Lorus Therapeutics Inc.
|
||
Date: August 29, 2011
|
By: | /s/ “Elizabeth Williams” |
Elizabeth Williams | ||
Director of Finance and Controller |
99.1 |
Audited Consolidated Financial Statments for the year ended May 31, 2011
|
99.2 |
Management’s Discussion and Analysis for the year ended May 31, 2011
|
99.3 |
Annual Information Form
|
99.4 |
CEO/CFO Certification
|
![]() |
KPMG LLP
Chartered Accountants
Adelaide Centre
333 Bay Street Suite 4600
Toronto ON M5H 2S5
Canada
|
Telephone (416) 777-8500
Fax (416) 777-8818
Internet www.kpmg.ca
|
KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity.
KPMG Canada provides services to KPMG LLP.
|
2011
|
2010
|
|||||||
Assets
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents (note 9)
|
$ | 911 | $ | 667 | ||||
Short-term investments (notes 4 and 9)
|
– | 247 | ||||||
Prepaid expenses and other assets
|
388 | 636 | ||||||
1,299 | 1,550 | |||||||
Fixed assets (note 5)
|
99 | 147 | ||||||
Goodwill
|
606 | 606 | ||||||
$ | 2,004 | $ | 2,303 | |||||
Liabilities and Shareholders' Equity (Deficiency)
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 215 | $ | 387 | ||||
Accrued liabilities
|
944 | 1,458 | ||||||
Promissory note payable (note 16)
|
– | 1,000 | ||||||
1,159 | 2,845 | |||||||
Shareholders' equity (deficiency):
|
||||||||
Share capital (note 6):
|
||||||||
Common shares
|
168,787 | 163,920 | ||||||
Stock options
|
1,156 | 3,704 | ||||||
Contributed surplus
|
18,988 | 14,875 | ||||||
Warrants
|
1,032 | 1,039 | ||||||
Deficit accumulated during development stage
|
(189,118 | ) | (184,080 | ) | ||||
845 | (542 | ) | ||||||
Basis of presentation (note 1)
|
||||||||
Contingencies, commitments and guarantees (note 14)
|
||||||||
Subsequent events (note 17)
|
||||||||
$ | 2,004 | $ | 2,303 |
Period from
|
||||||||||||||||
inception on
|
||||||||||||||||
September 5,
|
||||||||||||||||
1986 to
|
||||||||||||||||
Years ended May 31, |
May 31,
|
|||||||||||||||
2011
|
2010
|
2009
|
2011
|
|||||||||||||
Revenue
|
$ | – | $ | 131 | $ | 184 | $ | 1,171 | ||||||||
Expenses:
|
||||||||||||||||
Research and development (note 11)
|
2,298 | 2,517 | 3,757 | 128,812 | ||||||||||||
General and administrative
|
2,101 | 2,964 | 2,958 | 62,940 | ||||||||||||
Stock-based compensation (note 7)
|
526 | 176 | 446 | 9,120 | ||||||||||||
Depreciation and amortization of fixed assets
|
56 | 86 | 189 | 9,873 | ||||||||||||
Cost of sales
|
– | – | – | 105 | ||||||||||||
4,981 | 5,743 | 7,350 | 210,850 | |||||||||||||
Other expenses (income):
|
||||||||||||||||
Interest
|
71 | 54 | 707 | 4,093 | ||||||||||||
Accretion in carrying value of convertible debentures (note 13)
|
– | 80 | 1,707 | 4,983 | ||||||||||||
Amortization of deferred financing costs (note 13)
|
– | – | – | 412 | ||||||||||||
Interest
|
(14 | ) | (21 | ) | (270 | ) | (12,271 | ) | ||||||||
57 | 113 | 2,144 | (2,783 | ) | ||||||||||||
Loss from operations
|
(5,038 | ) | (5,725 | ) | (9,310 | ) | (206,896 | ) | ||||||||
|
||||||||||||||||
Gain on repurchase of convertible debentures and transfer of assets (note 13)
|
– | 11,006 | – | 11,006 | ||||||||||||
Gain on sale of shares (notes 1(b) and 14)
|
– | 50 | 450 | 6,799 | ||||||||||||
Net (loss) earnings for the period and other comprehensive (loss) income
|
$ | (5,038 | ) | $ | 5,331 | $ | (8,860 | ) | $ | (189,091 | ) | |||||
Basic and diluted (loss) earnings per common share
|
$ | (0.38 | ) | $ | 0.57 | $ | (1.08 | ) | ||||||||
Weighted average number of common shares outstanding used in the calculation of (in thousands):
|
||||||||||||||||
Basic (loss) earnings per share
|
13,157 | 9,364 | 8,236 | |||||||||||||
Diluted (loss) earnings per share
|
13,157 | 9,379 | 8,236 |
Period from
|
||||||||||||||||
inception on
|
||||||||||||||||
September 5,
|
||||||||||||||||
1986 to
|
||||||||||||||||
Years ended May 31, |
May 31,
|
|||||||||||||||
2011
|
2010
|
2009
|
2011
|
|||||||||||||
Deficit, beginning of period, as previously reported
|
$ | (184,080 | ) | $ | (189,411 | ) | $ | (180,551 | ) | $ | – | |||||
Change in accounting policy
|
– | – | – | (27 | ) | |||||||||||
Deficit, beginning of period, as restated
|
(184,080 | ) | (189,411 | ) | (180,551 | ) | (27 | ) | ||||||||
Net (loss) earnings for the period
|
(5,038 | ) | 5,331 | (8,860 | ) | (189,091 | ) | |||||||||
Deficit, end of period
|
$ | (189,118 | ) | $ | (184,080 | ) | $ | (189,411 | ) | $ | (189,118 | ) |
Period from
|
||||||||||||||||
inception on
|
||||||||||||||||
September 5,
|
||||||||||||||||
1986 to
|
||||||||||||||||
Years ended May 31,
|
May 31,
|
|||||||||||||||
2011
|
2010
|
2009
|
2011
|
|||||||||||||
Cash flows from operating activities:
|
||||||||||||||||
Net (loss) earnings for the period
|
$ | (5,038 | ) | $ | 5,331 | $ | (8,860 | ) | $ | (189,091 | ) | |||||
Items not involving cash:
|
||||||||||||||||
Gain on repurchase of convertible debentures and transfer of assets (note 13)
|
– | (11,006 | ) | – | (11,006 | ) | ||||||||||
Gain on sale of shares (notes 1(b) and 14)
|
– | (50 | ) | (450 | ) | (6,799 | ) | |||||||||
Stock-based compensation
|
526 | 176 | 446 | 9,120 | ||||||||||||
Interest on convertible debentures
|
– | 15 | 707 | 3,983 | ||||||||||||
Accretion in carrying value of convertible debentures
|
– | 80 | 1,707 | 4,983 | ||||||||||||
Amortization of deferred financing costs
|
– | – | – | 412 | ||||||||||||
Depreciation and amortization of fixed assets and acquired patents and licenses
|
56 | 86 | 189 | 22,434 | ||||||||||||
Other
|
– | (8 | ) | (10 | ) | 437 | ||||||||||
Change in non-cash operating working capital (note 12)
|
(1,438 | ) | 1,655 | (942 | ) | (237 | ) | |||||||||
Cash used in operating activities
|
(5,894 | ) | (3,721 | ) | (7,213 | ) | (165,764 | ) | ||||||||
Cash flows from financing activities:
|
||||||||||||||||
Issuance of debentures, net of
|
||||||||||||||||
issuance costs
|
– | – | – | 12,948 | ||||||||||||
Payment on settlement of convertible debentures, including transaction costs (note 13)
|
– | (3,521 | ) | – | (3,521 | ) | ||||||||||
Proceeds on sale of shares, net of arrangement costs (note 14(d))
|
– | – | 600 | 6,899 | ||||||||||||
Issuance of common shares and warrants, net of issuance costs (note 6)
|
5,899 | 2,287 | 3,207 | 157,571 | ||||||||||||
Cash provided by (used in) financing activities
|
5,899 | (1,234 | ) | 3,807 | 173,897 | |||||||||||
Cash flows from investing activities:
|
||||||||||||||||
Maturity (purchase) of investments, net
|
247 | 250 | 6,304 | (3 | ) | |||||||||||
Business acquisition, net of cash received
|
– | – | – | (539 | ) | |||||||||||
Acquired patents and licenses
|
– | – | – | (715 | ) | |||||||||||
Additions to fixed assets
|
(8 | ) | (2 | ) | (176 | ) | (6,313 | ) | ||||||||
Proceeds on sale of fixed assets
|
– | – | – | 348 | ||||||||||||
Cash provided by (used in) investing activities
|
239 | 248 | 6,128 | (7,222 | ) | |||||||||||
Increase (decrease) in cash and cash equivalents
|
244 | (4,707 | ) | 2,722 | 911 | |||||||||||
Cash and cash equivalents, beginning of period
|
667 | 5,374 | 2,652 | – | ||||||||||||
Cash and cash equivalents, end of period
|
$ | 911 | $ | 667 | $ | 5,374 | $ | 911 |
1.
|
Basis of presentation:
|
|
(a)
|
Going concern:
|
1.
|
Basis of presentation (continued):
|
|
(b)
|
Reorganization:
|
1.
|
Basis of presentation (continued):
|
|
(c)
|
Share consolidation:
|
2.
|
Changes in accounting policies:
|
3.
|
Significant accounting policies:
|
|
(a)
|
Principles of consolidation:
|
|
(b)
|
Revenue recognition:
|
3.
|
Significant accounting policies (continued):
|
|
(c)
|
Financial instruments:
|
|
(i)
|
Cash and cash equivalents:
|
|
(ii)
|
Short-term investments:
|
3.
|
Significant accounting policies (continued):
|
|
(iii)
|
Accounts payable and accrued liabilities:
|
|
(iv)
|
Secured convertible debentures:
|
|
(v)
|
Embedded derivatives:
|
3.
|
Significant accounting policies (continued):
|
|
(vi)
|
Transaction costs:
|
|
(vii) Fair value hierarchy:
|
|
•
|
Level 1 - applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
|
|
•
|
Level 2 - applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
|
|
•
|
Level 3 - applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
|
3.
|
Significant accounting policies (continued):
|
|
(d)
|
Fixed assets:
|
Furniture and equipment
|
Over 3 to 5 years
|
|
(e)
|
Research and development:
|
|
(f)
|
Goodwill:
|
3.
|
Significant accounting policies (continued):
|
|
(g)
|
Impairment of long-lived assets:
|
|
(h)
|
Stock-based compensation:
|
3.
|
Significant accounting policies (continued):
|
|
(i)
|
Investment tax credits:
|
3.
|
Significant accounting policies (continued):
|
|
(j)
|
Income taxes:
|
|
(k)
|
(Loss) earnings per share:
|
|
(l)
|
Segmented information:
|
|
(m)
|
Foreign currency translation:
|
3.
|
Significant accounting policies (continued):
|
|
(n)
|
Use of estimates:
|
|
(o)
|
Recent Canadian accounting pronouncements not yet adopted:
|
4.
|
Short-term investments:
|
Less than
|
Greater than
|
|||||||||||||||
one year
|
one year
|
Yield to
|
||||||||||||||
2011
|
maturities
|
maturities
|
Total
|
maturity
|
||||||||||||
|
||||||||||||||||
Corporate investments (guaranteed investment certificates)
|
$ | – | $ | – | $ | – | – |
Less than
|
Greater than
|
|||||||||||||||
one year
|
one year
|
Yield to
|
||||||||||||||
2010
|
maturities
|
maturities
|
Total
|
maturity
|
||||||||||||
|
||||||||||||||||
Corporate investments (guaranteed investment certificates)
|
$ | 247 | $ | – | $ | 247 | – |
5.
|
Fixed assets:
|
Accumulated
|
||||||||||||
depreciation
|
||||||||||||
and
|
Net book
|
|||||||||||
2011
|
Cost
|
amortization
|
value
|
|||||||||
Furniture and equipment
|
$ | 2,914 | $ | 2,815 | $ | 99 |
Accumulated
|
||||||||||||
depreciation
|
||||||||||||
and
|
Net book
|
|||||||||||
2010
|
Cost
|
amortization
|
value
|
|||||||||
Furniture and equipment
|
$ | 2,907 | $ | 2,760 | $ | 147 |
6.
|
Share capital:
|
|
(a)
|
Continuity of common shares and warrants:
|
Common shares
|
Warrants
|
|||||||||||||||
Number
|
Amount
|
Number
|
Amount
|
|||||||||||||
(In thousands)
|
(In thousands)
|
|||||||||||||||
Balance, May 31, 2008
|
7,255 | $ | 158,743 | – | $ | – | ||||||||||
Interest payments (note 13)
|
354 | 707 | – | – | ||||||||||||
Issuance of units (b)
|
951 | 2,790 | 571 | 417 | ||||||||||||
Balance, May 31, 2009
|
8,560 | 162,240 | 571 | 417 | ||||||||||||
Interest payments (note 13)
|
7 | 15 | – | – | ||||||||||||
Issuance of units (b)
|
1,366 | 1,665 | 755 | 622 | ||||||||||||
Balance, May 31, 2010
|
9,933 | 163,920 | 1,326 | 1,039 | ||||||||||||
Expiry of warrants (c)
|
– | – | (571 | ) | (417 | ) | ||||||||||
Issuance of units (b)
|
4,170 | 3,226 | 4,170 | 1,032 | ||||||||||||
Issuance of units (b)
|
1,582 | 1,641 | – | – | ||||||||||||
Expiry of warrants (c)
|
– | – | (755 | ) | (622 | ) | ||||||||||
Balance, May 31, 2011
|
15,685 | $ | 168,787 | 4,170 | $ | 1,032 |
|
(b)
|
Share issuances:
|
6.
|
Share capital (continued):
|
6.
|
Share capital (continued):
|
6.
|
Share capital (continued):
|
|
(c)
|
Expiry of warrants:
|
6.
|
Share capital (continued):
|
|
(d)
|
Contributed surplus:
|
2011
|
2010
|
2009
|
||||||||||
Balance, beginning of year
|
$ | 14,875 | $ | 10,744 | $ | 9,181 | ||||||
Cancellation and forfeiture of stock options (note 7)
|
3,074 | 317 | 1,563 | |||||||||
Expiry of warrants
|
1,039 | – | – | |||||||||
Equity portion of secured convertible debenture (note 13)
|
– | 3,814 | – | |||||||||
Balance, end of year
|
$ | 18,988 | $ | 14,875 | $ | 10,744 |
|
(e)
|
Continuity of stock options:
|
2011
|
2010
|
2009
|
||||||||||
Balance, beginning of the year
|
$ | 3,704 | $ | 3,845 | $ | 4,961 | ||||||
Stock option expense
|
526 | 176 | 446 | |||||||||
Cancellation and forfeiture of stock options (note 7)
|
(3,074 | ) | (317 | ) | (1,562 | ) | ||||||
Balance, end of year
|
$ | 1,156 | $ | 3,704 | $ | 3,845 |
|
(f)
|
Alternate compensation plans:
|
6.
|
Share capital (continued):
|
|
(g)
|
Employee share purchase plan:
|
|
(h)
|
Earnings per share:
|
7.
|
Stock-based compensation:
|
2011
|
2010
|
2009
|
||||||||||||||||||||||
Weighted
|
Weighted
|
Weighted
|
||||||||||||||||||||||
average
|
average
|
average
|
||||||||||||||||||||||
exercise
|
exercise
|
exercise
|
||||||||||||||||||||||
Options
|
price
|
Options
|
price
|
Options
|
price
|
|||||||||||||||||||
Outstanding, beginning of year
|
672,901 | $ | 6.60 | 562,358 | $ | 8.66 | 547,874 | $ | 13.52 | |||||||||||||||
Granted
|
1,049,700 | 1.01 | 189,406 | 2.41 | 170,807 | 3.39 | ||||||||||||||||||
Forfeited
|
(537,023 | ) | 6.76 | (78,863 | ) | 11.24 | (156,323 | ) | 19.94 | |||||||||||||||
Outstanding, end of year
|
1,185,578 | 1.58 | 672,901 | 6.60 | 562,358 | 8.66 | ||||||||||||||||||
Exercisable, end of year
|
662,316 | $ | 1.99 | 439,452 | $ | 8.54 | 323,555 | $ | 11.39 | |||||||||||||||
7.
|
Stock-based compensation (continued):
|
Options outstanding
|
Options exercisable
|
|||||||||||||||
Weighted
|
||||||||||||||||
average
|
Weighted
|
Weighted
|
||||||||||||||
remaining
|
average
|
average
|
||||||||||||||
Range of
|
contractual
|
exercise
|
exercise
|
|||||||||||||
exercise prices
|
Options
|
life (years)
|
price
|
Options
|
price
|
|||||||||||
$0.89 - $ 1.05 | 1,005,740 | 9.6 | $ | 1.00 | 502,870 | $ | 1.00 | |||||||||
$1.06 - $ 4.99 | 103,329 | 7.7 | 2.61 | 82,937 | 2.62 | |||||||||||
$5.00 - $18.00 | 76,509 | 5.5 | 7.74 | 76,509 | 7.74 | |||||||||||
1,185,578 | 9.2 | 1.58 | 662,316 | 1.99 |
2011
|
2010
|
2009
|
|
Risk-free interest rate
|
1.50% - 1.85%
|
2.44% - 2.60%
|
2.00% - 3.50%
|
Expected volatility
|
117% - 119%
|
82% - 124%
|
76%
|
Expected dividend yield
|
–
|
–
|
–
|
Expected life of options
|
5 years
|
5 years
|
5 years
|
Weighted average fair value of options granted or modified during the year
|
$0.83
|
$1.43
|
$2.16
|
8.
|
Capital risk management:
|
|
(a)
|
maintain its ability to continue as a going concern in order to provide returns to shareholders and benefits to other stakeholders;
|
|
(b)
|
maintain a flexible capital structure which optimizes the cost of capital at acceptable risk; and
|
|
(c)
|
ensure sufficient cash resources to fund its research and development activity, to pursue partnership and collaboration opportunities and to maintain ongoing operations.
|
9.
|
Financial instruments and risk management:
|
|
(a)
|
Financial instruments:
|
2011
|
2010
|
|||||||
Financial assets:
|
||||||||
Cash and cash equivalents, consisting of term deposits and guaranteed investment certificates at fair value
|
$ | 911 | $ | 667 | ||||
Short-term investments, held-for-trading, recorded at fair value
|
– | 247 | ||||||
Financial liabilities:
|
||||||||
Accounts payable, measured at amortized cost
|
215 | 387 | ||||||
Accrued liabilities, measured at amortized cost
|
944 | 1,458 | ||||||
Promissory note payable, measured at amortized cost
|
– | 1,000 |
9.
|
Financial instruments and risk management (continued):
|
2011
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Assets:
|
||||||||||||||||
Cash and cash equivalents
|
$ | 911 | $ | – | $ | – | $ | 911 | ||||||||
Short-term investments, consisting of guaranteed investment certificates
|
– | – | – | – | ||||||||||||
$ | 911 | $ | – | $ | – | $ | 911 | |||||||||
2010
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Assets:
|
||||||||||||||||
Cash and cash equivalents
|
$ | 667 | $ | – | $ | – | $ | 667 | ||||||||
Short-term investments, consisting of guaranteed investment certificates
|
247 | – | – | 247 | ||||||||||||
$ | 914 | $ | – | $ | – | $ | 914 |
|
(b)
|
Financial risk management:
|
|
(i)
|
Credit risk:
|
9.
|
Financial instruments and risk management (continued):
|
|
(ii)
|
Liquidity risk:
|
|
(iii)
|
Market risk:
|
9.
|
Financial instruments and risk management (continued):
|
10.
|
Income taxes:
|
2011
|
2010
|
|||||||
Non-capital loss carryforwards
|
$ | 2,918 | $ | 2,197 | ||||
Research and development expenditures
|
4,596 | 4,237 | ||||||
Fixed assets book over tax depreciation
|
529 | 529 | ||||||
Intangible asset
|
3,139 | 3,115 | ||||||
Ontario harmonization tax credit
|
302 | 347 | ||||||
Ontario Research and Development Tax Credit
|
228 | 172 | ||||||
Future tax assets
|
11,712 | 10,597 | ||||||
Valuation allowance
|
(11,712 | ) | (10,597 | ) | ||||
$ | – | $ | – |
10.
|
Income taxes (continued):
|
2015
|
$ | 10 | ||
2026
|
11 | |||
2027
|
4 | |||
2028
|
4,994 | |||
2029
|
3,753 | |||
2030
|
16 | |||
2031
|
2,883 | |||
$ | 11,671 |
10.
|
Income taxes (continued):
|
2011
|
2010
|
2009
|
||||||||||
Income tax expense (recovery) based on statutory rate of 29.5% (2010 - 32.6%, 2009 - 33.3%)
|
$ | (1,488 | ) | $ | 1,738 | $ | (2,950 | ) | ||||
Expiry of losses
|
– | 46 | 247 | |||||||||
Change in valuation allowance
|
1,116 | (1,552 | ) | 3,068 | ||||||||
Non-deductible accretion, stock-based compensation and capital gains
|
164 | (1,694 | ) | 582 | ||||||||
Ontario harmonization tax credit
|
– | – | (260 | ) | ||||||||
Change in substantively enacted tax rates
|
199 | 1,643 | 299 | |||||||||
Adjustment of prior year research and development expenditures
|
– | – | (856 | ) | ||||||||
Other
|
9 | (181 | ) | (130 | ) | |||||||
$ | – | $ | – | $ | – |
11.
|
Research and development programs:
|
|
•
|
small molecule therapies based on anti-angiogenic, anti-proliferative and anti-metastatic agents;
|
|
•
|
RNA-targeted (antisense and siRNA) therapies, based on synthetic segments of DNA or RNA designed to bind to the messenger RNA that is responsible for the production of proteins over-expressed in cancer cells; and
|
|
•
|
immunotherapy, based on macrophage-stimulating biological response modifiers.
|
11.
|
Research and development programs (continued):
|
|
(a)
|
Small Molecule Program:
|
|
(b)
|
RNA-Targeted Therapies:
|
|
(c)
|
Immunotherapy:
|
11.
|
Research and development programs (continued):
|
Period from
|
||||||||||||||||
inception on
|
||||||||||||||||
September 5,
|
||||||||||||||||
1986 to
|
||||||||||||||||
Years ended May 31, |
May 31,
|
|||||||||||||||
2011
|
2010
|
2009
|
2011
|
|||||||||||||
Small molecules:
|
||||||||||||||||
Expensed
|
$ | 1,672 | $ | 1,572 | $ | 2,634 | $ | 16,085 | ||||||||
Acquired
|
– | – | – | 1,228 | ||||||||||||
RNA-Targeted Therapies:
|
||||||||||||||||
Expensed
|
626 | 945 | 1,123 | 37,530 | ||||||||||||
Acquired
|
– | – | – | 11,000 | ||||||||||||
Immunotherapy:
|
||||||||||||||||
Expensed
|
– | – | – | 75,197 | ||||||||||||
Total expensed
|
$ | 2,298 | $ | 2,517 | $ | 3,757 | $ | 128,812 | ||||||||
Total acquired
|
$ | – | $ | – | $ | – | $ | 12,228 |
12.
|
Supplemental cash flow and other information:
|
Period from
|
||||||||||||||||
inception on
|
||||||||||||||||
September 5,
|
||||||||||||||||
1986 to
|
||||||||||||||||
Years ended May 31, |
May 31,
|
|||||||||||||||
2011
|
2010
|
2009
|
2011
|
|||||||||||||
Prepaid expenses and other assets
|
$ | 248 | $ | 190 | $ | (105 | ) | $ | 188 | |||||||
Accounts payable
|
(172 | ) | 88 | (624 | ) | (1,029 | ) | |||||||||
Accrued liabilities
|
(514 | ) | 377 | (213 | ) | 604 | ||||||||||
Promissory note payable
|
(1,000 | ) | 1,000 | – | – | |||||||||||
$ | (1,438 | ) | $ | 1,655 | $ | (942 | ) | $ | (237 | ) |
13.
|
Convertible debentures:
|
13.
|
Convertible debentures (continued):
|
13.
|
Convertible debentures (continued):
|
14.
|
Contingencies, commitments and guarantees:
|
|
(a)
|
Operating lease commitments:
|
|
(b)
|
Other contractual commitments:
|
14.
|
Contingencies, commitments and guarantees (continued):
|
|
(c)
|
Guarantees:
|
14.
|
Contingencies, commitments and guarantees (continued):
|
|
(d)
|
Indemnification on Arrangement:
|
|
(i)
|
prior to, at or after the effective time of the Arrangement ("Effective Time") and directly or indirectly relating to any of the assets of Old Lorus transferred to the Company pursuant to the Arrangement (including losses for income, sales, excise and other taxes arising in connection with the transfer of any such asset) or conduct of the business prior to the Effective Time;
|
|
(ii)
|
prior to, at or after the Effective Time as a result of any and all interests, rights, liabilities and other matters relating to the assets transferred by Old Lorus to the Company pursuant to the Arrangement; and
|
|
(iii)
|
prior to or at the Effective Time and directly or indirectly relating to, with certain exceptions, any of the activities of Old Lorus or the Arrangement.
|
15.
|
License agreement:
|
16.
|
Related party transactions:
|
17.
|
Subsequent events:
|
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
|
|
•
|
our ability to obtain the substantial capital required to fund research and operations;
|
|
•
|
our plans to obtain partners to assist in the further development of our product candidates;
|
|
•
|
our expectations with respect to existing and future corporate alliances and licensing transactions with third parties, and the receipt and timing of any payments to be made by us or to us in respect of such arrangements;
|
|
•
|
our expectations regarding future financings;
|
|
•
|
our plans to conduct clinical trials and pre-clinical programs;
|
|
•
|
the length of clinical trials;
|
|
•
|
the partnering potential of our products;
|
|
•
|
our business strategy;
|
|
•
|
our expectations regarding the progress and the successful and timely completion of the various stages of our drug discovery, pre-clinical and clinical studies and the regulatory approval process;
|
|
•
|
our plans, objectives, expectations and intentions; and
|
|
•
|
other statements including words such as “anticipate”, “contemplate”, “continue”, “believe”, “plan”, “estimate”, “expect”, “intend”, “will”, “should”, “may”, and other similar expressions.
|
|
•
|
our ability to continue to operate as a going concern;
|
|
•
|
our ability to obtain the substantial capital required to fund research and operations;
|
|
•
|
our lack of product revenues and history of operating losses;
|
|
•
|
our early stage of development, particularly the inherent risks and uncertainties associated with (i) developing new drug candidates generally, (ii) demonstrating the safety and efficacy of these drug candidates in clinical studies in humans, and (iii) obtaining regulatory approval to commercialize these drug candidates;
|
|
•
|
our ability to recruit patients for clinical trials;
|
|
•
|
the progress of our clinical trials;
|
|
•
|
our liability associated with the indemnification of Old Lorus and its directors, officers and employees in respect of the arrangement described in “The Corporation - Corporate History”;
|
|
•
|
our ability to find and enter into agreements with potential partners;
|
|
•
|
our drug candidates require time-consuming and costly preclinical and clinical testing and regulatory approvals before commercialization;
|
|
•
|
clinical studies and regulatory approvals of our drug candidates are subject to delays, and may not be completed or granted on expected timetables, if at all, and such delays may increase our costs and could delay our ability to generate revenue;
|
|
•
|
the regulatory approval process;
|
|
•
|
our ability to attract and retain key personnel;
|
|
•
|
our ability to obtain patent protection;
|
|
•
|
our ability to protect our intellectual property rights and not infringe on the intellectual property rights of others;
|
|
•
|
our ability to comply with applicable governmental regulations and standards;
|
|
•
|
development or commercialization of similar products by our competitors, many of which are more established and have or have access to greater financial resources than us;
|
|
•
|
commercialization limitations imposed by intellectual property rights owned or controlled by third parties;
|
|
•
|
our business is subject to potential product liability and other claims;
|
|
•
|
our ability to maintain adequate insurance at acceptable costs;
|
|
•
|
further equity financing may substantially dilute the interests of our shareholders;
|
|
•
|
changing market conditions; and
|
|
•
|
other risks detailed from time-to-time in our on-going quarterly filings, annual information forms, annual reports and annual filings with Canadian securities regulators and the SEC, and those which are discussed under the heading “Risk Factors” in this document.
|
OVERVIEW
|
Share Consolidation
|
RESULTS OF OPERATIONS
|
Revenue
|
Plan of Arrangement and Corporate Reorganization
|
SUBSEQUENT EVENT - EQUITY OFFERING
|
Mr. Abramson purchased 2.4 million Units of the Offering.
|
SELECTED ANNUAL FINANCIAL DATA
|
Consolidated Statements of (Loss) Earnings
|
|||||
Years Ended May 31
|
(amounts in Canadian 000's except for per common share data)
|
2011
|
2010
|
2009
|
||||||||
REVENUE
|
$ | - | $ | 131 | $ | 184 | |||||
EXPENSES
|
|||||||||||
Research and development
|
2,298 | 2,517 | 3,757 | ||||||||
General and administrative
|
2,101 | 2,964 | 2,958 | ||||||||
Stock-based compensation
|
526 | 176 | 446 | ||||||||
Depreciation and amortization
|
56 | 86 | 189 | ||||||||
Operating expenses
|
4,981 | 5,743 | 7,350 | ||||||||
Interest expense
|
71 | 54 | 707 | ||||||||
Accretion in carrying value of secured convertible debentures
|
- | 80 | 1,707 | ||||||||
Interest income
|
(14 | ) | (21 | ) | (270 | ||||||
Loss from operations for the period
|
(5,038 | ) | (5,725 | ) | (9,310 | ||||||
Gain on repurchase of convertible debentures and transfer of assets
|
- | 11,006 | - | ||||||||
Gain on sale of shares
|
- | 50 | 450 | ||||||||
Net (loss) earnings and other comprehensive (loss) income
|
(5,038 | ) | 5,331 | (8,860 | |||||||
Basic and diluted (loss) earnings per common share
|
$ | ( 0.38 | ) | $ | 0.57 | $ | (1.08 | ||||
Weighted average number of common shares
|
|||||||||||
outstanding used in the calculation of:
|
|||||||||||
Basic earnings (loss) per share
|
13,157 | 9,364 | 8,236 | ||||||||
Diluted earnings (loss) per share
|
13,157 | 9,379 | 8,236 | ||||||||
Total Assets
|
$ | 2,004 | $ | 2,303 | $ | 7,527 | |||||
Total Long-term liabilities
|
$ | - | $ | - | $ | - |
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
|
Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||||||
(Amounts in 000’s except for per common share data)
|
May 31, 2011
|
Feb 28, 2011
|
Nov. 30, 2010
|
Aug. 31, 2010
|
May 31, 2010
|
Feb 28, 2010
|
Nov 30, 2009
|
Aug 31, 2009
|
||||||||||||||||||||||||
Revenue
|
$ | ― | $ | ― | $ | ― | $ | ― | $ | ― | $ | 3 | $ | 79 | $ | 49 | ||||||||||||||||
Research and development expense
|
446 | 760 | 603 | 489 | 601 | 718 | 658 | 540 | ||||||||||||||||||||||||
General and administrative expense
|
421 | 527 | 564 | 589 | 1,173 | 515 | 743 | 533 | ||||||||||||||||||||||||
Net earnings (loss)
|
(1,037 | ) | (1,581 | ) | (1,255 | ) | (1,165 | ) | (1,820 | ) | (1,343 | ) | (1,266 | ) | 9,760 | |||||||||||||||||
Basic and diluted
|
||||||||||||||||||||||||||||||||
net (loss) profit per share
|
$ | (0.07 | ) | $ | (0.10 | ) | $ | (0.11 | ) | $ | (0.12 | ) | $ | (0.18 | ) | $ | (0.14 | ) | $ | (0.14 | ) | $ | 1.14 | |||||||||
Cash used in operating activities
|
$ | (930 | ) | $ | (1,676 | ) | $ | (2,603 | ) | $ | (685 | ) | $ | (271 | ) | $ | (1,812 | ) | $ | (651 | ) | $ | (987 | ) |
CAPITAL RISK MANAGEMENT
|
The Company’s objectives when managing capital are to:
|
|
•
|
Maintain its ability to continue as a going concern in order to provide returns to shareholders and benefits to other stakeholders;
|
|
•
|
Maintain a flexible capital structure which optimizes the cost of capital at acceptable risk;
|
|
•
|
Ensure sufficient cash resources to fund its research and development activity, to pursue partnership and collaboration opportunities and to maintain ongoing operations.
|
PRIVATE PLACEMENTS
|
December 2010
|
November 2009
|
RIGHTS OFFERINGS
|
PROMISSORY NOTES
|
TERMINATED U.S. FINANCING
|
Cash Position
|
Less than 1 year
|
1-3 years
|
3-5 years
|
Total
|
|||||||||||||
Operating leases
|
142 | 134 | 12 | 288 |
Indemnification
|
|
(i)
|
prior to, at or after the Effective Time of the Arrangement and directly or indirectly relating to any of the assets of Old Lorus transferred to New Lorus pursuant to the Arrangement (including losses for income, sales, excise and other taxes arising in connection with the transfer of any such asset) or conduct of the business prior to the Effective Time;
|
|
(ii)
|
prior to, at or after the Effective Time as a result of any and all interests, rights, liabilities and other matters relating to the assets transferred by Old Lorus to New Lorus pursuant to the Arrangement; and
|
|
(iii)
|
prior to or at the Effective Time and directly or indirectly relating to, with certain exceptions, any of the activities of Old Lorus or the Arrangement.
|
FINANCIAL INSTRUMENTS
|
May 31, 2011
|
May 31, 2010
|
|||||||
Financial assets
|
||||||||
Cash and cash equivalents, consisting of term deposits, and guaranteed investment certificates measured at fair value
|
$ | 911 | $ | 667 | ||||
|
||||||||
Short-term investments, held-for-trading, recorded at fair value
|
- | 247 | ||||||
Financial liabilities
|
||||||||
Accounts payable, measured at amortized cost
|
215 | 387 | ||||||
Accrued liabilities, measured at amortized cost
|
944 | 1,458 | ||||||
Promissory note payable, measured at amortized cost
|
- | 1,000 | ||||||
Credit risk
|
OUTLOOK
|
TRANSACTIONS WITH RELATED PARTIES
|
RISK FACTORS
|
|
•
|
engage in equity financings that could result in significant dilution to existing investors;
|
|
•
|
delay or reduce the scope of or eliminate one or more of our development programs;
|
|
•
|
obtain funds through arrangements with collaborators or others that may require us to relinquish rights to technologies, product candidates or products that we would otherwise seek to develop or commercialize ourselves; or license rights to technologies, product candidates or products on terms that are less favourable to us than might otherwise be available;
|
|
•
|
considerably reduce operations; or
|
|
•
|
cease our operations.
|
|
•
|
prior to, at or after the effective time of the arrangement transaction, and directly or indirectly relating to any of the assets of Old Lorus transferred to us pursuant to the arrangement transaction (including losses for income, sales, excise and other taxes arising in connection with the transfer of any such asset) or conduct of the business prior to the effective time of the arrangement;
|
|
•
|
prior to, at or after the effective time as a result of any and all interests, rights, liabilities and other matters relating to the assets transferred by Old Lorus to us under he arrangement; and
|
|
•
|
prior to or at the effective time and directly or indirectly relating to, with certain exceptions, any of the activities of Old Lorus or the arrangement.
|
|
•
|
drug products that have already been approved or are in development, and operate large, well-funded research and development programs in these fields;
|
|
•
|
substantially greater financial and management resources, stronger intellectual property positions and greater manufacturing, marketing and sales capabilities, areas in which we have limited or no experience; and
|
|
•
|
significantly greater experience than we do in undertaking preclinical testing and clinical trials of new or improved pharmaceutical products and obtaining required regulatory approvals.
|
|
•
|
our financial position and doubt as to whether we will be able to continue as a going concern;
|
|
•
|
our ability to raise additional capital;
|
|
•
|
the progress of our clinical trials:
|
|
•
|
our ability to obtain partners and collaborators to assist with the future development of our products;
|
|
•
|
general market conditions;
|
|
•
|
announcements of technological innovations or new product candidates by us, our collaborators or our competitors;
|
|
•
|
fluctuations in our operating results;
|
|
•
|
published reports by securities analysts;
|
|
•
|
developments in patent or other intellectual property rights;
|
|
•
|
the cash and short term investments held us and our ability to secure future financing;
|
|
•
|
public concern as to the safety and efficacy of drugs that we and our competitors develop; and
|
|
•
|
governmental regulation and changes in medical and pharmaceutical product reimbursement policies.
|
CRITICAL ACCOUNTING POLICIES
|
Critical Accounting Policies and Estimates
|
•
|
make policy and disclosure choices and design IFRS compliant internal and external reporting;
|
•
|
assess control framework implications to supporting an IFRS reporting environment; and
|
•
|
assess the financial statement impact of IFRS
|
•
|
Using the May 31, 2010 Canadian GAAP financial statements, prepare IFRS illustrative financial statements based on the proposed policy choices determined in Phase 2 to include:
|
|
•
|
June 1, 2010 Transition Date balance sheet and reconciliation from CGAAP to IFRS
|
|
•
|
August 31, 2010 financial statements and reconciliations from CGAAP to IFRS
|
|
•
|
Full set of IFRS-based notes, including the IFRS Transition note;
|
•
|
Develop new accounting policies, guidelines, processes for reporting packages to regulators, the Board of Directors and internal management; and
|
•
|
Develop revised internal control and disclosure control processes as necessary, updating key controls as required, and address any internal or disclosure control deficiencies.
|
UPDATED SHARE INFORMATION
|
ADDITIONAL INFORMATION
|
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
|
1
|
THE COMPANY
|
2
|
GENERAL DEVELOPMENT OF THE BUSINESS
|
3
|
PRODUCT PIPELINE
|
4
|
BUSINESS STRATEGY
|
4
|
FINANCIAL STRATEGY
|
5
|
REGULATORY APPROVAL PROCESS
|
7
|
BUSINESS OF THE COMPANY
|
9
|
RISK FACTORS
|
18
|
DIVIDENDS
|
25
|
SHARE CAPITAL AND MARKET FOR SECURITIES
|
25
|
DIRECTORS AND OFFICERS
|
26
|
AUDIT COMMITTEE INFORMATION
|
27
|
LEGAL PROCEEDINGS AND REGULATORY ACTIONS
|
28
|
INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
|
28
|
TRANSACTIONS WITH RELATED PARTIES
|
29
|
TRANSFER AGENT AND REGISTRAR
|
29
|
MATERIAL CONTRACTS
|
29
|
INTERESTS OF EXPERTS
|
29
|
ADDITIONAL INFORMATION
|
30
|
GLOSSARY
|
31
|
SCHEDULE A
|
34
|
|
•
|
our ability to obtain the substantial capital required to fund research and operations;
|
|
•
|
our plans to obtain partners to assist in the further development of our product candidates;
|
|
•
|
our expectations with respect to existing and future corporate alliances and licensing transactions with third parties, and the receipt and timing of any payments to be made by us or to us in respect of such arrangements;
|
|
•
|
our expectations regarding future financings;
|
|
•
|
our plans to conduct clinical trials and pre-clinical programs;
|
|
•
|
the length of clinical trials;
|
|
•
|
the partnering potential of our products;
|
|
•
|
our business strategy;
|
|
•
|
our expectations regarding the progress and the successful and timely completion of the various stages of our drug discovery, pre-clinical and clinical studies and the regulatory approval process;
|
|
•
|
our plans, objectives, expectations and intentions;
|
|
•
|
annual sales potential of our clinical stage drugs; and
|
|
•
|
other statements including words such as “anticipate”, “contemplate”, “continue”, “believe”, “plan”, “estimate”, “expect”, “intend”, “will”, “should”, “may”, and other similar expressions.
|
|
•
|
our ability to continue to operate as a going concern;
|
|
•
|
our ability to obtain the substantial capital required to fund research and operations;
|
|
•
|
our lack of product revenues and history of operating losses;
|
|
•
|
our early stage of development, particularly the inherent risks and uncertainties associated with (i) developing new drug candidates generally, (ii) demonstrating the safety and efficacy of these drug candidates in clinical studies in humans, and (iii) obtaining regulatory approval to commercialize these drug candidates;
|
|
•
|
our ability to recruit patients for clinical trials;
|
|
•
|
the progress of our clinical trials;
|
|
•
|
our liability associated with the indemnification of Old Lorus and its directors, officers and employees in respect of the arrangement described in “The Corporation - Corporate History”;
|
|
•
|
our ability to find and enter into agreements with potential partners;
|
|
•
|
our drug candidates require time-consuming and costly preclinical and clinical testing and regulatory approvals before commercialization;
|
|
•
|
clinical studies and regulatory approvals of our drug candidates are subject to delays, and may not be completed or granted on expected timetables, if at all, and such delays may increase our costs and could delay our ability to generate revenue;
|
|
•
|
the regulatory approval process;
|
|
•
|
our ability to attract and retain key personnel;
|
|
•
|
our ability to obtain patent protection;
|
|
•
|
our ability to protect our intellectual property rights and not infringe on the intellectual property rights of others;
|
|
•
|
our ability to comply with applicable governmental regulations and standards;
|
|
•
|
development or commercialization of similar products by our competitors, many of which are more established and have or have access to greater financial resources than us;
|
|
•
|
commercialization limitations imposed by intellectual property rights owned or controlled by third parties;
|
|
•
|
our business is subject to potential product liability and other claims;
|
|
•
|
our ability to maintain adequate insurance at acceptable costs;
|
|
•
|
further equity financing may substantially dilute the interests of our shareholders;
|
|
•
|
changing market conditions; and
|
|
•
|
other risks detailed from time-to-time in our on-going quarterly filings, annual information forms, annual reports and annual filings with Canadian securities regulators and the SEC, and those which are discussed under the heading “Risk Factors” in our annual information form for the fiscal year ended May 31, 2010
|
|
1.
|
Development of small molecules that recognize specific targets in cancer cells.
|
|
2.
|
RNA-targeted technologies such as antisense and siRNA.
|
|
3.
|
Immunotherapy using safe and efficacious products to stimulate the natural anticancer properties of the immune system.
|
|
•
|
LOR-500 platform. LOR-500 targets multikinases including tyrosine kinase family members and a member of the AMPK family of Ser/Thr kinases. Hit-to-lead identification and optimization of LOR-500 is being currently conducted to identify a lead drug candidate.
|
|
•
|
LOR-264, a second generation LOR-253 derivative, is being developed for oral administration. Like LOR-253, LOR-264 has demonstrated potent anticancer activity in animal studies and represents the lead oral drug in this development platform. Derivatization of LOR-264 is required to improve anticancer activity and oral bioavailability as part of our lead optimization process.
|
|
•
|
LOR-220 platform. LOR-220 is a current lead compound that targets novel bacterial Ser/Thr kinases. Structural optimization of LOR-220 is required to identify clinical drug candidates that show potent antimicrobial activity in animal models.
|
|
•
|
engage in equity financings that could result in significant dilution to existing investors;
|
|
•
|
delay or reduce the scope of or eliminate one or more of our development programs;
|
|
•
|
obtain funds through arrangements with collaborators or others that may require us to relinquish rights to technologies, product candidates or products that we would otherwise seek to develop or commercialize ourselves; or license rights to technologies, product candidates or products on terms that are less favourable to us than might otherwise be available;
|
|
•
|
considerably reduce operations; or
|
|
•
|
cease our operations.
|
|
•
|
prior to, at or after the effective time of the arrangement transaction, and directly or indirectly relating to any of the assets of Old Lorus transferred to us pursuant to the arrangement transaction (including losses for income, sales, excise and other taxes arising in connection with the transfer of any such asset) or conduct of the business prior to the effective time of the arrangement;
|
|
•
|
prior to, at or after the effective time as a result of any and all interests, rights, liabilities and other matters relating to the assets transferred by Old Lorus to us under he arrangement; and
|
|
•
|
prior to or at the effective time and directly or indirectly relating to, with certain exceptions, any of the activities of Old Lorus or the arrangement.
|
|
•
|
drug products that have already been approved or are in development, and operate large, well-funded research and development programs in these fields;
|
|
•
|
substantially greater financial and management resources, stronger intellectual property positions and greater manufacturing, marketing and sales capabilities, areas in which we have limited or no experience; and
|
|
•
|
significantly greater experience than we do in undertaking preclinical testing and clinical trials of new or improved pharmaceutical products and obtaining required regulatory approvals.
|
|
•
|
our financial position and doubt as to whether we will be able to continue as a going concern;
|
|
•
|
our ability to raise additional capital;
|
|
•
|
the progress of our clinical trials:
|
|
•
|
our ability to obtain partners and collaborators to assist with the future development of our products;
|
|
•
|
general market conditions;
|
|
•
|
announcements of technological innovations or new product candidates by us, our collaborators or our competitors;
|
|
•
|
fluctuations in our operating results;
|
|
•
|
published reports by securities analysts;
|
|
•
|
developments in patent or other intellectual property rights;
|
|
•
|
the cash and short term investments held us and our ability to secure future financing;
|
|
•
|
public concern as to the safety and efficacy of drugs that we and our competitors develop; and
|
|
•
|
governmental regulation and changes in medical and pharmaceutical product reimbursement policies.
|
High
($)
|
Low
($)
|
Volume
(#)
|
|||
2011
|
|||||
May
|
0.80
|
0.69
|
73,200
|
||
April
|
0.89
|
0.71
|
77,500
|
||
March
|
1.05
|
0.75
|
83,100
|
||
February
|
1.03
|
0.95
|
458,000
|
||
January
|
1.08
|
0.96
|
521,800
|
||
2010
|
|||||
December
|
1.18
|
1.01
|
201,300
|
||
November
|
1.38
|
0.95
|
404,600
|
||
October
|
1.18
|
0.95
|
206,300
|
||
September
|
1.40
|
1.05
|
78,100
|
||
August
|
1.88
|
1.25
|
107,540
|
||
July
|
2.10
|
1.72
|
146,288
|
||
June
|
2.55
|
2.00
|
248,763
|
Name and Province/State and Country of Residence
|
Position
|
Director or Officer Since
|
Directors:
|
||
Herbert Abramson(3) (1)
Ontario, Canada
|
Director
|
July 2007
|
Denis Burger(1)(2)
Oregon, United States
|
Chairman, Director
|
September 2007
|
Dr. Mark Vincent(3)
Ontario, Canada
|
Director
|
September 2007
|
Warren Whitehead(1)
Ontario, Canada
|
Director
|
April, 2011
|
Dr. Jim Wright(2)
Ontario, Canada
|
Director, former President and Chief Executive Officer,
|
October 1999
|
Officers:
|
||
Dr. Aiping Young
Ontario, Canada
|
President and Chief Executive Officer, Director,
|
October 1999
|
Dr. Yoon Lee
Ontario, Canada
|
Vice President Research
|
May 2008
|
Elizabeth Williams
Ontario, Canada
|
Acting Chief Financial Officer and Director of Finance
|
November 2005
|
2011
|
2010
|
|||||||
Audit Fees
|
$ | 312,856 | $ | 379,500 | ||||
Tax Fees
|
$ | 8,800 | $ | 19,150 | ||||
All Other Fees
|
$ | 26,885 | $ | 36,638 | ||||
Total
|
$ | 348,541 | $ | 435,288 |
|
1.
|
Share Purchase Warrant Indenture dated August 15, 2011 between the Company and Computershare Trust Company of Canada regarding the provision for issuance of common share purchase warrants.
|
|
2.
|
Agency Agreement dated July 20, 2011 in connection with an offering of units between the Company and Euro Pacific Canada Inc.
|
|
3.
|
Commitment Letter for minimum $4million equity investment dated June 20, 2011 and subsequently amended July 11, 2011 from Mr. Abramson.
|
|
4.
|
Form of Subscription agreement used in connection with December 2010 private placement.
|
|
5.
|
Form of Warrant issued in connection with December 2010 private placement.
|
|
6.
|
Share Purchase Warrant Indenture dated October 4, 2010 between the Company and Computershare Trust Company of Canada regarding the provision for issuance of common share purchase warrants.
|
|
7.
|
First Supplemental Indenture dated October 18, 2010 to the Share Purchase Warrant Indenture dated October 4, 2010.
|
|
8.
|
Standby Purchase Agreement dated September 16, 2010 between the Company and Herbert Abramson in connection with the November 2010 rights Offering
|
|
9.
|
Standby Purchase Agreement Amendment dated September 27, 2010.
|
|
•
|
the 2011 Financial Statements and our most recent unaudited financial statements that have been filed, if any, for any period subsequent to the year ended May 31, 2011;
|
|
•
|
this annual information form and any document or the pertinent pages of any document incorporated by reference in this annual information form; and
|
|
•
|
any other documents that are incorporated by reference into a short form prospectus or preliminary short form prospectus otherwise not referred to therein when our securities are in the course of a distribution pursuant to a short form prospectus or a preliminary short form prospectus,
|
Analog:
|
a chemical derivative or variation of a parent molecule
|
Antimicrobial:
|
a substance that kills or inhibits the growth of microorganisms.
|
Anti-proliferative:
|
preventing cell division
|
Ara-C:
|
chemotherapy drug most commonly used in treatment of AML, chronic myeloid leukemia, acute lymphoid leukemia and lymphomas
|
Bioavailability:
|
a subcategory of absorption and is used to describe the fraction of an administered dose of unchanged drug that reaches the systemic circulation or site of action.
|
Carcinoma:
|
any cancerous tumor that starts with the cells that cover the inner and outer body surfaces
|
Complete response:
|
When all signs of cancer disappear in response to treatment. This is based on symptoms, physical exam, and radiology and lab tests. This does not always mean the cancer has been cured. Also called complete remission.
|
CLT:
|
clotrimazole
|
Cytokine:
|
a generic term for a non-antibody protein released by a cell population (e.g., activated macrophages) of the immune system on contact with chemical or biological stimuli
|
Cytoreduction:
|
to reduce the number of cancer cells
|
Cytotoxic:
|
pertaining to the destruction of cells
|
Derivatization:
|
a technique used in chemistry that transforms a chemical compound into a product (the reaction's derivate) of similar chemical structure called a derivative.
|
Deoxyribonucleotides:
|
a nucleotide having a purine or pyrimidine base bonded to deoxyribose, which in turn is bonded to a phosphate group.
|
Downregulation:
|
the process by which a cell decreases the quantity of a cellular component (e.g. a protein) in response to an external variable.
|
Efficacy:
|
the ability of a drug to produce a desired result
|
Eosinophils:
|
a type of white blood cell.
|
GLP:
|
Good Laboratory Practises - a system of management controls for laboratories and research organizations to ensure the consistency and reliability of results
|
GMP or Good Manufacturing Practice:
|
practices and the systems required to be adapted in pharmaceutical manufacturing, quality control, quality system covering the manufacture and testing of pharmaceuticals or drugs including active pharmaceutical ingredients, diagnostics, foods, pharmaceutical products, and medical devices.
|
Immune system:
|
the totality of organs and cells involved in the body’s immunologic response to foreign antigens and malignant tissue
|
IND:
|
investigational new drug
|
In vitro:
|
in the test tube; referring to chemical reactions, fermentation, etc., occurring therein e.g., in cell-free extracts
|
In vivo:
|
in the living body; referring to chemical processes occurring within cells, etc., as distinguished from those occurring in cell-free extracts (in vitro)
|
Kinase:
|
In chemistry and biochemistry, a type of enzyme that transfers phosphate groups from high-energy donor molecules to specific substrates (a molecule that is acted upon by an enzyme).
|
Malignant/
malignancy:
|
describes a tumor that is cancerous. Two important qualities of malignancies are the tendency to invade surrounding tissues and to break off and spread elsewhere (metastasis)
|
Metabolism:
|
the overall biochemical reactions that take place in a living organism including the building up of complex molecules or breakdown of molecules to provide energy
|
Metastasis:
|
the process by which tumor cells are spread to other parts of the body
|
Microsomes:
|
vesicle-like artifacts formed from the endoplasmic reticulum (ER) when eukaryotic cells are broken-up in the laboratory and a valuable tool for investigating the metabolism of compounds
|
mRNA:
|
messenger, or mRNA, is a copy of the information carried by a gene on the DNA. The role of mRNA is to move the information contained in DNA to the translation machinery.
|
NDA:
|
new drug application, the application to obtain marketing approval filed with the FDA or BCD after completion of human clinical trials
|
Nucleotide:
Pharmacodynamic:
|
a compound consisting of a purine or pyrimidine base, a pentose sugar and a phosphoric acid; they are the building blocks from which nucleic acids (DNA or RNA) are constructed
the division of pharmacology that studies the effects of drugs and their mechanisms of action in the body.
|
Pharmacokinetics:
|
the action of drugs in the body over a period of time, including the process of absorption, distribution, localization in tissues, biotransformation and excretion
|
Pre-clinical testing:
|
testing that is conducted in the laboratory (chemistry and pharmacology) and with animals to help determine a product’s chemical, pharmacological and pharmaceutical characteristics (including mechanism of action), toxicity, efficacy and side effects
|
Proinflammatory:
|
capable of promoting inflammation.
|
Proteins:
|
large molecules composed of long chains of sub-units of amino acids
|
R1 and R2:
|
components of ribonucleotide reductase
|
Ribonucleic acid (RNA):
ribonucleotide reductase (RNR):
|
a nucleic acid found in both the nucleus and the cytoplasm of all cells. It carries genetic information from the nucleus to the cytoplasm, where it also reacts as a template in association with ribosomes to synthesize proteins
a protein complex that converts ribonucleotide diphosphates (NDPs) into corresponding deoxyribonucleotide diphosphates (dNDPs).
|
siRNA:
|
a short sequence of RNA that can decrease gene expression in a highly specific manner (gene silencing).
|
Toxicity:
|
a condition that results from exposure to a substance at levels causing deleterious side effects which may be harmful to an organism
|
Tumor:
|
an abnormal swelling or lump in the body caused by the growth of new tissues which differ in structure from the part of the body in which they are growing. A tumor may be benign or malignant
|
Unresectable:
|
Unable to be removed (resected) by surgery.
|
Xenograft:
|
an implant of a foreign substance
|
|
1.
|
Serve as an independent and objective party to oversee the integrity of the Company’s financial reporting process, audits of the Company’s financial statements and systems of internal controls regarding finance, accounting, and legal compliance;
|
|
2.
|
Identify and monitor the management of the principal risks that could impact the financial reporting of the Company;
|
|
3.
|
Monitor the independence and performance of the Company’s independent auditors;
|
|
4.
|
Provide an avenue of communication among the independent auditors, management, and the Board; and
|
|
5.
|
Encourage continuous improvement of, and foster adherence to, the Company’s policies, procedures and practices at all levels.
|
|
A.
|
Review Procedures
|
|
1)
|
Maintain a Charter that sets out the Audit Committees mandate and responsibilities. Review and reassess the adequacy of this Charter at least annually.
|
|
2)
|
Review and discuss with management and the external auditors the Company’s financial statements, MD&A and annual and interim results press releases prior to filing or distribution. The Audit Committee must be satisfied that adequate procedures are in place for the review of the Company’s public disclosure of financial information extracted or derived from the Company’s financial statements (other than public disclosure of financial statements, MD&A and annual and interim results press releases), and must periodically assess the adequacy of those procedures. Consider the independent auditors’ judgements about the quality and appropriateness, not just the acceptability, of the Company’s accounting principles and financial disclosure practices, as applied in its financial reporting, particularly about the degree of aggressiveness or conservatism of its accounting principles and underlying estimates and whether those principles are common practices or minority practices.
|
|
3)
|
Consider and approve, if appropriate, major changes to the Company’s accounting principles and practices as suggested by the independent auditors or management and assure that the reasoning is described in determining the appropriateness of changes in accounting principles and disclosures.
|
|
4)
|
In consultation with the management and the independent auditors, consider the integrity of the Company’s financial reporting processes and controls. Discuss significant financial risk exposures and the steps management has taken to monitor, control, and report such exposures. Review significant findings prepared by the independent auditors together with management’s responses.
|
|
5)
|
The Audit Committee is directly responsible for overseeing the work of the independent auditors including the review of any disagreements among management and the independent auditors in connection with financial statements, and overseeing the resolution of any such disagreements.
|
|
6)
|
Annually review policies and procedures as well as audit results associated with directors’ and officers expense accounts and perquisites. Annually review a summary of director and officers’ related party transactions and potential conflicts of interest.
|
|
7)
|
Annually conduct self-assessment of Audit Committee performance including a review and discussion of the Audit Committee roles and responsibilities, seeking input from senior management, the full Board and others if needed.
|
|
B.
|
Independent Auditors
|
|
1)
|
The independent auditors are accountable to the Audit Committee and the Board and shall report directly to the Audit Committee. The Audit Committee shall review the independence and performance of the auditors and annually recommend to the Board:
|
|
1)
|
The external auditor to be nominated for the purpose of preparing or issuing an auditor’s report and performing other audit, review and attest services for the Company as required;
|
|
2)
|
Pre-approve all audit fees and terms and all permitted non-audit services (including the fees and terms thereof) to be provided by the external auditor, and consider whether these services are compatible with the auditors’ independence. Any member of the Audit Committee may approve additional proposed non-audit services that arise between Audit Committee meetings provided that the decision to pre-approve the services is presented at the next scheduled Audit Committee meeting. The approval of all non-audit services will be evidenced by the completion and approval of the Non-Audit Services Request Form.
|
|
3)
|
On an annual basis, the Audit Committee should review and discuss with the external auditors all relationships they have with the Company that could impair the auditors’ independence. In particular, the Audit Committee is responsible for ensuring its receipt from the external auditors of a formal written statement delineating all relationships between the external auditors and the Company, consistent with applicable regulations, actively engaging in a dialogue with the external auditors with respect to any disclosed relationships or services that may impact the objectivity and independence of the external auditors, and taking, or recommending that the full Board take, appropriate action to oversee the independence of the outside auditors.
|
|
4)
|
Review the external auditors’ audit plan - discuss scope, staffing, locations, reliance upon management and general audit approach.
|
|
5)
|
Consider the external auditors’ judgments about the quality and appropriateness of the Company’s accounting principles as applied in its financial reporting.
|
|
6)
|
Prior to releasing the year-end results, discuss the results of the audit with the external auditors. Discuss with management and the external auditors matters required to be communicated to audit committees in accordance with the standards established by the Canadian Institute of Chartered Accountants.
|
|
7)
|
Review and approve the Company’s hiring policies regarding partners, employees and former partners and employees of the present and former independent auditors of the Company.
|
|
8)
|
Review and discuss quarterly reports from the external auditors on:
|
|
i.
|
All critical accounting policies and practices to be used;
|
|
ii.
|
All alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the external auditor; and
|
|
iii.
|
Other material written communications between the external auditor and management, such as any management letter or schedule of unadjusted differences.
|
|
1)
|
On at least an annual basis, review with the Company’s counsel, any legal matters that could have a significant impact on the organization’s financial statements, the Company’s compliance with applicable laws and regulations, and inquiries received from regulators or governmental agencies.
|
|
2)
|
Perform any other activities consistent with this Charter, the Company’s by-laws, and governing law, as the Audit Committee or the Board deems necessary or appropriate.
|
|
1)
|
The receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and
|
|
2)
|
The confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.
|
E.
|
Other Audit Committee Responsibilities
|
|
1)
|
Create an agenda for the ensuing year.
|
|
2)
|
Describe in the Company’s annual information form the Audit Committee’s composition and responsibilities and how they were discharged in accordance with the requirements of 52-110F1.
|
|
3)
|
Submit the minutes of all meetings of the Audit Committee to the Board.
|
|
4)
|
Provide any other disclosure required to be included with respect to the Audit Committee or the Company’s securities law filings.
|
1.
|
Review: I have reviewed the AIF, if any, annual financial statements and annual MD&A, including, for greater certainty, all documents and information that are incorporated by reference in the AIF (together, the "annual filings") of Lorus Therapeutics Inc. (the "issuer") for the financial year ended May 31, 2011.
|
2.
|
No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the annual filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, for the period covered by the annual filings.
|
3.
|
Fair presentation: Based on my knowledge, having exercised reasonable diligence, the annual financial statements together with the other financial information included in the annual filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date of and for the periods presented in the annual filings.
|
4.
|
Responsibility: The issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.
|
5.
|
Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer(s) and I have, as at the financial year end
|
|
(a)
|
designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
|
|
(i)
|
material information relating to the issuer is made known to us by others, particularly during the period in which the annual filings are being prepared; and
|
|
(ii)
|
information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
|
|
(b)
|
designed ICFR, or caused it 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 the issuer's GAAP.
|
5.1
|
Control framework: The control framework the issuer's other certifying officer(s) and I used to design the issuer's ICFR is the Internal Control -Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework.
|
5.2
|
N/A
|
5.3
|
N/A
|
|
(a)
|
evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer's DC&P at the financial year end and the issuer has disclosed in its annual MD&A our conclusions about the effectiveness of DC&P at the financial year end based on that evaluation; and
|
|
(b)
|
evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer's ICFR at the financial year end and the issuer has disclosed in its annual MD&A
|
|
(i)
|
our conclusions about the effectiveness of ICFR at the financial year end based on that evaluation; and
|
7.
|
Reporting changes in ICFR: The issuer has disclosed in its annual MD&A any change in the issuer's ICFR that occurred during the period beginning on March 1, 2011 and ended on May 31, 2011 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.
|
8.
|
Reporting to the issuer's auditors and board of directors or audit committee: The issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of ICFR, to the issuer's auditors, and the board of directors or the audit committee of the board of directors any fraud that involves management or other employees who have a significant role in the issuer's ICFR.
|
1.
|
Review: I have reviewed the AIF, if any, annual financial statements and annual MD&A, including, for greater certainty, all documents and information that are incorporated by reference in the AIF (together, the "annual filings") of Lorus Therapeutics Inc. (the "issuer") for the financial year ended May 31, 2011.
|
2.
|
No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the annual filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, for the period covered by the annual filings.
|
3.
|
Fair presentation: Based on my knowledge, having exercised reasonable diligence, the annual financial statements together with the other financial information included in the annual filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date of and for the periods presented in the annual filings.
|
4.
|
Responsibility: The issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.
|
5.
|
Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer(s) and I have, as at the financial year end
|
|
(a)
|
designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
|
|
(i)
|
material information relating to the issuer is made known to us by others, particularly during the period in which the annual filings are being prepared; and
|
|
(ii)
|
information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
|
|
(b)
|
designed ICFR, or caused it 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 the issuer's GAAP.
|
5.1
|
Control framework: The control framework the issuer's other certifying officer(s) and I used to design the issuer's ICFR is the Internal Control -Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework.
|
5.2
|
N/A
|
|
(a)
|
evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer's DC&P at the financial year end and the issuer has disclosed in its annual MD&A our conclusions about the effectiveness of DC&P at the financial year end based on that evaluation; and
|
|
(b)
|
evaluated, or caused to be evaluated under our supervision, the effectiveness of the issuer's ICFR at the financial year end and the issuer has disclosed in its annual MD&A
|
|
(i)
|
our conclusions about the effectiveness of ICFR at the financial year end based on that evaluation; and
|
7.
|
Reporting changes in ICFR: The issuer has disclosed in its annual MD&A any change in the issuer's ICFR that occurred during the period beginning on March 1, 2011 and ended on May 31, 2011 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.
|
8.
|
Reporting to the issuer's auditors and board of directors or audit committee: The issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of ICFR, to the issuer's auditors, and the board of directors or the audit committee of the board of directors any fraud that involves management or other employees who have a significant role in the issuer's ICFR.
|