Kamada Ltd. — Interim / Quarterly Report 2017

Nov 13, 2017

KAMADA LTD.

CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2017

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 September 30,	As of December 31,
	2017	2016
	Unaudited	2016	Audited
		In thousands
Current Assets
Cash and cash equivalents	\$ 12,156	\$ 6,476	\$ 9,968
Short-term investments	27,986	20,722	18,664
Trade receivables, net	21,980	14,501	19,788
Other accounts receivables Inventories	2,683 23,144	4,022 28,086	3,063 25,594
	87,949	73,807	77,077
Non-Current Assets
Property, plant and equipment, net	23,597	20,720	22,249
Other long-term assets	443	71	370
	24,040	20,791	22,619
	111,989	94,598	99,696
Current Liabilities
Current maturities of loans	602	416	412
Trade payables	12,004	8,916	16,277
Other accounts payables	6,299	4,744	5,614
Deferred revenues	4,816	4,858	4,903
	23,721	18,934	27,206
Non-Current Liabilities
Loans	1,501	1,502	1,364
Employee benefit liabilities, net	1,000	798	722
Deferred revenues	2,057	4,693	3,661
	4,558	6,993	5,747
Shareholder's Equity	10,399	9,320	9,320
Ordinary shares Share premium	177,193	162,649	162,671
Capital reserve due to translation to presentation currency	(3,490)	(3,490)	(3,490)
Capital reserve from hedges	57	52	(27)
Capital reserve from available for sale financial assets	34	87	19
Capital reserve from share-based payments	10,413	9,768	9,795
Capital reserve from employee benefits	(81)	(59)	(81)
Accumulated deficit	(110,815)	(109,656)	(111,464)
	83,710	68,671	66,743
	\$ 111,989	\$ 94,598	\$ 99,696

Consolidated Statements of Comprehensive Income (loss)

	Nine months period ended September 30,		Three months period ended September 30,			Year ended December 31
	2017	2016	2017	2016		2016
		Unaudited			Audited
				In thousands (except for per-share data)
Revenues from proprietary products	\$ 50,568	\$ 38,270	\$ 17,058	\$ 15,044	\$	55,958
Revenues from distribution	16,547	14,966	5,860	4,329		21,536
Total revenues	67,115	53,236	22,918	19,373		77,494
Cost of revenues from proprietary products	32,727	23,843	11,509	9,433		37,433
Cost of revenues from distribution	13,930	12,711	4,961	3,664		18,411
Total cost of revenues	46,657	36,554	16,470	13,097		55,844
Gross profit	20,458	16,682	6,448	6,276		21,650
Research and development expenses	10,056	12,024	3,418	4,415		16,245
Selling and marketing expenses	3,133	2,557	1,021	866		3,243
General and administrative expenses	6,270	5,688	2,323	2,014		7,643
Operating income (loss)	999	(3,587)	(314)	(1,019)		(5,481)
Financial income	266	388	92	90		469
Income (expense) in respect of currency
exchange and derivatives instruments, net Financial expense	(479) (50)	(132) (106)	- (14)	(73) (39)		127 (126)
Gain (loss) before taxes on income	736	(3,437)	(236)	(1,041)		(5,011)
Taxes on income	87	1,488	-	-		1,722
Net income (loss)	649	(4,925)	(236)	(1,041)		(6,733)
Other Comprehensive Income (loss): Items that may be reclassified to profit or loss in subsequent periods:
Gain (loss) on available for sale financial assets	15	14	3	(32)		(54)
Gain (loss) on cash flow hedges Net amounts transferred to the statement of profit	303	124	(69)	44		47
or loss for cash flow hedges	(219)	(71)	(103)	(1)		(73)
Items that will not be reclassified to profit or loss in subsequent periods:
Actuarial net gain of defined benefit plans Total comprehensive income (loss)	\$ - 748	\$ - (4,858)	\$ - (405)	\$ - (1,030)	\$	(22) (6,835)
Earnings (loss) per share attributable to equity holders of the Company:
Basic earnings (loss) per share	\$ 0.02	\$ (0.14)	\$ (0.01)	\$ (0.03)	\$	(0.18)
Diluted earnings (loss) per share	\$ 0.02	\$ (0.14)	\$ (0.01)	\$ (0.03)	\$	(0.18)

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

	Share Capital		Share premium			Capital reserve Capital from reserve due available to translation for sale to financial presentation assets 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 (audited) Net income	\$	9,320 -	\$	162,671 -	\$	19 -	\$	(3,490) -	\$ (27) -	\$	9,795 -	\$	(81) -	\$ (111,464) 649	\$	66,743 649
Other comprehensive income		-		-		15		-	84		-		-	-		99
Total comprehensive income Exercise of share-based payment into		-		-		15			84				- -	649		748
shares Issuance of ordinary shares, net of		2		41		-		-	-		(41)			-		2
issuance costs		1,077		14,481		-		-	-		-			-		15,558
Cost of share-based payment		-		-		-		-	-		659		-	-		659
Balance as of September 30, 2017	\$	10,399	\$	177,193	\$	34	\$	(3,490)	\$ 57	\$	10,413	\$	(81)	\$ (110,815)	\$	83,710

					Capital reserve from available for sale		Capital reserve due to translation to				Capital reserve from	Capital reserve from
		Share Capital		Share premium		financial assets	presentation currency		Capital reserve from hedges		share-based payments		employee benefits	Accumulated deficit		Total equity
									Unaudited In thousands
Balance as of January 1, 2016
(audited)	\$	9,320	\$	162,238	\$ 73	\$	(3,490)	\$	(1)	\$	9,157	\$ (59)	\$	(104,731)	\$ 72,507
Loss		-		-	-		-		-		-	-		(4,925)	(4,925)
Other comprehensive income		-		-	14		-		53		-	-		-	67
Total comprehensive income (loss)		-		-	14		-		53		-	-		(4,925)	(4,858)
Exercise of options into shares, net		*		*	-		-		-		*	-		-	*
Forfeiture of options		-		411	-		-		-		(411)	-		-	-
Cost of share-based payment		-		-	-		-		-		1,022	-		-	1,022
Balance as of September 30, 2016	\$	9,320	\$	162,649	\$ 87	\$	(3,490)		\$ 52	\$	9,768	\$ (59)	\$	(109,656)	\$ 68,671

						Capital
						reserve from		Capital
						available for	reserve due to					Capital	Capital
					sale financial assets		translation to presentation currency		Capital reserve from hedges		reserve from		reserve from
				Share							share-based			employee		Accumulated
		Share Capital	premium								payments		benefits			deficit	Total equity
										Unaudited
										In thousands
Balance as of July 1, 2017	\$	9,321	\$	162,686	\$	31	\$	(3,490)	\$	229	\$	10,221	\$	(81)	\$	(110,579)	\$	68,338
Net loss		-		-		-		-		-		-		-		(236)		(236)
Other comprehensive income (loss)		-		-		3		-		(172)		-		-		-		(169)
Total comprehensive income (loss)		-		-		3		-		(172)		-		-		(236)		(405)
Exercise of share-based payment into
shares		1		26								(26)						1
Issuance of ordinary shares, net of		1,077		14,481
issuance costs						-		-		-				-		-		15,558
Cost of share-based payment		-		-		-		-		-		218		-		-		218
Balance as of September 30, 2017	\$	10,399	\$	177,193	\$	34	\$	(3,490)		\$ 57	\$	10,413	\$	(81)		\$ (110,815)	\$	83,710

*Represent an amount of less than 1 thousands.

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

	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 July 1, 2016	\$	9,320	\$	162,649	\$	119	\$	(3,490)	\$	9	\$	9,455	\$	(59)	\$	(108,615)		69,388
Loss		-		-		-		-		-		-		-		(1,043)		(1,043)
Other comprehensive income (loss)		-		-		(32)		-		43		-		-		-		11
Total comprehensive income (loss)		-		-		(32)		-		43		-		-		(1,043)		(1,030)
Exercise of options into shares, net		*		*		-		-		-		-		-		-		*
Cost of share-based payment		-		-		-		-		-		313		-		-		313
Balance as of September 30, 2016	\$	9,320	\$	162,649	\$	87	\$	(3,490)	\$	52	\$	9,768	\$	(59)	\$	(109,656)	\$	68,671

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 Audited	Capital reserve from share-based payments	Capital reserve from employee benefits	Accumulated deficit	Total equity
							In thousands
Balance as of December 31, 2015
(audited)	\$	9,320	\$ 162,238	\$	73	\$ (3,490)	\$	(1)	\$ 9,157	\$ (59)	\$ (104,731)	\$ 72,507
Net loss		-	-		-	-		-	-	-	(6,733)	(6,733)
Other comprehensive loss		-	-		(54)	-		(26)	-	(22)	-	(102)
Total comprehensive 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 than 1 thousand

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine months period	Ended		Three months period Ended	Year Ended
	September 30,				September 30,	December 31,
	2017		2016	2017	2016	2016
			Unaudited	In thousands		Audited
Cash Flows from Operating Activities
Net gain (loss)	\$ 649	\$	(4,925)	\$ (236)	\$ (1,041)	\$ (6,733)
Adjustments to reconcile gain (loss) to net cash provided by (used in) operating activities:
Adjustments to the profit or loss items:
Depreciation, amortization and impairment of
equipment	2,648		2,631	903	922	3,501
Finance expense ( income), net	263		(150)	(78)	22	(470)
Cost of share-based payment	659		1,022	218	313	1,071
Income tax expense Loss (gain) from sale of property and equipment	87 (49)		1,488 (23)	- (4)	- (33)	1,722 (18)
Change in employee benefit liabilities, net	278		11	137	396	(87)
	3,886		4,979	1,176	1,620	5,719
Changes in asset and liability items:
Decrease (increase) in trade receivables, net	(2,924)		8,948	863	1,644	3,489
Decrease in other accounts receivables	(393)		(654)	(547)	(801)	211
Decrease (increase) in inventories	2,450		(1,750)	928	235	742
Decrease (increase) in deferred expenses	872		(487)	(132)	287	(433)
Decrease in trade payables	(3,885)		(8,277)	(1,906)	(1,408)	(2,650)
Increase in other accounts payables	716		681	(473)	(45)	1,520
Increase (decrease) in deferred revenues	(1,691)		2,022	(1,238)	(987)	1,035
	(4,855)		483	(2,505)	(973)	3,914
Cash received (paid) during the period for:
Interest paid	(16)		(46)	(7)	(37)	(60)
Interest received	266		657	117	233	842
Taxes paid	(14)		(1,781)	(4)	(1,475)	(1,785)
	236		(1,170)	106	(1,279)	(1,003)
Net cash provided by (used in) operating activities	\$ (84)	\$	(633)	\$ (1,459)	\$ (1,673)	\$ 1,897

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine months period	Ended September 30,		Three months period September 30,	Ended	Year Ended December 31,
	2017		2016	2017		2016		2016
			Unaudited				Audited
	Thousands of US dollar
Cash Flows from Investing Activities
Proceeds from sale of )investment in) short term
investments, net	\$ (9,068)		\$ 2,369	\$(12,041)		\$ 1,593	\$	4,236
Purchase of property and equipment	(3,407)		(1,904)	(792)		(435)		(2,641)
Proceeds from sale of property and equipment	57		41	4		20		42
Net cash provided by (used in) investing activities	(12,418)		506	(12,829)		1,178		1,637
Cash Flows from Financing Activities
Proceeds from exercise of share base payment	2		*	1		*		*
Receipt of long-term loans	279		1,701	279		-		1,701
Repayment of long-term loans	(380)		(159)	(142)		(98)		(211)
Proceeds from issuance of ordinary shares, net	15,558		-	15,558		-		-
Net cash provided by (used in) financing activities	15,459		1,542	15,696		(98)		1,490
Exchange differences on balances of cash and cash
equivalent	(769)		14	(276)		(67)		(103)
Increase (decrease) in cash and cash equivalents	2,188		1,429	1,132		(660)		4,921
Cash and cash equivalents at the beginning of the
period	9,968		5,047	11,024		7,136		5,047
Cash and cash equivalents at the end of the period	\$ 12,156	\$	6,476	\$ 12,156	\$	6,476	\$	9,968
Significant non-cash transactions
Purchase of property and equipment through capital
lease	\$ 282	\$	132	\$ -	\$	48	\$	132
Purchase of property and equipment	\$ 398	\$	-	\$ 398	\$	-	\$	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 September 30, 2017 and for the nine 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, 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
Nine months period ended September 30, 2017		Unaudited
Revenues	\$ 50,568	\$ 16,547	\$	67,115
Gross profit	\$ 17,841	\$ 2,617		20,458
Unallocated corporate expenses Finance expense, net				(19,459) (263)
Gain before taxes on income			\$	736

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3:- Operating Segments (Cont.)

	Proprietary Distribution Products			Total
Nine months period ended September 30, 2016				Unaudited
Revenues	\$	38,270	\$	14,966	\$	53,236
Gross profit	\$	14,427	\$	2,255		16,682
Unallocated corporate expenses Finance income, net						(20,269) 150
Loss before taxes on income					\$	(3,437)

		Proprietary Distribution Products			Total
	Unaudited
Three months period ended September 30, 2017
Revenues	\$	17,058	\$	5,860	\$	22,918
Gross profit	\$	5,549	\$	899		6,448
Unallocated corporate expenses Finance expense, net						(6,762) 78
Loss before taxes on income					\$	(236)

		Proprietary Products		Distribution	Total
Three months period ended September 30, 2016				Unaudited
Revenues	\$	15,044	\$	4,329	\$ 19,373
Gross profit	\$	5,611	\$	665	6,276
Unallocated corporate expenses Finance income, net					(7,295) (22)
Loss before taxes on income					\$ (1,041)

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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
September 30, 2017
Marketable securities at fair value through profit or loss:
Equity shares	\$	79 \$	-
Mutual funds		442	-
Debt securities (corporate and government)		1,167	-
		1,688
Derivatives instruments	\$	-	\$ 93
Available for sale debt securities (corporate and government)	\$	-	\$ 8,162
	\$	1,688	\$ 8,255
September 30, 2016
Marketable securities at fair value through profit or loss:
Equity shares	\$	75	-
Mutual funds		393	-
Debt securities (corporate and government)		1,054	\$ -
		1,522	-
Derivatives instruments	\$	-	\$ 38
Available for sale debt securities (corporate and government)	\$	-	\$ 19,201
	\$	1,522	\$ 19,239
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 nine months ended on September 30, 2017 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, 2017, the Israeli corporate tax rate was reduced from 25% to 24%.
• b. On August 2, 2017 the Company had a public offering on the NASDAQ of 3,333,334 shares at \$4.5 per share. As part of the offering, the underwriters received a right to purchase an additional 500,000 ordinary shares to cover over-allotments at the same price per share. This option was fully exercise on August 30, 2017. The Company's total net proceeds from the issuance of the above shares were \$15.6 million.
• c. On July 31, 2017 the Company's Board of Directors approved to grant share base payment to the Company's employees, management and directors. The share base payment grants are as follows:
  • 1. A grant of 398,450 options at a range of an exercise price of NIS 20.94 to NIS 21.99 per option and 48,669 restricted shares ("RS") (with no exercise price) to the Company's management and employees. The options are exercisable into ordinary shares. According to a calculation formula based on the Binomial Model, the fair value of the options and of the RSs was estimated at \$583 thousands and \$220 thousands, respectively.
  • 1. The grant of 18,000 options at an exercise price of NIS 21.99 per option 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 and of the RSs was estimated at \$38 thousands and \$27 thousands, respectively.
  • 1. The grant of 40,000 options at an exercise price of NIS 21.99 per option to board members at a fair value of approximately \$85 thousands.
  • The grant of options to the board members and the grant of options and RS to Mr. Amir London are subject to the approval of the General Meeting of Shareholders of the Company that is scheduled on November 30, 2017.
  • d. In August 2017, the Company received the Food and Drug Administration (FDA) approval for marketing the KamRAB, a post exposure prophylaxis product for the prevention of rabies in human beings, in the United States. The Company expects to start marketing the product in 2018.