Exhibit 99.2
Consolidated Financial Statements
December 31, 2020
March 16, 2021
Management’s Responsibility for Financial Reporting
The accompanying 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.
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(signed) |
“Frederic Ors” |
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(signed) |
“Pierre Labbé” |
Chief Executive Officer |
Chief Financial Officer | |||
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Approved on behalf of the Board of Directors
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(signed) |
“James W. Hall”, Director |
(signed) |
“Wayne Pisano”, Director | |
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of IMV Inc.
We have audited the accompanying consolidated statements of financial position of IMV Inc. and its subsidiary (together, the Company) as of December 31, 2020 and 2019, and the related consolidated statements of equity, loss and comprehensive loss and cash flows for the years then ended, including the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and its financial performance and its cash flows for the years then ended in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Chartered Professional Accountants
Halifax, Nova Scotia, Canada
March 16, 2021
We have served as the Company's auditor since 2003.
PricewaterhouseCoopers LLP
Cogswell Tower, 2000 Barrington Street, Suite 1101, Halifax, Nova Scotia, Canada B3J 3K1
T: +1 902 491 7400, F: +1 902 422 1166
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership
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IMV Inc. | |
Consolidated Statements of Financial Position | |
As at December 31, 2020 and 2019 | |
(Expressed in thousands of Canadian dollars except for share and per share amounts) |
2020 |
2019 | ||||
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Assets | |||||
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Current assets | |||||
Cash and cash equivalents |
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Amounts receivable (note 6) |
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Prepaid expenses |
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Investment tax credits receivable |
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Property and equipment (note 8) |
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Liabilities | |||||
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Current liabilities | |||||
Accounts payable, accrued and other liabilities (note 10) |
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Current portion of long-term debt (note 9) |
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Current portion of lease obligation (note 7) |
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Lease obligation (note 7) |
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Long-term debt (note 9) |
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Equity |
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Commitments (note 17) |
The accompanying notes form an integral part of these consolidated financial statements.
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IMV Inc. | |
Consolidated Statements of Equity | |
For the years ended December 31, 2020 and 2019 | |
(Expressed in thousands of Canadian dollars except for per share amounts) |
Share |
Contributed | |||||||||||||
Capital |
Surplus |
Warrants |
Deficit |
Total | ||||||||||
$ |
$ |
$ |
$ |
$ | ||||||||||
(note 11) |
(note 12) |
(note 13) | ||||||||||||
Balance, December 31, 2018 |
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Net loss and comprehensive loss for the year |
– |
– |
– |
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( |
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Issuance of shares in public offering |
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– |
– |
– |
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Share issuance costs |
( |
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– |
– |
– |
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Deferred share units (“DSU”) settled in shares: | ||||||||||||||
Reclassification of units to equity-settled |
– |
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– |
– |
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Value of services recognized |
– |
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– |
– |
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Exercise of warrants |
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– |
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– |
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Expiry of warrants |
– |
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– |
– | ||||||||
Employee share options: | ||||||||||||||
Value of services recognized |
– |
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– |
– |
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Exercise of options |
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– |
– |
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Balance, December 31, 2019 |
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Net loss and comprehensive loss for the year |
– |
– |
– |
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Issuance of shares in public equity offering |
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– |
– |
– |
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Share issuance costs in a public equity offering |
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– |
– |
– |
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Issuance of shares and warrants in private placement |
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– |
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– |
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Share and warrant issuance costs in private placement |
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– |
– |
– |
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Redemption of DSU’s, net of applicable taxes |
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– |
– |
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Warrants exercised |
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– |
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Warrants expired |
– |
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– |
– | ||||||||
DSUs: | ||||||||||||||
Value of services recognized |
– |
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– |
– |
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Employee share options: | ||||||||||||||
Value of services recognized |
– |
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– |
– |
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Exercise of options |
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– |
– |
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Balance, December 31, 2020 |
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The accompanying notes form an integral part of these consolidated financial statements.
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IMV Inc. | |
Consolidated Statements of Loss and Comprehensive Loss | |
For the years ended December 31, 2020 and 2019 | |
(Expressed in thousands of Canadian dollars except for per share amounts) |
2020 |
2019 | |||||
$ |
$ | |||||
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Revenue | ||||||
Subcontract revenue |
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Interest income |
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Expenses | ||||||
Research and development |
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General and administrative |
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Government assistance (note 5) |
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Accreted interest and valuation adjustments (note 9) |
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Net loss and comprehensive loss for the year |
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Basic and diluted loss per share |
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Weighted-average shares outstanding |
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The accompanying notes form an integral part of these consolidated financial statements.
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IMV Inc. | |
Consolidated Statements of Cash Flows | |
For the years ended December 31, 2020 and 2019 | |
(Expressed in thousands of Canadian dollars except for per share amounts) |
2020 |
2019 | |||||
$ |
$ | |||||
Cash provided by (used in) | ||||||
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Operating activities | ||||||
Net loss and comprehensive loss for the year |
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( |
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Charges to operations not involving cash | ||||||
Depreciation of property and equipment |
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Accreted interest and valuation adjustments |
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Deferred share unit compensation |
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Stock-based compensation |
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Loss on disposal of assets |
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Fair value adjustment on government loan |
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Net change in non-cash working capital balances related to operations | ||||||
(Increase) decrease in amounts receivable |
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Increase in prepaid expenses |
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Increase in investment tax credits receivable |
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Increase (decrease) in accounts payable and other liabilities |
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Financing activities | ||||||
Proceeds from issuance of share capital and warrants in private placement |
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Share and warrant issuance costs in private placement |
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Proceeds from public equity offering |
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Share Issuance costs in public equity offering |
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Proceeds from the exercise of stock options |
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Proceeds from short-term borrowing |
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Repayment of short-term borrowing |
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Proceeds from the exercise of warrants |
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Proceeds from long-term debt |
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Repayment of long-term debt |
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Repayment of lease obligation |
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Investing activities | ||||||
Acquisition of property and equipment |
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Net change in cash and cash equivalents during the year |
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Cash and cash equivalents – Beginning of year |
14,066 |
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Cash and cash equivalents – End of year |
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Supplementary cash flow | ||||||
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Interest received |
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The accompanying notes form an integral part of these consolidated financial statements.
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IMV Inc. | |
Notes to the Consolidated Financial Statements | |
For the years ended December 31, 2020 and 2019 | |
(Expressed in thousands of Canadian dollars except for share and per share amounts) |
1Nature of operations
IMV Inc. (the “Corporation” or “IMV”) is, through its 100% owned subsidiary, a biopharmaceutical company committed to improving the treatment of cancer and giving patients with hard-to-treat cancers a chance to enjoy a long and healthy life. IMV is using its DPX delivery technology (“DPX platform” or “DPX”) to generate targeted, specific and sustainable immune activation. The Corporation is developing a portfolio of DPX-based immunotherapies that address unmet medical needs, and its lead candidate, maveropepimut-S (DPX-Survivac) is a pipeline in a product that generates sustained and targeted immune responses against survivin, a tumor-associated protein, overexpressed in a high number of tumor types. Maveropepimut-S, in association with low dose cyclophosphamide used as an immune modulator, is being evaluated in three phase 2 clinical trials across 6 different cancer indications with and without Merck’s Keytruda®. With the financial support of the Canadian Government, IMV initiated the development of DPX-COVID-19, a vaccine candidate against SARS-CoV-2 using the DPX platform. The DPX platform is a versatile technology that gives IMV the opportunity to develop new immunotherapies in its portfolio with the goal to address more unmet medical needs in the future. Also, the Corporation believes that its DPX platform offers a novel way to deliver drugs to the human body.
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”. The address of its principal place of business is 130 Eileen Stubbs Avenue, Suite 19, Dartmouth, Nova Scotia, Canada.
An outbreak of a novel strain of coronavirus, identified as “COVID-19”, was declared a global pandemic by the World Health Organization on March 11, 2020. To date, COVID-19 has not had a material impact on the Corporation’s financial condition, liquidity or longer-term strategic development and commercialization plans. The extent to which COVID-19 may cause more significant disruptions to IMV’s business and greater impacts to results of operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration and severity of outbreaks, including potential future waves or cycles, and the effectiveness of actions to contain and treat COVID-19. The Corporation cannot predict the duration, scope and severity of any potential business shutdowns or disruptions, including to ongoing and planned clinical studies and regulatory approval prospects. Further prolonged shutdowns or other business interruptions could result in material and negative effects to the Corporation’s ability to conduct its business in the manner and on the timelines currently planned, which could have a material adverse impact on IMV’s business, results of operations, and financial condition. The COVID-19 pandemic continues to rapidly evolve, and the Corporation will continue to monitor the effects of COVID-19 on its business.
2Basis of presentation
The Corporation prepares its 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 consolidated financial statements were approved by the Board of Directors on March 16, 2021.
(1)
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IMV Inc. | |
Notes to the Consolidated Financial Statements | |
For the years ended December 31, 2020 and 2019 | |
(Expressed in thousands of Canadian dollars except for share and per share amounts) |
3New standards and interpretations not yet adopted
In January 2020, the IASB issued amendments to Presentation of financial statements (“IAS 1”) to provide a more general approach to the classification of liabilities under IAS 1 based on the contractual arrangements in place at the reporting date. The amendments to IAS 1 are effective for annual reporting periods beginning on or after January 1, 2023.
There are no other standards, interpretations or amendments to existing standards that are not yet effective that are expected to have a material impact on the consolidated financial statements of the Corporation.
4Significant accounting policies, judgments and estimation uncertainty
Basis of measurement
The consolidated financial statements have been prepared under the historical cost convention.
Consolidation
The financial statements of the Corporation consolidate the accounts of IMV Inc. and its subsidiary. All intercompany transactions, balances and unrealized gains and losses from intercompany transactions are eliminated on consolidation. There are no non-controlling interests, therefore, all loss and comprehensive loss is attributable to the shareholders of the Corporation.
Foreign currency translation
i)Functional and presentation currency
Items included in the consolidated financial statements of the Corporation are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in Canadian dollars, which is the Corporation’s functional currency.
ii)Transactions and balances
Foreign currency translation of monetary assets and liabilities, denominated in currencies other than the Corporation’s functional currency, are converted at the rate of exchange in effect at the consolidated statements of financial position date. Revenue and expense items are translated at the rate of exchange in effect at the transaction date. Translation gains or losses are included in determining income or loss for the year. Foreign exchange loss of $
Cash and cash equivalents
Cash and cash equivalents include cash on hand, balances with banks, and highly liquid temporary investments that are readily convertible to known amounts of cash.
(2)
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IMV Inc. | |
Notes to the Consolidated Financial Statements | |
For the years ended December 31, 2020 and 2019 | |
(Expressed in thousands of Canadian dollars except for share and per share amounts) |
4Significant accounting policies, judgments and estimation uncertainty (continued)
Financial instruments
Financial assets and liabilities are recognized when the Corporation becomes a party to the contractual provisions of the instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have been transferred and the Corporation has transferred substantially all risks and rewards of ownership.
Financial assets and liabilities are offset and the net amount is reported in the consolidated statements of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.
The Corporation recognizes financial instruments based on their classification. Depending on the financial instruments’ classification, changes in subsequent measurements are recognized in net loss and comprehensive loss. Financial instruments do not include amounts due to or from government entities.
The Corporation has implemented the following classifications:
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Cash and cash equivalents and amounts receivable are classified as amortized cost (previously loans and receivables). After their initial fair value measurement, they are measured at amortized cost using the effective interest method; and
•
Accounts payable, accrued and other liabilities, amounts due to directors and long-term debt are classified as other amortized cost (previously financial liabilities). After their initial fair value measurement, they are measured at amortized cost using the effective interest method.
Impairment of financial assets
The Corporation applies the simplified method of the expected credit loss model required under IFRS 9, Financial Instruments. Under this method, the Corporation estimates a lifetime expected loss allowance for all receivables. Receivables are written off when there is no reasonable expectation of recovery.
If there is objective evidence that an impairment loss has incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows. The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate.
Property and equipment
Property and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Corporation and the cost can be measured reliably. The carrying amount of a replaced asset is derecognized when replaced. Repairs and maintenance costs are charged to the consolidated statements of loss and comprehensive loss during the period in which they are incurred.
(3)
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IMV Inc. | |
Notes to the Consolidated Financial Statements | |
For the years ended December 31, 2020 and 2019 | |
(Expressed in thousands of Canadian dollars except for share and per share amounts) |
4Significant accounting policies, judgments and estimation uncertainty (continued)
Property and equipment (continued)
Depreciation of property and equipment is calculated using the declining-balance method, with the exception of leasehold improvements, right-of-use assets and leased premises, at the following annual rates:
Computer equipment |
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Computer software |
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Furniture and fixtures |
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Laboratory equipment |
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Leasehold improvements and right-of-use assets |
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Residual values, method of depreciation and useful lives of the assets are reviewed annually and adjusted if appropriate.
Gains and losses on disposals of property and equipment are determined by comparing the proceeds with the carrying amount of the asset and are included as part of general and administrative expenses in the consolidated statements of loss and comprehensive loss.
Property and equipment and intangible assets are tested for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. For the purpose of measuring recoverable amounts, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units or “CGU”s). The recoverable amount is the higher of an asset’s fair value less the costs to sell, and value in use (being the present value of the expected future cash flows of the relevant asset or CGU).
An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount.
The Corporation evaluates impairment losses for potential reversals when events or circumstances warrant such consideration.
Leases
Under IFRS 16, Leases, the Corporation assesses whether a contract is or contains a lease based on the definition of a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Corporation assesses whether:
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the contract involves the use of an identified asset, specified either explicitly or implicitly, that is physically distinct, and usage represents substantially all of the capacity of the asset;
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the Corporation has the right to obtain substantially all of the economic benefits from use of the asset; and
•
the Corporation has the right to direct use of the asset, which is evidenced by decision-making rights to direct how and for what purpose the asset is used.
The Corporation recognizes an asset and a lease liability at the lease commencement date.
(4)
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IMV Inc. | |
Notes to the Consolidated Financial Statements | |
For the years ended December 31, 2020 and 2019 | |
(Expressed in thousands of Canadian dollars except for share and per share amounts) |
4Significant accounting policies, judgments and estimation uncertainty (continued)
Leases (continued)
The asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred, less any incentives received. The asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the asset or the end of the lease term. The estimated useful lives of leased assets are determined on the same basis as those of property and equipment. The carrying amount of the leased asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability, if any.
The lease liability is initially measured at the present value of future lease payments, discounted using the interest rate implicit in the lease, or, if that rate cannot be readily determined, the Corporation’s incremental borrowing rate. Generally, the Corporation uses its incremental borrowing rate as the discount rate. The lease liability is subsequently measured at amortized cost using the effective interest method. It is remeasured if the Corporation changes its assessment of whether it will exercise a purchase, extension, or termination option. If the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the leased asset, or is recorded in the consolidated statements of loss and comprehensive loss if the carrying value of the leased asset is zero.
The Corporation has elected not to recognize assets and lease liabilities for short-term leases with a term of 12 months or less, and leases of low value assets.
The lease payments associated with these leases are recognized as an expense in the consolidated statements of loss and comprehensive loss over the lease term. Low value assets consist primarily of computers and information technology equipment.
Income tax
Income tax is comprised of current and deferred income tax. Income tax is recognized in the consolidated statements of loss and comprehensive loss except to the extent that it relates to items recognized directly in equity, in which case the income tax is also recognized directly in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted, at the end of the reporting period, and any adjustment to tax payable in respect of previous years.
In general, deferred income tax is recognized in respect of temporary differences including non-refundable investment tax credits, arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.
Deferred income tax is determined on a non-discounted basis using tax rates and laws that have been enacted or substantively enacted at the consolidated statements of financial position date and are expected to apply when the deferred income tax asset or liability is settled. Deferred income tax assets are recognized to the extent that it is probable that the assets can be recovered.
(5)
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IMV Inc. | |
Notes to the Consolidated Financial Statements | |
For the years ended December 31, 2020 and 2019 | |
(Expressed in thousands of Canadian dollars except for share and per share amounts) |
4Significant accounting policies, judgments and estimation uncertainty (continued)
Research and development
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except in the case of subsidiaries, where the timing of the reversal of the temporary difference is controlled by the Corporation and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are presented as non-current.
All research costs are expensed in the period incurred. Development costs are expensed in the period incurred, unless they meet the criteria for capitalization, in which case, they are capitalized and then amortized over the useful life. Development costs are written off when there is no longer an expectation of future benefits.
Revenue recognition
Revenue is recognized as the Corporation satisfies its performance obligations under the terms of the contract. Performance obligations are considered to be satisfied when the customer obtains control of the related asset. Current and expected future revenue streams include: (i) milestone payments generated upon entering into potential contractual partnerships and achieving development and sales milestones; (ii) future royalties generated from the eventual commercialization of the Corporation’s products; and (iii) amounts generated for providing formulation and research support services related to existing licensing and research agreements with partners.
Revenue resulting from formulation services is recognized in the accounting period in which the formulation is delivered to the customer. Typically, the customer does not have control of the asset while services are being performed and, therefore, revenues are recognized at the time the Corporation has completed its obligation and the customer obtains control of the asset.
Revenue resulting from research support services is recognized over time as the services are performed, as the customer benefits simultaneously from the service, and as the Corporation satisfies its performance obligation.
The Corporation expects to generate upfront payments, milestone and royalty revenues from future licenses for the Corporation’s products. Upfront payments and milestones will be recognized as revenue when or as the underlying obligations are achieved and are not conditional on any further performance, which could be at a point in time or over time depending on the contractual terms. Royalty revenue will be recognized in the period in which the Corporation earns the royalty.
The Corporation does not generate licensing or royalty revenues at this time.
Share capital
Common shares are classified as equity. Incremental costs directly attributable to the issuance of shares are recognized as a deduction from share capital.
(6)
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IMV Inc. | |
Notes to the Consolidated Financial Statements | |
For the years ended December 31, 2020 and 2019 | |
(Expressed in thousands of Canadian dollars except for share and per share amounts) |
4Significant accounting policies, judgments and estimation uncertainty (continued)
Loss per share
Basic loss per share (“LPS”) is calculated by dividing the net loss for the year attributable to equity owners of the Corporation by the weighted average number of common shares outstanding during the year.
Diluted LPS is calculated by adjusting the weighted average number of common shares outstanding for dilutive instruments. The number of shares included with respect to options, warrants and similar instruments is computed using the treasury stock method. Diluted LPS is equal to the LPS as the Corporation is in a loss position and all securities, comprised of options and warrants, would be anti-dilutive.
Stock-based compensation plan
The Corporation grants stock options to certain employees and non-employees. Beginning January 1, 2018,
A holder of an option may, rather than exercise such option, elect a cashless exercise of such option payable in common shares equaling the amount by which the value of an underlying share at that time exceeds the exercise price of such option or warrant to acquire such share.
Deferred share unit plan (“DSU Plan)
The Corporation grants deferred share units (“DSUs”) to members of its Board of Directors (“Board Members”), who are not employees or officers of the Corporation. DSUs cannot be redeemed until the holder is no longer a director of the Corporation and are considered equity-settled instruments. In accordance with the DSU Plan, DSUs for ongoing services are granted quarterly and vest immediately. The Board Members can also grant DSUs at its discretion, which may vest over time. The value attributable to DSUs is based on the market value at the time of grant and a compensation expense is recognized in general and administrative expenses on the consolidated statements of loss and comprehensive loss in accordance with the vesting terms. At the time of redemption, each DSU may be exchanged for one common share of IMV Inc.
Government assistance
Government assistance consists of non-repayable government grants, from a number of government agencies and the difference between the fair value and the book value of repayable low-interest government loans, recorded initially at fair value. Government assistance is recorded in the period earned using the cost reduction method and is included in government assistance on the consolidated statements of loss and comprehensive loss. As at December 31, 2020, $
(7)
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IMV Inc. | |
Notes to the Consolidated Financial Statements | |
For the years ended December 31, 2020 and 2019 | |
(Expressed in thousands of Canadian dollars except for share and per share amounts) |
4Significant accounting policies, judgments and estimation uncertainty (continued)
Research and development tax credits
Refundable investment tax credits relating to scientific research and experimental development expenditures (“SR&ED”) are recorded in the accounts in the fiscal period in which the qualifying expenditures are incurred provided there is reasonable assurance that the tax credits will be realized. Refundable investment tax credits, in connection with SR&ED activities, are accounted for using the cost reduction method and included in government assistance on the statements of loss and comprehensive loss.
Amounts recorded for refundable investment tax credits are calculated based on the expected eligibility and tax treatment of qualifying SR&ED expenditures recorded in the Corporation’s consolidated financial statements.
Critical accounting estimates and judgments
The Corporation makes estimates and assumptions concerning the future that will, by definition, seldom equal actual results. The following are the estimates and judgments applied by management that most significantly affect the Corporation’s consolidated financial statements.
The following estimates and judgments have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
Calculation of initial fair value and carrying amount of long-term debt
Atlantic Canada Opportunities Agency (“AOCA”) conditionally repayable loans (“Conditional ACOA”) loans
The initial fair value of the Conditional ACOA loans is determined by using a discounted cash flow analysis for each of the loans, which require a number of assumptions. The difference between the face value and the initial fair value of the Conditional ACOA loans is recorded in the consolidated statements of loss and comprehensive loss as government assistance. The carrying amount of the Conditional ACOA loans requires management to adjust the long-term debt to reflect actual and revised estimated cash flows whenever revised cash flow estimates are made or new information related to market conditions is made available. Management recalculates the carrying amount by computing the present value of the estimated future cash flows at the original effective interest rate. Any adjustments are recognized in the consolidated statements of loss and comprehensive loss as accreted interest and other adjustments after initial recognition.
The significant assumptions used in determining the discounted cash flows include estimating the amount and timing of future revenue for the Corporation and the discount rate.
As the Conditional ACOA loans are repayable based on a percentage of gross revenue, if any, the determination of the amount and timing of future revenue significantly impacts the initial fair value of the loan, as well as the carrying value of the Conditional ACOA loans at each reporting date. The expected revenue streams include i) estimated royalties generated from the eventual commercialization of the Corporation’s products, and ii) estimated milestone payments generated upon entering into potential contractual partnerships and achieving development and sales milestones. The amount and timing of estimated milestone payments forecasted are
(8)
| |
IMV Inc. | |
Notes to the Consolidated Financial Statements | |
For the years ended December 31, 2020 and 2019 | |
(Expressed in thousands of Canadian dollars except for share and per share amounts) |
4Significant accounting policies, judgments and estimation uncertainty (continued)
Critical accounting estimates and judgments (continued)
earlier and less predictable, therefore, changes in the amount and timing of milestone payments could have a significant impact on the fair value of the loans. Further, the Corporation is in the early stages of research for its product candidates; accordingly, determination of the amount and timing of any revenue streams requires significant judgment by management.
The discount rate determined on initial recognition of the Conditional ACOA loans is used to determine the present value of estimated future cash flows expected to be required to settle the debt. In determining the appropriate discount rates, the Corporation considered the interest rates of similar long-term debt arrangements with similar terms. The Conditional ACOA loans are repayable based on a percentage of gross revenue, if any; accordingly, finding financing arrangements with similar terms is difficult and management was required to use significant judgment in determining the appropriate discount rates. Management used a discount rate of
If the weighted average discount rate used in determining the initial fair value and the carrying value at each reporting date of all Conditional ACOA loans, with repayment terms based on future revenue, had been determined to be
Province of Nova Scotia (“the Province”) loan
The initial fair value of the Province loan is determined by using a discounted cash flow analysis for the loan. The interest rate on the loan is below the market rate for a commercial loan with similar terms.
The significant assumption used in determining the discounted cash flows is the discount rate. Any changes in the discount rate would impact the amount recorded as initial fair value of the long-term debt and the carrying value of the long-term debt at each reporting date. In determining the appropriate discount rate, the Corporation considers the interest rates of similar long-term debt arrangements with similar terms. The Province loan is a government loan with principal payments only beginning after seven years; accordingly, finding financing arrangements with similar terms is difficult and management was required to use significant judgment in determining the appropriate discount rates. Management used a discount rate of
If the discount rate used for the Province loan had been determined to be higher or lower by
(9)
| |
IMV Inc. | |
Notes to the Consolidated Financial Statements | |
For the years ended December 31, 2020 and 2019 | |
(Expressed in thousands of Canadian dollars except for share and per share amounts) |
4Significant accounting policies, judgments and estimation uncertainty (continued)
Critical accounting estimates and judgments (continued)
Province of Nova Scotia (“the Province”) loan (continued)
Any changes in the amounts recorded on the consolidated statements of financial position for the Province loan result in an offsetting charge to accreted interest after initial recognition in the consolidated statements of loss and comprehensive loss.
5Government grants and assistance
The Corporation is evaluating all applicable government relief programs. Notably, in response to the negative economic impact of COVID-19, the Government of Canada, in collaboration with the National Research Council of Canada Industrial Research Assistance Program (“NRC IRAP”), announced the Innovation Assistance Program (“IAP”) program in April 2020. IAP provides a wage subsidy on eligible remuneration, subject to limits per employee, to eligible employers pursuing technology driven innovation who are not eligible for funding under the Canada Emergency Wage Subsidy. The Corporation qualified for this subsidy from the April 1, 2020 effective date through to June 23, 2020, and has, accordingly, recognized $
In May 2020, the Corporation qualified for $
In July 2020, the Corporation qualified for $
In August 2020, the Corporation qualified for COVID-19 project funding from ACOA. ACOA’s contribution is an interest free government loan with a maximum contribution of $
(10)
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IMV Inc. | |
Notes to the Consolidated Financial Statements | |
For the years ended December 31, 2020 and 2019 | |
(Expressed in thousands of Canadian dollars except for share and per share amounts) |
5Government grants and assistance (continued)
In October 2020, the Corporation qualified for an additional $
6Amounts receivable
2020 |
2019 | ||||
$ |
$ | ||||
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Amounts due from government assistance and government loans |
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Sales tax receivable |
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Revenue from subcontracts |
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Other |
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7Lease obligation
Amount | |||
$ | |||
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Balance – December 31, 2018 |
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Repayment of lease obligation |
( |
) | |
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Accreted interest |
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Balance – December 31, 2019 |
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Additions |
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Repayment of lease obligation |
( |
) | |
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Accreted interest |
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Balance – December 31, 2020 |
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Less: Current portion |
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Non-current portion |
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The Corporation recognizes a right-of-use asset and lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the liability, discounted at an incremental borrowing rate of
(11)
| |
IMV Inc. | |
Notes to the Consolidated Financial Statements | |
For the years ended December 31, 2020 and 2019 | |
(Expressed in thousands of Canadian dollars except for share and per share amounts) |
7Lease obligation (continued)
position and recognized $
8Property, plant and equipment
Computer | ||||||||||||||||||
equipment |
Leasehold | |||||||||||||||||
and |
Furniture |
Laboratory |
Right-of- |
improve- | ||||||||||||||
software |
and fixtures |
equipment |
use assets |
ments |
Total | |||||||||||||
$ |
$ |
$ |
$ |
$ |
$ | |||||||||||||
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Year ended December 31, 2019 | ||||||||||||||||||
Opening net book value |
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Additions |
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Disposals | ||||||||||||||||||
Cost |
( |
) |
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( |
) |
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Accumulated depreciation |
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Depreciation for the year |
( |
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( |
) |
( |
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Closing net book value |
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As at December 31, 2019 | ||||||||||||||||||
Cost |
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Accumulated depreciation |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) | ||||||
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Net book value |
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Year ended December 31, 2020 | ||||||||||||||||||
Opening net book value |
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Additions |
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Disposals | ||||||||||||||||||
Cost |
( |
) |
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( |
) |
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( |
) | |||||||||
Accumulated depreciation |
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Depreciation for the year |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) | ||||||
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Closing net book value |
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As at December 31, 2020 | ||||||||||||||||||
Cost |
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Accumulated depreciation |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) |
( |
) | ||||||
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Net book value |
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(12)
| |
IMV Inc. | |
Notes to the Consolidated Financial Statements | |
For the years ended December 31, 2020 and 2019 | |
(Expressed in thousands of Canadian dollars except for share and per share amounts) |
9Long-term debt
2020 |
2019 | |||||||
$ |
$ | |||||||
ACOA Atlantic Innovation Fund (“AIF”), interest-free loan1 with a maximum contribution of $ |
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ACOA AIF, interest-free loan1 with a maximum contribution of $ |
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ACOA Business Development Program, interest-free loan with a maximum contribution of $ |
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ACOA AIF, interest-free loan1 with a maximum contribution of $ |
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| ||||||||
TNC 120-140 Eileen Stubbs Ltd. (the Landlord) loan, with an original balance of $ |
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Province of Nova Scotia (the “Province”), secured loan with a maximum contribution of $ |
|
| ||||||
| ||||||||
ACOA Regional Economic Growth through Innovation1 – Business Scale-Up and Productivity Program, interest-free loan with a maximum contribution of $ |
|
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Less: Current portion |
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1The carrying amount of these loans are reviewed each reporting period and adjusted as required to reflect management’s best estimate of future cashflows, based on a number of assumptions, discounted at the original effective interest rate. |
(13)
| |
IMV Inc. | |
Notes to the Consolidated Financial Statements | |
For the years ended December 31, 2020 and 2019 | |
(Expressed in thousands of Canadian dollars except for share and per share amounts) |
9Long-term debt (continued)
Total contributions received, less amounts that have been repaid as at December 31, 2020, is $
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
In accounting for this change, the Corporation determined, based on industry risk, its own credit risk and the interest rate environment, that the effective interest rate of the loan of
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 $
The minimum annual principal repayments of long-term debt over the next five years, excluding the repayments of the Conditional ACOA loans for 2021 and beyond which are not determinable at this time, are as follows:
$ | |||
Year ending December 31, 2021 |
| ||
2022 |
| ||
2023 |
| ||
2024 |
| ||
2025 |
|
(14)
| |
IMV Inc. | |
Notes to the Consolidated Financial Statements | |
For the years ended December 31, 2020 and 2019 | |
(Expressed in thousands of Canadian dollars except for share and per share amounts) |
9Long-term debt (continued)
2020 |
2019 | |||||||
$ |
$ | |||||||
Balance – Beginning of year |
|
| ||||||
Borrowings |
1,000 |
– | ||||||
Accreted interest and valuation adjustments |
|
| ||||||
Revaluation of long-term debt |
( |
) |
( |
) | ||||
Repayment of debt |
( |
) |
( |
) | ||||
| ||||||||
Balance – End of year |
|
| ||||||
Less: Current portion |
1,094 |
88 | ||||||
| ||||||||
Non-current portion |
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| ||||||
| ||||||||
The Corporation is in compliance with its debt covenants.
10Accounts payable, accrued and other liabilities
2020 |
2019 | |||||
$ |
$ | |||||
Trade payables |
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Accrued and other liabilities |
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Payroll taxes |
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Amounts due to Directors |
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11Share capital
Authorized
Unlimited number of common shares and preferred shares, issuable in series, all without par value.
Common shares |
Amount | ||||
# |
$ | ||||
Issued and outstanding | |||||
Balance – December 31, 2018 |
|
| |||
Issued for cash, net of issuance costs |
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Stock options exercised |
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Warrants exercised |
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Balance – December 31, 2019 |
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Issued for cash, net of issuance costs |
|
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Stock options exercised |
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DSUs redeemed |
|
| |||
Warrants exercised |
|
| |||
Balance – December 31, 2020 |
|
| |||
(15)
| |
IMV Inc. | |
Notes to the Consolidated Financial Statements | |
For the years ended December 31, 2020 and 2019 | |
(Expressed in thousands of Canadian dollars except for share and per share amounts) |
11Share capital (continued)
As at December 31, 2020, a total of
On October 16, 2020, the Corporation entered into an Equity Distribution Agreement (“October 2020 ATM”) with Piper Sandler & Co. (“Piper Sandler”) authorizing the Corporation to offer and sell common shares from time-to-time up to an aggregate offering amount of US$
On May 7, 2020, the Corporation completed a private placement of
On March 17, 2020, the Corporation entered into an Equity Distribution Agreement (“March 2020 ATM”) with Piper Sandler authorizing the Corporation to offer and sell common shares from time-to-time up to an aggregate offering amount of US$
On March 6, 2019, the Corporation completed a public offering, issuing an aggregate of
(16)
| |
IMV Inc. | |
Notes to the Consolidated Financial Statements | |
For the years ended December 31, 2020 and 2019 | |
(Expressed in thousands of Canadian dollars except for share and per share amounts) |
12Contributed surplus
Amount | |||
$ | |||
Contributed surplus | |||
| |||
Balance – December 31, 2018 |
| ||
| |||
Share-based compensation | |||
Stock options vested |
| ||
DSUs vested |
| ||
Reclassification of DSUs |
| ||
Stock options exercised |
( |
) | |
Warrants expired |
| ||
| |||
Balance – December 31, 2019 |
| ||
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Share-based compensation | |||
Stock options vested |
| ||
DSUs vested |
| ||
Stock options exercised |
( |
) | |
DSUs Redeemed |
( |
) | |
Warrants expired |
| ||
| |||
Balance – December 31, 2020 |
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|
Deferred share units
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
DSU activity for the years ended December 31, 2020 and December 31, 2019 are as follows:
2020 |
2019 | ||||
# |
# | ||||
| |||||
Opening balance |
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| |||
Granted |
|
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Redeemed |
( |
) |
| ||
| |||||
Closing balance |
|
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The compensation expense (recovery) at December 31, 2020 was $
On August 8, 2019 (“the reclassification date”), the Corporation resolved to settle all future DSU redemptions in shares, instead of cash. All outstanding DSUs are accordingly now considered equity-settled instruments. As a result of this change, the fair value of the DSUs at the reclassification date were reclassified from liabilities to contributed surplus.
(17)
| |
IMV Inc. | |
Notes to the Consolidated Financial Statements | |
For the years ended December 31, 2020 and 2019 | |
(Expressed in thousands of Canadian dollars except for share and per share amounts) |
12Contributed surplus (continued)
Stock options
The Board of Directors of the Corporation has established a stock option plan (the "Plan") under which options to acquire common shares of the Corporation are granted to directors, employees and other advisors of the Corporation. The maximum number of common shares issuable under the Plan shall not exceed
Stock options are granted with an exercise price determined by the Board of Directors, which is not less than the market price of the shares on the day preceding the award.
In the event that the option holder should die while he or she is still a director, employee or other advisor of the Corporation, the expiry date shall be 12 months from the date of death of the option holder, not to exceed the original expiry date of the option. In the event that the option holder ceases to be a director, employee or other advisor of the Corporation other than by reason of death or termination, the expiry date of the option shall be the 90th day following the date the option holder ceases to be a director, employee or other advisor of the Corporation, not to exceed the original expiry date of the option.
The fair values of stock options are estimated using the Black-Scholes option pricing model. During the year ended December 31, 2020,
2020 |
2019 | ||||
Risk-free interest rate |
|
| |||
Exercise price |
$ |
$ | |||
Market price |
$ |
$ | |||
Expected volatility |
|
| |||
Expected dividend yield |
|
| |||
Expected life (years) |
|
| |||
Forfeiture rate |
|
|
(18)
| |
IMV Inc. | |
Notes to the Consolidated Financial Statements | |
For the years ended December 31, 2020 and 2019 | |
(Expressed in thousands of Canadian dollars except for share and per share amounts) |
12Contributed surplus (continued)
Stock options (continued)
Option activity for the years ended December 31, 2020 and 2019 was as follows:
2020 |
2019 | ||||||||||||
Weighted |
Weighted | ||||||||||||
average |
average | ||||||||||||
Number |
exercise price |
Number |
exercise price | ||||||||||
# |
$ |
# |
$ | ||||||||||
Outstanding - Beginning of year |
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Granted |
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Exercised |
( |
)1 |
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( |
)1 |
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Forfeited |
( |
) |
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( |
) |
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Cancelled |
( |
) |
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Expired |
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( |
) |
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Outstanding - End of year |
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1 |
The number and weighted average exercise price of options exercisable as at December 31, 2020 is
At December 31, 2020, the following options were outstanding:
Options outstanding |
Options exercisable | ||||||||||||||||||
Weighted |
Weighted | ||||||||||||||||||
Weighted |
average |
Weighted |
average | ||||||||||||||||
Exercise |
average |
remaining |
average |
remaining | |||||||||||||||
price |
exercise |
contractual life |
exercise |
contractual life | |||||||||||||||
range |
Number |
price |
(years) |
Number |
price |
(years) | |||||||||||||
$ |
# |
$ |
# |
$ | |||||||||||||||
| |||||||||||||||||||
1.98 – 2.38 |
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2.39 – 3.89 |
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3.90 – 6.19 |
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6.20 – 6.72 |
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6.73 – 7.39 |
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|
(19)
| |
IMV Inc. | |
Notes to the Consolidated Financial Statements | |
For the years ended December 31, 2020 and 2019 | |