2012 Annual Report - Prometic - Life Science, Inc.

FOURTH QUARTER
The following information is a summary of selected unaudited
consolidated financial information of the Company for the three-month
periods ended December 31, 2012, and 2011.
2012 2011
Revenues 8,322 8,423
Operating expenses 6,870 4,735
Operating profit (loss) 1,452 3,688
Gain (Loss) on foreign exchange (115) 42
Loss on disposition and impairment of assets (12) (59)
Finance costs (379) (318)
Share of net profit in an associated company 69 -
Net profit 1,015 3,355
Net profit (loss) attributable to the owners
of the parent 1,036 (1,951)
Basic and diluted profit (loss) per share
attributable to the owners of the parent 0.00 0.01
Revenues for the fourth quarter of 2012 were $8.3 million, similar to
revenues of the same quarter of 2011. Operating expenses were
$6.9 million for the fourth quarter of 2012 compared to $4.7 million
in 2011. The difference is due to differing mix of products and services
sold during the fourth quarter. There were no costs of goods sold
associated with the licensing revenues.
Cash inflows from operating activities were $1.2 million compared to a
cash outflows of $0.3 million for the same period in 2011. This increase
was attributed to non monetary licensing revenues in 2011.
Cash outflows from financing activities were $0.1 million in 2012
compared to cash inflows of $1.3 million in the fourth quarter of 2011.
This is mainly attributed to the repayable government grant, the other
loan and the proceeds from the shares issued in 2011.
OFF-BALANCE SHEET ARRANGEMENTS
In the normal course of business, the Company finances certain of its
activities off-balance sheet through leases.
CONTINGENT LIABILITY
During the year 2012, the Company was served with a lawsuit in the
Federal Court of Canada (Court) relating to a claim for infringement
of two patents held by a third party plaintiff. The Company instructed
outside legal counsel to prepare, serve and file a statement of defense
on the infringement claims, in addition to a counterclaim requesting
that the Court declare both patents invalid and unenforceable.
Since the plaintiff has claimed unspecified damages and none of the
allegations in the claim provide any information as to the basis upon
which the plaintiff would be claiming monetary compensation and
on the basis that the Company does not believe that this claim will be
successful, the Company has not taken a provision in the consolidated
financial statements.
CRITICAL ACCOUNTING ESTIMATES
The preparation of the consolidated financial statements requires
the use of judgment, estimates and assumptions that affect the
reported amounts of revenues, expenses, assets and liabilities and the
accompanying disclosures. The uncertainty that is often inherent
in estimates and assumptions could result in outcomes that result in
material adjustments to assets or liabilities affected in future periods.
During the year ended December 31, 2012, the Company signed
revenue agreements which provided for, among other payments,
upfront payments in exchange for licenses and other access to
intellectual property. This required careful judgment whether these
payments were received in exchange for the provision of goods or
services which had stand-alone value to the customer.
In determining that the Company did not control, but had only
significant influence in the investment in an associated company
described in note 10, consideration was given to the composition of the
entity’s board of directors and the manner in which key operating and
financing decisions were to be made. Had the Company reached the
conclusion that it controlled the investment would have required that
its assets and liabilities and results of operations be consolidated with
those of the Company, along with the elimination of all inter-company
transactions.
On an ongoing basis, the Company enters into finance leases for
buildings and equipment. Minimum future rental payments under
these operating leases, determined as at December 31, 2012 are
included in the contractual obligations table above.
One letter of credit amounting to $130,000 was issued to the lessor of our
facility in Maryland as collateral for our performance of obligations under
the leases. This letter of credit is collateralized by a guaranteed investment
certificate for the same amount. The guaranteed investment certificate
related to the letter of credit has been classified as restricted cash.
The functional currency of foreign subsidiaries is reviewed on an
ongoing basis to assess if changes in the underlying transactions,
events and conditions have result in a change. During the year ended
December 31, 2012 and 2011, no changes were deemed necessary.
In addition, judgment is applied the treatment and amount of the
currency translation of inter-company loans in order to determine if
they form part of the parent company’s net investment in the foreign
subsidiary. This treatment results in foreign currency adjustments from
translation recorded in other comprehensive (loss) income.
PROMETIC LIFE SCIENCES INC.
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