,438)  $(620,442)  $(2,339,380)  $(1,902,324)

 

12.Share-based payment:

 

At December 31, 2017, the Corporation had the following share-based payment arrangements:

 

(a)Corporation stock option plan:

 

(i)Stock option plan:

 

The Corporation has established a stock option plan for directors, officers, employees and consultants. Awards under the plan grants a participant the right to purchase a certain number of Common Shares, subject to certain conditions described below, at an exercise price equal to at least the Market Price (as defined after) of the Common Shares on the grant date. The “Market Price” of Common Shares as of a particular date shall generally mean the VWAP (volume weighted average trading price of the Common Shares) obtained for such Common Shares on the TSX (and if listed on more than one stock exchange, then the highest of such closing prices) during the last ten (10) Business Day prior to the Grant Date (10-day VWAP). The terms and conditions for exercising options and purchasing the underlying Common Shares are set by the Board of Directors, and subject, among others, to the following limitations: the term of the options cannot exceed ten years and every stock option granted under the stock option plan will be subject to conditions no less restrictive than a minimum vesting period of 18 months and a gradual and equal acquisition of vesting rights at least on a quarterly basis. The Corporation can issue a number of Common Shares not exceeding 15% of the number of Common Shares issued and outstanding at the time of any grant pursuant to the stock option plan. The total number of Common Shares issuable to a single holder pursuant to the stock option plan cannot exceed 5% of the Corporation’s total issued and outstanding Common Shares at the time of the grant, with the maximum of 2% for any one consultant.

 

 15 

 

NEPTUNE TECHNOLOGIES & BIORESSOURCES INC.

Notes to Consolidated Interim Financial Statements, Continued

(Unaudited)

 

Three-month and nine-month periods ended December 31, 2017 and November 30, 2016

 

 

12.Share-based payment (continued):

 

(a)Corporation stock option plan (continued):

 

(i)Stock option plan:

 

The number and weighted average exercise prices of stock options are as follows:

 

    2017    2016 
    Weighted
average
exercise
price 		    Number of
options		    Weighted
average
exercise
price 		    Number of
options		 
                     
Options outstanding at April 1, 2017 and March 1, 2016  $1.92    3,765,000   $2.50    4,242,025 
Granted (i)   1.90    7,501,980    1.54    881,000 
Exercised (note 9 (c))   1.70    (66,000)   –    – 
Forfeited   1.54    (816,435)   2.71    (406,461)
Expired   2.91    (210,000)   3.39    (218,599)
Options outstanding at December 31, 2017 and November 30, 2016  $1.92    10,174,545   $2.24    4,497,965 
                     
Options exercisable at December 31, 2017 and November 30, 2016  $1.96    2,370,667   $2.58    2,670,964 

 

(i)Of the 7,501,980 options granted, 2,095,333 options have restrictions on their exercise subject to shareholder approval as required by the rules of the Toronto Stock Exchange.

 

The fair value of options granted, excluding 2,095,333 options which have restrictions on their exercise subject to shareholder approval for the nine-month period ended December 31, 2017, has been estimated according to the Black-Scholes option pricing model and based on the weighted average of the following assumptions for options granted to employees during the periods ended:

 

    

Nine-month

period ended

December 31,

    

Nine-month

period ended

November 30,

 
    2017    2016 
           
Exercise price  $1.87   $1.54 
Share price  $1.79   $1.54 
Dividend   –    – 
Risk-free interest   1.47%   0.67%
Estimated life   3.90 years    3.50 years 
Expected volatility   48.63%   49.46%

 

The weighted average fair value of the options granted to employees during the nine-month period ended December 31, 2017 is $0.68 ($0.56 for the nine-month period ended November 30, 2016).

 

Stock-based compensation recognized under this plan amounted to $233,630 and $530,686, respectively, for the three-month and nine-month periods ended December 31, 2017 ($174,515 and $557,119 for the three-month and nine-month periods ended November 30, 2016).

 16 

 

NEPTUNE TECHNOLOGIES & BIORESSOURCES INC.

Notes to Consolidated Interim Financial Statements, Continued

(Unaudited)

 

Three-month and nine-month periods ended December 31, 2017 and November 30, 2016

 

 

12.Share-based payment (continued):

 

(a)Corporation stock option plan (continued):

 

(ii)Performance options:

 

On October 16, 2015, the Corporation granted 625,000 performance options under the Corporation stock option plan at an exercise price of $1.55 per share expiring on October 16, 2020. The options vest after a two-year minimum service period and the attainment of market performance conditions within the following three years. A proportion of 1/3 of the total number of options will vest upon every increase of $0.50 in the share market value of the Neptune class A common shares.

 

The number and weighted average exercise prices of performance options are as follows:

 

    2017    2016 
    

Weighted
average

exercise
price

    Number of
options		    

Weighted
average

exercise

price

    Number of
options		 
                     
Options outstanding at April 1, 2017 and March 1, 2016  $1.55    475,000   $1.55    625,000 
Forfeited   1.55    (150,000)   1.55    (150,000)
Options outstanding at December 31, 2017 and November 30, 2016  $1.55    325,000   $1.55    475,000 
                     
Options exercisable at December 31, 2017 and November 30, 2016  $1.55    108,333   $–    – 

 

On January 17, 2018, all performance options were exercisable.

 

Stock-based compensation recognized under this plan amounted to ($34,545) and ($17,485), respectively, for the three-month and nine-month periods ended December 31, 2017 ($48,618 and $122,825 for the three-month and nine-month periods ended November 30, 2016).

 

(b)Corporation Deferred Share Units (‘’DSUs’’):

 

The Corporation has established an equity incentive plan for employees, directors and consultants of the Corporation. The plan provides for the issuance of restricted share units, performance share units, restricted shares, deferred share units and other share-based awards, subject to restricted conditions as may be determined by the Board of Directors. Upon fulfillment of the restricted conditions, as the case may be, the plan provides for settlement of the awards outstanding through shares.

 

    2017    2016 
    

Weighted
average

market
price

    Number of
DSUs		    

Weighted
average

market

price

    Number of
DSUs		 
                     
DSUs outstanding at April 1, 2017 and March 1, 2016  $1.60    425,354   $1.72    75,000 
Granted   1.27    201,342    1.57    350,354 
Released through the issuance of common shares (note 9 (b))   1.43    (55,944)   –    – 
DSUs outstanding at December 31, 2017 and November 30, 2016  $1.50    570,752   $1.60    425,354 
                     
DSUs exercisable at December 31, 2017 and November 30, 2016  $1.50    356,630   $1.64    189,306 

 17 

 

NEPTUNE TECHNOLOGIES & BIORESSOURCES INC.

Notes to Consolidated Interim Financial Statements, Continued

(Unaudited)

 

Three-month and nine-month periods ended December 31, 2017 and November 30, 2016

 

 

12.Share-based payment (continued):

 

(b)Corporation Deferred Share Units (‘’DSUs’’) (continued):

 

Out of the 570,752 DSUs outstanding as at December 31, 2017, 160,000 DSUs vest upon achievement of performance conditions to be achieved no later than June 30, 2019, 72,164 DSUs vest upon services to be rendered during a period of twelve months from date of grant, 263,588 vested DSUs were granted for past services and 75,000 DSUs were in compensation for consulting services rendered by a member of the Board of Directors and have vested in full. However, the shares will be delivered when the consultant ceases to be a member of the board. The fair value of the DSUs is determined to be the share price at the date of grant and is recognized as stock-based compensation, through contributed surplus, over the vesting period.

 

The weighted average fair value of the DSUs granted during the nine-month period ended December 31, 2017 was $1.27 ($1.57 for the nine-month period ended November 30, 2016) per unit.

 

Stock-based compensation recognized under this plan amounted to ($127) and $267,884, respectively, for the three-month and nine-month periods ended December 31, 2017 ($91,684 and $304,842 for the three-month and nine-month periods ended November 30, 2016).

 

(c)Corporation warrants:

 

As part of the NeuroBioPharm Plan of Arrangement for the acquisition by Neptune of all of the issued and outstanding shares of NeuroBioPharm in February 2015, the rights over NeuroBioPharm warrants and call-options were exchanged for Neptune warrants.

 

The number and weighted average exercise prices of warrants are as follows:

 

    2017    2016 
    

Weighted
average

exercise
price

    Number of
warrants		    

Weighted
average

exercise

price

    Number of
warrants		 
                     
Warrants outstanding at April 1, 2017 and March 1, 2016  $21.50    24,174   $12.84    292,047 
Forfeited   21.50    (465)   11.86    (129,122)
Expired   21.50    (23,709)   12.25    (138,751)
Warrants outstanding and exercisable at December 31, 2017 and November 30, 2016  $–    –   $21.50    24,174 

 

(d)Acasti stock option plan

 

Stock-based compensation recognized under Acasti’s stock option plan amounted to $329,779 and $660,611, respectively, for the three-month and nine-month periods ended December 31, 2017 ($155,133 and $429,856 for the three-month and nine-month periods ended November 30, 2016). The amounts for the nine-month periods ended December 31, 2017 and November 30, 2016 are included in the ‟share-based payment transactions’’ of the equity attributable to non-controlling interest.

 

 18 

 

NEPTUNE TECHNOLOGIES & BIORESSOURCES INC.

Notes to Consolidated Interim Financial Statements, Continued

(Unaudited)

 

Three-month and nine-month periods ended December 31, 2017 and November 30, 2016

 

 

13.Income tax (expense) recovery:

 

Income tax recognized in income or loss:

 

    Three-month periods ended    Nine-month periods ended 
    December 31,    November 30,    December 31,    November 30, 
    2017    2016    2017    2016 
                     
Deferred tax (expense) recovery  $(52,778)  $216,650   $(39,581)  $(82,876)
                     
Income tax (expense) recovery  $(52,778)  $216,650   $(39,581)  $(82,876)

 

The deferred income tax recovery (expense) for three-month and nine-month periods ended December 31, 2017 and November 30, 2016, results from the (utilization) or recognition of deferred tax assets recognized following the acquisition of Biodroga on January 7, 2016. No tax expense is recognized on the net gain on sale of assets described in note 4 or on the taxable temporary difference on the investment in Acasti on change of control, as the determined tax impacts will be completely offset by previously unrecognized deferred tax assets.

 

14.Income per share:

 

The following table provides a reconciliation between the number of basic and diluted shares outstanding:

 

    Three-month periods ended    Nine-month periods ended 
    December 31,    November 30,    December 31,    November 30, 
    2017    2016    2017    2016 
                     
Weighted average number of voting shares   78,667,951    77,945,548    78,539,581    77,945,548 
Dilutive effect of deferred share units   393,790    232,510    347,630    147,960 
Dilutive effect of stock options   75,947    –    –    – 
Weighted average number of diluted shares   79,137,688    78,178,058    78,887,211    78,093,508 
                     
Number of anti-dilutive stock options, warrants and deferred share units excluded from diluted earnings per share calculation   10,270,573    5,907,139    11,453,434    5,990,758 

 

Stock options, deferred share units and warrants could be dilutive in the future.

 

 19 

 

NEPTUNE TECHNOLOGIES & BIORESSOURCES INC.

Notes to Consolidated Interim Financial Statements, Continued

(Unaudited)

 

Three-month and nine-month periods ended December 31, 2017 and November 30, 2016

 

 

15.Supplemental cash flow disclosure:

 

(a)Changes in operating assets and liabilities:

 

    Three-month periods ended    Nine-month periods ended 
    December 31,    November 30,    December 31,    November 30, 
    2017    2016    2017    2016 
                     
Trade and other receivables  $(1,253,723)  $(9,807,733)  $11,345,867   $(6,313,434)
Tax credits receivable   122,693    98,691    121,220    41,237 
Prepaid expenses   (952,594)   (17,425)   (922,068)   482,965 
Inventories   347,136    1,024,439    (5,416,158)   4,118,891 
Trade and other payables   2,157,991    (3,184,992)   2,020,051    (5,429,737)
Deferred revenues   70,733    361,275    82,378    506,896 
Changes in operating assets and liabilities  $492,236   $(11,525,745)  $7,231,290   $(6,593,182)

 

(b)Non-cash transactions:

 

    Three-month periods ended    Nine-month periods ended 
    December 31,    November 30,    December 31,    November 30, 
    2017    2016    2017    2016 
                     
Acquired property, plant and equipment included in trade and other payables  $(119,000)  $297,679   $45,949   $324,014 
Intangible assets included in trade and other payables   (1,740)   6,181,714    267,377    6,182,603 
Intangible assets included in long-term payable   (110,379)   –    517,106    – 
Liability settlement in shares   –    –    858,000    – 
Convertible debenture interest paid in shares of subsidiary   –    –    56,984    – 

 

16.Financial Instruments:

 

Financial instruments – carrying values and fair values:

 

Financial assets and liabilities measured at fair value on a recurring basis as at December 31, 2017 and March 31, 2017 are the investment in BlueOcean Nutrascience Inc. (“BlueOcean”), the derivative warrant liabilities until December 27, 2017 and derivative swap agreements.

 

(i)Other investment:

 

In October 2014, the Corporation received 3,750,000 publicly traded common shares of BlueOcean on the signing of a license agreement. In April 2015, the Corporation acquired 1,120,000 units under a private placement transaction of BlueOcean. The Corporation measures its investment in BlueOcean at fair value on a recurring basis with changes in fair value recorded in other comprehensive income (loss). This investment was measured using a level 1 input.

 

The fair value of the investment in BlueOcean was determined to be $165,580 or $0.34 per share as at December 31, 2017 ($65,745 or $0.135 as at March 31, 2017). The change in fair value amounted to a gain of $141,230 and $99,835, respectively, for the three-month and nine-month periods ended December 31, 2017 (a loss of $39,379 and $115,990 for the three-month and nine-month periods ended November 30, 2016) accounted for through other comprehensive income or loss. In January 2018, all units of BlueOcean held by Neptune were sold for total proceeds of $103,275.

 20 

 

NEPTUNE TECHNOLOGIES & BIORESSOURCES INC.

Notes to Consolidated Interim Financial Statements, Continued

(Unaudited)

 

Three-month and nine-month periods ended December 31, 2017 and November 30, 2016

 

 

16.Financial Instruments (continued):

 

Financial instruments – carrying values and fair values (continued):

 

(ii)Derivative warrant liabilities:

 

Warrants issued as part of a public offering of units of Acasti composed of Class A shares and Class A share purchase warrants of Acasti in 2014 are derivative liabilities for accounting purposes due to the currency of the exercise price being different from Acasti’s functional currency until December 27, 2017, date of loss of control.

 

The Corporation measured its derivative warrant liabilities at fair value on a recurring basis. These financial liabilities were measured using a level 3 input.

 

The fair value of the derivative warrant liabilities was estimated according to the Black-Scholes option pricing model and based on the following assumptions:

 

     December 27,    March 31,  
    2017    2017 
           
Exercise price (1)   US$ 1.50    US$ 1.50 
Share price (1)   US$ 0.94    US$ 1.36 
Dividend   –    – 
Risk-free interest   1.75%   1.22%
Estimated life   0.92 year    1.68 years 
Expected volatility   113.43%   108.35%

 

(1) In order to obtain one share of Acasti, 10 warrants must be exercised.

 

The fair value of the warrants issued was determined to be $0.01 per share issuable as at December 27, 2017 ($0.11 per share issuable as at March 31, 2017).

 

The reconciliation of changes in level 3 fair value measurements of financial liabilities as at December 31, 2017 and March 31, 2017 is presented in the following table:

 

     December 31,    March 31,  
    2017    2017 
           
Opening balance at April 1, 2017 and March 1, 2016  $202,610   $151,343 
Change in fair value (gain) loss   (189,001)   51,267 
Loss of control of subsidiary (note 10)   (13,609)   – 
Closing balance at December 31, 2017 and March 31, 2017  $–   $202,610 

 

 21 

 

NEPTUNE TECHNOLOGIES & BIORESSOURCES INC.

Notes to Consolidated Interim Financial Statements, Continued

(Unaudited)

 

Three-month and nine-month periods ended December 31, 2017 and November 30, 2016

 

 

16.Financial Instruments (continued):

 

Financial instruments – carrying values and fair values (continued):

 

(iii)Derivative swap agreements:

 

    December 31,    March 31,  
    2017    2017 
           
Non-current asset          
Interest rate swap contract  $24,917   $– 
   $24,917   $– 
           
Non-current liability          
Cross currency swap contract  $-   $207,839 
Interest rate swap contract   -    7,298 
   $-   $215,137 

 

The Corporation used currency swap agreements to convert a long-term debt in pounds to the US dollar to mitigate its financial liabilities exposure to foreign currency risk as well as mitigate the risk from short-term financial assets denominated in US dollars. The Corporation did not apply hedge accounting to foreign currency differences arising from these agreements. These instruments were recorded into the consolidated statement of financial position at their fair value.

 

The change in fair value of these cross currency swaps amounted to nil and a gain of $156,339 for the three-month and nine-month periods ended December 31, 2017 respectively and is accounted for in change in fair value of derivative assets and liabilities. The cross currency swaps were cancelled and settled for $58,999 following the transaction with Aker BioMarine (see note 4).

 

The Corporation uses interest rate swap agreement to lock-in a portion of its debt cost and reduce its exposure to the variability of interest rates by exchanging variable rate payments for fixed rate payments. The Corporation has designated its interest rate swap as cash flow hedge for which it uses hedge accounting. The maturity analysis associated with the interest rate swap agreement used to manage interest risk associated with long-term debt is as follows:

 

    Fixed rate    Notional       December 31,    March 31, 
    %    amount   Maturity   2017    2017 
                        
Interest rate swap agreement   2.94   $4,084,817   Dec. 27, 2018  $24,917   $7,298 
                        

 

The level 2 fair value determination of the interest rate swap is measured using a generally accepted valuation technique which is the discounted value of the difference between the value of the swap based on variable interest rates (estimated using the yield curve for anticipated interest rates) and the value of the swap based on the swap’s fixed interest rate. The Corporation’s and the counterparty’s credit risk is also taken into consideration in determining fair value. The interest rate swap is decreasing at the same proportion of the debt covered. The change in fair value is recognized in other comprehensive income.

 

An assumed 1% change in the interest rate would not have a material effect on the net income.

 

 22 

 

NEPTUNE TECHNOLOGIES & BIORESSOURCES INC.

Notes to Consolidated Interim Financial Statements, Continued

(Unaudited)

 

Three-month and nine-month periods ended December 31, 2017 and November 30, 2016

 

 

16.Financial Instruments (continued):

 

Financial instruments – carrying values and fair values (continued):

 

The Corporation has determined that the carrying values of its short-term financial assets and liabilities approximate their fair value given the short-term nature of these instruments. The carrying value of the restricted short-term investment also approximates its fair value given the short-term maturity of the reinvested funds. For variable rate loans and borrowings, the fair value is considered to approximate the carrying amount.

 

The fair value of the fixed rate loans and borrowings is determined by discounting future cash flows using a rate that the Corporation could obtain for loans with similar terms, conditions and maturity dates. The fair value of these instruments approximates the carrying amounts and was measured using level 3 inputs.

 

17.Commitments and contingencies:

 

(a)Commitments:

 

(i)As at September 30, 2016, Neptune has entered into an exclusive commercial agreement for a specialty ingredient. According to this agreement, to maintain the exclusivity, Neptune must reach minimum annual volumes of sales for the duration of the agreement of 11 years. In addition, Neptune has to pay royalties on sales.

 

(ii)A capital expenditure of $5,000,000 was approved by the Board of the Corporation to make the Sherbrooke facility ready and compliant for the extraction of cannabis oil. As at December 31, 2017, Neptune signed various capital expenditure contracts amounting to $2,392,289.

 

(b)Contingencies:

 

In the normal course of operations, the Corporation is involved in various claims and legal proceedings. The most significant of which are as follow:

 

(i)A former CEO of the Corporation is claiming the payment of approximately $8,500,000 and the issuance of equity instruments. As the Corporation’s management believes that these claims are not valid, no provision has been recognized. As of the date of these consolidated interim financial statements, no agreement has been reached. Neptune and its subsidiaries also filed an additional claim to recover certain amounts from this former officer. All outstanding share-based payments held by the former CEO have been cancelled during the year ended February 28, 2015.

 

(ii)Under the terms of an agreement entered into with a corporation controlled by the former CEO of the Corporation, the Corporation should pay royalties of 1% of its krill oil revenues in semi-annual installments, for an unlimited period. Neptune filed a motion challenging the validity of certain clauses of the agreement.

 

(iii)The Corporation initiated arbitration against a customer that owed $5,000,000 (US$3,700,000). The full amount receivable has been written-off. This customer is counterclaiming a sum in damages. As the Corporation’s management believes that this claim is not valid, no additional provision has been recognized.

 

Although the outcome of the these and various other claims and legal proceedings against the Corporation as at December 31, 2017 cannot be determined with certainty, based on currently available information, management believes that the ultimate outcome of these matters, individually and in aggregate, would not have a material adverse effect on the Corporation’s financial position or overall trends in results of operations.

 23 

 

NEPTUNE TECHNOLOGIES & BIORESSOURCES INC.

Notes to Consolidated Interim Financial Statements, Continued

(Unaudited)

 

Three-month and nine-month periods ended December 31, 2017 and November 30, 2016

 

 

18.Operating segments:

 

The Corporation had two reportable segments until the loss of control of subsidiary on December 27, 2017, which were the Corporation’s strategic business units. As at December 31, 2017, the cardiovascular segment that develops pharmaceutical products for cardiovascular diseases is no longer a strategic business unit for Neptune that produces and commercializes nutraceutical products and turnkey solutions for primarily omega-3 softgel capsules and liquids.

 

Information regarding the results of each reportable segment is included below. The cardiovascular results are presented until the loss of control. Performance is measured based on segment net income (loss), as included in the internal management reports that are reviewed by the Corporation’s Chief Operating Decision Maker. Segment income (loss) is used to measure performance, as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Transfer pricing is based on predetermined rates accepted by all parties involved. The reportable segment assets of the Cardiovascular segment as at December 31, 2017 consists of the investment in Acasti (note 10).

 

Three-month period ended December 31, 2017:

 

    Nutraceutical    Cardiovascular    Intersegment
eliminations		    Total 
                     
Revenue from external sales and royalties  $7,314,664   $–   $–   $7,314,664 
Gross margin   2,014,980    –    –    2,014,980 
                     
Research and development expenses (i)   (1,784,964)   (4,284,391)   580,707    (5,488,648)
Research tax credits and grants   12,399    23,852    –    36,251 
Selling, general and administrative expenses   (2,477,185)   (907,984)   –    (3,385,169)
Other income – net gain on sale of assets   (147,397)   –    –    (147,397)
Loss from operating activities   (2,382,167)   (5,168,523)   580,707    (6,969,983)
                     
Gain on loss of control of subsidiary   8,783,613    –    –    8,783,613 
                     
Finance income   90,933    8,673    –    99,606 
Finance costs   (487,337)   (67,101)   –    (554,438)
Change in fair value of derivative assets and liabilities   –    37,266    (1,637)   35,629 
Income (loss) before income tax   6,005,042    (5,189,685)   579,070    1,394,427 
                     
Income taxes   (52,778)   –    –    (52,778)
Net income (loss)   5,952,264    (5,189,685)   579,070    1,341,649 
                     
Depreciation and amortization   (762,437)   (670,225)   580,707    (851,955)
Stock-based compensation   (198,957)   (329,779)   –    (528,736)
Reportable segment assets   93,678,038    6,079,271    –    99,757,309 
Reportable segment liabilities   10,278,631    –    –    10,278,631 

 

(i)These research and development expenses of the Nutraceutical segment include $1,730,308 of costs associated to the cannabis business.

 24 

 

NEPTUNE TECHNOLOGIES & BIORESSOURCES INC.

Notes to Consolidated Interim Financial Statements, Continued

(Unaudited)

 

Three-month and nine-month periods ended December 31, 2017 and November 30, 2016

 

 

18.Operating segments (continued):

 

Three-month period ended November 30, 2016:

 

    Nutraceutical    Cardiovascular    Intersegment
eliminations		    Total 
                     
Revenue from external sales and royalties  $12,251,873   $1,258   $(112,500)  $12,140,631 
Gross margin   3,450,378    1,258    1,230    3,452,866 
                     
Research and development expenses   (348,849)   (1,707,875)   580,707    (1,476,017)
Research tax credits and grants   9,354    23,418    –    32,772 
Selling, general and administrative expenses   (4,511,700)   (829,092)   –    (5,340,792)
Other income – royalty settlement   13,117,000    –    –    13,117,000 
Income (loss) from operating activities   11,716,183    (2,512,291)   581,937    9,785,829 
                     
Finance income   126,144    118,637    (6,011)   238,770 
Finance costs   (625,208)   (1,245)   6,011    (620,442)
Change in fair value of derivative assets and liabilities   (197,786)   (1,941)   62    (199,665)
Income (loss) before income tax   11,019,333    (2,396,840)   581,999    9,204,492 
                     
Income taxes recovery   216,650    –    –    216,650 
Net income (loss)   11,235,983    (2,396,840)   581,999    9,421,142 
                     
Depreciation and amortization   (856,355)   (620,536)   580,707    (896,184)
Stock-based compensation   (314,817)   (155,133)   –    (469,950)
Reportable segment assets   101,628,355    21,588,747    (13,175,563)   110,041,539 
Reportable segment liabilities   36,807,866    1,819,202    (16,064)   38,611,004 

 

 

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NEPTUNE TECHNOLOGIES & BIORESSOURCES INC.

Notes to Consolidated Interim Financial Statements, Continued

(Unaudited)

 

Three-month and nine-month periods ended December 31, 2017 and November 30, 2016

 

 

18.Operating segments (continued):

 

Nine-month period ended December 31, 2017:

 

              Intersegment      
    Nutraceutical    Cardiovascular    eliminations    Total 
                     
Revenue from external sales and royalties  $20,640,397   $-   $-   $20,640,397 
Gross margin   4,866,316    -    -    4,866,316 
                     
Research and development expenses (i)   (2,572,360)   (9,675,625)   1,742,121    (10,505,864)
Research tax credits and grants   61,818    84,119    -    145,937 
Selling, general and administrative expenses   (8,273,694)   (2,761,478)   -    (11,035,172)
Other income – net gain on sale of assets   23,723,680    -    -    23,723,680 
Income (loss) from operating activities   17,805,760    (12,352,984)   1,742,121    7,194,897 
                     
Gain on loss of control of subsidiary   8,783,613    -    -    8,783,613 
                     
Finance income   108,034    38,637    -    146,671 
Finance costs   (1,983,968)   (355,412)   -    (2,339,380)
Change in fair value of derivative assets and liabilities   156,339    195,740    (6,739)   345,340 
Income (loss) before income tax   24,869,778    (12,474,019)   1,735,382    14,131,141 
                     
Income taxes   (39,581)   -    -    (39,581)
Net income (loss)   24,830,197    (12,474,019)   1,735,382    14,091,560 
                     
Depreciation and amortization   (2,511,026)   (2,005,019)   1,742,121    (2,773,924)
Stock-based compensation   (781,085)   (660,611)   -    (1,441,696)
Reportable segment assets   93,678,038    6,079,271    -    99,757,309 
Reportable segment liabilities   10,278,631    -    -    10,278,631 

 

(i)These research and development expenses of the Nutraceutical segment include $1,730,308 of costs associated to the cannabis business.

 26 

 

NEPTUNE TECHNOLOGIES & BIORESSOURCES INC.

Notes to Consolidated Interim Financial Statements, Continued

(Unaudited)

 

Three-month and nine-month periods ended December 31, 2017 and November 30, 2016

 

 

18.Operating segments (continued):

 

Nine-month period ended November 30, 2016:

 

              Intersegment      
    Nutraceutical    Cardiovascular    eliminations    Total 
                     
Revenue from external sales and royalties  $35,093,200   $7,797   $(112,500)  $34,988,497 
Gross margin   9,554,395    7,797    1,230    9,563,422 
                     
Research and development expenses   (1,118,952)   (5,747,718)   1,742,121    (5,124,549)
Research tax credits and grants   28,062    70,253    –    98,315 
Selling, general and administrative expenses   (10,197,830)   (2,251,484)   –    (12,449,314)
Other income – royalty settlement   13,117,000    –    –    13,117,000 
Income (loss) from operating activities   11,382,675    (7,921,152)   1,743,351    5,204,874 
                     
Finance income   226,505    (39,652)   (89,153)   97,700 
Finance costs   (1,975,572)   (15,905)   89,153    (1,902,324)
Change in fair value of derivative assets and liabilities   (233,160)   96,365    (3,101)   (139,896)
Income (loss) before income tax   9,400,448    (7,880,344)   1,740,250    3,260,354 
                     
Income taxes   (82,876)   –    –    (82,876)
Net income (loss)   9,317,572    (7,880,344)   1,740,250    3,177,478 
                     
Depreciation and amortization   (2,388,711)   (1,843,458)   1,742,121    (2,490,048)
Stock-based compensation   (984,786)   (429,856)   –    (1,414,642)
Reportable segment assets   101,628,355    21,588,747    (13,175,563)   110,041,539 
Reportable segment liabilities   36,807,866    1,819,202    (16,064)   38,611,004 

 

Differences between the sums of all segments and consolidated balances are explained primarily by the cardiovascular segment operating under license issued by the nutraceutical segment, the ultimate owner of the original intellectual property used in pharmaceutical applications. The intangible license asset of the cardiovascular segment and its amortization charge are eliminated upon consolidation. Intersegment balances payable or receivable explain further eliminations to reportable segment assets and liabilities.

 

The nutraceutical segment is the primary obligor of corporate expenses of the Corporation. All material corporate expenses are allocated to each reportable segment in a fraction that is commensurate to the estimated fraction of services or benefits received by each segment. These charges may not represent the cost that the segments would otherwise need to incur, should they not receive these services or benefits through the shared resources of the Corporation or receive financing from the nutraceutical segment.

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NEPTUNE TECHNOLOGIES & BIORESSOURCES INC.

Notes to Consolidated Interim Financial Statements, Continued

(Unaudited)

 

Three-month and nine-month periods ended December 31, 2017 and November 30, 2016

 

 

19.Related parties:

 

Key management personnel compensation:

 

The key management personnel are the officers of the Corporation and members of the Board of Directors. They control 9% of the voting shares of the Corporation.

 

Key management personnel compensation includes the following for the three-month and nine-month periods ended December 31, 2017 and November 30, 2016:

 

    Three-month periods ended    Nine-month periods ended 
    December 31,    November 30,    December 31,    November 30, 
    2017    2016    2017    2016 
                     
Short-term benefits  $820,912   $609,353   $2,744,588   $1,962,810 
Share-based compensation costs   413,924    393,089    1,142,885    1,158,677 
   $1,234,836   $1,002,442   $3,887,473   $3,121,487 

 

 

 

 

 

 

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