10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

———————

FORM 10-Q

———————

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2014
Or
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from: _____________ to _____________

———————

TRIBUTE PHARMACEUTICALS CANADA INC.

 (Exact name of small business issuer as specified in its charter)

———————

ONTARIO, CANADA	0-31198	N/A
(State or Other Jurisdiction	(Commission	(I.R.S. Employer
of Incorporation)	File Number)	Identification No.)

151 Steeles Avenue, East Street, Milton, Ontario, Canada L9T 1Y1

 (Address of Principal Executive Office) (Zip Code)

(519) 434-1540

 (Issuer’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

———————

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated filer o	Non-accelerated filer   o	Smaller Reporting Company þ
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The number of outstanding common shares, no par value, of the Registrant at: June 30, 2014: 51,581,238

TABLE OF CONTENTS

	PART I – CONDENSED INTERIM FINANCIAL STATEMENTS
Item 1.	Unaudited Condensed Interim Financial Statements	3
(A)	Condensed Interim Balance Sheets	3
(B)	Condensed Interim Statements of Operations, Comprehensive (Loss) and Deficit	4
(C)	Condensed Interim Statements of Cash Flows	5
(D)	Notes to the Condensed Interim Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Conditions and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Evaluation of Disclosure Controls and Procedures	23
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	24
Item 1a.	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3.	Defaults Upon Senior Securities	24
Item 4.	Mine Safety Disclosures	24
Item 5.	Other Information	24
Item 6.	Exhibits	24

2

TRIBUTE PHARMACEUTICALS CANADA INC.

CONDENSED INTERIM BALANCE SHEETS

(Expressed in Canadian dollars)

(Unaudited)

	As at June 30,			As at December 31,
	2014			2013
ASSETS
Current
Cash and cash equivalents	$	2,302,033		$	2,813,472
Accounts receivable, net of allowance of $nil (2013 - $nil) (Note 16c)		1,947,243			591,766
Inventories (Note 2)		1,058,899			1,044,831
Taxes recoverable		178,713			651,791
Loan receivable		15,814			15,814
Prepaid expenses and other receivables (Note 3)		192,755			165,886
Current portion of debt issuance costs, net (Note 6)		116,522			91,100
Total current assets		5,811,979			5,374,660
Property, plant and equipment, net (Note 4)		1,054,646			1,089,919
Intangible assets, net (Note 5)		9,622,191			9,717,173
Goodwill		3,599,077			3,599,077
Debt issuance costs, net (Note 6)		301,832			253,712
Total assets	$	20,389,725		$	20,034,541
LIABILITIES
Current
Accounts payable and accrued liabilities	$	4,057,315		$	3,284,756
Current portion of long term debt (Note 6)		582,872			204,700
Warrant liability (Note 7 c)		7,705,377			2,966,714
Other current liability (Note 17)		189,430			38,156
Total current liabilities		12,534,994			6,494,326
Long term debt (Note 6)		7,366,024			5,640,102
Total liabilities		19,901,018			12,134,428
Contingencies and commitments (Notes 6 and 10)
SHAREHOLDERS’ EQUITY
Capital Stock
AUTHORIZED
Unlimited   Non-voting, convertible redeemable and retractable preferred shares with no par value
Unlimited   Common shares with no par value
ISSUED (Note 7 a)
Common shares 51,581,238  (2013 – 51,081,238)		20,159,102			19947290
Additional paid-in capital options (Note 7 b)		2,503,966			2,286,890
Accumulated other comprehensive loss (Note 17)		(189,430	)		(38,156	)
Deficit		(21,984,931	)		(14,295,911	)
Total shareholders’ equity		488,707			7,900,113
Total liabilities and shareholders’ equity	$	20,389,725		$	20,034,541

See accompanying notes to the condensed interim financial statements.

3

TRIBUTE PHARMACEUTICALS CANADA INC.

CONDENSED INTERIM STATEMENTS OF OPERATIONS,

 COMPREHENSIVE (LOSS) AND DEFICIT

(Expressed in Canadian dollars)

(Unaudited)

	For the Three Month Periods Ended June 30						For the Six Month Periods Ended June 30
	2014			2013			2014			2013
Revenues
Licensed domestic product net sales	$	2,463,309		$	2,242,649		$	4,739,693		$	4,136,289
Other domestic product sales		1,220,104			729,183			1,954,882			1,828,345
International product sales		357,872			358,215			821,849			689,553
Royalty and licensing revenues		-			-			18,414			98,040
Total revenues (Notes11 and 14)		4,041,285			3,330,047			7,534,838			6,752,227
Cost of Sales
Licensor sales and distribution fees		1,636,895			1,473,246			3,049,938			2,761,725
Cost of products sold		350,600			365,578			696,464			823,341
Expired products		13,356			-			13,356			-
Total Cost of Sales		2,000,851			1,838,824			3,759,758			3,585,066
Gross Profit		2,040,434			1,491,223			3,775,080			3,167,161
Expenses
Selling, general and administrative (Notes 7b, 12 and 15)		2,409,678			2,507,117			5,632,339			5,456,721
Amortization of assets		296,574			334,487			586,926			664,059
Total operating expenses		2,706,252			2,841,604			6,219,265			6,120,780
Loss from operations		(665,818	)		(1,350,381	)		(2,444,185	)		(2,953,619	)
Non-operating income (expenses)
Gain (loss) on derivative instrument (Note 17)		(196,800	)		-			3,200			-
Change in warrant liability (Note 7c)		(3,205,975	)		466,566			(4,617,749	)		(850,475	)
Accretion expense (Note 6)		(34,409	)		(22,984	)		(65,526	)		(47,229	)
Interest income		166			1,242			538			1,967
Interest expense		(298,006	)		(80,145	)		(565,298	)		(168,003	)
Loss before tax		(4,400,842	)		(985,702	)		(7,689,020	)		(4,017,359	)
Deferred income tax recovery (Note 13)		-			-			-			(314,900	)
Net loss for the period	$	(4,400,842	)	$	(985,702	)	$	(7,689,020	)	$	(3,702,459	)
Unrealized loss on derivative instrument, net of tax (Note 17)		(85,942	)		-			(189,430	)		-
Net loss and comprehensive loss for the period		(4,486,784	)		(985,702	)		(7,878,450	)		(3,702,459	)
Deficit, beginning of period		(17,584,089	)		(10,440,313	)		(14,295,911	)		(7,723,556	)
Deficit, end of period	$	(21,984,931	)	$	(11,426,015	)	$	(21,984,931	)	$	(11,426,015	)
Loss per share (Note 8) – Basic and diluted	$	(0.09	)	$	(0.02	)	$	(0.15	)	$	(0.08	)
Weighted Average Number of Common Shares – Basic and diluted		51,581,238			50,972,542			51,501,128			45,274,545

See accompanying notes to the condensed interim financial statements.

4

TRIBUTE PHARMACEUTICALS CANADA INC.

CONDENSED INTERIM STATEMENTS OF CASH FLOWS

(Expressed in Canadian dollars)

(Unaudited)

For the Periods Ended June 30,

	For Six Month Periods Ended
	2014			2013
Cash flows from (used in) operating activities
Net (loss)	$	(7,689,020	)	$	(3,702,459	)
Items not affecting cash:
Deferred income tax (recovery)		-			(314,900	)
Amortization		598,789			673,579
Changes in warrant liability (Note 7c)		4,617,749			850,475
Stock-based compensation (Note 7b)		217,076			289,969
Accretion expense		65,526			47,229
Paid-in common shares for services (Note 7a)		211,812			-
Change in non-cash operating assets and liabilities (Note 9)		(337,439	)		(2,042,686	)
Cash flows (used in) operating activities		(2,315,507	)		(4,198,793	)
Cash flows from (used in) investing activities
Additions to property, plant and equipment		(6,525	)		(19,996	)
Payment of contingent liability		-			(460,000	)
Increase in intangible assets		(222,727	)		(6,780	)
Cash flows (used in) investing activities		(229,252	)		(486,776	)
Cash flows from (used in) financing activities
Financing costs deferred		(128,181	)		-
Long term debt issued (Note 6)		2,211,000			-
Units issued		-			4,662,700
Long term debt repayment		-			(663,939	)
Share issuance costs		-			(428,857	)
Cash flows from financing activities		2,082,819			3,569,904
Changes in cash and cash equivalents		(461,940	)		(1,115,665	)
Change in cash and cash equivalents due to changes in foreign exchange		(49,499	)		152,466
Cash and cash equivalents, beginning of period		2,813,472			2,283,868
Cash and cash equivalents, end of period	$	2,302,033		$	1,320,669

 See accompanying notes to the condensed interim financial statements.

5

TRIBUTE PHARMACEUTICALS CANADA INC.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

(Expressed in Canadian dollars)

(Unaudited)

1. Basis of Presentation

These unaudited condensed interim financial statements should be read in conjunction with the financial statements for Tribute Pharmaceuticals Canada Inc.’s ("Tribute" or the "Company") most recently completed fiscal year ended December 31, 2013.  These condensed interim financial statements do not include all disclosures required in annual financial statements, but rather are prepared in accordance with recommendations for interim financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).  These unaudited condensed interim financial statements have been prepared using the same accounting policies, and methods as those used by the Company in the annual audited financial statements for the year ended December 31, 2013, except when disclosed below.

The unaudited condensed interim financial statements contain all adjustments (consisting of only normal recurring adjustments) which are necessary to present fairly the financial position of the Company as at June 30, 2014, and the results of its operations for the three and six month periods ended June 30, 2014 and 2013 and its cash flows for the six month periods ended June 30, 2014 and 2013.  Note disclosures have been presented for material updates to the information previously reported in the annual audited financial statements.

a) Estimates

The preparation of these financial statements has required management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of the revenues and expenses during the reporting period.  On an ongoing basis, the Company evaluates its estimates, including those related to provision for doubtful accounts, accrued liabilities, income taxes, stock based compensation, revenue recognition, intangible assets and derivative financial instruments.  The Company bases its estimates on historical experiences and on various other assumptions believed to be reasonable under the circumstances.  Actual results could differ from those estimates. As adjustments become necessary, they are reported in earnings in the period in which they become known.

2. Inventories

	June 30, 2014		December 31, 2013
Raw materials	$	314,869	$	236,444
Finished goods		368,516		418,635
Packaging materials		61,727		56,007
Work in process		313,787		333,745
	$	1,058,899	$	1,044,831

3. Prepaid Expenses and Other Receivables

	June 30,  2014		December 31, 2013
Prepaid operating expenses	$	186,455	$	140,986
Deposits		-		18,825
Interest receivable on loan receivables		6,300		6,075
	$	192,755	$	165,886

6

4. Property, Plant and Equipment

	June 30, 2014
	Cost		Accumulated Amortization		Net Carrying Amount
Land	$	90,000	$	-	$	90,000
Building		618,254		285,342		332,912
Leasehold improvements		10,359		3,626		6,733
Office equipment		61,308		50,313		10,995
Manufacturing equipment		1,103,525		586,366		517,159
Warehouse equipment		17,085		17,071		14
Packaging equipment		111,270		56,919		54,351
Computer equipment		136,639		94,157		42,482
	$	2,148,440	$	1,093,794	$	1,054,646

	December 31, 2013
	Cost		Accumulated Amortization		Net Carrying Amount
Land	$	90,000	$	-	$	90,000
Building		618,254		269,886		348,368
Leasehold improvements		10,359		2,590		7,769
Office equipment		61,308		48,299		13,009
Manufacturing equipment		1,103,525		576,862		526,663
Warehouse equipment		17,085		16,737		348
Packaging equipment		111,270		51,700		59,570
Computer equipment		130,114		85,922		44,192
	$	2,141,915	$	1,051,996	$	1,089,919

5. Intangible Assets

	June 30, 2014
	Cost		Accumulated Amortization		Net Carrying Amount
Patents	$	304,850	$	45,301	$	259,549
Licensing asset		1,005,820		135,399		870,421
Licensing agreements		10,377,325		1,885,104		8,492,221
	$	11,687,995	$	2,065,804	$	9,622,191

	December 31, 2013
	Cost		Accumulated Amortization		Net Carrying Amount
Patents	$	268,786	$	39,562	$	229,224
Licensing asset		1,005,820		96,713		909,107
Licensing agreements		10,004,000		1,425,158		8,578,842
	$	11,278,606	$	1,561,433	$	9,717,173

Amortization expense of intangible assets for the three and six month periods ended June 30, 2014 was $252,185 and $504,371, respectively (2013 - $262,574 and $525,114, respectively).

The Company has patents pending of $148,265 at June 30, 2014 (December 31, 2013 - $112,902) and licensing agreements of $373,325 (December 31, 2013 - $nil) not currently being amortized.

7

6. Long Term Debt and Debt Issuance Costs

On August 8, 2013, SWK Funding LLC ("SWK"), a wholly-owned subsidiary of SWK Holdings Corporation entered into a credit agreement (the "Credit Agreement") pursuant to which the lenders party thereto provided to the Company a term loan in the principal amount of US$6,000,000 ($6,381,600) (the "Loan") which was increased, as per the terms of the Credit Agreement, by an additional US$2,000,000 ($2,211,000) at the Company's request on February 5, 2014.  SWK served as the agent under the Credit Agreement.  The Loan matures on August 8, 2018.

The Loan accrues interest at an annual rate of 11.5% plus the Libor Rate (as defined in the Credit Agreement), with the Libor Rate being subject to a minimum floor of 2%, such that that minimum interest rate is 13.5%.  In the event of a change of control, a merger or a sale of all or substantially all of the Company’s assets, the Loan shall be due and payable.

Upon receipt of the additional US$2,000,000 ($2,211,000) of the Loan, the Company issued to SWK 347,222 common share purchase warrants with a grant date fair value of the warrants of $120,914. Each warrant entitles SWK to acquire one common share in the capital of the Company at an exercise price of US$0.432 ($0.4612), at any time prior to February 4, 2021.

The discount to the carrying value of the Loan is being amortized as a non-cash interest expense over the term of the Loan using the effective interest rate method.  The grant date fair value of the 347,222 warrants issued to SWK was determined using the Black-Scholes model with the following assumptions: expected volatility of 117%, a risk-free interest rate of 1.85%, an expected life of seven years, and no expected dividend yield.

During the three and six month periods ended June 30, 2014, the Company accreted $34,409 and $65,526, respectively (2013 - $22,984 and $47,229, respectively) in non-cash accretion expense in connection with the long term loans, which is included in accretion expense on the condensed interim statements of operations, comprehensive loss and deficit.

During the three and six month periods ended June 30, 2014, the Company also incurred US$116,169 ($128,425) in legal costs related to the additional US$2,000,000 ($2,211,000) Loan. These fees and costs were classified as debt issuance costs on the balance sheet.  These assets are being amortized as a non-cash interest expense over the term of the outstanding Loan using the effective interest rate method.  During the three and six month periods ended June 30, 2014, the Company amortized $27,854 and $52,619, respectively (2013 – $38,795 and $92,762, respectively) in non-cash interest expense, which is included in amortization expense on the condensed interim statements of operations, comprehensive loss and deficit.

During the six month period ended June 30, 2014, the Company made no principal payments (year ended December 31, 2013 - US$3,281,250 ($3,386,630)) and interest payments of US$471,000 ($502,829) (year ended December 31, 2013 – US$409,653 ($422,341)) under the MidCap Financial LLC (now repaid) and SWK loan agreements.  The Company has estimated the following revenue-based principal and interest payments over the next five years ended December 31 based on the assumption that only the minimum revenue requirements will be met under the Credit Agreement:

	Principal Payments		Interest Payments
2014	US$52,035	($55,553)	US$550,965	($588,210)
2015	US$721,460	($770,231)	US$1,041,040	($1,111,414)
2016	US$872,654	($931,645)	US$934,846	($998,042)
2017	US$1,001,370	($1,069,063)	US$806,130	($860,624)
2018	US$5,352,481	($5,714,309)	US$417,053	($445,246)

7. Capital Stock

(a) Common Shares

During the six month period ended June 30, 2014, the Company issued 500,000 common shares to a consultant for services and recorded $211,812 as paid-in common shares based on the fair market value of the common shares at the date of issuance.

8

	Number of Shares		Amount
Balance, December 31, 2013		51,081,238	$	19,947,290
Common shares for services issued		500,000		211,812
Balance, June 30, 2014		51,581,238	$	20,159,102

(b)           Stock Based Compensation

The Company’s stock-based compensation program ("Plan") includes stock options in which some options vest based on continuous service, while others vest based on performance conditions such as profitability and sales goals. For those equity awards that vest based on continuous service, compensation expense is recorded over the service period from the date of grant. For performance-based awards, compensation expense is recorded over the remaining service period when the Company determines that achievement is probable.

During the three and six month periods ended June 30, 2014, there were 29,740 and 1,327,985, respectively, options granted to officers, employees and a consultant of the Company (2013 – 723,750 and 1,006,250, respectively). The exercise price of 1,107,985 of these options is $0.40, with one-eighth vesting quarterly over two years on each of March 31, June 30, September 30 and December 31, in 2015 and 2016, upon achieving certain financial objectives. Since stock-based compensation is recognized only for those awards that are ultimately expected to vest, the Company has applied an estimated forfeiture rate (based on historical experience and projected employee turnover) to unvested awards for the purpose of calculating compensation expense. The grant date fair value of these options was estimated as $0.33 using the Black-Scholes option pricing model, based on the following assumptions: expected dividend yield of 0%; expected volatility of 123%; expected risk free interest rate of 1.61%; and expected term of 5 years.

In addition, 200,000 options were granted with an exercise price of $0.42 and will fully vest on January 3, 2015 (Note 12). The grant date fair value of these options was estimated as $0.39 using the Black-Scholes option pricing model, based on the following assumptions: expected dividend yield of 0%; expected volatility of 123%; expected risk free interest rate of 1.69%; and expected term of 5 years.

The remaining, 20,000 options were granted with an exercise price of $0.61, with 10,000 vesting on November 30, 2014 and the remaining 10,000 vesting over two years on each of March 31, June 30, September 30 and December 31, in 2015 and 2016.  The grant date fair value of these options was estimated as $0.52 using the Black-Scholes option pricing model, based on the following assumptions: expected dividend yield of 0%; expected volatility of 123%; expected risk free interest rate of 1.50%; and expected term of 5 years.

For the three and six month periods ended June 30, 2014, the Company recorded $99,944 and $217,076, respectively (2013 – $115,482 and $289,969, respectively) as compensation expense for options issued to directors, officers and employees based on continuous service.  Included in this amount is $16,222 and $36,444 for options issued to a consultant for service (Note 12). This expense was recorded as selling, general and administrative expense on the condensed interim statements of operations, comprehensive loss and deficit.  Due to termination of employment and non-achievement of performance-based awards, 13,750 options were removed from the number of options issued during the six month period ended June 30, 2014 (year ended December 31, 2013 – 560,917).

The activities in additional paid in-capital options are as follows:

	Amount
Balance, December 31, 2013	$	2,286,890
Expense recognized for options issued to employees		100,910
Expense recognized for options issued to consultants		16,222
Balance, March 31, 2014		2,404,022
Expense recognized for options issued to employees		79,722
Expense recognized for options issued to consultants		20,222
Balance, June 30, 2014	$	2,503,966

The total number of options outstanding as at June 30, 2014 was 5,139,070 (December 31, 2013 – 3,824,835). The weighted average grant date fair value of the options granted during the three and six month periods ended June 30, 2014, was $0.52 and $0.34 (2013 - $0.48 and $0.48, respectively).

The maximum number of options that may be issued under the Plan is floating at an amount equivalent to 10% of the issued and outstanding common shares, or 5,158,124 as at June 30, 2014 (December 31, 2013 – 5,108,124).

9

(c) Warrants

As at June 30, 2014, the following warrants were outstanding:

Expiration Date	Number of Warrants	Weighted Average Exercise Price	Fair Value at June 30, 2014		Fair Value at December 31, 2013
May 11, 2017	750,000	US$0.43 ($0.46)	$	441,986	$	223,356
February 27, 2015	4,429,688	US$0.50 ($0.53)	$	1,659,926	$	518,256
February 27, 2018	4,429,687	US$0.60 ($0.64)	$	3,026,646	$	1,286,216
March 5, 2015	1,253,000	US$0.50 ($0.53)	$	472,209	$	146,596
March 5, 2018	1,253,000	US$0.60 ($0.64)	$	856,130	$	363,825
March 11, 2015	343,750	US$0.50 ($0.53)	$	130,281	$	49,723
March 11, 2018	343,750	US$0.60 ($0.64)	$	234,872	$	99,812
August 8, 2018	755,794	US$0.5954 ($0.6356)	$	547,068	$	245,982
September 20, 2018	108,696	US$0.55 ($0.59)	$	75,661	$	32,948
February 4, 2021	347,222	US$0.4320 ($0.4612)	$	260,598	$	-
	14,014,587	US$0.55 ($0.59)	$	7,705,377	$	2,966,714

In connection with the additional US$2,000,000 ($2,211,000) loan, the Company issued SWK 347,222 common share purchase warrants with each warrant entitling SWK to acquire one common share in the capital of the Company at an exercise price of US$0.432 ($0.4612), at any time prior to February 5, 2021. The fair value of the warrant liability at the date of grant was $120,914 and was estimated using the Black-Scholes option pricing model, based on the following assumptions: expected dividend yield of 0%; expected volatility of 117%; risk free interest rate of 1.85%; and expected term of 7 years.

ASC 815 "Derivatives and Hedging" indicates that warrants with exercise prices denominated in a currency other than an entity’s functional currency should not be classified as equity.  As a result, these warrants have been treated as derivatives and recorded as liabilities carried at their fair value, with period-to-period changes in the fair value recorded as a gain or loss in the condensed interim statements of operations, comprehensive loss and deficit.  The Company treated the compensation warrants as a liability upon their issuance.

As at June 30, 2014, the fair value of the warrant liability of $7,705,377 (December 31, 2013 - $2,966,714) was estimated using the Black-Scholes option pricing model based on the following weighted average assumptions: expected dividend yield of 0% (December 31, 2013 – 0%) expected volatility of 113% (December 31, 2013 – 114%) risk-free interest rate of 1.4% (December 31, 2013 – 1.58%) and expected term of 2.55 years (December 31, 2013 – 2.94 years).

10

8. Loss Per Share

The treasury stock method assumes that proceeds received upon the exercise of all warrants and options outstanding in the period is used to repurchase the Company’s shares at the average share price during the period.  The diluted loss per share is not computed when the effect of such calculation is anti-dilutive.  In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive.  Potentially dilutive securities, which were not included in diluted weighted average shares for the three and six month periods ended June 30, 2014 and June 30, 2013, consist of outstanding stock options (5,139,070 and 4,183,752, respectively) and outstanding warrant grants (14,014,587 and 12,802,875, respectively).

The following table sets forth the computation of (loss) per share:

	For the Three Month Period Ended June 30						For the Six Month Period Ended June 30
Numerator:	2014			2013			2014			2013
Net (loss) available to common shareholders	$	(4,400,842	)	$	(985,702	)	$	(7,689,020	)	$	(3,702,459	)
Denominator:
Weighted average number of common shares		51,581,238			50,972,542			51,501,128			45,274,545
Effect of dilutive common shares		-			-			-			-
Diluted weighted average number of common shares outstanding		51,581,238			50,972,542			51,501,128			45,274,545
(Loss) per share – basic and diluted	$	(0.09	)	$	(0.02	)	$	(0.15	)	$	(0.08	)

9. Statement of Cash Flows

Changes in non-cash balances related to operations are as follows:

		For the Six Months Ended June 30
		2014			2013
Accounts receivable	$	(1,355,477	)	$	114,198
Inventories		(14,068	)		120,378
Prepaid expenses and other receivables		(26,869	)		(109,939	)
Taxes recoverable		473,078			(143,483	)
Accounts payable and accrued liabilities		585,897			(1,554,688	)
	$	(337,439	)		(2,042,686	)

Included in accounts payable and accrued liabilities at the end of the six month period ended June 30, 2014, is an amount related to patents and licenses of $18,599 (December 31, 2013 - $14,365), an amount related to computer equipment of $695 (December 31, 2013 - $nil) and an amount related to license fees of $186,663 (€125,000) (December 31, 2013 - $nil).

During the six month period ended June 30, 2014, there was $502,829 (2013 - $168,003) in interest paid and $nil in taxes paid (2013 – $nil).

During the six month period ended June 30, 2014, there was $65,526 (2013 - $92,762) of non-cash debt issuance costs (see Note 6) expensed as amortization of assets.

During the six month period ended June 30, 2014, warrants were issued and valued at $120,914 in regards to the additional USD$2,000,000 ($2,211,000) advanced under the Credit Agreement (see Note 6).

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10.           Contingencies and Commitments

The Company has royalty, licensing and manufacturing agreements that have remained in effect for the Company during the quarter.  In addition, there were no material changes to the lease agreements during the period.

               (a)             License Agreements

On December 1, 2011, the Company acquired 100% of the outstanding shares of Tribute Pharmaceuticals Canada Ltd. and Tribute Pharma Canada Inc.  Included in this transaction were the following license agreements:

On June 30, 2008, Tribute signed a Sales, Marketing and Distribution Agreement with Actavis Group PTC ehf (“Actavis”) to perform certain sales, marketing, distribution, finance and other general management services in Canada in connection with the importation, marketing, sales and distribution of Bezalip® SR and Soriatane® (the “Products”). On January 1, 2010, a first amendment was signed with Actavis to grant the Company the right and obligation to more actively market and promote the Products in Canada. On March 31, 2011, a second amendment was signed with Actavis that extended the term of the agreement, modified the terms of the agreement and increased the Company’s responsibilities to include the day-to-day management of regulatory affairs, pharmacovigilance and medical information relating to the Products. The Company pays Actavis a sales and distribution fee up to an annual base-line net sales forecast plus an incremental fee for incremental net sales above the base-line. On May 4, 2011, the Company signed a Product Development and Profit Share Agreement with Actavis to develop, obtain regulatory approval of and market Bezalip SR in the U.S. The Company shall pay US$5,000,000 ($5,338,000) to Actavis within 30 days of receipt of the regulatory approval to market Bezalip SR in the U.S.

On November 9, 2010, the Company signed a license agreement (the "License Agreement") with Nautilus Neurosciences, Inc. (“Nautilus”) for the exclusive rights to develop, register, promote, manufacture, use, market, distribute and sell Cambia® in Canada. On August 11, 2011, the Company and Nautilus executed the first amendment to the License Agreement and on September 30, 2012 executed the second amendment to the License Agreement. Aggregate payments of US$1,000,000 ($1,005,820) were issued under this agreement, which included an upfront payment to Nautilus upon the execution of the agreement an amount payable upon the first commercial sale of the product.  These payments have been included in intangible assets and will be amortized over the life of the License Agreement.  Up to US$6,000,000 ($6,405,600) in additional one-time performance based sales milestones, based on a maximum of six different sales tiers, are payable over time, due upon achieving annual net sales ranging from US$2,500,000 ($2,669,000) to US$20,000,000 ($21,352,000) in the first year of the achievement of the applicable milestone.  Royalty rates are tiered and payable at rates ranging from 22.5% to 25.0% of net sales.

On December 30, 2011, the Company signed a license agreement to commercialize MycoVa in Canada. As of June 30, 2014, this product has not been filed with Health Canada and to-date no upfront payments have been paid. Within 10 days of execution of a manufacturing agreement, the Company shall pay an up-front license fee of $200,000. Upon Health Canada approval the Company shall pay $400,000. Sales milestones payments of $250,000 each are based on the achievement of aggregate net sales in increments of $5,000,000. Royalties are payable at rates ranging from 20% to 25% of net sales.

On May 13, 2014, the Company entered into an exclusive license and supply agreement with Faes Farma, S.A. (“Faes”), a Spanish pharmaceutical company, for the exclusive right to sell bilastine, a product for the treatment of Allergic Rhinitis and Chronic Idiopathic Urticaria (hives) in Canada. The exclusive license is inclusive of prescription and non-prescription rights for bilastine, as well as adult and paediatric presentations in Canada. Sales of bilastine are subject to receiving regulatory approval from Health Canada. Payment for the licensing rights is based on an initial fee of €250,000 ($373,325) divided into two equal payments, one on signing €125,000 (($186,663) paid) and the second payment due before December 31, 2014 (€125,000 ($186,663) accrued at June 30, 2014). These payments have been included in intangible assets and will be amortized over the life of the license agreement.  Any remaining milestone payments based on the achievement of specific events, including regulatory and sales milestones of up to $3,643,525 (€1,466,600 ($2,143,525) and $1,500,000) are payable over time, beginning with an approval for bilastine from Health Canada. Thereafter, milestones are payable upon attainment of cumulative net sales targets, up to net sales of $60,000,000.

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(b)           Executive Termination Agreements

The Company currently has employment agreements with the provision of termination and change of control benefits with officers and executives of the Company. The agreements for the officers and executives provide that in the event that any of their employment is terminated during the initial term (i) by the Company for any reason other than just cause or death; (ii) by the Company because of disability; (iii) by the officer or executive for good reason; or (iv) following a change of control, the officer or executive shall be entitled to the balance of the remuneration owing for the remainder of the initial term of up to an aggregate amount of $854,616 as of June 30, 2014 (December 31, 2013 - $792,200) or if a change of control occurs subsequent to the initial term, while the officers or executives are employed on an indefinite basis, a lump sum payment of up to an aggregate amount of $1,909,616 (based on current base salaries).

11.           Significant Customers

During the three month period ended June 30, 2014, the Company had three significant wholesale customers (2013 – two) that represented 68.9% (2013 – 55.0%) of product sales.

During the six month period ended June 30, 2014, the Company had three (2013 – two) significant wholesale customers that represented 67.4% (2013 – 57.5%) of product sales.

The Company believes that its relationship with these customers is satisfactory.

12.           Related Party Transactions

During the three and six month periods ended June 30, 2014 the Company granted nil and 200,000 stock options,  respectively, as payment for services in 2014 to LMT Financial Inc. ("LMT"), a company beneficially owned by a director and former interim officer of the Company, and his spouse for consulting services. For the three and six month periods ended June 30, 2014, the Company recorded $20,222 and $36,444, respectively as a non-cash expense.  During the three and six month periods ended June 30, 2013 the Company recorded and paid to LMT an aggregate of $18,000 and $36,000, respectively. These amounts have been recorded as selling, general and administrative expense in the condensed interim statements of operations, comprehensive (loss) and deficit.

13.          Income Taxes

The Company has no taxable income under Canadian Federal and Provincial tax laws for the six month periods ended June 30, 2014 and 2013. The Company has non-capital loss carry-forwards at June 30, 2014 totaling approximately $12,972,000, which may be offset against future taxable income.  If not utilized, the loss carry-forwards will expire between 2014 and 2034.  The cumulative carry-forward pool of SR&ED expenditures as at June 30, 2014, that may be offset against future taxable income, with no expiry date, is $1,798,300.

The non-refundable portion of the tax credits as at June 30, 2014 was $341,300.

14.           Segmented Information

The Company is a specialty pharmaceutical company with a primary focus on the acquisition, licensing, development and promotion of healthcare products in Canada. The Company targets several therapeutic areas in Canada, but has a particular interest in products for the treatment of pain, dermatology and endocrinology/cardiology. The Company also sells Uracyst® and NeoVisc® internationally through a number of strategic partnerships. Currently, all of the Company’s manufacturing assets are located in Canada. All direct sales take place in Canada. Licensing arrangements have been obtained to distribute and sell the Company’s products in various countries around the world.

Revenue for the three and six month periods ended June 30, 2014 and 2013 includes products sold in Canada and international sales of products.  Revenue earned is as follows:

	For the Three Month Period Ended June 30				For the Six Month Period Ended June 30
Product sales:	2014		2013		2014		2013
Domestic sales	$	3,676,588	$	2,959,865	$	6,676,500	$	5,941,784
International sales		357,872		358,215		821,849		689,552
Other revenue		6,825		11,967		18,075		22,851
Total	$	4,041,285	$	3,330,047	$	7,516,424	$	6,654,187
Royalty  revenues	$	-	$	-	$	18,414	$	98,040
Total revenues	$	4,041,285	$	3,330,047	$	7,534,838	$	6,752,227

The Company currently sells its own products and is in-licensing other products in Canada.  In addition, revenues include products which the Company out-licenses throughout most countries in Europe, the Caribbean, Austria, Germany, Italy, Lebanon, Kuwait, Malaysia, Portugal, Romania, Spain, South Korea, Turkey, Egypt, Hong Kong and the United Arab Emirates. The operations reflected in the condensed interim statements of operations, comprehensive (loss) and deficit includes the Company’s activity in these markets.

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15.           Foreign Currency Gain (Loss)

The Company enters into foreign currency transactions in the normal course of business. Expenses incurred in currencies other than Canadian dollars are therefore subject to gains or losses due to fluctuations in these currencies. As at June 30, 2014, the Company held cash of $987,955 (US$771,927 and €112,108) in denominations other than in Canadian dollars (December 31, 2013 - $1,211,602 (US$1,134,686 and €747)); had accounts receivables of $320,233 (US$81,998 and €159,214) denominated in foreign currencies (December 31, 2013 - $258,027 (US$51,395 and €138,964); had accounts payable and accrued liabilities of $235,258 (US$48,482 and €125,555) denominated in foreign currencies (December 31, 2013 – $115,373 (US$72,693 and €25,969)); warrant liability of $7,705,377 (US$7,217,476) (December 31, 2013 - $2,966,714 (US$2,789,315)); and long term debt of $8,540,800 (US$8,000,000) (December 31, 2013 - $6,381,600 (US$6,000,000)). For the three and six month periods ended June 30, 2014, the Company had a foreign currency gain (loss) of $(10,506) and $185,559, respectively (2013 – loss of $27,804 and $96,264, respectively). These amounts have been included in selling, general and administrative expenses in the condensed interim statements of operations, comprehensive (loss) and deficit.

16.           Financial Instruments

                 (a)Financial assets and liabilities – fair values

The carrying amounts of cash and cash equivalents, accounts receivable, certain other current assets, accounts payables and accrued liabilities are a reasonable estimate of their fair values because of the short maturity of these instruments.

Warrant liability and other current liability are financial liabilities where fluctuations in market rates will affect the fair value of these financial instruments.  The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted prices in active markets for identical assets or liabilities.

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.

Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

Cash equivalents, warrant liability and other current liability are classified as Level 2 financial instruments within the fair value hierarchy.

                 (b)Liquidity risk

The Company generates sufficient cash from operating and financing activities to fund its operations and fulfill its obligations as they become due.  The Company has sufficient funds available through its cash, cash equivalents, and financing arrangements, should its cash requirements exceed cash generated from operations to cover financial liability obligations.  The Company’s investment policy is to invest excess cash resources into highly liquid short-term investments purchased with an original maturity of three months or less with tier one financial institutions.  As at June 30, 2014, there were no restrictions on the flow of these funds nor have any of these funds been committed in any way, except as outlined in the detailed notes.

In the normal course of business, management considers various alternatives to ensure that we can meet some of our operating cash flow requirements through financing activities, such as private placements of our common stock, preferred stock offerings and offerings of debt and convertible debt instruments as well as through merger or acquisition opportunities. Management may also consider strategic alternatives, including strategic investments and divestitures. As future operations may be financed out of funds generated from financing activities, the Company’s ability to do so is dependent on, among other factors, the overall state of capital markets and investor appetite for investments in the pharmaceutical industry and our securities in particular. Should we elect to satisfy our cash commitments through the issuance of securities, by way of either private placement or public offering or otherwise, there can be no assurance that our efforts to obtain such additional funding will be successful, or achieved on terms favorable to us or our existing shareholders. If adequate funds are not available on terms favorable to us, we may have to reduce substantially or eliminate expenditures such as promotion, marketing or production of our current or proposed products, or obtain funds through other sources such as divestiture or monetization of certain assets or sublicensing (where permitted) of certain rights to certain of our technologies or products. 

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                 (c)Concentration of credit risk and major customers

The Company considers its maximum credit risk to be $1,963,057 (December 31, 2013 - $607,580). This amount is the total of the following financial assets: accounts receivable and loan receivable. The Company’s cash and cash equivalents are held through various high grade financial institutions.

The Company is exposed to credit risk from its customers and continually monitors its customers’ credit.  It establishes the provision for doubtful accounts based upon the credit risk applicable to each customer.  In line with other pharmaceutical companies, the Company sells its products through a small number of wholesalers and retail pharmacy chains in addition to hospitals, pharmacies, physicians and other groups. Note 11 discloses the significant customer details and the Company believes that the concentrations on the Company’s customers are considered normal for the Company and its industry.

As at June 30, 2014, the Company had two customers which made up 58.1% of the outstanding accounts receivable in comparison to three customers which made up 38.4% at December 31, 2013. As at June 30, 2014, all outstanding accounts receivable were related to product sales, of which $1,136,912 or 58.1% was related to two wholesale accounts.  As at December 31, 2013 all outstanding accounts receivables were related to product sales, of which $63,722 or 10.8% were related to one wholesale account and $163,220 or 27.6% was related to two international customers.

                (d)Foreign exchange risk

The Company principally operates within Canada; however, a portion of the Company’s revenues, expenses, and current assets and liabilities, are denominated in United States dollars and the EURO. The Company’s long term debt is repayable in U.S. dollars, which exposes the Company to foreign exchange risk due to changes in the value of the Canadian dollar. As at June 30, 2014, a 5% change in the foreign exchange rate would increase/decrease the long term debt balance by $400,000 and would increase/decrease both interest expense and net loss by approximately $28,300 for the six month period ended June 30, 2014.

                (e)Interest rate risk

The Company is exposed to interest rate fluctuations on its cash and cash equivalents as well as its long term debt. At June 30, 2014, the Company had an outstanding long term debt balance of US$8,000,000 ($8,540,800), which bears interest annually at a rate of 11.5% plus the Libor Rate with the Libor Rate being subject to a minimum floor of 2%, such that that minimum interest rate is 13.5%, which may expose the Company to market risk due to changes in interest rates. For the six month period ended June 30, 2014, a 1% increase in interest rates would increase interest expense and net loss by approximately $42,700. However, based on current LIBOR interest rates, which are currently under the minimum floor set at 2% and based on historical movements in LIBOR rates, the Company believes a near-term change in interest rates would not have a material adverse effect on the financial position or results of operations.

17. Derivative Financial Instruments

The Company enters into foreign currency contracts with financial institutions to reduce the risk that its cash flows and earnings will be adversely affected by foreign currency exchange rate fluctuations.  In accordance with the Company’s current foreign exchange rate risk management policy, this program is not designated for trading or speculative purposes.

The Company recognizes derivative instruments as either assets or liabilities in the accompanying balance sheets at fair value.

During the three and six month periods ended June 30, 2014, the Company entered into foreign currency call options designated as cash flow hedges to hedge certain forecasted expenses related to its loan obligation denominated in United States Dollars. The notional principal of the foreign currency call option to purchase US$6,000,000 was $6,603,000 at July 31, 2014.

The Company initially reports any gain or loss on the effective portion of the cash flow hedge as a component of other comprehensive income and subsequently reclassifies to the statements of operations when the hedged transaction occurs. Any ineffectiveness is recognized in earnings immediately.

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Valuation techniques used to measure fair value are intended to maximize the use of observable inputs and minimize the use of unobservable inputs.

The Company has determined the foreign currency call option to be Level 2. The fair value of the foreign currency call option at June 30, 2014 was a loss of $189,430 (December 31, 2013 – a loss of $38,156), and is reported in other current liability in the accompanying balance sheets. During the three month period ended June 30, 2014, the Company recognized a loss on the settled foreign exchange contract of $196,800 (2013 $nil). For the six month periods ended June 30, 2014, the Company recognized a gain on the settled foreign exchange contract of $3,200 (2013 - $nil).

At June 30, 2014 and December 31, 2013, the notional principal and fair value of the Company’s outstanding foreign currency derivative financial instruments were as follows:

	June 30, 2014		December 31, 2013
	Notional Principal	Fair Value	Notional Principal	Fair Value
Foreign currency sold – call options	USD $6,000,000	$(189,430)	USD $5,000,000	$(38,156)

The notional principal amounts provide one measure of the transaction volume outstanding as of June 30, 2014 and December 31, 2013, and do not represent the amount of the Company’s exposure to market loss. The estimates of fair value are based on applicable and commonly used pricing models using prevailing financial market information as of June 30, 2014 and December 31, 2013. The amounts ultimately realized upon settlement of these financial instruments, together with the gains and losses on the underlying exposures, will depend on actual market conditions during the remaining life of the instruments.

18.           Subsequent Events

On July 15, 2014, the Company completed a public offering (“Offering”) in which 42,895,000 units (“Unit”) were issued at a price of $0.70 per Unit for gross proceeds of $30,026,500. Each Unit consisted of one common share and one-half of one common share purchase warrant (each whole warrant being referred to as a “Warrant”). Each whole Warrant entitles the holder to acquire one common share of the Company at a price per share of $0.90 for a period of twenty-four (24) months following the issuance thereof.

In connection with the Offering, the syndicate of underwriters received a cash commission of $2,251,988, equal to 7.5% of the gross proceeds raised under the Offering, and 3,217,125 non-transferable broker warrants.  Each broker warrant is exercisable into one Unit of the Company at a price per Unit of $0.70 for a period of (twenty-four) 24 months from the closing of the Offering.

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ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND   RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS AND SUPPLEMENTARY DATA

The following discussion should be read in conjunction with our condensed interim financial statements and other financial information appearing elsewhere in this quarterly report. In addition to historical information, the following discussion and other parts of this quarterly report contain forward-looking statements. You can identify these statements by forward-looking words such as “plan,” “may,” “will,” “expect,” “intend,” “anticipate,” believe,” “estimate” and “continue” or similar words. Forward-looking statements are statements that are not historical facts, and include statements regarding the Company’s planned research and development programs, anticipated future losses, revenues and market shares, planned clinical trials, expected future expenditures, the Company’s intention to raise new financing, sufficiency of working capital for continued operations, and other statements regarding anticipated future events and the Company’s anticipated future performance. You should read statements that contain these words carefully because they discuss future expectations and plans, which contain projections of future results of operations or financial condition or state other forward-looking information. We believe that it is important to communicate future expectations to investors. However, there may be events in the future that we are not able to accurately predict or control. Accordingly, we do not undertake any obligation to update any forward-looking statements for any reason, even if new information becomes available or other events occur in the future, except as required by law.

The forward-looking statements included herein are based on current expectations that involve a number of risks and uncertainties set forth under “Risk Factors” in our Annual Report on Form 10-K as of and for the year ended December 31, 2013 and other periodic reports filed with the United States Securities and Exchange Commission (“SEC”). Accordingly, to the extent that this quarterly report contains forward-looking statements regarding the financial condition, operating results, business prospects or any other aspect of the Company, please be advised that the Company’s actual financial condition, operating results and business performance may differ materially from that projected or estimated by the Company in forward-looking statements.

 All amounts are stated in Canadian dollars unless otherwise stated and have been rounded to the nearest one hundredth   dollar.

CRITICAL ACCOUNTING POLICIES

The SEC defines critical accounting policies as those that are, in management’s view, important to the portrayal of the Company’s financial condition and results of operations and require management’s judgment. The Company’s discussion and analysis of its financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).  The preparation of these statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. The Company bases its estimates on experience and on various assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about its carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates. The Company’s critical accounting policies include:

Revenue Recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable, and collectability is reasonably assured. License fees which are comprised of initial fees and milestone payments are recognized upon achievement of each such milestone, provided the milestone is meaningful, and provided that collectability is reasonably assured and other revenue recognition criteria are met. Milestone payments are recognized into income upon the achievement of the specified milestones when the Company has no further involvement or obligation to perform services, as related to that specific element of the arrangement. Upfront fees and other amounts received in excess of revenue recognized are recorded as deferred revenues.

Revenues from the sale of products, net of trade discounts, returns and allowances, are recognized when legal title to the goods has been passed to the customer and collectability is reasonably assured. Revenues associated with multiple-element arrangements are attributed to the various elements, if certain criteria are met, including whether the delivered element has stand-alone value to the customer and whether there is objective and reliable evidence of the fair value of the undelivered elements. Non-refundable up-front fees for the transfer of methods and technical know-how, not requiring the Company to perform additional research or development activities or other significant future performance obligations, are recognized upon delivery of the methods and technical know-how.

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Royalty revenue is recognized when the Company has fulfilled the terms in accordance with the contractual agreement and has no material future obligation, other than inconsequential and perfunctory support, as would be expected under such agreements and the amount of the royalty fee is determinable and collection is reasonably assured.

A customer is obligated to pay for products sold to it within a specified number of days from the date that title to the products is transferred to the customer. The Company’s standard terms are typically 0.5% to 2% prompt payment discount when payment is received within 15 to 20 days from the date of invoice.

The Company has a product returns policy on some of its products, which allows the customer to return pharmaceutical products that have expired, for full credit, provided the expired products are returned within twelve months from the expiration date.

Transfer of title occurs and risk of ownership passes to a customer at the time of shipment or delivery, depending on the terms of the agreement with a particular customer. The sale price of the Company’s products is substantially fixed or determinable at the date of sale based on purchase orders generated by a customer and accepted by the Company. A customer’s obligation to pay the Company for products sold to it is not contingent upon the resale of those products. The Company recognizes revenues for the sale of products from the date the title to the products is transferred to the customer. 

Long Term Debt and Debt Issuance Costs

On August 8, 2013, SWK Funding LLC ("SWK"), a wholly-owned subsidiary of SWK Holdings Corporation entered into a credit agreement (the "Credit Agreement") pursuant to which the lenders party thereto provided to the Company a term loan in the principal amount of US$6,000,000 ($6,381,600) (the "Loan") which was increased, as per the terms of the Credit Agreement, by an additional US$2,000,000 ($2,211,000) at the Company's request on February 4, 2014.  SWK served as the agent under the Credit Agreement.  The Loan matures on August 8, 2018.

The Loan accrues interest at an annual rate of 11.5% plus the Libor Rate (as defined in the Credit Agreement), with the Libor Rate being subject to a minimum floor of 2%, such that that minimum interest rate is 13.5%.  In the event of a change of control, a merger or a sale of all or substantially all of the Company’s assets, the Loan shall be due and payable.

Upon receipt of the additional US$2,000,000 ($2,211,000) of the Loan, the Company issued to SWK 347,222 common share purchase warrants with a grant date fair value of the warrants of $120,914. Each warrant entitles SWK to acquire one common share in the capital of the Company at an exercise price of US$0.432 ($0.4612), at any time prior to February 5, 2021.

The discount to the carrying value of the Loan is being amortized as a non-cash interest expense over the term of the Loan using the effective interest rate method.  The grant date fair value of the 347,222 warrants issued to SWK was determined using the Black-Scholes model with the following assumptions: expected volatility of 117%, a risk-free interest rate of 1.85%, an expected life of seven years, and no expected dividend yield.

During the three and six month periods ended June 30, 2014, the Company accreted $34,400 and $65,500, respectively (2013 - $23,000 and $47,200, respectively) in non-cash accretion expense in connection with the long term loans, which is included in accretion expense on the condensed interim statements of operations, comprehensive loss and deficit.

During the three and six month periods ended June 30, 2014, the Company also incurred US$116,200 ($128,400) in legal costs related to the additional US$2,000,000 ($2,211,000) Loan. These fees and costs were classified as debt issuance costs on the balance sheet.  These assets are being amortized as a non-cash interest expense over the term of the outstanding Loan using the effective interest rate method.  During the three and six month periods ended June 30, 2014, the Company amortized $27,900 and $52,600, respectively (2013 – $38,800 and $92,800, respectively) in non-cash interest expense, which is included in amortization expense on the condensed interim statements of operations, comprehensive loss and deficit.

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During the six month period ended June 30, 2014, the Company made no principal payments (year ended December 31, 2013 - US$3,281,300 ($3,386,600)) and interest payments of US$471,000 ($502,800) (year ended December 31, 2013 – US$409,700 ($422,300)) under the MidCap Financial LLC (now repaid) and SWK loan agreements.  The Company has estimated the following revenue-based principal and interest payments over the next five years ended December 31 based on the assumption that only the minimum revenue requirements will be met under the Credit Agreement:

	Principal Payments		Interest Payments
2014	US $52,000	($55,600)	US $551,000	($588,200)
2015	US $721,500	($770,200)	US $1,041,000	($1,111,400)
2016	US $872,700	($931,6400)	US $934,900	($998,000)
2017	US $1,001,400	($1,069,100)	US $806,100	($860,600)
2018	US $5,352,500	($5,714,300)	US $417,100	($445,200)

Stock-Based Consideration

The Company uses the fair value based method of accounting for all its stock-based compensation in accordance with FASB Accounting Standards Codification ("ASC") ASC 718 “Compensation – Stock Compensation”. The estimated fair value of the options that are ultimately expected to vest based on performance related conditions, as well as the options that are expected to vest based on future service, is recorded over the option’s requisite service period and charged to stock-based compensation. In determining the amount of options that are expected to vest, the Company takes into account, voluntary termination behavior, as well as trends of actual option forfeitures.

Stock options and warrants which are indexed to a factor which is not a market, performance or service condition, in addition to the Company’s share price, are classified as liabilities and re-measured at each reporting date based on the Black-Scholes option pricing model with a charge to operations, until the date of settlement. Some warrants have been reflected as a liability as they are indexed to a factor which is not a market performance or service condition.

OVERVIEW

The second quarter of 2014 ending June 30, 2014 was highlighted by the following events:

●   Total revenues grew by 21.4% in Q2 2014 compared to Q2 2013.

●   Licensed domestic product net sales, which includes the Company’s promoted products Soriatane® and Bezalip SR®, increased 9.8% in the three month period ended June 30, 2014 compared to the same period in 2013.

●   Other domestic product sales increased 67.3% in the three month period ended June 30, 2014 compared to the same period in 2013 primarily based on the growth of Cambia sales during this period.

●   IMS Health, an audited third party provider of sales data, reported a 27.0% increase in total prescriptions written for Cambia® during the three months ended June 30, 2014 compared to the three months ended March 31, 2014.

●   On May 13, 2014 Tribute and Faes Farma, S.A. (BME:FAE), a Spanish pharmaceutical company, announced the signing of a license agreement for the exclusive right to sell Faes’ proprietary product bilastine a product for the treatment of Allergic Rhinitis and Chronic Idiopathic Urticaria (hives) in Canada.

●   On May 23, 2014 Tribute received approval to list its common shares on the TSX Venture Exchange (TSX-V) and on May 27, 2014, the Company started trading under the symbol TRX.

●   On July 15, 2014, subsequent to the quarter ended June 30, 2014, Tribute completed a public offering in which 42,895,000 units were issued at a price of $0.70 per unit for gross proceeds of $30,026,500.

RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014

Total revenues for the three month period ended June 30, 2014 increased by 21.4% to $4,041,300 compared to $3,330,000 in 2013. The increase in revenue was attributable to an increase in licensed domestic product net sales of $220,700 or 9.8% and other domestic product sales of $490,900 or 67.3%.

For the six month period ended June 30, 2014 total revenues increased by 11.6% to $7,534,800 compared to $6,752,200 in 2013. The increase in revenue was attributable to an increase in licensed domestic product net sales of $603,400 or 14.6%, an increase in other domestic product sales of $126,500 or 6.9% and an increase in international product sales of $132,300 or 19.2%. Serving as a partial offset was a decrease in royalty and licensing revenues of $79,600.

The net loss before taxes for the three month period ended June 30, 2014 was $4,400,800 compared to a loss of $985,700 for the same period in the prior year.

19

Main factors decreasing the net loss for three month period ended June 30, 2014 compared to the same period in the prior year include:

●   Increased gross profit of $549,200 or 36.8%;

●   Decrease in selling, general and administrative expenses of $97,400; and

●   A decrease in amortization of $37,900.

Factors increasing the net loss for three month period ended June 30, 2014 compared to the same period in the prior year include:

●   Loss on derivative instrument of $196,800;

●   An increase in the warrant liability (non-cash) of $3,672,500;

●   An increase in accretion expense of $11,400; and

●   An increase in interest expense net of interest income of $218,900.

The net loss before taxes for the six month period ended June 30, 2014 was $7,689,000 compared to a loss of $4,017,400 for the same period in the prior year.

Main factors decreasing the net loss for six month period ended June 30, 2014 compared to the same period in the prior year include:

●   Increased gross profit of $607,900 or 19.2%;

●   A decrease in amortization of $77,100; and

●   Gain on derivative instrument of $3,200

Factors increasing the net loss for six month period ended June 30, 2014 compared to the same period in the prior year include:

●   Increase in selling, general and administrative expenses of $175,600;

●   An increase in the warrant liability (non-cash) of $3,767,300;

●   An increase in accretion expense of $18,300; and

●   An increase in interest expense net of interest income of $398,700.

Gross Profit and Cost of Sales

Gross profit for the three month period ended June 30, 2014 was $2,040,400, higher by 36.8%, or $549,200 compared to the same period in the prior year. Underlying improvements in gross profit for the three month period ended June 30, 2014 resulted from an increase in gross profit of $57,000 from licensed domestic product net sales and an increase of $492,200 from other domestic product sales and international product sales primarily based on the growth of Cambia sales during this period.

Gross profit for the six month period ended June 30, 2014 was $3,775,100, higher by 19.2%, or $607,900 compared to the same period in the prior year. Underlying improvements in gross profit for the six month period ended June 30, 2014 resulted from an increase in gross profit of $315,200 from licensed domestic product net sales and an increase of $372,400 from other domestic product sales and international product sales. Serving as a partial offset was a decrease in royalty and licensing revenues of $79,600.

20

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the for the three month period ended June 30, 2014 were $2,409,700 compared to $2,507,100 for the same period in 2013. The decrease of $97,400 or 3.9% is primarily due to foreign exchange gains in the quarter partially offset by a continued investment in the Company’s sales force and marketing expenses to grow its existing products, plus an increase in business development activities including $41,400 related to a Bezalip SR® filing in the U.S. and $42,400 related to recently licensed bilastine. Included in the reduced selling, general and administrative expenses was a decrease of $15,600 for the three month period ended June 30, 2014 in costs related to non-cash expenses for stock options issued to directors, officers and employees of the Company (June 30, 2014 - $99,900 compared to June 30, 2013 - $115,500).

Selling, general and administrative expenses for the for the six month period ended June 30, 2014 were $5,632,300 compared to $5,456,700 for the same period in 2013. The increase of $175,600 or 3.2% related to continued investment in the Company’s sales force and marketing expenses to grow its existing products, plus an increase in business development activities including $286,500 related to a Bezalip SR® filing in the U.S. and $65,100 related to recently licensed bilastine. Serving as a partial offset is a decrease of $72,900 for the six month period ended June 30, 2014 in costs related to non-cash expenses for stock options issued to directors, officers and employees of the Company (June 30, 2014 - $217,100 compared to June 30, 2013 - $290,000).

Loss from Operations

The loss from operations for the three month period ended June 30, 2014 was $665,800 compared to the same period in 2013 of $1,350,400, a decrease of $684,600 or 50.7%. The decrease in the loss from operations relates to increased gross profit of $549,200, lower selling, general and administrative expenses $97,400 and decreased amortization of $37,900.

The loss from operations for the six month period ended June 30, 2014 was $2,444,200 compared to the same period in 2013 of $2,953,600, a decrease of $509,400 or 17.3%. The decrease in the loss from operations is mainly attributable to a higher gross profit of $607,900 and lower amortization of $77,100 and higher selling, general and administrative expenses of $175,600.

Warrant Liability

The revaluation of the warrants liability for the three month period ended June 31, 2014, resulted in an increase in the warrant expense (non-cash) of $3,206,000 (June 30, 2013 - $466,600 credit). The increase primarily relates to a private placement in 2013 of approximately $4.6 million of units of the Company’s equity securities. Since the warrants are denominated in U.S. dollars and the Company’s functional currency is in Canadian dollars, the fair market value of the warrants fluctuates from period to period. The fair market value is based on the current stock price, volatility, the risk free interest rate, time remaining until expiry and changes in the exchange rate between the U.S. and Canadian dollar. 

For the six month period ended June 30, 2014 the revaluation of the warrant liability resulted in an increase in the warrant expense (non-cash) of $4,617,700 (June 30, 2013 - $850,500).  The increase primarily relates to the private placement of approximately $4.6 million completed in the first quarter of 2013.

Interest and Other Income

Interest and other income for the three month period ended June 30, 2014 was $200 (2013 - $1,200). These amounts include interest received on short-term investments for both 2014 and 2013. During the six month period ended June 30, 2014 interest and other income was $500 (2013 - $2,000).

Deferred Income Tax Recovery

During the three month period ended June 30, 2014 the Company recorded a deferred income tax recovery of $0 related to tax assets not previously recognized (2013 –$0). The Company expects to be able to use its deferred tax assets to offset the tax liability acquired. For the six month period ended June 30, 2014 the Company recorded deferred income tax recovery of $0 related to tax assets not previously recognized (2013 –$314,900). 

Net Income (Loss)

The net loss for the three month period ended June 30, 2014 was $4,400,800, compared to a net loss of $985,700 for the same period in the prior year or an increase of $3,415,100 or 346.5%. This equates to a loss of $(0.09) per share compared to a loss of $(0.02) per share for the same period in 2013.  The increase primarily relates to an increase in the warrant expense (non-cash) of $3,672,500.

The net loss for the six month period ended June 30, 2014 was $7,689,000, compared to a net loss of $3,702,500 for the same period in the prior year or an increase of $3,986,600 or 107.7%. This equates to a loss of $(0.15) per share compared to a loss of $(0.08) per share for the same period in 2013. The increase primarily relates to an increase in the warrant expense (non-cash) of $3,767,300.

LIQUIDITY AND CAPITAL RESOURCES

The Company’s cash and cash equivalents position amounted to $2,302,000 at June 30, 2014 compared to $2,813,500 at December 31, 2013.

Cash used by operations for the six month period ended June 30, 2014 was $2,315,500 (2013 - $4,198,800) mainly as a result the continued investment in the expansion of the Company’s sales force and marketing expenses to grow its existing products, marketing initiatives for Cambia, as well as an increase in business development activities including fees related to Bezalip SR® in the U.S and recently licensed bilastine.  Also included are changes in non-cash operating assets and liabilities, which increased to $337,400 for the same period (2013 - $2,042,700 increase).

21

Cash used in investing activities for the six month period ended June 30, 2014 was $229,300 (2013 - $486,800).

Cash provided by financing activities for the six month period ended June 30, 2014 was $2,082,800 (2013 - $3,569,900).

On February 4, 2014, pursuant to the terms of the Credit Agreement, SWK advanced the Company the remaining US$2,000,000 in funds available to the Company pursuant to the Credit Agreement. All terms under the Credit Agreement apply to the additional funds. On the closing date of the second advance of funds ("Second Closing Date"), the Company issued the Lender a warrant to purchase 347,222 common shares of the Company (the "Subsequent Loan Warrant"). The Subsequent Loan Warrant is exercisable for a period of seven years from the Second Closing Date at an exercise price of US$0.432 ($0.4612). The Lender may exercise the Subsequent Loan Warrant on a cashless basis at any time. In the event the Lender exercises the Subsequent Loan Warrant on a cashless basis the Company will not receive any proceeds. The exercise price of the Subsequent Loan Warrant is subject to customary adjustment provisions for stock splits, stock dividends, recapitalizations and the like. For further information on the terms of the Credit Agreement refer to the Company’s Form 8-K filed on February 10, 2014.

The Company may seek additional funding, primarily by way of one or more equity offerings, to carry out its business plan and to minimize risks to its operations. The market for equity financing for companies such as Tribute is challenging and there can be no assurance that additional funding will become available by way of equity financing. Any additional equity financing may result in significant dilution to the existing shareholders at the time of such financing. The Company may also seek additional funding from other sources, including licensing, co-development collaborations and other strategic alliances. Such funding, if obtained, may reduce the Company’s interest in its projects or products. Regardless, there can be no assurance that any alternative sources of funding will be available to the Company.

OFF-BALANCE SHEET ARRANGEMENTS

The Company does not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which are established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

RELATED PARTY TRANSACTIONS

During the three and six month periods ended June 30, 2014 the Company granted nil and 200,000 stock options, respectively, as payment for services in 2014 to LMT Financial Inc. ("LMT"), a company beneficially owned by a director and former interim officer of the Company, and his spouse for consulting services. For the three and six month periods ended June 30, 2014, the Company recorded $20,200 and $36,400, respectively as a non-cash expense.  During the three and six month periods ended June 30, 2013 the Company recorded and paid to LMT an aggregate of $18,000 and $36,000, respectively. These amounts have been recorded as selling, general and administrative expense in the condensed statements of operations and comprehensive (loss).

SIGNIFICANT CUSTOMERS

During the three month period ended June 30, 2014, the Company had three significant wholesale customers (2013 – two) that represented 68.9% (2013 – 55.0%) of product sales.

During the six month period ended June 30, 2014, the Company had three significant wholesale customers that represented 67.4% of product sales (2013 – 57.5% (two major wholesalers)).

SUBSEQUENT EVENTS

On July 15, 2014, the Company completed a public offering (“Offering”) in which 42,895,000 units (“Unit”) were issued at a price of $0.70 per Unit for gross proceeds of $30,026,500. Each Unit consisted of one common share and one-half of one common share purchase warrant (each whole warrant being referred to as a “Warrant”). Each whole Warrant entitles the holder to acquire one common share of the Company at a price per share of $0.90 for a period of twenty-four (24) months following the issuance thereof.

In connection with the Offering, the syndicate of underwriters received a cash commission of $2,251,988, equal to 7.5% of the gross proceeds raised under the Offering, and 3,217,125 non-transferable broker warrants.  Each broker warrant is exercisable into one Unit of the Company at a price per Unit of $0.70 for a period of (twenty-four) 24 months from the closing of the Offering.

22

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

N/A

ITEM 4.    EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.

Evaluation of disclosure controls and procedures.    

We maintain "disclosure controls and procedures," as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

As of June 30, 2014, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in our periodic reports is recorded, processed, summarized and reported, within the time periods specified for each report and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting.

There were no changes in the Company’s internal control over financial reporting for the quarterly period ended June 30, 2014, identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 that materially affected, or is reasonably likely to affect, our internal control over financial reporting.

23

PART II – OTHER INFORMATION

ITEM 1.                                LEGAL PROCEEDINGS.

From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business.  However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm its business.  The Company is currently not aware of any such legal proceedings or claims that they believe will have, individually or in the aggregate, a material adverse effect on its business, financial condition or operating results.

ITEM 1A.                               RISK FACTORS.

The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide information required under this Item.

ITEM 2.                                UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3.                                DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.                                MINE SAFETY DISCLOSURES.

Not Applicable.

ITEM 5.                                OTHER INFORMATION.

None.

ITEM 6.                                EXHIBITS.

.

Exhibit No.	Description
31.1	Certificate of the Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a) promulgated under the Exchange Act.
31.2	Certificate of the Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a) promulgated under the Exchange Act.
32.1	Certificate of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certificate of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document*
101.SCH	XBRL Taxonomy Extension Schema Document*
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document*
101.LAB	XBRL Taxonomy Extension Label Linkbase Document*
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document*

24

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO RULE 13A-14

UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

(SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002)

I, Rob Harris, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarter ending June 30, 2014 for Tribute Pharmaceuticals Canada Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the small business issuer and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuers, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and

5. Subject to the qualification as noted as Item 4 of the Company’s Management and Discussion  Analysis report, the small business issuer's other certifying officer(s) and I have disclosed:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.

Date:  August 11, 2014

/s/ Rob Harris

Rob Harris

President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO RULE 13A-14

UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

(SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002)

I, Scott Langille, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarter ending June 30, 2014 for Tribute Pharmaceuticals Canada Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the small business issuer and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuers, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and

5. Subject to the qualification as noted as Item 4 of the Company’s Management and Discussion  Analysis report, the small business issuer's other certifying officer(s) and I have disclosed:

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.

Date: August 11, 2014

/s/ Scott Langille

Scott Langille

Chief Financial Officer

(Principle Accounting Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 (AS ADOPTED

PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002)

In connection with the quarterly report of Tribute Pharmaceuticals Canada Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2014as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Rob Harris, Chief Executive Officer, certify to my knowledge and in my capacity as an officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and,

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

Date: August 11, 2014

/s/ Rob Harris

Rob Harris

President and Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 (AS ADOPTED

PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002)

In connection with the quarterly report of Tribute Pharmaceuticals Canada Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Scott Langille, Chief Financial Officer, certify to my knowledge and in my capacity as an officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and,

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

Date:  August 11, 2014

/s/ Scott Langille

Scott Langille

Chief Financial Officer

(Principle Financial Officer)

XML

5. Intangible Assets (Details Narrative) (CAD)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014 Patents	Dec. 31, 2013 Patents	Jun. 30, 2014 Licensing agreements	Dec. 31, 2013 Licensing agreements
Amortization expense of intangible assets	252,185	262,574	504,371	525,114
Intangible assets pending not amortized					148,265	112,902	373,325	0

XML

14. Segmented Information (Details) (CAD)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Product sales:
Domestic sales	3,676,588	2,959,865	6,676,500	5,941,784
International sales	357,872	358,215	821,849	689,552
Other revenue	6,825	11,967	18,075	22,851
Total	4,041,285	3,330,047	7,516,424	6,654,187
Royalty revenues			18,414	98,040
Total revenues	4,041,285	3,330,047	7,534,838	6,752,227

XML

9. Statement of Cash Flows (Details) (CAD)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Notes to Financial Statements
Accounts receivable	(1,355,477)	114,198
Inventories	(14,068)	120,378
Prepaid expenses and other receivables	(26,869)	(109,939)
Taxes recoverable	473,078	(143,483)
Accounts payable and accrued liabilities	585,897	(1,554,688)
Changes in non-cash balances related to operations	(337,439)	(2,042,686)

XML

15. Foreign Currency Gain (Loss) (Details Narrative) (CAD)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Notes to Financial Statements
Foreign currency (gain) loss	10,506	27,804	(185,559)	96,264

XML

8. Loss Per Share (Details) (CAD)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Numerator:
Net loss available to common shareholders	(4,400,842)	(985,702)	(7,689,020)	(3,702,459)
Denominator:
Weighted average number of common shares	51,581,238	50,972,542	51,501,128	45,274,545
Effect of dilutive common shares
Diluted weighted average number of common shares outstanding	51,581,238	50,972,542	51,501,128	45,274,545
(Loss) per share - basic and diluted	(0.09)	(0.02)	(0.15)	(0.08)

XML

14. Segmented Information (Tables)

6 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

Schedule of Segment Reporting

Revenue for the three and six month periods ended June 30, 2014 and 2013 includes products sold in Canada and international sales of products. Revenue earned is as follows:

	For the Three Month Period Ended June 30				For the Six Month Period Ended June 30
Product sales:	2014		2013		2014		2013
Domestic sales	$	3,676,588	$	2,959,865	$	6,676,500	$	5,941,784
International sales		357,872		358,215		821,849		689,552
Other revenue		6,825		11,967		18,075		22,851
Total	$	4,041,285	$	3,330,047	$	7,516,424	$	6,654,187
Royalty  revenues	$	—	$	—	$	18,414	$	98,040
Total revenues	$	4,041,285	$	3,330,047	$	7,534,838	$	6,752,227

XML

17. Derivative Financial Instruments (Details) (CAD)	Jun. 30, 2014	Dec. 31, 2013
Fair Value
Foreign currency sold - call options	(189,430)	(38,156)
Notional Principal
Foreign currency sold - call options	6,000,000	5,000,000

XML

2. Inventories (Tables)

6 Months Ended

Jun. 30, 2014

Inventory Disclosure [Abstract]

Schedule of Inventory

	June 30, 2014		December 31, 2013
Raw materials	$	314,869	$	236,444
Finished goods		368,516		418,635
Packaging materials		61,727		56,007
Work in process		313,787		333,745
	$	1,058,899	$	1,044,831

XML

10. Contingencies and Commitments (Details Narrative) (CAD)	Jun. 30, 2014	Dec. 31, 2013
Contingencies And Commitments Details Narrative
Executive termination under initial agreement	854,616	792,200
Remuneration to executive	1,909,616

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7. Capital Stock (Details) (CAD)	3 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2014
Equity [Abstract]
Begining Balance, Number of Shares		51,081,238
Begining Balance, Amount		19,947,290
Common shares for services issued	500,000	500,000
Common shares for services issued, value	211,812	211,812
Ending Balance, Number of Shares	51,581,238	51,581,238
Ending Balance, Amount	20,159,102	20,159,102

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4. Property, Plant and Equipment (Details) (CAD)	Jun. 30, 2014	Dec. 31, 2013
Cost	2,148,440	2,141,915
Accumulated Amortization	1,093,794	1,051,996
Net Carrying Amount	1,054,646	1,089,919
Land
Cost	90,000	90,000
Accumulated Amortization
Net Carrying Amount	90,000	90,000
Building
Cost	618,254	618,254
Accumulated Amortization	285,342	269,886
Net Carrying Amount	332,912	348,368
Leasehold Improvements
Cost	10,359	10,359
Accumulated Amortization	3,626	2,590
Net Carrying Amount	6,733	7,769
Office Equipment
Cost	61,308	61,308
Accumulated Amortization	50,313	48,299
Net Carrying Amount	10,995	13,009
Manufacturing equipment
Cost	1,103,525	1,103,525
Accumulated Amortization	586,366	576,862
Net Carrying Amount	517,159	526,663
Warehouse equipment
Cost	17,085	17,085
Accumulated Amortization	17,071	16,737
Net Carrying Amount	14	348
Packaging equipment
Cost	111,270	111,270
Accumulated Amortization	56,919	51,700
Net Carrying Amount	54,351	59,570
Computer equipment
Cost	136,639	130,114
Accumulated Amortization	94,157	85,922
Net Carrying Amount	42,482	44,192

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12. Related Party Transactions (Details Narrative) (CAD)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Notes to Financial Statements
Stock options granted to LMT			200,000
Non-cash expense	20,222		36,444
Related Party, consulting services		18,000		36,000

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8. Loss Per Share (Details Narrative)	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013
Notes to Financial Statements
Outstanding stock options	5,139,070	3,824,835	4,183,752
Outstanding warrant grants	14,014,587		12,802,875

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4. Property, Plant and Equipment

6 Months Ended

Jun. 30, 2014

Property, Plant and Equipment [Abstract]

4. Property, Plant and Equipment

4. Property, Plant and Equipment

	June 30, 2014
	Cost		Accumulated Amortization		Net Carrying Amount
Land	$	90,000	$	-	$	90,000
Building		618,254		285,342		332,912
Leasehold improvements		10,359		3,626		6,733
Office equipment		61,308		50,313		10,995
Manufacturing equipment		1,103,525		586,366		517,159
Warehouse equipment		17,085		17,071		14
Packaging equipment		111,270		56,919		54,351
Computer equipment		136,639		94,157		42,482
	$	2,148,440	$	1,093,794	$	1,054,646

	December 31, 2013
	Cost		Accumulated Amortization		Net Carrying Amount
Land	$	90,000	$	-	$	90,000
Building		618,254		269,886		348,368
Leasehold improvements		10,359		2,590		7,769
Office equipment		61,308		48,299		13,009
Manufacturing equipment		1,103,525		576,862		526,663
Warehouse equipment		17,085		16,737		348
Packaging equipment		111,270		51,700		59,570
Computer equipment		130,114		85,922		44,192
	$	2,141,915	$	1,051,996	$	1,089,919

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7. Capital Stock (Details 1) (CAD)	3 Months Ended
	Jun. 30, 2014	Mar. 31, 2014
Equity [Abstract]
Paid-in Capital Options, Beginning	2,404,022	2,286,890
Expense recognized for options issued to employees	79,722	100,910
Expense recognized for options issued to consultants	20,222	16,222
Paid-in Capital Options, Ending	2,503,966	2,404,022

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6. Long Term Debt and Debt Issuance Costs (Tables)

6 Months Ended

Jun. 30, 2014

Debt Disclosure [Abstract]

Schedule of payments for Long-term Debt

	Principal Payments				Interest Payments
2014	US	$	52,035	($55,553)	US	$	550,965	($588,210)
2015	US	$	721,460	($770,231)	US	$	1,041,040	($1,111,414)
2016	US	$	872,654	($931,645)	US	$	934,846	($998,042)
2017	US	$	1,001,370	($1,069,063)	US	$	806,130	($860,624)
2018	US	$	5,352,481	($5,714,309)	US	$	417,053	($445,246)

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5. Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2014

Intangible Assets Tables

Schedule of Intangible Assets

	June 30, 2014
	Cost		Accumulated Amortization		Net Carrying Amount
Patents	$	304,850	$	45,301	$	259,549
Licensing asset		1,005,820		135,399		870,421
Licensing agreements		10,377,325		1,885,104		8,492,221
	$	11,687,995	$	2,065,804	$	9,622,191

	December 31, 2013
	Cost		Accumulated Amortization		Net Carrying Amount
Patents	$	268,786	$	39,562	$	229,224
Licensing asset		1,005,820		96,713		909,107
Licensing agreements		10,004,000		1,425,158		8,578,842
	$	11,278,606	$	1,561,433	$	9,717,173

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16. Financial Instruments (Details Narrative) (CAD)	Jun. 30, 2014	Dec. 31, 2013
Notes to Financial Statements
Credit risk	1,963,057	607,580
Outstanding long term debt	8,540,800

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7. Capital Stock (Details 2) (CAD)				6 Months Ended		6 Months Ended		6 Months Ended		6 Months Ended		6 Months Ended		6 Months Ended		6 Months Ended		6 Months Ended		6 Months Ended		6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013	Jun. 30, 2014 Warrant 1	Dec. 31, 2013 Warrant 1	Jun. 30, 2014 Warrant 2	Dec. 31, 2013 Warrant 2	Jun. 30, 2014 Warrant 3	Dec. 31, 2013 Warrant 3	Jun. 30, 2014 Warrant 4	Dec. 31, 2013 Warrant 4	Jun. 30, 2014 Warrant 5	Dec. 31, 2013 Warrant 5	Jun. 30, 2014 Warrant 6	Dec. 31, 2013 Warrant 6	Jun. 30, 2014 Warrant 7	Dec. 31, 2013 Warrant 7	Jun. 30, 2014 Warrant 8	Dec. 31, 2013 Warrant 8	Jun. 30, 2014 Warrant 9	Dec. 31, 2013 Warrant 9	Jun. 30, 2014 Warrant 10	Dec. 31, 2013 Warrant 10
Expiration Date				2017-05-11		2015-02-27		2018-02-27		2015-03-05		2018-03-05		2015-03-11		2018-03-11		2018-08-08		2018-09-20		2021-02-04
Number of Warrants	14,014,587		12,802,875	750,000		4,429,688		4,429,687		1,253,000		1,253,000		343,750		343,750		755,794		108,696		347,222
Weighted Average Exercise Price	0.59			0.46		0.53		0.64		0.53		0.64		0.53		0.64		0.6356		0.59		0.4612
Fair Value	7,705,377	2,966,714		441,986	223,356	1,659,926	518,256	3,026,646	1,286,216	472,209	146,596	856,130	363,825	130,281	49,723	234,872	99,812	547,068	245,982	75,661	32,948	260,598

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7. Capital Stock (Tables)

6 Months Ended

Jun. 30, 2014

Equity [Abstract]

Schedule of Common Stock Outstanding

	Number of Shares		Amount
Balance, December 31, 2013		51,081,238	$	19,947,290
Common shares for services issued		500,000		211,812
Balance, June 30, 2014		51,581,238	$	20,159,102

Schedule of Paid-in Capital Options

The activities in additional paid in-capital options are as follows:

	Amount
Balance, December 31, 2013	$	2,286,890
Expense recognized for options issued to employees		100,910
Expense recognized for options issued to consultants		16,222
Balance, March 31, 2014		2,404,022
Expense recognized for options issued to employees		79,722
Expense recognized for options issued to consultants		20,222
Balance, June 30, 2014	$	2,503,966

Schedule of warrants outstanding

As at June 30, 2014, the following warrants were outstanding:

Expiration Date	Number of Warrants	Weighted Average Exercise Price		Fair Value at June 30, 2014	Fair Value at December 31, 2013
May 11, 2017	750,000	US$0.43 ($0.46)	$	441,986	$	223,356
February 27, 2015	4,429,688	US$0.50 ($0.53)	$	1,659,926	$	518,256
February 27, 2018	4,429,687	US$0.60 ($0.64)	$	3,026,646	$	1,286,216
March 5, 2015	1,253,000	US$0.50 ($0.53)	$	472,209	$	146,596
March 5, 2018	1,253,000	US$0.60 ($0.64)	$	856,130	$	363,825
March 11, 2015	343,750	US$0.50 ($0.53)	$	130,281	$	49,723
March 11, 2018	343,750	US$0.60 ($0.64)	$	234,872	$	99,812
August 8, 2018	755,794	US$0.5954 ($0.6356)	$	547,068	$	245,982
September 20, 2018	108,696	US$0.55 ($0.59)	$	75,661	$	32,948
February 4, 2021	347,222	US$0.4320 ($0.4612)	$	260,598	$	-
	14,014,587	US$0.55 ($0.59)	$	7,705,377	$	2,966,714

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8. Loss Per Share (Tables)

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Schedule of Computation of Earnings Per Share

The following table sets forth the computation of (loss) per share:

	For the Three Month Period Ended June 30						For the Six Month Period Ended June 30
Numerator:	2014			2013			2014			2013
Net (loss) available to common shareholders	$	(4,400,842	)	$	(985,702	)	$	(7,689,020	)	$	(3,702,459	)
Denominator:
Weighted average number of common shares		51,581,238			50,972,542			51,501,128			45,274,545
Effect of dilutive common shares		—			—			—			—
Diluted weighted average number of common shares outstanding		51,581,238			50,972,542			51,501,128			45,274,545
(Loss) per share – basic and diluted	$	(0.09	)	$	(0.02	)	$	(0.15	)	$	(0.08	)

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3. Prepaid Expenses and Other Receivables

6 Months Ended

Jun. 30, 2014

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

3. Prepaid Expenses and Other Receivables

3. Prepaid Expenses and Other Receivables

	June 30,  2014		December 31, 2013
Prepaid operating expenses	$	186,455	$	140,986
Deposits		-		18,825
Interest receivable on loan receivables		6,300		6,075
	$	192,755	$	165,886

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9. Statement of Cash Flows (Tables)

6 Months Ended

Jun. 30, 2014

Supplemental Cash Flow Elements [Abstract]

Changes in non-cash balances related to operations

Changes in non-cash balances related to operations are as follows:

	For the Six Months Ended June 30
	2014			2013
Accounts receivable	$	(1,355,477	)	$	114,198
Inventories		(14,068	)		120,378
Prepaid expenses and other receivables		(26,869	)		(109,939	)
Taxes recoverable		473,078			(143,483	)
Accounts payable and accrued liabilities		585,897			(1,554,688	)
	$	(337,439	)		(2,042,686	)

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6. Long Term Debt and Debt Issuance Costs (Details) (CAD)	Jun. 30, 2014
Debt Disclosure [Abstract]
Principle Payments - 2014	55,553
Principle Payments - 2015	770,231
Principle Payments - 2016	931,645
Principle Payments - 2017	1,069,063
Principle Payments - 2018	5,714,309
Interest Payments - 2014	588,210
Interest Payments - 2015	1,111,414
Interest Payments - 2016	998,042
Interest Payments - 2017	860,624
Interest Payments - 2018	445,246

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13. Income Taxes (Details Narrative) (CAD)	6 Months Ended
	Jun. 30, 2014
Non-capital loss carry-forwards	12,972,000
Carry-forward expenditures offset against future taxable income	1,798,300
Tax credits, non-refundable	341,300
Minimum [Member]
Loss Carryforwards Expiration Dates	2014
Maximum [Member]
Loss Carryforwards Expiration Dates	2034

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CONDENSED INTERIM BALANCE SHEETS (Unaudited) (CAD)	Jun. 30, 2014	Dec. 31, 2013
ASSETS
Cash and cash equivalents	2,302,033	2,813,472
Accounts receivable, net of allowance of $nil (2013 - $nil) (Note 16c)	1,947,243	591,766
Inventories (Note 2)	1,058,899	1,044,831
Taxes recoverable	178,713	651,791
Loan receivable	15,814	15,814
Prepaid expenses and other receivables (Note 3)	192,755	165,886
Current portion of debt issuance costs, net (Note 6)	116,522	91,100
Total current assets	5,811,979	5,374,660
Property, plant and equipment, net (Note 4)	1,054,646	1,089,919
Intangible assets, net (Note 5)	9,622,191	9,717,173
Goodwill	3,599,077	3,599,077
Debt issuance costs, net (Note 6)	301,832	253,712
Total assets	20,389,725	20,034,541
Current
Accounts payable and accrued liabilities	4,057,315	3,284,756
Current portion of long term debt (Note 6)	582,872	204,700
Warrant liability (Note 7 c)	7,705,377	2,966,714
Other current liability (Note 17)	189,430	38,156
Total current liabilities	12,534,994	6,494,326
Long term debt (Note 6)	7,366,024	5,640,102
Total liabilities	19,901,018	12,134,428
Contingencies and commitments (Notes 6 and 10)
SHAREHOLDERS' EQUITY
AUTHORIZED Unlimited Non-voting, convertible redeemable and retractable preferred shares with no par value Unlimited Common shares with no par value ISSUED (Note 7 a) Common shares 51,581,238 (2013 - 51,081,238)	20,159,102	19,947,290
Additional paid-in capital options (Note 7b)	2,503,966	2,286,890
Accumulated other comprehensive loss (Note 17)	(189,430)	(38,156)
Deficit	(21,984,931)	(14,295,911)
Total shareholders' equity	488,707	7,900,113
Total liabilities and shareholders' equity	20,389,725	20,034,541

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7. Capital Stock (Details Narrative) (CAD)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Common shares issued for services to consultants	211,812		211,812
Common shares issued for services to consultants, shares	500,000		500,000
Options granted to officers and employees and a consultant	29,740	723,750	1,327,985	1,006,250
Options issued			1,107,985
Exercise price of options			0.40
Fair value of options	0.52	0.48	0.33	0.48
Expected dividend yield			0.00%
Expected volatility			123.00%
Risk free interest rate			1.61%
Remaining options granted			200,000
Expected term			5 years
Number of options outstanding	5,139,070	4,183,752	5,139,070	4,183,752	3,824,835
Common shares outstanding	5,158,124		5,158,124		5,108,124
Compensation expense for options issued	99,944	115,482	217,076	289,969
Number of options issued terminated			13,750		560,917
Warrant [Member]
Expected dividend yield			0.00%		0.00%
Expected volatility			113.00%		114.00%
Risk free interest rate			1.40%		1.58%
Expected term			2 years 6 months 18 days		2 years 11 months 9 days
Fair value of the warrant liability	7,705,377		7,705,377		2,966,714

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1. Basis of Presentation

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

1. Basis of Presentation

1. Basis of Presentation

These unaudited condensed interim financial statements should be read in conjunction with the financial statements for Tribute Pharmaceuticals Canada Inc.’s ("Tribute" or the "Company") most recently completed fiscal year ended December 31, 2013.  These condensed interim financial statements do not include all disclosures required in annual financial statements, but rather are prepared in accordance with recommendations for interim financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).  These unaudited condensed interim financial statements have been prepared using the same accounting policies, and methods as those used by the Company in the annual audited financial statements for the year ended December 31, 2013, except when disclosed below.

The unaudited condensed interim financial statements contain all adjustments (consisting of only normal recurring adjustments) which are necessary to present fairly the financial position of the Company as at June 30, 2014, and the results of its operations for the three and six month periods ended June 30, 2014 and 2013 and its cash flows for the six month periods ended June 30, 2014 and 2013.  Note disclosures have been presented for material updates to the information previously reported in the annual audited financial statements.

a) Estimates

The preparation of these financial statements has required management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of the revenues and expenses during the reporting period.  On an ongoing basis, the Company evaluates its estimates, including those related to provision for doubtful accounts, accrued liabilities, income taxes, stock based compensation, revenue recognition, intangible assets and derivative financial instruments.  The Company bases its estimates on historical experiences and on various other assumptions believed to be reasonable under the circumstances.  Actual results could differ from those estimates. As adjustments become necessary, they are reported in earnings in the period in which they become known.

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2. Inventories (Details) (CAD)	Jun. 30, 2014	Dec. 31, 2013
Inventories Details
Raw materials	314,869	236,444
Finished goods	368,516	418,635
Packaging materials	61,727	56,007
Work in process	313,787	333,745
Inventories	1,058,899	1,044,831

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17. Derivative Financial Instruments

6 Months Ended

Jun. 30, 2014

Derivative Financial Instruments

17. Derivative Financial Instruments

17. Derivative Financial Instruments

The Company enters into foreign currency contracts with financial institutions to reduce the risk that its cash flows and earnings will be adversely affected by foreign currency exchange rate fluctuations.  In accordance with the Company’s current foreign exchange rate risk management policy, this program is not designated for trading or speculative purposes.

The Company recognizes derivative instruments as either assets or liabilities in the accompanying balance sheets at fair value.

During the three and six month periods ended June 30, 2014, the Company entered into foreign currency call options designated as cash flow hedges to hedge certain forecasted expenses related to its loan obligation denominated in United States Dollars. The notional principal of the foreign currency call option to purchase US$6,000,000 was $6,603,000 at July 31, 2014.

The Company initially reports any gain or loss on the effective portion of the cash flow hedge as a component of other comprehensive income and subsequently reclassifies to the statements of operations when the hedged transaction occurs. Any ineffectiveness is recognized in earnings immediately. 

Valuation techniques used to measure fair value are intended to maximize the use of observable inputs and minimize the use of unobservable inputs.

The Company has determined the foreign currency call option to be Level 2. The fair value of the foreign currency call option at June 30, 2014 was a loss of $189,430 (December 31, 2013 – a loss of $38,156), and is reported in other current liability in the accompanying balance sheets. During the three month period ended June 30, 2014, the Company recognized a loss on the settled foreign exchange contract of $196,800 (2013 $nil). For the six month periods ended June 30, 2014, the Company recognized a gain on the settled foreign exchange contract of $3,200 (2013 - $nil).

At June 30, 2014 and December 31, 2013, the notional principal and fair value of the Company’s outstanding foreign currency derivative financial instruments were as follows:

	June 30, 2014					December 31, 2013
	Notional Principal		Fair Value			Notional Principal		Fair Value
Foreign currency sold – call options	USD$	6,000,000	$	(189,430	)	USD$	5,000,000	$	(38,156	)

The notional principal amounts provide one measure of the transaction volume outstanding as of June 30, 2014 and December 31, 2013, and do not represent the amount of the Company’s exposure to market loss. The estimates of fair value are based on applicable and commonly used pricing models using prevailing financial market information as of June 30, 2014 and December 31, 2013. The amounts ultimately realized upon settlement of these financial instruments, together with the gains and losses on the underlying exposures, will depend on actual market conditions during the remaining life of the instruments.

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3. Prepaid Expenses and Other Receivables (Details) (CAD)	Jun. 30, 2014	Dec. 31, 2013
Prepaid Expenses And Other Receivables Details
Prepaid operating expenses	186,455	140,986
Deposits		18,825
Interest receivable on loan receivables	6,300	6,075
Prepaid expenses and other receivables	192,755	165,886

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1. Basis of Presentation (Policy)

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Estimates

a) Estimates

The preparation of these financial statements has required management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of the revenues and expenses during the reporting period.  On an ongoing basis, the Company evaluates its estimates, including those related to provision for doubtful accounts, accrued liabilities, income taxes, stock based compensation, revenue recognition, intangible assets and derivative financial instruments.  The Company bases its estimates on historical experiences and on various other assumptions believed to be reasonable under the circumstances.  Actual results could differ from those estimates. As adjustments become necessary, they are reported in earnings in the period in which they become known.

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2. Inventories

6 Months Ended

Jun. 30, 2014

Inventory Disclosure [Abstract]

2. Inventories

2. Inventories

	June 30, 2014		December 31, 2013
Raw materials	$	314,869	$	236,444
Finished goods		368,516		418,635
Packaging materials		61,727		56,007
Work in process		313,787		333,745
	$	1,058,899	$	1,044,831

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CONDENSED INTERIM BALANCE SHEETS (Parenthetical)	Jun. 30, 2014	Dec. 31, 2013
Shareholders Equity
Common Shares Authorized	51,581,238	51,081,238

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12. Related Party Transactions

6 Months Ended

Jun. 30, 2014

Related Party Transactions [Abstract]

12. Related Party Transactions

12.           Related Party Transactions

During the three and six month periods ended June 30, 2014 the Company granted nil and 200,000 stock options,  respectively, as payment for services in 2014 to LMT Financial Inc. ("LMT"), a company beneficially owned by a director and former interim officer of the Company, and his spouse for consulting services. For the three and six month periods ended June 30, 2014, the Company recorded $20,222 and $36,444, respectively as a non-cash expense.  During the three and six month periods ended June 30, 2013 the Company recorded and paid to LMT an aggregate of $18,000 and $36,000, respectively. These amounts have been recorded as selling, general and administrative expense in the condensed interim statements of operations, comprehensive (loss) and deficit.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2014
Document And Entity Information
Entity Registrant Name	Tribute Pharmaceuticals Canada Inc.
Entity Central Index Key	0001159019
Document Type	10-Q
Document Period End Date	Jun. 30, 2014
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding	51,581,238
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2014

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13. Income Taxes

6 Months Ended

Jun. 30, 2014

Income Tax Disclosure [Abstract]

13. Income Taxes

13.          Income Taxes

The Company has no taxable income under Canadian Federal and Provincial tax laws for the six month periods ended June 30, 2014 and 2013. The Company has non-capital loss carry-forwards at June 30, 2014 totaling approximately $12,972,000, which may be offset against future taxable income.  If not utilized, the loss carry-forwards will expire between 2014 and 2034.  The cumulative carry-forward pool of SR&ED expenditures as at June 30, 2014, that may be offset against future taxable income, with no expiry date, is $1,798,300.

The non-refundable portion of the tax credits as at June 30, 2014 was $341,300.

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CONDENSED INTERIM STATEMENTS OF OPERATIONS, COMPREHENSIVE (LOSS) AND DEFICIT (Unaudited) (CAD)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Revenues
Licensed domestic product net sales	2,463,309	2,242,649	4,739,693	4,136,289
Other domestic product sales	1,220,104	729,183	1,954,882	1,828,345
International product sales	357,872	358,215	821,849	689,553
Royalty and licensing revenues			18,414	98,040
Total revenues (Notes 11 and 14)	4,041,285	3,330,047	7,534,838	6,752,227
Cost of Sales
Licensor sales and distribution fees	1,636,895	1,473,246	3,049,938	2,761,725
Cost of products sold	350,600	365,578	696,464	823,341
Expired products	13,356		13,356
Total Cost of Sales	2,000,851	1,838,824	3,759,758	3,585,066
Gross profit	2,040,434	1,491,223	3,775,080	3,167,161
Expenses
Selling, general and administrative (Notes 7b, 12 and 15)	2,409,678	2,507,117	5,632,339	5,456,721
Amortization of assets	296,574	334,487	586,926	664,059
Total operating expenses	2,706,252	2,841,604	6,219,265	6,120,780
Loss from operations	(665,818)	(1,350,381)	(2,444,185)	(2,953,619)
Non-operating income (expenses)
Gain (loss) on derivative instrument (Note 17)	(196,800)		3,200
Change in warrant liability (Note 7c)	(3,205,975)	466,566	(4,617,749)	(850,475)
Accretion expense (Note 6)	(34,409)	(22,984)	(65,526)	(47,229)
Interest income	166	1,242	538	1,967
Interest expense	(298,006)	(80,145)	(565,298)	(168,003)
Loss before tax	(4,400,842)	(985,702)	(7,689,020)	(4,017,359)
Deferred income tax recovery (Note 13)				(314,900)
Net loss for the period	(4,400,842)	(985,702)	(7,689,020)	(3,702,459)
Unrealized loss on derivative instrument, net of tax (Note 17)	(85,942)		(189,430)
Net loss and comprehensive loss for the period	(4,486,784)	(985,702)	(7,878,450)	(3,702,459)
Deficit, beginning of period	(17,584,089)	(10,440,313)	(14,295,911)	(7,723,556)
Deficit, end of period	(21,984,931)	(11,426,015)	(21,984,931)	(11,426,015)
Loss per share (Note 8) - Basic and diluted	(0.09)	(0.02)	(0.15)	(0.08)
Weighted Average Number of Common Shares - Basic and diluted	51,581,238	50,972,542	51,501,128	45,274,545

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7. Capital Stock

6 Months Ended

Jun. 30, 2014

Equity [Abstract]

7. Capital Stock

7. Capital Stock

(a) Common Shares

During the six month period ended June 30, 2014, the Company issued 500,000 common shares to a consultant for services and recorded $211,812 as paid-in common shares based on the fair market value of the common shares at the date of issuance.

	Number of Shares		Amount
Balance, December 31, 2013		51,081,238	$	19,947,290
Common shares for services issued		500,000		211,812
Balance, June 30, 2014		51,581,238	$	20,159,102

(b)           Stock Based Compensation

The Company’s stock-based compensation program ("Plan") includes stock options in which some options vest based on continuous service, while others vest based on performance conditions such as profitability and sales goals. For those equity awards that vest based on continuous service, compensation expense is recorded over the service period from the date of grant. For performance-based awards, compensation expense is recorded over the remaining service period when the Company determines that achievement is probable.

During the three and six month periods ended June 30, 2014, there were 29,740 and 1,327,985, respectively, options granted to officers, employees and a consultant of the Company (2013 – 723,750 and 1,006,250, respectively). The exercise price of 1,107,985 of these options is $0.40, with one-eighth vesting quarterly over two years on each of March 31, June 30, September 30 and December 31, in 2015 and 2016, upon achieving certain financial objectives. Since stock-based compensation is recognized only for those awards that are ultimately expected to vest, the Company has applied an estimated forfeiture rate (based on historical experience and projected employee turnover) to unvested awards for the purpose of calculating compensation expense. The grant date fair value of these options was estimated as $0.33 using the Black-Scholes option pricing model, based on the following assumptions: expected dividend yield of 0%; expected volatility of 123%; expected risk free interest rate of 1.61%; and expected term of 5 years.

In addition, 200,000 options were granted with an exercise price of $0.42 and will fully vest on January 3, 2015 (Note 12). The grant date fair value of these options was estimated as $0.39 using the Black-Scholes option pricing model, based on the following assumptions: expected dividend yield of 0%; expected volatility of 123%; expected risk free interest rate of 1.69%; and expected term of 5 years.

The remaining, 20,000 options were granted with an exercise price of $0.61, with 10,000 vesting on November 30, 2014 and the remaining 10,000 vesting over two years on each of March 31, June 30, September 30 and December 31, in 2015 and 2016.  The grant date fair value of these options was estimated as $0.52 using the Black-Scholes option pricing model, based on the following assumptions: expected dividend yield of 0%; expected volatility of 123%; expected risk free interest rate of 1.50%; and expected term of 5 years.

For the three and six month periods ended June 30, 2014, the Company recorded $99,944 and $217,076, respectively (2013 – $115,482 and $289,969, respectively) as compensation expense for options issued to directors, officers and employees based on continuous service.  Included in this amount is $16,222 and $36,444 for options issued to a consultant for service (Note 12). This expense was recorded as selling, general and administrative expense on the condensed interim statements of operations, comprehensive loss and deficit.  Due to termination of employment and non-achievement of performance-based awards, 13,750 options were removed from the number of options issued during the six month period ended June 30, 2014 (year ended December 31, 2013 – 560,917).

The activities in additional paid in-capital options are as follows:

	Amount
Balance, December 31, 2013	$	2,286,890
Expense recognized for options issued to employees		100,910
Expense recognized for options issued to consultants		16,222
Balance, March 31, 2014		2,404,022
Expense recognized for options issued to employees		79,722
Expense recognized for options issued to consultants		20,222
Balance, June 30, 2014	$	2,503,966

The total number of options outstanding as at June 30, 2014 was 5,139,070 (December 31, 2013 – 3,824,835).  The weighted average grant date fair value of the options granted during the three and six month periods ended June 30, 2014, was $0.52 and $0.34 (2013 - $0.48 and $0.48, respectively).

The maximum number of options that may be issued under the Plan is floating at an amount equivalent to 10% of the issued and outstanding common shares, or 5,158,124 as at June 30, 2014 (December 31, 2013 – 5,108,124). 

(c) Warrants

As at June 30, 2014, the following warrants were outstanding:

Expiration Date	Number of Warrants	Weighted Average Exercise Price		Fair Value at June 30, 2014	Fair Value at December 31, 2013
May 11, 2017	750,000	US$0.43 ($0.46)	$	441,986	$	223,356
February 27, 2015	4,429,688	US$0.50 ($0.53)	$	1,659,926	$	518,256
February 27, 2018	4,429,687	US$0.60 ($0.64)	$	3,026,646	$	1,286,216
March 5, 2015	1,253,000	US$0.50 ($0.53)	$	472,209	$	146,596
March 5, 2018	1,253,000	US$0.60 ($0.64)	$	856,130	$	363,825
March 11, 2015	343,750	US$0.50 ($0.53)	$	130,281	$	49,723
March 11, 2018	343,750	US$0.60 ($0.64)	$	234,872	$	99,812
August 8, 2018	755,794	US$0.5954 ($0.6356)	$	547,068	$	245,982
September 20, 2018	108,696	US$0.55 ($0.59)	$	75,661	$	32,948
February 4, 2021	347,222	US$0.4320 ($0.4612)	$	260,598	$	-
	14,014,587	US$0.55 ($0.59)	$	7,705,377	$	2,966,714

In connection with the additional US$2,000,000 ($2,211,000) loan, the Company issued SWK 347,222 common share purchase warrants with each warrant entitling SWK to acquire one common share in the capital of the Company at an exercise price of US$0.432 ($0.4612), at any time prior to February 5, 2021. The fair value of the warrant liability at the date of grant was $120,914 and was estimated using the Black-Scholes option pricing model, based on the following assumptions: expected dividend yield of 0%; expected volatility of 117%; risk free interest rate of 1.85%; and expected term of 7 years.

ASC 815 "Derivatives and Hedging" indicates that warrants with exercise prices denominated in a currency other than an entity’s functional currency should not be classified as equity.  As a result, these warrants have been treated as derivatives and recorded as liabilities carried at their fair value, with period-to-period changes in the fair value recorded as a gain or loss in the condensed interim statements of operations, comprehensive loss and deficit.  The Company treated the compensation warrants as a liability upon their issuance.

As at June 30, 2014, the fair value of the warrant liability of $7,705,377 (December 31, 2013 - $2,966,714) was estimated using the Black-Scholes option pricing model based on the following weighted average assumptions: expected dividend yield of 0% (December 31, 2013 – 0%) expected volatility of 113% (December 31, 2013 – 114%) risk-free interest rate of 1.4% (December 31, 2013 – 1.58%) and expected term of 2.55 years (December 31, 2013 – 2.94 years).

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6. Long Term Debt and Debt Issuance Costs

6 Months Ended

Jun. 30, 2014

Debt Disclosure [Abstract]

6. Long Term Debt and Debt Issuance Costs

6. Long Term Debt and Debt Issuance Costs

On August 8, 2013, SWK Funding LLC ("SWK"), a wholly-owned subsidiary of SWK Holdings Corporation entered into a credit agreement (the "Credit Agreement") pursuant to which the lenders party thereto provided to the Company a term loan in the principal amount of US$6,000,000 ($6,381,600) (the "Loan") which was increased, as per the terms of the Credit Agreement, by an additional US$2,000,000 ($2,211,000) at the Company's request on February 5, 2014.  SWK served as the agent under the Credit Agreement.  The Loan matures on August 8, 2018.

The Loan accrues interest at an annual rate of 11.5% plus the Libor Rate (as defined in the Credit Agreement), with the Libor Rate being subject to a minimum floor of 2%, such that that minimum interest rate is 13.5%.  In the event of a change of control, a merger or a sale of all or substantially all of the Company’s assets, the Loan shall be due and payable.

Upon receipt of the additional US$2,000,000 ($2,211,000) of the Loan, the Company issued to SWK 347,222 common share purchase warrants with a grant date fair value of the warrants of $120,914. Each warrant entitles SWK to acquire one common share in the capital of the Company at an exercise price of US$0.432 ($0.4612), at any time prior to February 4, 2021.

The discount to the carrying value of the Loan is being amortized as a non-cash interest expense over the term of the Loan using the effective interest rate method.  The grant date fair value of the 347,222 warrants issued to SWK was determined using the Black-Scholes model with the following assumptions: expected volatility of 117%, a risk-free interest rate of 1.85%, an expected life of seven years, and no expected dividend yield.

During the three and six month periods ended June 30, 2014, the Company accreted $34,409 and $65,526, respectively (2013 - $22,984 and $47,229, respectively) in non-cash accretion expense in connection with the long term loans, which is included in accretion expense on the condensed interim statements of operations, comprehensive loss and deficit.

During the three and six month periods ended June 30, 2014, the Company also incurred US$116,169 ($128,425) in legal costs related to the additional US$2,000,000 ($2,211,000) Loan. These fees and costs were classified as debt issuance costs on the balance sheet.  These assets are being amortized as a non-cash interest expense over the term of the outstanding Loan using the effective interest rate method.  During the three and six month periods ended June 30, 2014, the Company amortized $27,854 and $52,619, respectively (2013 – $38,795 and $92,762, respectively) in non-cash interest expense, which is included in amortization expense on the condensed interim statements of operations, comprehensive loss and deficit.

During the six month period ended June 30, 2014, the Company made no principal payments (year ended December 31, 2013 - US$3,281,250 ($3,386,630)) and interest payments of US$471,000 ($502,829) (year ended December 31, 2013 – US$409,653 ($422,341)) under the MidCap Financial LLC (now repaid) and SWK loan agreements.  The Company has estimated the following revenue-based principal and interest payments over the next five years ended December 31 based on the assumption that only the minimum revenue requirements will be met under the Credit Agreement:

	Principal Payments				Interest Payments
2014	US	$	52,035	($55,553)	US	$	550,965	($588,210)
2015	US	$	721,460	($770,231)	US	$	1,041,040	($1,111,414)
2016	US	$	872,654	($931,645)	US	$	934,846	($998,042)
2017	US	$	1,001,370	($1,069,063)	US	$	806,130	($860,624)
2018	US	$	5,352,481	($5,714,309)	US	$	417,053	($445,246)

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18. Subsequent Event

6 Months Ended

Jun. 30, 2014

Subsequent Events [Abstract]

18. Subsequent Event

18.           Subsequent Events

On July 15, 2014, the Company completed a public offering (“Offering”) in which 42,895,000 units (“Unit”) were issued at a price of $0.70 per Unit for gross proceeds of $30,026,500. Each Unit consisted of one common share and one-half of one common share purchase warrant (each whole warrant being referred to as a “Warrant”). Each whole Warrant entitles the holder to acquire one common share of the Company at a price per share of $0.90 for a period of twenty-four (24) months following the issuance thereof.

In connection with the Offering, the syndicate of underwriters received a cash commission of $2,251,988, equal to 7.5% of the gross proceeds raised under the Offering, and 3,217,125 non-transferable broker warrants.  Each broker warrant is exercisable into one Unit of the Company at a price per Unit of $0.70 for a period of (twenty-four) 24 months from the closing of the Offering.

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14. Segmented Information

6 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

14. Segmented Information

14.           Segmented Information

The Company is a specialty pharmaceutical company with a primary focus on the acquisition, licensing, development and promotion of healthcare products in Canada. The Company targets several therapeutic areas in Canada, but has a particular interest in products for the treatment of pain, dermatology and endocrinology/cardiology. The Company also sells Uracyst® and NeoVisc® internationally through a number of strategic partnerships. Currently, all of the Company’s manufacturing assets are located in Canada. All direct sales take place in Canada. Licensing arrangements have been obtained to distribute and sell the Company’s products in various countries around the world.

Revenue for the three and six month periods ended June 30, 2014 and 2013 includes products sold in Canada and international sales of products.  Revenue earned is as follows:

	For the Three Month Period Ended June 30				For the Six Month Period Ended June 30
Product sales:	2014		2013		2014		2013
Domestic sales	$	3,676,588	$	2,959,865	$	6,676,500	$	5,941,784
International sales		357,872		358,215		821,849		689,552
Other revenue		6,825		11,967		18,075		22,851
Total	$	4,041,285	$	3,330,047	$	7,516,424	$	6,654,187
Royalty  revenues	$	-	$	-	$	18,414	$	98,040
Total revenues	$	4,041,285	$	3,330,047	$	7,534,838	$	6,752,227

The Company currently sells its own products and is in-licensing other products in Canada.  In addition, revenues include products which the Company out-licenses throughout most countries in Europe, the Caribbean, Austria, Germany, Italy, Lebanon, Kuwait, Malaysia, Portugal, Romania, Spain, South Korea, Turkey, Egypt, Hong Kong and the United Arab Emirates. The operations reflected in the condensed interim statements of operations, comprehensive (loss) and deficit includes the Company’s activity in these markets.

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10. Contingencies and Commitments

6 Months Ended

Jun. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

10. Contingencies and Commitments

10.    Contingencies and Commitments

The Company has royalty, licensing and manufacturing agreements that have remained in effect for the Company during the quarter.  In addition, there were no material changes to the lease agreements during the period.

(a)      License Agreements

On December 1, 2011, the Company acquired 100% of the outstanding shares of Tribute Pharmaceuticals Canada Ltd. and Tribute Pharma Canada Inc.  Included in this transaction were the following license agreements:

On June 30, 2008, Tribute signed a Sales, Marketing and Distribution Agreement with Actavis Group PTC ehf (“Actavis”) to perform certain sales, marketing, distribution, finance and other general management services in Canada in connection with the importation, marketing, sales and distribution of Bezalip® SR and Soriatane® (the “Products”). On January 1, 2010, a first amendment was signed with Actavis to grant the Company the right and obligation to more actively market and promote the Products in Canada. On March 31, 2011, a second amendment was signed with Actavis that extended the term of the agreement, modified the terms of the agreement and increased the Company’s responsibilities to include the day-to-day management of regulatory affairs, pharmacovigilance and medical information relating to the Products. The Company pays Actavis a sales and distribution fee up to an annual base-line net sales forecast plus an incremental fee for incremental net sales above the base-line. On May 4, 2011, the Company signed a Product Development and Profit Share Agreement with Actavis to develop, obtain regulatory approval of and market Bezalip SR in the U.S. The Company shall pay US$5,000,000 ($5,338,000) to Actavis within 30 days of receipt of the regulatory approval to market Bezalip SR in the U.S.

On November 9, 2010, the Company signed a license agreement (the "License Agreement") with Nautilus Neurosciences, Inc. (“Nautilus”) for the exclusive rights to develop, register, promote, manufacture, use, market, distribute and sell Cambia® in Canada. On August 11, 2011, the Company and Nautilus executed the first amendment to the License Agreement and on September 30, 2012 executed the second amendment to the License Agreement. Aggregate payments of US$1,000,000 ($1,005,820) were issued under this agreement, which included an upfront payment to Nautilus upon the execution of the agreement an amount payable upon the first commercial sale of the product.  These payments have been included in intangible assets and will be amortized over the life of the License Agreement.  Up to US$6,000,000 ($6,405,600) in additional one-time performance based sales milestones, based on a maximum of six different sales tiers, are payable over time, due upon achieving annual net sales ranging from US$2,500,000 ($2,669,000) to US$20,000,000 ($21,352,000) in the first year of the achievement of the applicable milestone.  Royalty rates are tiered and payable at rates ranging from 22.5% to 25.0% of net sales.

On December 30, 2011, the Company signed a license agreement to commercialize MycoVa in Canada. As of June 30, 2014, this product has not been filed with Health Canada and to-date no upfront payments have been paid. Within 10 days of execution of a manufacturing agreement, the Company shall pay an up-front license fee of $200,000. Upon Health Canada approval the Company shall pay $400,000. Sales milestones payments of $250,000 each are based on the achievement of aggregate net sales in increments of $5,000,000. Royalties are payable at rates ranging from 20% to 25% of net sales.

On May 13, 2014, the Company entered into an exclusive license and supply agreement with Faes Farma, S.A. (“Faes”), a Spanish pharmaceutical company, for the exclusive right to sell bilastine, a product for the treatment of Allergic Rhinitis and Chronic Idiopathic Urticaria (hives) in Canada. The exclusive license is inclusive of prescription and non-prescription rights for bilastine, as well as adult and paediatric presentations in Canada. Sales of bilastine are subject to receiving regulatory approval from Health Canada. Payment for the licensing rights is based on an initial fee of €250,000 ($373,325) divided into two equal payments, one on signing €125,000 (($186,663) paid) and the second payment due before December 31, 2014 (€125,000 ($186,663) accrued at June 30, 2014). These payments have been included in intangible assets and will be amortized over the life of the license agreement.  Any remaining milestone payments based on the achievement of specific events, including regulatory and sales milestones of up to $3,643,525 (€1,466,600 ($2,143,525) and $1,500,000) are payable over time, beginning with an approval for bilastine from Health Canada. Thereafter, milestones are payable upon attainment of cumulative net sales targets, up to net sales of $60,000,000. 

(b)     Executive Termination Agreements

The Company currently has employment agreements with the provision of termination and change of control benefits with officers and executives of the Company. The agreements for the officers and executives provide that in the event that any of their employment is terminated during the initial term (i) by the Company for any reason other than just cause or death; (ii) by the Company because of disability; (iii) by the officer or executive for good reason; or (iv) following a change of control, the officer or executive shall be entitled to the balance of the remuneration owing for the remainder of the initial term of up to an aggregate amount of $854,616 as of June 30, 2014 (December 31, 2013 - $792,200) or if a change of control occurs subsequent to the initial term, while the officers or executives are employed on an indefinite basis, a lump sum payment of up to an aggregate amount of $1,909,616 (based on current base salaries).

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8. Loss Per Share

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

8. Loss Per Share

8. Loss Per Share

The treasury stock method assumes that proceeds received upon the exercise of all warrants and options outstanding in the period is used to repurchase the Company’s shares at the average share price during the period.  The diluted loss per share is not computed when the effect of such calculation is anti-dilutive.  In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive.  Potentially dilutive securities, which were not included in diluted weighted average shares for the three and six month periods ended June 30, 2014 and June 30, 2013, consist of outstanding stock options (5,139,070 and 4,183,752, respectively) and outstanding warrant grants (14,014,587 and 12,802,875, respectively).

The following table sets forth the computation of (loss) per share:

	For the Three Month Period Ended June 30						For the Six Month Period Ended June 30
Numerator:	2014			2013			2014			2013
Net (loss) available to common shareholders	$	(4,400,842	)	$	(985,702	)	$	(7,689,020	)	$	(3,702,459	)
Denominator:
Weighted average number of common shares		51,581,238			50,972,542			51,501,128			45,274,545
Effect of dilutive common shares		-			-			-			-
Diluted weighted average number of common shares outstanding		51,581,238			50,972,542			51,501,128			45,274,545
(Loss) per share – basic and diluted	$	(0.09	)	$	(0.02	)	$	(0.15	)	$	(0.08	)

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9. Statement of Cash Flows

6 Months Ended

Jun. 30, 2014

Supplemental Cash Flow Elements [Abstract]

9. Statement of Cash Flows

9. Statement of Cash Flows

Changes in non-cash balances related to operations are as follows:

		For the Six Months Ended June 30
		2014			2013
Accounts receivable	$	(1,355,477	)	$	114,198
Inventories		(14,068	)		120,378
Prepaid expenses and other receivables		(26,869	)		(109,939	)
Taxes recoverable		473,078			(143,483	)
Accounts payable and accrued liabilities		585,897			(1,554,688	)
	$	(337,439	)		(2,042,686	)

Included in accounts payable and accrued liabilities at the end of the six month period ended June 30, 2014, is an amount related to patents and licenses of $18,599 (December 31, 2013 - $14,365), an amount related to computer equipment of $695 (December 31, 2013 - $nil) and an amount related to license fees of $186,663 (€125,000) (December 31, 2013 - $nil).

During the six month period ended June 30, 2014, there was $502,829 (2013 - $168,003) in interest paid and $nil in taxes paid (2013 – $nil).

During the six month period ended June 30, 2014, there was $65,526 (2013 - $92,762) of non-cash debt issuance costs (see Note 6) expensed as amortization of assets.

During the six month period ended June 30, 2014, warrants were issued and valued at $120,914 in regards to the additional USD$2,000,000 ($2,211,000) advanced under the Credit Agreement (see Note 6).

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11. Significant Customers

6 Months Ended

Jun. 30, 2014

Risks and Uncertainties [Abstract]

11. Significant Customers

11.           Significant Customers

During the three month period ended June 30, 2014, the Company had three significant wholesale customers (2013 – two) that represented 68.9% (2013 – 55.0%) of product sales.

During the six month period ended June 30, 2014, the Company had three (2013 – two) significant wholesale customers that represented 67.4% (2013 – 57.5%) of product sales.

The Company believes that its relationship with these customers is satisfactory.

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17. Derivative Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2014

Derivative Financial Instruments

Notional principal and fair value of the Company's outstanding foreign currency derivative financial instruments

At June 30, 2014 and December 31, 2013, the notional principal and fair value of the Company’s outstanding foreign currency derivative financial instruments were as follows:

	June 30, 2014					December 31, 2013
	Notional Principal		Fair Value			Notional Principal		Fair Value
Foreign currency sold – call options	USD$	6,000,000	$	(189,430	)	USD$	5,000,000	$	(38,156	)

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11. Significant Customers (Details Narrative)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Risk percentage	68.90%	55.00%	67.40%	57.50%
Major customer
Concentration Risk, Customer	3	2	3	2

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16. Financial Instruments

6 Months Ended

Jun. 30, 2014

Investments, All Other Investments [Abstract]

16. Financial Instruments

16.           Financial Instruments

(a)  Financial assets and liabilities – fair values

The carrying amounts of cash and cash equivalents, accounts receivable, certain other current assets, accounts payables and accrued liabilities are a reasonable estimate of their fair values because of the short maturity of these instruments.

Warrant liability and other current liability are financial liabilities where fluctuations in market rates will affect the fair value of these financial instruments.  The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted prices in active markets for identical assets or liabilities.

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.

Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

Cash equivalents, warrant liability and other current liability are classified as Level 2 financial instruments within the fair value hierarchy.

(b)  Liquidity risk

The Company generates sufficient cash from operating and financing activities to fund its operations and fulfill its obligations as they become due.  The Company has sufficient funds available through its cash, cash equivalents, and financing arrangements, should its cash requirements exceed cash generated from operations to cover financial liability obligations.  The Company’s investment policy is to invest excess cash resources into highly liquid short-term investments purchased with an original maturity of three months or less with tier one financial institutions.  As at June 30, 2014, there were no restrictions on the flow of these funds nor have any of these funds been committed in any way, except as outlined in the detailed notes.

In the normal course of business, management considers various alternatives to ensure that we can meet some of our operating cash flow requirements through financing activities, such as private placements of our common stock, preferred stock offerings and offerings of debt and convertible debt instruments as well as through merger or acquisition opportunities. Management may also consider strategic alternatives, including strategic investments and divestitures. As future operations may be financed out of funds generated from financing activities, the Company’s ability to do so is dependent on, among other factors, the overall state of capital markets and investor appetite for investments in the pharmaceutical industry and our securities in particular. Should we elect to satisfy our cash commitments through the issuance of securities, by way of either private placement or public offering or otherwise, there can be no assurance that our efforts to obtain such additional funding will be successful, or achieved on terms favorable to us or our existing shareholders. If adequate funds are not available on terms favorable to us, we may have to reduce substantially or eliminate expenditures such as promotion, marketing or production of our current or proposed products, or obtain funds through other sources such as divestiture or monetization of certain assets or sublicensing (where permitted) of certain rights to certain of our technologies or products.            

(c)  Concentration of credit risk and major customers

The Company considers its maximum credit risk to be $1,963,057 (December 31, 2013 - $607,580). This amount is the total of the following financial assets: accounts receivable and loan receivable. The Company’s cash and cash equivalents are held through various high grade financial institutions.

The Company is exposed to credit risk from its customers and continually monitors its customers’ credit.  It establishes the provision for doubtful accounts based upon the credit risk applicable to each customer.  In line with other pharmaceutical companies, the Company sells its products through a small number of wholesalers and retail pharmacy chains in addition to hospitals, pharmacies, physicians and other groups. Note 11 discloses the significant customer details and the Company believes that the concentrations on the Company’s customers are considered normal for the Company and its industry.

As at June 30, 2014, the Company had two customers which made up 58.1% of the outstanding accounts receivable in comparison to three customers which made up 38.4% at December 31, 2013. As at June 30, 2014, all outstanding accounts receivable were related to product sales, of which $1,136,912 or 58.1% was related to two wholesale accounts.  As at December 31, 2013 all outstanding accounts receivables were related to product sales, of which $63,722 or 10.8% were related to one wholesale account and $163,220 or 27.6% was related to two international customers.

(d)  Foreign exchange risk

The Company principally operates within Canada; however, a portion of the Company’s revenues, expenses, and current assets and liabilities, are denominated in United States dollars and the EURO. The Company’s long term debt is repayable in U.S. dollars, which exposes the Company to foreign exchange risk due to changes in the value of the Canadian dollar. As at June 30, 2014, a 5% change in the foreign exchange rate would increase/decrease the long term debt balance by $400,000 and would increase/decrease both interest expense and net loss by approximately $28,300 for the six month period ended June 30, 2014.

(e)  Interest rate risk

The Company is exposed to interest rate fluctuations on its cash and cash equivalents as well as its long term debt. At June 30, 2014, the Company had an outstanding long term debt balance of US$8,000,000 ($8,540,800), which bears interest annually at a rate of 11.5% plus the Libor Rate with the Libor Rate being subject to a minimum floor of 2%, such that that minimum interest rate is 13.5%, which may expose the Company to market risk due to changes in interest rates. For the six month period ended June 30, 2014, a 1% increase in interest rates would increase interest expense and net loss by approximately $42,700. However, based on current LIBOR interest rates, which are currently under the minimum floor set at 2% and based on historical movements in LIBOR rates, the Company believes a near-term change in interest rates would not have a material adverse effect on the financial position or results of operations.

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3. Prepaid Expenses and Other Receivables (Tables)

6 Months Ended

Jun. 30, 2014

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Schedule of Prepaid Expenses and Other Receivables

	June 30,  2014		December 31, 2013
Prepaid operating expenses	$	186,455	$	140,986
Deposits		-		18,825
Interest receivable on loan receivables		6,300		6,075
	$	192,755	$	165,886

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9. Statement of Cash Flows (Details Narrative) (CAD)	6 Months Ended			12 Months Ended	6 Months Ended	12 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014 Patents and licenses	Dec. 31, 2013 Patents and licenses	Jun. 30, 2014 Computer equipment	Dec. 31, 2013 Computer equipment	Jun. 30, 2014 License fees	Dec. 31, 2013 License fees
Accounts payable and accrued liabilities	585,897	(1,554,688)	18,599	14,365	695	0	186,663	0
Interest paid	502,829	168,003
Taxes paid		0
Non-cash debt issuance costs	65,526	92,762
Warrants issued, value	120,914
Warrants issued under credit agreement, value	2,211,000

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6. Long Term Debt and Debt Issuance Costs (Details Narrative) (CAD)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Debt Disclosure [Abstract]
Non-cash accretion expense	34,409	22,984	65,526	47,229
Legal Fees	128,425
Long term debt issued			2,211,000
Non-cash interest expense	27,854	38,795	52,619	92,762
Principal payments			0		3,386,630
Interest payments			502,829		422,341

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CONDENSED INTERIM STATEMENTS OF CASH FLOWS (Unaudited) (CAD)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Cash flows from (used in) operating activities
Net (loss)	(7,689,020)	(3,702,459)
Items not affecting cash:
Deferred income tax (recovery)		(314,900)
Amortization	598,789	673,579
Changes in warrant liability (Note 7c)	4,617,749	850,475
Stock-based compensation (Note 7b)	217,076	289,969
Accretion expense	65,526	47,229
Paid-in common shares for services (Note 7a)	211,812
Change in non-cash operating assets and liabilities (Note 9)	(337,439)	(2,042,686)
Cash flows (used in) operating activities	(2,315,507)	(4,198,793)
Cash flows from (used in) investing activities
Additions to property, plant and equipment	(6,525)	(19,996)
Payment of contingent liability		(460,000)
Increase in intangible assets	(222,727)	(6,780)
Cash flows (used in) investing activities	(229,252)	(486,776)
Cash flows from (used in) financing activities
Financing costs deferred	(128,181)
Long term debt issued (Note 6)	2,211,000
Units issued		4,662,700
Long term debt repayment		(663,939)
Share issuance costs		(428,857)
Cash flows from financing activities	2,082,819	3,569,904
Changes in cash and cash equivalents	(461,940)	(1,115,665)
Change in cash and cash equivalents due to changes in foreign exchange	(49,499)	152,466
Cash and cash equivalents, beginning of period	2,813,472	2,283,868
Cash and cash equivalents, end of period	2,302,033	1,320,669

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5. Intangible Assets

6 Months Ended

Jun. 30, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

5. Intangible Assets

5. Intangible Assets

	June 30, 2014
	Cost		Accumulated Amortization		Net Carrying Amount
Patents	$	304,850	$	45,301	$	259,549
Licensing asset		1,005,820		135,399		870,421
Licensing agreements		10,377,325		1,885,104		8,492,221
	$	11,687,995	$	2,065,804	$	9,622,191

	December 31, 2013
	Cost		Accumulated Amortization		Net Carrying Amount
Patents	$	268,786	$	39,562	$	229,224
Licensing asset		1,005,820		96,713		909,107
Licensing agreements		10,004,000		1,425,158		8,578,842
	$	11,278,606	$	1,561,433	$	9,717,173

Amortization expense of intangible assets for the three and six month periods ended June 30, 2014 was $252,185 and $504,371, respectively (2013 - $262,574 and $525,114, respectively).

The Company has patents pending of $148,265 at June 30, 2014 (December 31, 2013 - $112,902) and licensing agreements of $373,325 (December 31, 2013 - $nil) not currently being amortized.

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4. Property, Plant and Equipment (Tables)

6 Months Ended

Jun. 30, 2014

Property, Plant and Equipment [Abstract]

Schedule of Property, Plant and Equipment

	June 30, 2014
	Cost		Accumulated Amortization		Net Carrying Amount
Land	$	90,000	$	-	$	90,000
Building		618,254		285,342		332,912
Leasehold improvements		10,359		3,626		6,733
Office equipment		61,308		50,313		10,995
Manufacturing equipment		1,103,525		586,366		517,159
Warehouse equipment		17,085		17,071		14
Packaging equipment		111,270		56,919		54,351
Computer equipment		136,639		94,157		42,482
	$	2,148,440	$	1,093,794	$	1,054,646

	December 31, 2013
	Cost		Accumulated Amortization		Net Carrying Amount
Land	$	90,000	$	-	$	90,000
Building		618,254		269,886		348,368
Leasehold improvements		10,359		2,590		7,769
Office equipment		61,308		48,299		13,009
Manufacturing equipment		1,103,525		576,862		526,663
Warehouse equipment		17,085		16,737		348
Packaging equipment		111,270		51,700		59,570
Computer equipment		130,114		85,922		44,192
	$	2,141,915	$	1,051,996	$	1,089,919

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5. Intangible Assets (Details) (CAD)	Jun. 30, 2014	Dec. 31, 2013
Cost	11,687,995	11,278,606
Accumulated Amortization	2,065,804	1,561,433
Net Carrying Amount	9,622,191	9,717,173
Patents
Cost	304,850	268,786
Accumulated Amortization	45,301	39,562
Net Carrying Amount	259,549	229,224
Licensing asset
Cost	1,005,820	1,005,820
Accumulated Amortization	135,399	96,713
Net Carrying Amount	870,421	909,107
Licensing agreements
Cost	10,377,325	10,004,000
Accumulated Amortization	1,885,104	1,425,158
Net Carrying Amount	8,492,221	8,578,842

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15. Foreign Currency Gain (Loss)

6 Months Ended

Jun. 30, 2014

Foreign Currency [Abstract]

15. Foreign Currency Gain (Loss)

15.           Foreign Currency Gain (Loss)

The Company enters into foreign currency transactions in the normal course of business. Expenses incurred in currencies other than Canadian dollars are therefore subject to gains or losses due to fluctuations in these currencies. As at June 30, 2014, the Company held cash of $987,955 (US$771,927 and €112,108) in denominations other than in Canadian dollars (December 31, 2013 - $1,211,602 (US$1,134,686 and €747)); had accounts receivables of $320,233 (US$81,998 and €159,214) denominated in foreign currencies (December 31, 2013 - $258,027 (US$51,395 and €138,964); had accounts payable and accrued liabilities of $235,258 (US$48,482 and €125,555) denominated in foreign currencies (December 31, 2013 – $115,373 (US$72,693 and €25,969)); warrant liability of $7,705,377 (US$7,217,476) (December 31, 2013 - $2,966,714 (US$2,789,315)); and long term debt of $8,540,800 (US$8,000,000) (December 31, 2013 - $6,381,600 (US$6,000,000)). For the three and six month periods ended June 30, 2014, the Company had a foreign currency gain (loss) of $(10,506) and $185,559, respectively (2013 – loss of $27,804 and $96,264, respectively). These amounts have been included in selling, general and administrative expenses in the condensed interim statements of operations, comprehensive (loss) and deficit.