Kamada Ltd. — Interim / Quarterly Report 2016

Aug 2, 2016

KAMADA LTD.

CONSOLIDATED FINANCIAL STATEMENTS

AS OF JUNE 30, 2016

TABLE OF CONTENTS

	Page
Consolidated Balance Sheets	2
Consolidated Statements of Comprehensive Income (loss)	3
Consolidated Statements of Changes in Equity	4-6
Consolidated Statements of Cash Flows	7-8
Notes to the Consolidated Financial Statements	9-12

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CONSOLIDATED BALANCE SHEETS

	As of June 30,	As of December 31,
	2016	2015
	Unaudited	2015	Audited
		In thousands
Current Assets
Cash and cash equivalents	\$ 7,136	\$ 6,807	\$ 5,047
Short-term investments	22,391	73,511	23,259
Trade receivables, net	15,936	15,584	23,071
Other accounts receivables	3,475	4,408	2,881
Inventories	28,423	24,785	26,336
	77,361	89,095	80,594
Non-Current Assets
Property, plant and equipment, net	21,138	21,562	21,309
Other long-term assets	73	103	89
	21,211	21,665	21,398
	98,572	110,760	101,992
Current Liabilities
Current maturities of loans and convertible debentures	392	7,924	37
Trade payables	10,247	14,808	16,917
Other accounts payables	6,068	3,385	4,064
Deferred revenues	5,114	1,792	1,921
	21,821	27,909	22,939
Non-Current Liabilities
Loans	1,537	-	151
Employee benefit liabilities, net	402	693	787
Deferred revenues	5,424	6,895	5,608
	7,363	7,588	6,546
Shareholder's Equity Ordinary shares of NIS 1 par value: Authorized - 60,000,000 ordinary shares; Issued and outstanding – 36,418,741 and 36,387,929 shares at June 30,
2016 and 2015, respectively.	9,320	9,312	9,320
Share premium	162,649	160,927	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	9	134	(1)
Capital reserve from available for sale financial assets	119	49	73
Capital reserve from share-based payments	9,455	8,362	9,157
Capital reserve from employee benefits	(59)	(81)	(59)
Accumulated deficit	(108,615)	(101,097)	(104,731)
	69,388	75,263	72,507
	\$ 98,572	\$ 110,760	\$ 101,992

Consolidated Statements of Comprehensive Income (loss)

		Six months period ended	June 30,		Three months period ended June 30,			Year ended December 31
	2016			2015	2016		2015		2015
				Unaudited					Audited
		In thousands (except for per-share data)
Revenues from proprietary products	\$	23,226	\$	15,881	\$ 12,106	\$	12,708	\$	42,952
Revenues from distribution		10,637		12,295	6,960		6,538		26,954
Total revenues		33,863		28,176	19,066		19,246		69,906
Cost of revenues from proprietary products		14,410		12,930	7,479		9,635		30,468
Cost of revenues from distribution		9,047		11,214	5,958		5,971		23,640
Total cost of revenues		23,457		24,144	13,437		15,606		54,108
Gross profit		10,406		4,032	5,629		3,640		15,798
Research and development expenses		7,609		7,058	3,502		3,415		16,530
Selling and marketing expenses		1,691		1,743	856		944		3,652
General and administrative expenses		3,674		3,437	1,861		1,737		7,040
Operating loss		(2,568)		(8,206)	(590)		(2,456)		(11,424)
Financial income		928		300	133		114		463
Income (expense) in respect of currency
exchange and derivatives instruments, net		(92)		761	90		248		625
Financial expense		(73)		(491)	(30)		(248)		(934)
Loss before taxes on income Taxes on income		(2,396) 8,411		(7,636) -	(397) 1,188		(2,342) -		(11,270) -
Loss		(3,884)		(7,636)	(1,585)		(2,342)		(11,270)
Other Comprehensive Income (loss): Items that may be reclassified to profit or loss in subsequent periods:
Gain (loss) on available for sale financial assets		46		39	(25)		(79)		63
Profit (loss) on cash flow hedges Net amounts transferred to the statement of profit		80		194	(165)		415		71
or loss for cash flow hedges		(70)		56	(36)		(16)		44
Items that will not be reclassified to profit or loss in subsequent periods:
Actuarial net gain of defined benefit plans Total comprehensive loss	\$	- (3,828)	\$	- (7,347)	\$ - (1,811)	\$	- (2,022)	\$	22 (11,070)
Loss per share attributable to equity holders of the Company:
Basic loss per share	\$	(0.11)	\$	(0.21)	\$ (0.04)	\$	(0.06)	\$	(0.31)
Diluted loss per share	\$	(0.11)	\$	(0.21)	\$ (0.04)	\$	(0.06)	\$	(0.31)

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		Capital reserve from share based payments	Capital reserve from employee benefits	Accumulated deficit		Total equity
									Unaudited
									In thousands
Balance as of January 1, 2016
(audited) Loss	\$	9,320 -	\$ 162,238 -	\$	73 -	\$	(3,490) -	\$	(1) \$ -	9,157 -	\$ (59) -	\$	(104,731) (3,884)	\$	72,507 (3,884)
Other comprehensive income		-	-		46		-		10	-	-		-		56
Total comprehensive income (loss)		-	-		46				10		-		(3,884)		(3,828)
Forfeiture of options		-	411		-		-		-	(411)	-		-		-
Cost of share-based payment		-	-		-		-		-	709	-		-		709
Balance as of June 30, 2016	\$	9,320	\$ 162,649	\$	119	\$	(3,490)		\$ 9 \$	9,455	\$ (59)	\$	(108,615)	\$	69,388

	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	Capital reserve from share-based payments		benefits	Capital reserve from employee	Accumulated deficit	Total equity
	Unaudited
									In thousands
Balance as of January 1, 2015	\$	9,208 \$	158,417	\$	1,147	\$	10	\$	(3,490) \$		(116)	\$	8,783	\$	(81)	\$ (93,461)	\$ 80,417
Net loss		-	-		-		-		-		-		-		-	(7,636)	(7,636)
Other comprehensive income		-	-		-		39		-		250		-		-	-	289
Total comprehensive income (loss)		-	-		-		39		-		250		-		-	(7,636)	(7,347)
Exercise of options into shares, net		104	2,510		-		-		-		-		(1,450)		-	-	1,164
Cost of share-based payment		-	-		-		-		-		-		1,029		-	-	1,029
Balance as of June 70, 2019	\$	9,312 \$	160,927	\$	1,147	\$	49	\$	(3,490)	\$	134		\$ 8,362	\$	(81)	\$ (101,097)	\$ 75,263

		Share Capital					Capital reserve from available for sale Share financial premium assets		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
										Unaudited
										In thousands
Balance as of April 1, 2016	\$	9,320	\$	162,531	\$	144	\$	(3,490)	\$	210	\$ 9,245	\$	(59)	\$	(107,030)		70,871
Loss		-		-		-		-		-	-		-		(1,585)		(1,585)
Other comprehensive loss		-		-		(25)		-		(201)	-		-		-		(226)
Total comprehensive loss		-		-		(25)		-		(201)	-		-		(1,585)		(1,811)
Forfeiture of options		-		118		-		-		-	(118)		-		-		-
Cost of share-based payment		-		-		-		-		-	328		-		-		328
Balance as of June 30, 2016	\$	9,320	\$	162,649	\$	119	\$	(3,490)	\$	9	\$ 9,455	\$	(59)	\$	(108,615)	\$	69,388

	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		Capital reserve from share-based payments		Capital reserve from employee benefits		Accumulated deficit		Total equity
										Unaudited
										In thousands
Balance as of April 1, 2015	\$	9,227	\$	158,893	\$	1,147	\$	128	\$	(3,490)	\$	(265)	\$	9,009	\$	(81)	\$	(98,755)	\$	75,813
Net loss		-		-		-		-		-		-		-		-		(2,342)		(2,342)
Other comprehensive income (loss)		-		-		-		(79)		-		399		-		-		-		320
Total comprehensive income (loss)		-		-		-		(79)		-		399		-		-		(2,342)		(2,022)
Exercise of options into shares, net		85		2,034		-		-		-		-		(1,171)		-				948
Cost of share-based payment		-		-		-		-		-		-		524		-				524
Balance as of June 70, 2015	\$	9,312	\$	160,927	\$	1,147	\$	49	\$	(3,490)	\$	134	\$	8,362	\$	(81)		\$ (101,097)	\$	75,263

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

	Six months period Ended June 30,			Three months period Ended	Year Ended December 31,
		1026		2015	1026	June 30,	2015		2015
				Unaudited					Audited
					In thousands
Cash Flows from Operating Activities
Net loss	\$	(3,884)		\$ (7,636)	\$ (1,585)	\$	(2,342)	\$	(11,270)
Adjustments to reconcile loss to net cash provided by (used in) operating activities:
Adjustments to the profit or loss items:
Depreciation, amortization and impairment of
equipment		1,709		1,572	878		801		3,227
Finance income, net		(172)		(570)	(193)		*(114)		(154)
Cost of share-based payment		709		1,029	328		524		1,907
Income tax expense		1,488		-	1,188		-		-
Loss from sale of property and equipment		10		-	-		-		-
Change in employee benefit liabilities, net		(385)		(29)	(250)		(46)		87
		3,359		2,002	1,951		1,165		5,067
Changes in asset and liability items:
Decrease (increase) in trade receivables, net		7,304		2,211	(6,955)		(6,207)		(5,604)
Decrease (increase) in other accounts receivables		147		(502)	905		*102		118
Decrease (increase) in inventories		(2,087)		638	3,182		2,650		(913)
Increase in deferred expenses		(774)		(1,400)	(304)		(1,471)		(565)
Increase (decrease) in trade payables		(6,869)		(1,461)	(7,939)		1,111		887
Increase (decrease) in other accounts payables		726		(584)	439		75		24
Increase (decrease) in deferred revenues		3,009		(1,247)	3,975		(1,070)		(2,405)
		1,456		(2,345)	(6,697)		(4,801)		(8,388)
Cash received (paid) during the period for:
Interest paid		(9)		(243)	(7)		(122)		(484)
Interest received		424		594	138		244		1,143
Taxes paid		(306)		(47)	(303)		(18)		(47)
		109		304	(172)		104		612
Net cash provided by (used in) operating activities	\$	1,040	\$	(7,675)	\$ (6,503)	\$	(5,883)		\$ (13,979)

*Reclassification

CONSOLIDATED STATEMENTS OF CASH FLOWS

		Six months period Ended June 30,		Three months period Ended June 30,	Year Ended December 31,
	1026 2015 Unaudited			1026	2015	2015
						Audited
					Thousands of US dollar
Cash Flows from Investing Activities Proceeds from sale of )investment in) short term
investments, net	\$	776	\$	25	\$ 1,392	\$ (400)	\$ 13,971
Purchase of property and equipment		(1,469)		(1,332)	(543)	(823)	(2,718)
Proceeds from sale of property and equipment		21		-	-	-	-
Net cash provided by (used in) investing activities		(672)		(1,307)	849	(1,223)	11,253
Cash Flows from Financing Activities
Proceeds from exercise of warrants and options		-		1,165	-	* 949	1,254
Receipt of long-term loans Repayment of long-term loans		1,701 (61)		- -	1,071 (50)	- -	197 (9)
Repayment of convertible debentures		-		-	-	-	(7,797)
							-
Net cash provided by (used in) financing activities		1,640		1,165	1,021	949	(6,355)
Exchange differences on balances of cash and cash
equivalent		81		78	164	*(47)	(418)
Increase (decrease) in cash and cash equivalents		2,089		(7,739)	(4,469)	(6,204)	(9,499)
Cash and cash equivalents at the beginning of the period		5,047		14,546	11,605	13,011	14,546
Cash and cash equivalents at the end of the period	\$	7,136	\$	6,807	\$ 7,136	\$ 6,807	\$ 5,047
Significant non-cash transactions Purchase of property and equipment through capital lease	\$	84	\$	-	\$ -	\$ -	\$ -

*Reclassification

Note 1:- General

These Financial Statements have been prepared in a condensed format as of June 30, 2016 and for the six and 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
Six months period ended June 30,2016
Revenues	\$ 23,226	\$ 10,637	\$ 33,863
Gross profit	\$ 8,816	\$ 1,590	10,406
Unallocated corporate expenses Finance income, net			(12,974) 172
Loss before taxes on income			\$ (2,396)

Note 3:- Operating Segments (Cont.)

	Proprietary Distribution Products		Total
	Unaudited
Six months period ended June 30,2015
Revenues	\$	15,881	\$	12,295	\$	28,176
Gross profit	\$	2,951	\$	1,081		4,032
Unallocated corporate expenses Finance income, net						(12,238) 570
Loss before taxes on income					\$	(7,636)

	Proprietary Products		Distribution		Total
	Unaudited
Three months period ended June 30,2016
Revenues	\$ 12,106	\$	6,960	\$	19,066
Gross profit	\$ 4,627	\$	1,002		5,629
Unallocated corporate expenses Finance income, net					(6,219) 193
Loss before taxes on income				\$	(397)

	Products		Distribution		Total
Three months period ended June 30,2015			Unaudited
Revenues	\$ 12,708	\$	6,538	\$	19,246
Gross profit (loss)	\$ 3,073	\$	567		3,640
Unallocated corporate expenses Finance expenses, net					(6,096) 114
Loss before taxes on income				\$	(2,342)

Proprietary

	Proprietary Products	Distribution	Total
		In thousands Audited
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
June 30, 2016
Marketable securities at fair value through profit or loss:
Equity shares	\$	68 \$		-
Mutual funds		375		-
Debt securities (corporate and government)		1,017		-
		1,460
Derivatives instruments			\$	(91)
Available for sale debt securities (corporate and government)	\$	-	\$	20,931
	\$	1,460	\$	20,840
June 30, 2015
Marketable securities at fair value through profit or loss:
Equity shares	\$	584		-
Mutual funds		1,332		-
Exchange traded notes		25
Debt securities (corporate and government)	\$	7,118 \$		-
		9,059		-
Derivatives instruments	\$	-	\$	105
Available for sale debt securities (corporate and government)	\$	-	\$	28,452
	\$	9,059	\$	28,557
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 six months ended on June 30, 2016 there was no transfer 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 Events during the period

• a. Commencing January 1, 2016, the Israeli corporate tax rate decreased from 26.5% to 25%.
• b. In April 2016 the Company received payments as a result of achieving certain regulatory and sales milestones under the strategic agreements with Chiesi Farmaceutici S.p.A. and Baxalta Incorporated and recorded them as deferred revenues. These deferred revenues will be recognized during the term of the strategic agreements.
• c. 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 at an exercise price of NIS 14.82 per option. The fair value of the options was estimated at \$462 thousands.

Note 6:- Subsequent Events

• a. On July 10, 2016 the Company and the Israel Tax Authority (ITA) entered into a settlement agreement for the tax years 2004-2006. As part of the agreement, the Company will pay NIS 5 million (\$ 1.3 million) (including interest and CPI adjustment). As of December 31, 2015, the Company has carry forward losses in the amount of \$ 85.8 million.
• b. On July 12, 2016 the Company's Board of Directors approved the grant, of 57,500 options at an exercise price of NIS 15.20 per option and 19,167 restricted shares ("RS") (with no exercise price) to the Company's management , and 18,000 options and 6,000 RS to Mr. Amir London, the Company's CEO. The options are exercisable into ordinary shares. The fair value of the options was estimated at \$126 thousands. In addition the board approved the grant of 50,000 options to board members at a fair value of approximately \$75 thousands. The grants of options to the board, the grant to Mr. Amir London of options and RS and the grant of the RS to management are subject to the approval of the General Meeting of Shareholders of the Company.