Kamada Ltd.

Quarterly Report • May 9, 2016

KAMADA LTD.

CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2016

TABLE OF CONTENTS

	Page
Consolidated Balance Sheets	2
Consolidated Statements of Comprehensive Income	3
Consolidated Statements of Changes in Equity	4-5
Consolidated Statements of Cash Flows	6-7
Notes to the Consolidated Financial Statements	8-11

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CONSOLIDATED BALANCE SHEETS

	As of March 31,	As of December 31,
	2016	2015	2015
		Unaudited	Audited
		In thousands
Current Assets Cash and cash equivalents Short-term investments	\$ 11,605 23,921	\$ 13,011 36,693	\$ 5,047 23,259
Trade receivables	12,042	8,863	23,071
Other accounts receivables	5,922	2,954	2,881
Inventories	31,605	27,435	26,336
	85,095	88,956	80,594
Property, plant and equipment, net	21,465	21,523	21,309
Other long-term assets	81	110	89
	21,546	21,633	21,398
	106,641	110,589	101,992
Current Liabilities
Current maturities of convertible debentures , bank loans
and capital lease	191	7,411	37
Trade payables	18,298	13,376	16,917
Other accounts payables Deferred revenues	4,350 4,525	3,493 2,799	4,064 1,921
	27,364	27,079	22,939
Non-Current Liabilities
Long term loans and capital lease	716	-	151
Employee benefit liabilities, net	652	739	787
Deferred revenues	7,038	6,958	5,608
	8,406	7,697	6,546
Equity Share capital	9,320	9,227	9,320
Share premium	162,531	158,893	162,238
Conversion option in convertible debentures	-	1,147	-
Capital reserve due to translation to presentation currency	(3,490)	(3,490)	(3,490)
Capital reserve from hedges	210	(265)	(1)
Capital reserve from available for sale financial assets Capital reserve from share-based payments	144 9,542	128 9,009	73 9,157
Capital reserve from employee benefits	(59)	(81)	(59)
Accumulated deficit	(107,030)	(98,755)	(104,731)
	70,871	75,813	72,507
	\$ 106,641	\$ 110,589	\$ 101,992

Consolidated Statements of Comprehensive Income

		Year ended December 31
		2016 Unaudited	2015		2015 Audited
			In thousands
Revenues from proprietary products Revenues from distribution	\$	11,120 3,677	\$ 3,173 5,757	\$	42,952 26,954
Total revenues		14,797	8,930		69,906
Cost of revenues from proprietary products Cost of revenues from distribution		6,931 3,089	3,295 5,243		30,468 23,640
Total cost of revenues		10,020	8,538		54,108
Gross profit		4,777	392		15,798
Research and development expenses		4,107	3,643		16,530
Selling and marketing expenses		835	799		3,652
General and administrative expenses		1,813	1,700		7,040
Operating loss		(1,978)	(5,750)		(11,424)
Financial income Income (expense) in respect of currency exchange and		165	186		463
translation differences and derivatives instruments, net		(149)	513		625
Financial expense		(37)	(243)		(934)
Loss before taxes on income Taxes on income		(1,999) 300	(5,294) -		(11,270) -
Loss		(2,299)	(5,294)		(11,270)
Other Comprehensive loss: Items that may be reclassified to profit or loss in subsequent periods:
Gain on available for sale financial assets		71	118		63
Profit (loss) on cash flow hedges		245	(221)		71
Net amounts transferred to the statement of profit or loss for cash flow hedges		(34)	72		44
Items that will not be reclassified to profit or loss in subsequent periods:
Actuarial gain from defined benefit plans		-	-		22
Total comprehensive loss	\$	(2,017)	\$ (5,325)	\$	(11,070)
Loss per share attributable to equity holders of the Company:
Basic loss per share	\$	(0.06)	\$ (0.15)		\$ (0.31)
Diluted loss per share	\$	(0.06)	\$ (0.15)		\$ (0.31)

KAMADA LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

	Share Capital	Share premium	Capital reserve from available for sale financial assets	Capital reserve due to translation to presentation currency		Capital reserve from hedges Unaudited	Capital reserve from share based payments		Capital reserve from employee benefits		Accumulated deficit		Total equity
Balance as of January 1, 2016 (audited) Loss	\$ 9,320 -	\$ 162,238 -	\$ 73 -		\$(3,490) -	In thousands \$ (1) -	\$	9,157 -	\$	(59) -	\$(104,731) (2,299)		\$	72,507 (2,299)
Other comprehensive income Total comprehensive income (loss) Forfeiture of options Cost of share-based payment Balance as of March 13, 2016	\$ - - - - 9,320	- - 293 - \$ 162,531	\$ 71 71 - 144	\$	- - (3,490)	211 211 - \$ 210	\$	- (293) 381 9,245	\$	- - (59)	(2,299) \$ (107,030)	- -		282 (2,017) - 381 70,871
	Share Capital	Share premium	Conversion option in convertible debentures	Capital reserve from available for sale financial assets		Capital reserve due to translation to presentation currency	Capital reserve from hedges Unaudited		Capital reserve from share based payments		Capital reserve from employee benefits		Accumulated deficit		Total equity
Balance as of January 1, 2015 (audited) Loss	\$ 9,208 -	\$ 158,417 -	\$ 1,147 -	\$	10 \$ -	(3,490) -	In thousands \$ (116) -	\$	8,783 -	\$	(81) -	\$	(93,461) (5,294)	\$	80,417 (5,294)
Other comprehensive income (loss) Total comprehensive income (loss)	- -	- -	- -		118 118	-	(149) (149)		-		-		- (5,294)		(31) (5,325)
Exercise of options into shares Cost of share-based payment Balance as of March 13, 2015	\$ 19 - 9,227	476 - \$ 158,893	\$ - - 1,147	\$	- - 128	- - \$ (3,490)	- - \$ (265)	\$	(279) 505 9,009	\$	- - (81)	\$	- - (98,755)		216 505 75,813

The accompanying Notes are an integral part of the Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

	Share capital		Share premium	Conversion option in convertible debentures	Available for sale reserve	Capital reserve due to translation to presentation currency	Capital reserve from hedges	Capital reserve from share based payments	Capital reserve from employee benefits	Accumulated deficit	Total equity
							Audited
							In thousands
Balance as of December 31, 2014	\$	9,208	\$ 158,417	\$1,147	\$10	\$ (3,490)	\$ (116)	\$ 8,783	\$ (81)	\$ (93,461)	\$ 80,417
Net loss		-	-	-	-	-	-	-		- (11,270)	(11,270)
Other comprehensive income		-	-	-	63	-	115	-		22 -	200
Total comprehensive income (loss)		-	-	-	63	-	115	-		22 (11,270)	(11,070)
Exercise of options into shares		112	2,674	-	-	-	-	(1,533)		- -	1,253
Expiration of conversion option on convertible debentures		-	1,147	(1,147)	-	-	-	-		- -	-
Cost of share-based payment		-	-	-	-	-	-	1,907		- -	1,907
										\$
Balance as of December 31, 2015	\$	9,320	\$ 162,238	\$ -	\$ 73	\$ (3,490)	\$ (1)	\$ 9,157	\$ (59)	(104,731)	\$ 72,507

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three months period Ended March, 31	Year Ended December 31,
	1016		1015
	Unaudited		Audited
		In thousands
Cash Flows from Operating Activities
Loss	\$ (2,299)	\$ (5,294)	\$	(11,270)
Adjustments to reconcile loss to net cash used in operating activities:
Adjustments to the profit or loss items:
Depreciation and amortization	831	771		3,227
Finance expenses (income), net	21	(447)		(154)
Cost of share-based payment	381	505		1,907
Taxes on income	300	-		-
Loss from sale of property and equipment	10	-		-
Change in employee benefit liabilities, net	(135)	17		87
	1,408	846		5,067
Changes in asset and liability items:
Decrease (increase) in trade receivables Decrease (increase) in other accounts	14,259	8,418		(5,604)
receivables	(758)	*(613)		118
Increase in inventories	(5,269)	(2,012)		(913)
Increase (decrease) in deferred expenses	(470)	71		(565)
Increase (decrease) in trade payables	1,070	(2,572)		887
Increase (decrease) in other accounts payables	287	(659)		44
Decrease in deferred revenues	(966)	(177)		(2,405)
	8,153	2,456		(8,388)
Cash paid and received during the period for:
Interest paid	(2)	(121)		(484)
Interest received	286	350		1,143
Taxes paid	(3)	(29)		(47)
	281	200		612
Net cash provided by (used in) operating
activities	\$ 7,543	\$ (1,792)		\$ (13,979)

*Reclassification

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three months period Ended March, 31 1016 1015			Year Ended December 31, 2015
	Unaudited			Audited
					13,971
					(2,718)
					-
	(1,521)		(84)		11,253
					1,254
					197
					(9)
					(7,797)
	619		216		(6,355)
					(418)
	6,558		(1,535)		(9,499)
					14,546
\$	11,605	\$	13,011	\$	5,047
through \$	84	\$	-	\$	-
	short term Exchange differences on balances of cash and Cash and cash equivalents at the beginning of the	\$ (616) (926) 21 - 630 (11) - (83) 5,047	\$	In thousands 425 (509) - 216 - - - 125 14,546	\$

*Reclassification

Note 1:- General

These Financial Statements have been prepared in a condensed format as of March 31, 2016 and for the three months then ended ("interim consolidated financial statements").

These financial statements should be read in conjunction with the Company's annual financial statements as of December 31, 2015 and for the year then ended and the accompanying notes ("annual consolidated financial statements").

Note 2:- Significant Accounting Policies

a. Basis of preparation of the interim consolidated financial statements:

The interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for the preparation of financial statements for interim periods, as prescribed in IAS 34, "Interim Financial Reporting".

Note 3:- Operating Segments

a. General:

The company has two operating segments, as follows:

Proprietary Products	Medicine development, manufacture and sale of - plasma-derived therapeutics products.
Distribution	Distribution of drugs in Israel manufacture by other - companies for clinical uses, most of which are produced from plasma or its derivatives products.

b. Reporting on operating segments:

	Proprietary Products	Distribution	Total
	In thousands
Three months period ended March 31,2016		Unaudited
Revenues	\$ 11,120	\$ 3,677	\$ 14,797
Gross profit	\$ 4,189	\$ 588	4,777
Unallocated corporate expenses Finance expenses, net			(6,755) (21)
Loss before taxes on income			\$ (1,999)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3:- Operating Segments (Cont.)

	Proprietary Products	Distribution	Total
	In thousands
Three months period Ended March 31, 2015		Unaudited
Revenues	\$ 3,173	\$ 5,757	\$ 8,930
Gross profit (loss)	\$ (122)	\$ 514	392
Unallocated corporate expenses Finance expenses, net			(6,142) 456
Loss before taxes on income			\$ (5,294)

	Proprietary Products	Distribution	Total
		In thousands
		Unaudited
Year Ended December 31, 2015
Revenues	\$ 42,952	\$ 26,954 \$	69,906
Gross profit	\$ 12,484	\$ 3,314	\$ 15,798
Unallocated corporate expenses Finance expenses, net			(27,222) 154
Loss before taxes on income			\$ (11,270)

Note 4:- Financial Instruments

a. Classification of financial instruments by fair value hierarchy

Financial assets (liabilities) measured at fair value

	Level 1 Level		2
				In thousands
March 31, 2016
Marketable securities at fair value through profit or loss:
Equity shares		\$ 73	\$	-
Mutual funds		380		-
Debt securities (corporate and government)		964		-
		1,417
Derivatives instruments				146
Available for sale debt securities (corporate and government)	\$	-	\$	22,504
	\$	1,417	\$	22,650
March 31, 2015
Marketable securities at fair value through profit or loss:
Equity shares	\$	583		-
Mutual funds		1,314		-
Exchange traded notes		35
Debt securities (corporate and government)	\$	6,685	\$	-
		8,617		-
Derivatives instruments	\$		- \$	(183)
Available for sale debt securities (corporate and government)	\$	-	\$	28,076
	\$	8,617	\$	27,893
December 31, 2015
Marketable securities at fair value through profit or loss:
Equity shares	\$	67	\$	-
Mutual funds		365		-
Debt securities (corporate and government)		993		-
		1,425		-
Derivatives instruments		-		34
Available for sale debt securities (corporate and government)		-		21,834
	\$	1,425	\$	21,868

b. During the three months ended on March 31, 2016 there were no transfers due to the fair value measurement of any financial instrument from Level 1 to Level 2, and furthermore, there were no transfers to or from Level 3 due to the fair value measurement of any financial instrument.

Note 5:- Significant event during the period

• a. Commencing January 1, 2016, the Israeli regular tax rate was reduced from 26.5% to 25%.
• b. The Company recorded deferred revenue as a result of achieving certain regulatory and sales milestones under the strategic agreements with Chiesi Farmaceutici S.p.A. and Baxalta Incorporated. This deferred revenue will be recognized during the term of the strategic agreements. After the reporting date the Company received the payments for those milestones.

Note 6:- Subsequent Events

1. On May 8, 2016 the Company's Board of Directors approved the grant, for no consideration, of 263,900 options to employees exercisable into ordinary shares. The fair value of the options was estimated at \$507 thousands.

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