Kamada Ltd.

Annual / Quarterly Financial Statement • May 16, 2017

CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2017

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,
	2017	2016
		Unaudited	Audited
Current Assets		In thousands
Cash and cash equivalents	\$ 10,778	\$ 11,605	\$ 9,968
Short-term investments	17,865	23,921	18,664
Trade receivables	10,849	12,042	19,788
Other accounts receivables	2,930	5,922	3,063
Inventories	27,677	31,605	25,594
	70,099	85,095	77,077
Property, plant and equipment, net	22,655	21,465	22,249
Other long-term assets	372	81	370
	23,027	21,546	22,619
	\$ 93,126	\$ 106,641	\$ 99,696
Current Liabilities
Current maturities of bank loans and capital leases	437	191	412
Trade payables	14,648	18,298	16,277
Other accounts payables	4,843	4,350	5,614
Deferred revenues	4,911	4,525	4,903
	24,839	27,364	27,206
Non-Current Liabilities
Long term loans and capital leases	1,330	716	1,364
Employee benefit liabilities, net	820	652	722
Deferred revenues	2,922	7,038	3,661
	5,072	8,406	5,747
Equity Share capital	9,321	9,320	9,320
Share premium	162,686	162,531	162,671
Capital reserve due to translation to presentation currency	(3,490)	(3,490)	(3,490)
Capital reserve from hedges	158	210	(27)
Capital reserve from available for sale financial assets	37	144	19
Capital reserve from share-based payments Capital reserve from employee benefits	10,025 (81)	9,245 (59)	9,795 (81)
Accumulated deficit	(115,441)	(107,030)	(111,464)
	63,215	70,871	66,743
	\$ 93,126	\$ 106,641	\$ 99,696

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

Consolidated Statements of Comprehensive Income

	As of March 31,	Year ended December 31 2016
	2017
	Unaudited	Audited
		In thousands
Revenues from proprietary products	\$ 6,636	\$ 11,120	\$ 55,958
Revenues from distribution	5,012	3,677	21,536
Total revenues	11,648	14,797	77,494
Cost of revenues from proprietary products	5,165	6,931	37,433
Cost of revenues from distribution	4,185	3,089	18,411
Total cost of revenues	9,350	10,020	55,844
Gross profit	2,298	4,777	21,650
Research and development expenses	3,151	4,107	16,245
Selling and marketing expenses	1,028	835	3,243
General and administrative expenses	1,830	1,813	7,643
Operating loss	(3,711)	(1,978)	(5,481)
Financial income Income (expense) in respect of currency exchange and	78	165	469
translation differences and derivatives instruments, net	(234)	(149)	127
Financial expense	(23)	(37)	(126)
Loss before taxes on income	(3,890)	(1,999)	(5,011)
Taxes on income	87	300	1,722
Net loss	(3,977)	(2,299)	(6,733)
Other Comprehensive loss:
Items that may be reclassified to profit or loss in subsequent periods:
Gain on available for sale financial assets	18	71	(54)
Profit (loss) on cash flow hedges	207	245	47
Net amounts transferred to the statement of profit or loss for cash flow hedges	(22)	(34)	(73)
Items that will not be reclassified to profit or loss in subsequent periods:
Actuarial gain from defined benefit plans	-	-	(22)
Total comprehensive loss	\$ (3,774)	\$ (2,017)	\$ (6,835)
Loss per share attributable to equity holders of the Company:
Basic loss per share	\$ (0.11)	\$ (0.06)	\$ (0.18) )
Diluted loss per share	\$ (0.11)	\$ (0.06)	\$ (0.18) )

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
					In thousands
Balance as of January 1, 2017	\$ 9,320	\$ 162,671	\$ 19	\$ (3,490)	\$ (27)	\$ 9,795	\$ (81)	\$ (111,464)	\$ 66,743
(audited)
Net loss	-	-	-	-	-	-	-	(3,977)	(3,977)
Other comprehensive income	-	-	18	-	185	-	-	-	203
Total comprehensive income (loss)	-	-	18		185			(3,977)	(3,774)
Exercise of options into shares	1	15				(15)			1
Cost of share-based payment	-	-	-	-	-	245	-	-	245
Balance as of March 31, 2017	\$ 9,321	\$ 162,686	\$ 37	\$ (3,490)	\$ 158	\$ 10,025	\$ (81)	\$ (115,441)	\$ 63,215

Capital

	Share Capital		Share premium		Capital reserve from available for sale financial assets		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
										In thousands
Balance as of January 1, 2016 (audited) Net loss	\$	9,320 -	\$	162,238 -	\$	73 -	\$	(3,490) -	\$	(1) -	\$	9,157 -	\$	(59) -	\$ (104,731) (2,299)	\$	72,507 (2,299)
Other comprehensive income (loss)		-		-		71		-		211		-		-	-		282
Total comprehensive income (loss)		-		-		71				211					(2,299)		(2,017)
Forfeiture of options		-		293				-				(293)					-
Cost of share-based payment		-		-		-		-		-		381		-	-		381
Balance as of March 31, 2016	\$	9,320	\$	162,531	\$	144	\$	(3,490)	\$	210	\$	9,245	\$	(59)	\$ (107,030)	\$	70,871

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

	Share capital	Share premium	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, 2015	\$ 9,320	\$ 162,238	\$ 73	\$ (3,490)	\$ (1)	\$ 9,157	\$ (59)	\$ (104,731)	\$ 72,507
Net loss	-	-	-	-	-	-	-	(6,733)	(6,733)
Other comprehensive income	-	-	(54)	-	(26)	-	(22)	-	(102)
Total comprehensive income (loss)	-	-	(54)	-	(26)	-	(22)	(6,733)	(6,835)
Exercise of options into shares	*	433	-	-	-	(433)	-	-	*
Cost of share-based payment	-	-	-	-	-	1,071	-	-	1,071
Balance as of December 31, 2016	\$ 9,320	\$ 162,671	\$ 19	\$ (3,490)	\$ (27)	\$ 9,795	\$ (81)	\$ (111,464)	\$ 66,743

* Represent an amount of less 1 thousand.

CONSOLIDATED STATEMENTS OF CASH FLOWS

		Three months period Ended March, 31	Year Ended December 31,
	2017 2016				2016
		Unaudited			Audited
				In thousands
Cash Flows from Operating Activities
Loss	\$	(3,977)	\$	(2,299)	\$	(6,733)
Adjustments to reconcile loss to net cash used in operating activities:
Adjustments to the profit or loss items:
Depreciation and amortization		884		831		3,501
Finance expenses (income), net		179		21		(470)
Cost of share-based payment		245		381		1,071
Taxes on income		87		300		1,722
Loss from sale of property and equipment		-		10		(18)
Change in employee benefit liabilities, net		98		(135)		(87)
		1,493		1,408		5,719
Changes in asset and liability items:
Decrease in trade receivables		8,490		14,259		3,489
Decrease (increase) in other accounts receivables		(255)		(758)		211
Decrease (increase) in inventories		(2,083)		(5,269)		742
Increase (decrease) in deferred expenses		570		(470)		(433)
Increase (decrease) in trade payables		(1,864)		1,070		(2,650)
Increase (decrease) in other accounts payables		(739)		287		1,520
Increase (decrease) in deferred revenues		(731)		(966)		1,035
		3,388		8,153		3,914
Cash paid and received during the period for:
Interest paid		(4)		(2)		(60)
Interest received		108		286		842
Taxes paid		(4)		(3)		(1,785)
		100		281		(1,003)
Net cash provided by (used in) operating activities	\$	1,004	\$	7,543	\$	1,897

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three months period Ended March, 31	Year Ended December 31,
	2017		2016	2016
	Unaudited			Audited
			In thousands
Cash Flows from Investing Activities
Proceeds from sale of )investment in) short term
investments, net	\$ 912	\$	(616)	\$	4,236
Purchase of property and equipment	(736)		(926)		(2,641)
Proceeds from sale of property and equipment	*		21		42
Net cash provided by (used in) investing activities	176		(1,521)		1,637
Cash Flows from Financing Activities
Exercise of warrants and options into shares	1		-		*
Receipt of long-term loans	-		630		1,701
Repayment of long-term loans	(105)		(11)		(211)
Repayment of convertible debentures	-		-		-
Net cash provided by (used in) financing activities
	(104)		619		1,490
Exchange differences on balances of cash and
cash equivalent	(266)		(83)		(103)
Increase (decrease) in cash and cash equivalents	810		6,558		4,921
Cash and cash equivalents at the beginning of the
year	9,968		5,047		5,047
Cash and cash equivalents at the end of the period	\$ 10,778	\$	11,605	\$	9,968
Significant non-cash transactions
Purchase of property and equipment through
capital lease	\$ -	\$	84	\$	132
Purchase of property and equipment	\$ 561		-	\$	1,968

*Represent an amount of less than 1 thousand

Note 1:- General

These Financial Statements have been prepared in a condensed format as of March 31, 2017 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, 2016 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 31,2017		Unaudited
Revenues	\$ 6,636	\$ 5,012	\$ 11,648
Gross profit	\$ 1,471	\$ 827	2,298
Unallocated corporate expenses Finance expenses, net			(6,009) (179)
Loss before taxes on income			\$ (3,890)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3:- Operating Segments (Cont.)

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

	Proprietary
		Products		Distribution	Total
	In thousands
				Unaudited
Year Ended December 31, 2016
Revenues	\$	55,958	\$	21,536 \$	77,494
Gross profit	\$	18,525	\$	3,125 \$	21,650
Unallocated corporate expenses Finance expenses, net					(27,131) 470
Loss before taxes on income				\$	(5,011)

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, 2017
Marketable securities at fair value through profit or loss:
Equity shares		74		-
Mutual funds		418		-
Debt securities (corporate and government)	1,088	-
		1,580
Derivatives instruments				177
Available for sale debt securities (corporate and government)		-		8,239
	\$	1,580	\$	8,416
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
December 31, 2016
Marketable securities at fair value through profit or loss:
Equity shares		70		-
Mutual funds		388		-
Debt securities (corporate and government)		1,032		-
		1,490		-
Derivatives instruments		-		(32)
Available for sale debt securities (corporate and government)		-		9,164
	\$	1,490	\$	9,132

b. During the three months ended on March 31, 2017 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, 2017, the Israeli regular tax rate was reduced from 25% to 24%.
• b. During Q1 2017 there was a delay in completing a periodical validation of Kamada's plant filling. As a result of this delay, shipments of Proprietary Products inventory, worth approximately \$11.5M in revenue were delayed. Subsequent to the end of the first quarter, the needed validation was successfully achieved, and the delayed revenue will be recorded in Q2 2017. As of March 31, 2017, no provision for write down was recorded on this inventory.

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