Tribute Pharmaceuticals Canada Inc. - FORM 8-K - EX-99.1 - PRESS RELEASE DATED NOVEMEBER 14, 2013 - November 14, 2013

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Press Release
Source: Tribute Pharmaceuticals
Canada Inc.

Tribute Pharmaceuticals Announces Solid Growth in
Third Quarter 2013 and Bezalip US IND Cleared by FDA


Milton, Ontario, Canada, November 14, 2013 – Tribute Pharmaceuticals Canada Inc. (OTCQB:TBUFF) ("Tribute" or "the Company"), a specialty pharmaceutical company with a primary focus on the acquisition, licensing, development and promotion of healthcare products in Canada, today announced financial results for its fiscal 2013 third quarter ending September 30, 2013.  In this press release, all dollar amounts are expressed in Canadian currency - unless otherwise noted - and results are reported in accordance with United States generally accepted accounting principles (U.S. GAAP).

Third Quarter 2013 Highlights:
·  
Revenues increased 8% for the three months ended September 30, 2013 compared to same period in 2012;
·  
Gross profit was up 16% for the three months ended September 30, 2013 compared to the same period in 2012;
·  
The Company recently announced that the Investigational New Drug application (“IND”) has been cleared by the FDA. For further information see the Company’s press release date November 11, 2013.
·  
On August 8, 2013, SWK Funding LLC and the Company entered into a credit agreement in US$6,000,000.
·  
The regulatory authorities of Hong Kong approved the sale of NeoVisc in Hong, expected to be launched in Q4 2013.
 

Total net revenue for the three month period ended September 30, 2013 increased by 8.3% to $3,480,100 compared to $3,213,500 in 2012.  The increase in sales between the corresponding periods was attributable to an increase in Other Domestic Product Sales of $214,200 or 37.2% as well as Royalty and Licensing Revenues of $99,900. 
 
For the nine month period ended September 30, 2013 total net revenues from all sources increased by 13.6% or $1,227,700 to $10,232,400 compared to $9,004,700 for the same period in 2012.  The increase in sales between the corresponding periods was attributable to an increase in Licensed Domestic Product Net Sales of $274,500 or 4.5%, an increase in Other Domestic Product Sales of $911,400 or 53.4%, and $197,900 of Royalty and Licensing Revenue in each case, as compared to the same period in 2012.  Serving as a partial offset was a decrease in International Product Sales of $156,100 or 13.1%.
 
The net loss before taxes for the three month period ended September 30, 2013 was $2,583,600 compared to a loss of $1,005,600 for the same period in the prior year.
 
Main factors decreasing the net loss for three month period ended September 30, 2013 compared to the same period in the prior year include:
 
Excluding non-operating expenses for the three month period ended September 30, 2013 of $1,615,000; the net loss from operations was $968,600.  This compares to the prior period net loss from operations of $928,000.  The increase in the operational loss of $40,600 or 4.4% represents higher selling, general and administrative costs offset in part by increases in product margins, detailed below.
 
For the nine month period ended September 30, 2013, the net loss before tax was $6,600,900 compared to a net loss of $2,878,000 for the same period in the prior year.
 
 
1
 
 
Main factors decreasing the net loss for the nine month period ended September 30, 2013 compared to the same period in the prior year include:
 
Excluding non-operating expenses for the nine month period ended September 30, 2013 of $2,678,800; the net loss from operations was $3,922,200.  This compares to the prior period net loss from operations of $2,764,800.  The increase in the operational loss represents higher selling, general and administrative costs offset in part by increases in product margins, detailed below.
 
Gross profit for the three month period ended September 30, 2013 was $1,569,500, higher by 15.5%, or $210,300 compared to the same period in the prior year.  Underlying improvements in gross profit for the three month period ended September 30, 2013 were due to additional gross profit of $110,100 from Other Domestic Product Sales and International Product Sales and $99,900 for Royalty and Licensing Revenue.
 
For the nine month period ended September 30, 2013 gross profit was $4,736,700, higher by 22.9% or $881,200 compared to the same period in the prior year. Underlying improvements in gross profit for the nine month period ended September 30, 2013 were due to additional gross profit of $237,700 from Licensed Domestic Product Net Sales, $445,500 from Other Domestic Product Sales and International Product Sales and $197,900 from Royalty and Licensing Revenues.
 
Selling, general and administrative expenses for the for the three month period ended September 30, 2013 were $2,224,500 compared to $2,131,400 for the same period in 2012 an increase of $93,100 or 4.4% and the development, preparation and filing of the Bezalip® SR IND with the FDA.  
 
For the nine month period ended September 30, 2013 selling, general and administrative expenses were $7,681,200 compared to $6,240,000 for the same period in 2012.  The increase of $1,441,200 or 23.1% is primarily due to a significant investment in the expansion of the Company’s sales force and marketing expenses to grow its existing products, marketing and sales expenses related to the launch of Cambia® to primary care physicians in the first quarter of 2013 and the development, preparation and filing of the Bezalip® SR IND with the FDA.
 
The net loss for the three month period ended September 30, 2013 was $2,583,600, compared to a net loss of $718,600 for the same period in the prior year.  This equates to a loss of ($0.05) per share compared to a loss of ($0.02) per share for the same period in 2012.
 
For the nine month period ended September 30, 2013 the net loss was $6,286,000, compared to a net loss of $2,076,400 for the same period in the prior year.  This equates to a loss of ($0.13) per share compared to a loss of ($0.05) per share for the same period in 2012.
 
On August 8, 2013, SWK Funding LLC ("SWK Funding"), 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 (the "Loan") which may be increased by an additional US$2,000,000 at the Company's request on or before December 31, 2014.  SWK Funding served as the agent, under the Credit Agreement.  The Loan matures on August 8, 2018.  The Loan shall accrue 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 connection with the Loan the Company issued SWK Funding 755,794 common share purchase warrants with each warrant entitling SWK Funding to acquire one common share in the capital of the Company at an exercise price of US$0.5954, at any time prior to August 8, 2020.  The Company has exercised its rights under the MidCap agreement to prepay the outstanding balance of the term loan with MidCap contemporaneously with the closing of the Credit Agreement with SWK.
 
 
2
 
 
The Company’s cash and cash equivalents position amounted to $2,749,200 at September 30, 2013 compared to $2,283,900 at December 31, 2012.
 
Cash used by operations for the nine month period ended September 30, 2013 was $5,444,900 (2012 - $2,231,300) mainly as a result a significant investment in the expansion of the Company’s sales force and promotional expenses to grow its existing products.  Also included are changes in non-cash operating assets and liabilities, which increased to $2,629,200 for the same period (2012- $249,500 increase).
 
 Cash used in investing activities for the nine month period ended September 30, 2013 was $498,700 (2012 - $489,800).
 
Cash provided by financing activities for the nine month period ended September 30, 2013 was $6,324,100 primarily from the private placement(s) completed for $4,713,800, less share issuance costs of $433,900 as well as the Credit Agreement completed with SWK Funding LLC for US$6,000,000 less financing costs of $305,200.  Cash used in financing activities included principal repayments to MidCap Funding III, LLC of $3,386,600.
 
About Tribute Pharmaceuticals Canada Inc.
Tribute is an emerging Canadian specialty pharmaceutical company focused on the acquisition, licensing, development and management of pharmaceutical and healthcare products with its primary focus on the Canadian market.

Tribute markets Cambia® (diclofenac potassium for oral solution), Bezalip® SR (bezafibrate), Soriatane® (acitretin), NeoVisc® (1.0% sodium hyaluronate solution) Uracyst® (sodium chondroitin sulfate solution 2%), and Collatamp G®(gentamicin-impregnated collagen) in the Canadian market. Additionally, NeoVisc® and Uracyst® are commercially available and are sold globally through various international partnerships.

For further information on Tribute visit the Company’s websites:  http://www.tributepharma.com

Tribute Pharmaceuticals' Forward Looking Statement
This press release contains certain forward-looking statements about Tribute as defined in the Private Securities Litigation Reform Act of 1995, which statements can be identified by the use of forward-looking terminology, such as "may", "will", "expect", "intend", "anticipate", "estimate", "predict", "plan" or "continue" or the negative thereof or other variations thereon or comparable terminology referring to future events or results.  Forward-looking statements, by their nature, are subject to risks and uncertainties, Tribute actual results could differ materially from those anticipated in these forward-looking statements as a result of numerous factors, including general economic conditions, the ability of Tribute to successfully integrate operations, and the timing of expenditures and expansion opportunities, any of which could cause actual results to vary materially from current results or anticipated future results. See Tribute reports filed with the Canadian Securities Regulatory Authorities and the U.S. Securities and Exchange Commission from time to time for cautionary statements identifying important factors with respect to such forward-looking statements, including certain risks and uncertainties that could cause actual results to differ materially from results referred to in forward-looking statements. Tribute assumes no obligation to update the information contained in this press release to update forward-looking statements to reflect changed assumptions, the occurrence of anticipated events or changes in future operating results, financial condition or business over time.

Soriatane® and Bezalip®SR  are registered trademarks and under license from Actavis Group PTC ehf
Cambia® is a registered trademark and under license from Nautilus Neurosciences, Inc.
Collatamp G® is a registered trademark and under license EUSA Pharma (Europe) Limited.

For further information on Tribute, visit http://www.tributepharma.com or contact:

Tribute Pharmaceuticals Canada Inc.
Scott Langille, CFO
905-876-3166
scott.langille@tributepharma.com

or

Arnold Tenney
Chairman
705-445-9505
 
 
3
 
 
TRIBUTE PHARMACEUTICALS CANADA INC.
(formerly Stellar Pharmaceuticals Inc.)
CONDENSED INTERIM BALANCE SHEETS
(Expressed in Canadian dollars)
(Unaudited)
 
   
As as September 30, 2013
    
As at December 31, 2012
  
ASSETS
            
Current
                
Cash and cash equivalents
  
$
 2,749,234
    
$
2,283,868
  
Accounts receivable, net of allowance of $nil (December 31, 2012 - $nil)
    
1,308,868
      
1,205,087
  
Inventories
   
1,142,500
      
1,000,557
  
Taxes recoverable
    
545,326
      
261,400
  
Loan receivable
    
15,814
      
15,814
  
Prepaid expenses and other receivables
   
403,181
      
118,910
  
Current portion of debt issuance costs, net
    
82,908
      
185,403
  
Total current assets
    
6,247,831
      
5,071,039
  
Property, plant and equipment, net
    
1,112,236
      
1,159,375
  
Intangible assets, net
   
9,949,193
      
10,883,179
  
Goodwill
    
3,599,077
      
3,599,077
  
Debt issuance costs, net
   
266,566
      
115,862
  
Total assets
  
$
21,174,903
    
$
20,828,532
  
 LIABILITIES
                
Current
                
Accounts payable and accrued liabilities
  
$
3,242,485
    
$
5,455,664
  
Current portion of long term debt
   
-
      
1,305,840
  
Warrant liability
   
4,078,296
      
202,213
  
Total current liabilities
    
7,320,781
      
6,963,717
  
Long term debt
   
5,617,124
      
1,815,791
  
Deferred tax liability
   
-
      
314,900
  
Total liabilities
    
12,937,905
      
9,094,408
  
Contingencies and commitments
               
 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 7a)
Common shares 51,081,238 (December 31, 2012 - 39,610,042)
    
19,950,384
      
17,589,957
  
Additional paid-in capital options
   
2,296,205
      
1,867,723
  
Deficit
    
(14,009,591
)
    
(7,723,556
) 
Total shareholders’ equity
    
8,236,998
      
11,734,124
  
Total liabilities and shareholders’ equity
  
$
21,174,903
    
$
20,828,532
  

 
4
 
 
TRIBUTE PHARMACEUTICALS CANADA INC.
(formerly Stellar Pharmaceuticals Inc.)
CONDENSED INTERIM STATEMENTS OF OPERATIONS,
 COMPREHENSIVE (LOSS) AND DEFICIT
(Expressed in Canadian dollars)
(Unaudited)
 
 
   
For the Three Month Period
Ended September 30
    
For the Nine Month Period
Ended September 30
  
   
2013
    
2012
    
2013
    
2012
  
Revenues
                        
Licensed domestic product net sales
  
$
2,242,333
    
$
2,267,509
    
$
6,378,621
    
$
6,104,160
  
Other domestic product sales
    
790,362
      
576,174
      
2,618,710
      
1,707,336
  
International product sales
    
347,551
      
369,816
      
1,037,103
      
1,193,219
  
Royalty and licensing revenues
    
99,884
      
-
      
197,924
      
-
  
Total revenues
   
3,480,130
      
3,213,499
      
10,232,358
      
9,004,715
  
                                 
Cost of Sales
                                
Licensor sales and distribution fees
    
1,501,243
      
1,526,690
      
4,262,968
      
4,226,247
  
Cost of products sold
    
409,358
      
327,582
      
1,232,701
      
922,983
  
Total Cost of Sales
    
1,910,601
      
1,854,272
      
5,495,669
      
5,149,230
  
Gross Profit
    
1,569,529
      
1,359,227
      
4,736,689
      
3,855,485
  
                                 
Expenses
                                
Selling, general and administrative
   
2,224,457
      
2,1231,379
      
7,681,179
      
6,240,007
  
Amortization of assets (non-manufacturing property, plant and equipment)
    
 313,635
      
155,807
      
977,693
      
380,270
  
Total operating expenses
    
2,538,092
      
2,287,186
      
8,658,872
      
6,620,277
  
(Loss) from operations
    
(968,563
)
    
(927,959
) 
    
(3,922,183
) 
    
(2,764,792
) 
Non-operating income (expenses)
                                
Change in warrant liability
   
(660,325
) 
    
66,183
      
(1,510,800
) 
    
203,396
  
Cost of extending the warrant expiration
    
-
      
-
      
-
      
(135,157
) 
Change in fair value of contingent consideration
    
-
      
-
      
-
      
79,724 
  
Research and development
    
-
      
(6,590
) 
    
-
      
(14,916
) 
Accretion expense
    
(20,895
)
    
(45,826
) 
    
(68,123
) 
    
(100,193
) 
Loss on disposal of intangible asset
   
(161,200
)
    
-
      
(1261,200
) 
    
-
  
Loss on extinguishment of loan
   
(620,835
)
    
 -
      
(620,835
) 
    
-
  
Interest income
    
268
      
12,150
      
2,235
      
12,150
  
Interest expense
    
(152,026
)
    
(103,551
) 
    
(320,029
) 
    
(158,175
) 
(Loss)  and comprehensive (loss)  before tax
    
(2,583,576
)
    
(1,005,593
) 
    
(6,600,935
) 
    
(2,877,963
) 
Current income tax recovery
    
-
      
71,153
              
71,153
  
Deferred income tax recovery
   
-
      
215,800
      
314,900
      
730,440
  
Net (loss) and comprehensive (loss) for the period
    
(2,583,576
)
    
(718,640
)
    
(6,286,035
)
    
(2,076,410
)
Deficit, beginning of period
    
(11,426,015
)
    
(5,732,360
) 
    
(7,723,556
) 
    
(4,374,590
) 
Deficit, end of period
    
(14,009,591
) 
    
(6,451,000
) 
    
(14,009,591
)
    
(6,451,000
) 
Loss per share  - Basic and diluted
    
(0.05
) 
    
(0.02
) 
    
(0.13
) 
    
(0.05
) 
 
 
5
 
 
TRIBUTE PHARMACEUTICALS CANADA INC.
(formerly Stellar Pharmaceuticals Inc.)
CONDENSED INTERIM STATEMENTS OF CASH FLOWS
(Expressed in Canadian dollars)
(Unaudited)


   
For the Nine Month Period
Ended September 30
  
   
2013
    
2012
  
Cash flows from (used in) operating activities
            
Net (loss)
  
$
(6,286,035
)
  
$
(2,076,410
)
Items not affecting cash:
                
Deferred income tax (recovery)
    
(314,900
)
    
(730,400
)
Amortization
    
995,758
      
412,490
  
Changes in warrant liability
   
1,510,800
      
(203,396
)
Cost of extending the warrant expiration
    
-
      
135,157
  
Changes in fair value of contingent consideration
    
-
      
(79,724
)
Loss on extinguishment of loan
    
620,835
      
-
  
Loss on disposal of intangible asset
    
161,200
      
-
  
Stock-based compensation
   
428,482
      
460,332
  
Accretion expense
    
68,124
      
100,193
  
Change in non-cash operating assets and liabilities
   
(2,629,186
)
    
(249,493
)
Cash flows (used in) operating activities
    
(5,444,922
)
    
(2,231,251
)
Cash flows from (used in) investing activities
                
Additions to property, plant and equipment
    
(25,562
)
    
(32,489
)
Payment of contingent liability
    
(460,000
)
    
-
  
Increase in intangible assets
    
-
      
(32,270
)
Increase to patents and licensing agreements
    
(13,180
)
    
(425,000
)
Cash flows (used in) investing activities
    
(498,742
)
    
(489,759
)
Cash flows from (used in) financing activities
                
Financing costs deferred
    
(305,227
)
    
(343,934
)
Long term debt issued
    
6,084,437
      
3,500,000
  
Units issued
   
4,713,787
      
-
  
Long term debt repayment
    
(3,386,630
)
    
-
  
Debt extinguishment costs
    
(348,420
)
    
-
  
Share issuance costs
    
(433,871
)
    
-
  
Cash flows from financing activities
    
6,324,076
      
3,156,066
  
Changes in cash and cash equivalents
    
380,412
      
435,056
  
Change in cash due to changes in foreign exchange
    
84,954
      
(54,378
)
Cash and cash equivalents, beginning of period
    
2,283,868
      
2,227,973
  
Cash and cash equivalents, end of period
  
$
2,749,234
    
$
2,608,651
  

6 

Tribute Pharmaceuticals Canada Inc. Reports