EX-99.1 2 exhibit99-1.htm INTERIM FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH 31, 2019 Exhibit 99.1

Exhibit 99.1

Unaudited Interim Condensed Consolidated
Financial Statements
March 31, 2019




May 9, 2019

Management’s Responsibility for Financial Reporting

The accompanying unaudited interim condensed consolidated financial statements of IMV Inc. (the “Corporation”) are the responsibility of management and have been approved by the Board of Directors. The consolidated financial statements have been prepared by management in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. The consolidated financial statements include some amounts and assumptions based on management’s best estimates which have been derived with careful judgment.

In fulfilling its responsibilities, management has developed and maintains a system of internal accounting controls. These controls are designed to ensure that the financial records are reliable for preparation of the consolidated financial statements. The Audit Committee of the Board of Directors reviewed and approved the Corporation’s consolidated financial statements, and recommended their approval by the Board of Directors.

(signed) “Frederic Ors” (signed) “Pierre Labbé”
   Chief Executive Officer    Chief Financial Officer

 




IMV Inc.
Unaudited Interim Condensed Consolidated Statements of Financial Position
As at March 31, 2019 and December 31, 2018
(Expressed in thousands of Canadian dollars except for per share amounts)

 

  March 31,   December 31,  
  2019   2018  
  $   $  
Assets        
         
Current assets        
Cash and cash equivalents 34,207   14,895  
Amounts receivable 878   1,337  
Prepaid expenses 2,974   2,699  
Investment tax credits receivable 1,456   1,111  
         
  39,515   20,042  
         
Property and equipment 2,880   2,883  
         
  42,395   22,925  
Liabilities        
         
Current liabilities        
Accounts payable and accrued liabilities 5,383   7,575  
Amounts due to directors 63   49  
Current portion of long-term debt (note 5) 84   81  
Current portion of lease obligation 92   90  
  5,622   7,795  
Lease obligation 1,285   1,308  
         
Deferred share units (note 4) 1,232   1,436  
         
Long-term debt (note 5) 8,444   8,069  
         
  16,583   18,608  
         
Equity 25,812   4,317  
         
  42,395   22,925  
Commitments        

The accompanying notes form an integral part of these consolidated financial statements.

Approved on behalf of the Board of Directors

(signed) “James W. Hall”, Director (signed) “Wayne Pisano”, Director

 




IMV Inc.
Unaudited Interim Condensed Consolidated Statements of Changes in Equity
As at March 31, 2019 and December 31, 2018
(Expressed in thousands of Canadian dollars except for per share amounts)

 

  Share   Contributed              
  Capital   Surplus   Warrants   Deficit   Total  
  $   $   $   $   $  
  (note 6)   (note 7)   (note 8)          
                 
Balance, December 31, 2017 70,113   6,375   674   (70,819 ) 6,343  
                     
Net loss and comprehensive loss for the period –   –   –   (21,935 ) (21,935 )
Issuance of shares in public offering 14,375   –   –   –   14,375  
Share issuance costs (1,480 ) –   –   –   (1,480 )
Redemption of DSUs, net of applicable taxes 220   –   –   –   220  
Issuance of broker warrants –   –   332   –   332  
Exercise of warrants 5,480   –   (591 ) –   4,889  
Employee share options:                    

Value of services recognized

 –   1,182   –   –   1,182  

Exercise of options

 1,444   (1,053 ) –   –   391  
                     
Balance, December 31, 2018 90,152   6,504   415   (92,754 ) 4,317  
                     
Net loss and comprehensive loss for the period –   –   –   (5,943 ) (5,943 )
Issuance of shares in public offering 29,456   –   –   –   29,456  
Share issuance costs (2,525 ) –   –   –   (2,525 )
Exercise of warrants 82   –   (21 ) –   61  
Employee share options:                    

Value of services recognized

 –   391   –   –   391  

Exercise of options

 242   (187 ) –   –   55  
Balance, March 31, 2019 117,407   6,708   394   (98,697 ) 25,812  

The accompanying notes form an integral part of these consolidated financial statements.




IMV Inc.
Unaudited Interim Condensed Consolidated Statements of Loss and Comprehensive Loss
For the three months ended March 31, 2019 and 2018
(Expressed in thousands of Canadian dollars except for per share amounts)

 

  Three months   Three months  
  ended March 31,   ended March 31,  
  2019   2018  
  $   $  
Revenue        
Subcontract revenue 8   27  
Interest revenue 74   69  
         
  82   96  
         
Expenses        
Research and development 4,013   1,882  
General and administrative 1,960   1,290  
Government assistance (346 ) (275 )
Accreted interest (note 5) 398   266  
         
  6,025   3,163  
         
Net loss and comprehensive loss for the year (5,943 ) (3,067 )
         
Basic and diluted loss per share (0.13 ) (0.07 )
         
Weighted-average shares outstanding 46,712,436   41,594,865  

The accompanying notes form an integral part of these consolidated financial statements.




IMV Inc.
Unaudited Interim Condensed Consolidated Statements of Cash Flows
For the three months ended March 31, 2019 and 2018
(Expressed in thousands of Canadian dollars except for per share amounts)

 

  Three months   Three months  
  ended March   ended March  
  31,   31,  
  2019   2018  
  $   $  
Cash provided by (used in)        
         
Operating activities        
Net loss and comprehensive loss for the year (5,943 ) (3,067 )
Charges to operations not involving cash        

Interest on lease obligation

 38   3  

Depreciation of property and equipment

 107   42  

Accretion of long-term debt

 398   266  

Deferred share unit compensation

 (203 ) (111 )

Stock-based compensation

 391   143  

Loss on disposal of assets

 8   –  
  (5,204 ) (2,724 )
Net change in non-cash working capital balances related to operations        

Decrease (increase) in amounts receivable

 459   (183 )

Decrease (increase) in prepaid expenses

 173   (222 )

Increase in investment tax credits receivable

 (345 ) (258 )

Decrease in accounts payable and accrued liabilities

 (3,303 ) (666 )

Increase (decrease) in amounts due to directors

 14   (4 )
         
  (8,206 ) (4,057 )
Financing activities        
Proceeds from public offering 29,456   14,375  
Share issuance costs in public offering (1,862 ) (1,148 )
Proceeds from the exercise of stock options 55   15  
Proceeds from the exercise of warrants 61   –  
Repayment of long-term debt (20 ) (18 )
Repayment of lease obligation (60 ) (3 )
       
  27,630   13,221  
Investing activities        
Acquisition of property and equipment (112 ) (54 )
         
Net change in cash and cash equivalents during the year 19,312   9,110  
         
Cash and cash equivalents – Beginning of year 14,895   14,909  
         
Cash and cash equivalents – End of year 34,207   24,019  
         
Supplementary cash flow        
         
Interest received 74   69  

 




IMV Inc.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
As at March 31, 2019 and December 31, 2018
(Expressed in thousands of Canadian dollars except for per share amounts)

 

1 Nature of operations

IMV Inc. (the “Corporation”, “IMV”) is, through its 100% owned subsidiary, a clinical-stage biopharmaceutical company dedicated to making immunotherapy more effective, more broadly applicable, and more widely available to people facing cancer and other serious diseases. IMV is pioneering a new class of immunotherapies based on the Corporation’s proprietary drug delivery platform (“DPX”). This patented technology leverages a novel mechanism of action (“MOA”) discovered by the Corporation. This MOA does not release the active ingredients at the site of injection but forces an active uptake and delivery of active ingredients into immune cells and lymph nodes. It enables the programming of immune cells in vivo, which are aimed at generating powerful new synthetic therapeutic capabilities. DPX’s no release MOA can be leveraged to generate “first-in-class” T cell therapies with the potential to be transformative in the treatment of cancer. The Corporation has research collaborations with companies and research organizations, including Merck and Leidos Inc. in the U.S. The Corporation has licensed the delivery technology to Zoetis, formerly the animal health division of Pfizer, Inc., for the development of vaccines for livestock. The Corporation has one reportable and geographic segment. Incorporated under the Canada Business Corporations Act and domiciled in Dartmouth, Nova Scotia, the shares of the Corporation are listed on the Nasdaq Stock Market and the Toronto Stock Exchange under the symbol “IMV”. On May 1, 2018, the Corporation changed its name from Immunovaccine Inc. to IMV Inc. The address of its principal place of business is 130 Eileen Stubbs, Suite 19, Dartmouth, Nova Scotia, Canada.

2 Basis of presentation

The Corporation prepares its unaudited interim condensed consolidated financial statements in accordance with Canadian generally accepted accounting principles as set out in the Chartered Professional Accountants of Canada Handbook – Accounting Part I, which incorporates International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

These unaudited interim condensed consolidated financial statements have been prepared in accordance with IFRS applicable to the preparation of interim financial statements, including IAS 34, International Accounting Standards 34 “Interim Financial Reporting”. Accordingly, certain information normally included in annual audited financial statements prepared in accordance with IFRS, as issued by the IASB, have been omitted or condensed. The unaudited interim condensed consolidated financial statements should be read in conjunction with the Corporation’s annual audited consolidated financial statements for the year ended December 31, 2018.

The policies applied in these unaudited interim condensed consolidated financial statements are based on IFRS issued and outstanding as of May 9, 2019, the date the Board of Directors approved the statements. Any subsequent changes to IFRS that are given effect in the Corporation’s annual audited consolidated financial statements for the year ending December 31, 2018 could result in restatement of these unaudited interim condensed consolidated financial statements.

3 Significant accounting policies, judgements and estimation uncertainty

These unaudited interim condensed consolidated financial statements have been prepared using the same policies and methods as the annual audited consolidated financial statements of the Corporation for the year ended December 31, 2018. Refer to note 4 of the Corporation’s annual audited consolidated financial statements for the year ended December 31, 2018 for more information on accounting policies and methods applied.

(2)




IMV Inc.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
As at March 31, 2019 and December 31, 2018
(Expressed in thousands of Canadian dollars except for per share amounts)

 

4 Deferred share units (“DSUs”)

The maximum number of common shares which the Corporation is entitled to issue from Treasury in connection with the redemption of DSUs granted under the DSU Plan is 468,750 common shares.

DSU activity for the three months ended March 31, 2019 and the year ended December 31, 2018 are as follows:

    March 31,   December 31,  
    2019   2018  
    Number   Number  
           
  Opening balance 223,604   186,330  
  Granted 26,945   97,072  
  Redeemed –   (59,798 )
           
  Closing balance 250,549   223,604  

At March 31, 2019, there were 250,549 (2018 - 223,604) DSUs outstanding related to this Plan and the total carrying amount of the liability was $1,232 (2018 - $1,436). The compensation expense at March 31, 2019 was ($203) (2018 - $508), recognized over the vesting period. Vested DSUs cannot be redeemed until the holder is no longer a member of the Board. The redemption value of a DSU equals the market value of an IMV Inc. common share at the time of redemption. On an ongoing basis, the Corporation values the DSU obligation at the current market value of a corresponding number of IMV Inc. common shares and records any increase or decrease in the DSU obligation as an expense on the consolidated statements of loss and comprehensive loss.

(3)




IMV Inc.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
As at March 31, 2019 and December 31, 2018
(Expressed in thousands of Canadian dollars except for per share amounts)

 

5 Long-term debt

    March 31,   December 31,  
    2019   2018  
    $   $  
 

Atlantic Canada Opportunities Agency (“ACOA”) Atlantic Innovation Fund interest-free loan with a maximum contribution of $3,786. Annual repayments, commencing December 1, 2008, are calculated as a percentage of gross revenue for the preceding fiscal year, at 2% when gross revenues are less than $5,000 and 5% when gross revenues are greater than $5,000. As at March 31, 2019, the amount drawn down on the loan, net of repayments, is $3,744 (2018 - $3,744).

 1,307   1,202  
           
  

ACOA Atlantic Innovation Fund interest-free loan with a maximum contribution of $3,000. Annual repayments, commencing December 1, 2011, are calculated as a percentage of gross revenue for the preceding fiscal year, at 2% when gross revenues are less than $5,000 and 5% when gross revenues are greater than $5,000. As at March 31, 2019, the amount drawn down on the loan is $2,995 (2018 - $2,995).

 1,155   1,034  
           
  

ACOA Business Development Program, interest-free loan with a maximum contribution of $395, repayable in monthly payments beginning October 2015 of $3 until October 2017 and $6 until September 2022. As at March 31, 2019, the amount drawn down on the loan, net of repayments, is $234 (2018 - $251).

  223   238  
           
  

ACOA Atlantic Innovation Fund interest-free loan with a maximum contribution of $2,944, annual repayments commencing September 1, 2014, are calculated as a percentage of gross revenue from specific product(s) for the preceding fiscal year, at 5% for the first 5 year period and 10%, thereafter. As at March 31, 2019, the amount drawn down on the loan is $2,944 (2018 - $2,944).

 1,042   957  
           
 

TNC 120-140 Eileen Stubbs Ltd. (the “Landlord”) loan, with a maximum contribution of $300,000, bearing interest at 8% annum, is repayable in monthly payments beginning upon receipt of the final installment of the loan until May 31, 2028. The loan is made available in three equal installments based on the Corporation meeting certain milestones. As at March 31, 2019, the amount drawn down on the loan is $296 (2018 - $300).

 296   300  
 

 

        
 

Province of Nova Scotia “The Province” secured loan with a maximum contribution of $5,000, interest bearing at a rate equal to the Province’s cost of funds plus 1%, compounded semi-annually and payable monthly. The loan is made available in four equal installments based on the Corporation meeting certain milestones, and is repayable on the seventh anniversary date of the first disbursement. The Corporation and its subsidiary have provided a general security agreement granting a first security interest in favour of the Province of Nova Scotia in and to all the assets of the Corporation and its subsidiary, including the intellectual property. As at March 31, 2019, the amount drawn down on the loan is $5,000 (2018 - $5,000).

 4,505   4,419  
 

 

        
    8,528   8,150  
           
  Less: Current portion 84   81  
           
    8,444   8,069  

(4)




IMV Inc.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
As at March 31, 2019 and December 31, 2018
(Expressed in thousands of Canadian dollars except for per share amounts)

 

5 Long-term debt (continued)

Total contributions received, less amounts that have been repaid as at March 31, 2019, is $15,213 (2018 - $15,234).

Certain ACOA loans and the Province loan require approval by ACOA or the Minister for the Province before the Corporation can pay management fees, bonuses, dividends or other distributions, or before there is any change of ownership of the Corporation. The Province loan requires the Corporation to obtain the written consent of the Province prior to the sale, disposal or abandonment of possession of the intellectual property of the Corporation or its subsidiary. If during the term of the Province loan, the head office, research and development facilities, or production facilities of the Corporation are moved from the Province, the Corporation is required to repay 40% of the outstanding principal of the loan.

In August 2017, the Corporation received a two-year extension of the maturity of the Province loan. The original maturity date of the loan was August 9, 2018 and is now August 9, 2020. The annual interest rate remains at the Province's cost of funds plus 1 per cent.

The Province loan requires certain early repayments if the Corporation’s subsidiary, or the Corporation on a consolidated basis, has cash flow from operations in excess of $1,500,000. The Province loan also requires repayment of the loan under certain circumstances, such as changes of control, sale or liquidation of the Corporation or the sale of substantially all of the assets of the Corporation.

    March 31,   December 31,  
    2018   2018  
    $   $  
  Balance – Beginning of year 8,150   6,537  
  Borrowings, net of $nil (2018 - $nil) allocated to government assistance –   300  
  Accreted interest 398   1,385  
  Repayment of debt (20 ) (72 )
           
  Balance – End of year 8,528   8,150  
  Less: Current portion 84   81  
           
  Non-current portion 8,444   8,069  

The Corporation is in compliance with its debt covenants.

(5)




IMV Inc.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
As at March 31, 2019 and December 31, 2018
(Expressed in thousands of Canadian dollars except for per share amounts)

 

6 Share capital

Authorized

Unlimited number of common shares and preferred shares, issuable in series, all without par value.

    Number of      
    common shares   Amount  
        $  
  Issued and outstanding        
  Balance – December 31, 2017 40,319,941   70,113  
  Issued for cash consideration, net of issuance costs 2,246,094   12,895  
  Stock options exercised 480,754   1,444  
  DSUs redeemed 29,713   220  
  Warrants exercised 2,029,899   5,480  
  Balance – December 31, 2018 45,106,401   90,152  
  Issued for cash, net of issuance costs 5,404,855   26,931  
  Stock options exercised 71,627   242  
  Warrants exercised 14,423   82  
  Balance – March 31, 2019 50,597,306   117,407  

As at March 31, 2019, a total of 2,030,471 shares (2018 - 1,890,539) are reserved to meet outstanding stock options, warrants and deferred share units.

On March 6, 2019, the Corporation completed a public offering, issuing an aggregate of 4,900,000 common shares at a price of $5.45 per common share, raising gross proceeds of $26.7 million. On March 11, 2019, the underwriters partially exercised their option to purchase common shares, resulting in the issuance of 504,855 common shares of the Corporation at a price of $5.45 per share for additional gross proceeds of approximately $2.75 million. As a result of the exercise of this option, the Corporation has raised total gross proceeds of approximately $29.46 million before deducting the underwriting commissions and offering expenses of $2.52 million.

On February 15, 2018, the Corporation completed a bought deal public offering of 2,246,094 common shares at a price of $6.40 per common share, for aggregate proceeds of $14,375. Total costs associated with the offering were $1,480, including cash costs for commissions of $863, professional fees and regulatory costs of $285, and 134,766 compensation warrants issued as commissions to the agents valued at $332. Each compensation warrant entitles the holder to acquire one common share of the Corporation at an exercise price of $6.53 for a period of 24 months, expiring on February 15, 2020.

(6)




IMV Inc.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
As at March 31, 2019 and December 31, 2018
(Expressed in thousands of Canadian dollars except for per share amounts)

 

7 Contributed surplus

 

    Amount  
    $  
  Contributed surplus    
       
   Balance – December 31, 2017 6,375  
       
   Share-based compensation – stock options vested 1,182  
  Stock options exercised (1,053 )
       
  Balance – December 31, 2018 6,504  
       
   Share-based compensation – stock options vested 391  
  Stock options exercised (187 )
       
   Balance – March 31, 2019 6,708  

Stock options

The fair values of stock options are estimated using the Black-Scholes option pricing model. As at March 31, 2019, 243,100 stock options (2018 - 619,505) with a weighted average exercise price of $7.39 (2018 - $6.65) and a term of five years (2018 - five years), were granted to employees and consultants. The expected volatility of these stock options was determined using historical volatility rates and the expected life was determined using the weighted average life of past options issued. The value of these stock options has been estimated at $909 (2018 - $2,378), which is a weighted average grant date value per option of $3.74 (2018 - $3.84), using the Black-Scholes valuation model and the following weighted average assumptions:

    2019   2018  
           
  Risk-free interest rate 1.89%   2.02%  
  Expected volatility 64%   77%  
  Expected life (years) 4.2   4.2  
  Forfeiture rate 5%   5%  

Option activity for the three months ended March 31, 2019 and the year ended December 31, 2018 was as follows:

    March 31, 2019     December 31, 2018  
        Weighted         Weighted  
        average         average  
    Number   exercise price     Number   exercise price  
        $         $  
                     
  Outstanding - Beginning of year 1,474,477   4.12     1,498,052   2.26  
                     
  Granted 243,100   7.39     619,505   6.65  
  Exercised (96,720 ) 1 2.37     (626,875 )1 2.18  
  Expired (12,500 ) 2.37     (5,569 ) 1.80  
  Forfeited (6,470 ) 7.27     (10,636 ) 4.92  
                     
   Outstanding - End of year 1,601,887   4.73     1,474,477   4.12  

1 Of the 96,720 (2018 - 626,875) options exercised, 74,001 (2018 - 443,748) elected the cashless exercise, under which 48,908 shares (2018 - 297,626) were issued. These options would have otherwise been exercisable for proceeds of $114 (2018 - $975) on the exercise date.

(7)




IMV Inc.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
As at March 31, 2019 and December 31, 2018
(Expressed in thousands of Canadian dollars except for per share amounts)

 

7 Contributed surplus ( continued)

Stock options (continued)

The weighted average exercise price of options exercisable at March 31, 2019 is $3.20 (2018 - $4.09).

The maximum number of common shares issuable under the Corporation’s stock option plan shall not exceed 3,437,500, inclusive of all shares presently reserved for issuance pursuant to previously granted stock options.

8 Warrants

Warrant activity for the period ended March 31, 2019 and the year ended December 31, 2018 was as follows:

    March 31, 2019     December 31, 2018  
        Weighted             Weighted      
        average             average      
        exercise             exercise      
    Number   price   Amount     Number   price   Amount  
        $   $         $   $  
                             
  Opening balance 192,459   5.84   415     2,087,598   2.46   674  
  Granted –   –   –     134,766   6.53   332  
  Exercised (14,423 ) 4.22   (21 )   (2,029,905 ) 2.41   (591 )
                             
  Closing balance 178,036       394     192,459       415  

The fair values of warrants are estimated using the Black-Scholes option pricing model. There have been no warrants issued to date in 2019. The weighted average assumptions used in the Black-Scholes valuation model for the periods presented were as follows:

    2019 2018  
         
  Risk-free interest rate – 1.84%  
  Expected volatility – 68%  
  Expected dividend yield – –  
  Expected life (years) – 2  

(8)




IMV Inc.
Notes to the Unaudited Interim Condensed Consolidated Financial Statements
As at March 31, 2019 and December 31, 2018
(Expressed in thousands of Canadian dollars except for per share amounts)

 

9 Financial instruments

Fair value of financial instruments

Financial instruments are defined as a contractual right or obligation to receive or deliver cash on another financial asset.

The following table sets out the approximate fair values of financial instruments as at the consolidated statements of financial position date with relevant comparatives:

    March 31, 2019     December 31, 2018  
    Carrying         Carrying      
    value   Fair value     value   Fair value  
    $   $     $   $  
  Cash and cash equivalents 34,207   34,207     14,895   14,895  
  Amounts receivable 564   564     780   780  
  Accounts payable and accrued liabilities 5,366   5,366     7,557   7,557  
  Amounts due to directors 63   63     49   49  
  Long-term debt 8,527   8,527     8,150   8,150  

Assets and liabilities, such as commodity taxes, that are not contractual and that arise as a result of statutory requirements imposed by governments, do not meet the definition of financial assets or financial liabilities and are, therefore, excluded from amounts receivable and accounts payable.

Fair value of items, which are short-term in nature, have been deemed to approximate their carrying value. The above noted fair values, presented for information only, reflect conditions that existed only at March 31, 2019 and December 31, 2018 and do not necessarily reflect future value or amounts which the Corporation might receive if it were to sell some or all of its assets to a willing buyer in a free and open market.

The fair value of the long-term debt is estimated based on the expected interest rates for similar borrowings by the Corporation at the consolidated statements of financial position dates. At March 31, 2019, the fair value is estimated to be equal to the carrying amount.

10. Related party transactions

During the three months ended March 31, 2019, there were no related party transactions (2018 - $nil).

(9)