Interim Consolidated Financial Statements

(in thousands of United States dollars)

THERATECHNOLOGIES INC.

Three- and six-month periods ended

May 31, 2021 and 2020

(Unaudited)

THERATECHNOLOGIES INC.

Table of Contents

(Unaudited)

(in thousands of United States dollars)

Page

Interim Consolidated Statements of Financial Position

1

Interim Consolidated Statements of Comprehensive Loss

2

Interim Consolidated Statements of Changes in Equity

3

Interim Consolidated Statements of Cash Flows

4

Notes to Interim Consolidated Financial Statements

5 - 17

THERATECHNOLOGIES INC.

Interim Consolidated Statements of Financial Position

(Unaudited)

As at May 31, 2021 and November 30, 2020

(in thousands of United States dollars)

Note May 31,
2021
November 30,
2020

$

$

Assets

Current assets

Cash

38,235 12,737

Bonds and money market funds

18,479 8,031

Trade and other receivables

10,352 12,430

Tax credits and grants receivable

475 755

Inventories

28,578 25,145

Prepaid expenses and deposits

5,524 5,189

Derivative financial assets

796 520

Total current assets

102,439 64,807

Non-current assets

Property and equipment

800 865

Right-of-use assets

2,424 2,618

Intangible assets

22,978 24,529

Other assets

4,882 7,323

Total non-current assets

31,084 35,335

Total assets

133,523 100,142

Liabilities

Current liabilities

Accounts payable and accrued liabilities

33,180 34,815

Provisions

5 3,991 1,947

Other obligations

6 4,863 4,666

Current portion of lease liabilities

8 471 425

Income taxes payable

22 16

Deferred revenue

28 50

Total current liabilities

42,555 41,919

Non-current liabilities

Convertible unsecured senior notes

7 53,291 52,403

Lease liabilities

8 2,447 2,555

Other liabilities

68 41

Total non-current liabilities

55,806 54,999

Total liabilities

98,361 96,918

Equity

Share capital and warrants

9 335,011 287,312

Equity component of convertible unsecured senior notes

4,457 4,457

Contributed surplus

12,336 12,065

Deficit

(315,833 ) (300,129 )

Accumulated other comprehensive loss

(809 ) (481 )

Total equity

35,162 3,224

Subsequent event

14

Total liabilities and equity

133,523 100,142

The accompanying notes are an integral part of these consolidated financial statements.

(1)

THERATECHNOLOGIES INC.

Interim Consolidated Statements of Comprehensive Loss

(Unaudited)

For the three- and six-month periods ended May 31, 2021 and 2020

(in thousands of United States dollars, except per share amounts)

For the three-month
periods ended May 31,
For the six-month
periods ended May 31,
Note 2021 2020 2021 2020
$ $ $ $

Revenue

3 17,787 17,162 33,217 32,881

Operating expenses

Cost of sales

Cost of goods sold

4,714 5,769 8,904 11,169

Other production-related costs

- 391 - 531

Amortization of other assets

1,220 1,220 2,441 2,441

Research and development expenses

(net of tax credits of $64 (2020 - nil))

6,417 3,622 11,300 7,041

Selling expenses

6,901 6,941 13,059 13,302

General and administrative expenses

3,884 3,706 7,446 6,276

Total operating expenses

23,136 21,649 43,150 40,760

Loss from operating activities

(5,349 ) (4,487 ) (9,933 ) (7,879 )

Finance income

4 432 80 481 246

Finance costs

4 (1,455 ) (1,399 ) (2,836 ) (2,717 )
(1,023 ) (1,319 ) (2,355 ) (2,471 )

Loss before income taxes

(6,372 ) (5,806 ) (12,288 ) (10,350 )

Income taxes

20 - 26 -

Net loss

(6,392 ) (5,806 ) (12,314 ) (10,350 )

Other comprehensive income (loss), net of tax

Items that may be reclassified to net profit (loss) in the future:

Net change in fair value of FVOCI
financial assets, net of tax

(59 ) 9 (61 ) 19

Exchange differences on translation
of foreign operations

(165 ) (42 ) (267 ) (44 )
(224 ) (33 ) (328 ) (25 )

Total comprehensive loss

(6,616 ) (5,839 ) (12,642 ) (10,375 )

Basic and diluted loss

9 (e) (0.07 ) (0.08 ) (0.14 ) (0.13 )

The accompanying notes are an integral part of these consolidated financial statements.

(2)

THERATECHNOLOGIES INC.

Interim Consolidated Statements of Changes in Equity

(Unaudited)

For the six-month periods ended May 31, 2021 and 2020

(in thousands of United States dollars, except per share amounts)

For the six-month period ended May 31, 2021
Note Share capital
and warrants
Number
of shares
Amount Equity
component
of convertible
notes
Contributed
surplus
Deficit Accumulated
other
comprehensive
loss
Total
$ $ $ $ $ $

Balance as at November 30, 2020

77,013,411 287,312 4,457 12,065 (300,129 ) (481 ) 3,224

Total comprehensive loss

Net loss

- - - - (12,314 ) - (12,314 )

Other comprehensive income:

- - - - - - -

Net change in fair value of FVOCI financial assets, net of tax

- - - - - (61 ) (61 )

Exchange differences on translation of foreign operation

- - - - - (267 ) (267 )

Total comprehensive loss

- - - - (12,314 ) (328 ) (12,642 )

Transactions with owners, recorded directly in equity

Public issue of common shares and warrants

9 (a) 16,727,900 46,002 - - - - 46,002

Share issue costs

- - - - (3,390 ) - (3,390 )

Exercise of warrants

197,400 628 - - - - 628

Share issue - Oncology

9 (b) 481,928 668 - (668 ) - - -

Share-based compensation plan:

Share-based compensation for stock option plan

9 (c) - - - 1,099 - - 1,099

Exercise of stock options:

Monetary consideration

9 (c) 400,000 241 - - - - 241

Attributed value

- 160 - (160 ) - - -

Total contributions by owners

17,807,228 47,699 - 271 (3,390 ) - 44,580

Balance as at May 31, 2021

94,820,639 335,011 4,457 12,336 (315,833 ) (809 ) 35,162
For the six-month period ended May 31, 2020
Share capital
and warrants
Number
of shares
Amount Equity
component
of convertible
notes
Contributed
surplus
Deficit Accumulated
other
comprehensive
loss
Total
$ $ $ $ $ $

Balance as at November 30, 2019

76,953,411 287,035 4,457 10,783 (277,462 ) 21 24,834

Total comprehensive loss

Net loss

- - - - (10,350 ) - (10,350 )

Other comprehensive income:

Net change in fair value of financial assets at fair value through other comprehensive income, net of tax

- - - - - 19 19

Exchange differences on translation of foreign operation

- - - - - (44 ) (44 )

Total comprehensive loss

- - - - (10,350 ) (25 ) (10,375 )

Transactions with owners, recorded directly in equity

Share based compensation plan:

Share based compensation for stock option plan

- - - 818 - - 818

Exercise of stock options:

Monetary consideration

60,000 145 - - - - 145

Attributed value

- 132 - (132 ) - - -

Total contributions by owners

60,000 277 - 686 - - 963

Balance as at May 31, 2020

77,013,411 287,312 4,457 11,469 (287,812 ) (4 ) 15,422

The accompanying notes are an integral part of these consolidated financial statements.

(3)

THERATECHNOLOGIES INC.

Interim Consolidated Statement of Cash Flows

(Unaudited)

For the three- and six-month periods ended May 31, 2021 and 2020

(in thousands of United States dollars)

For the three-month periods ended May 31, For the six-month periods ended May 31,
Note

2021

$

2020

$

2021

$

2020

$

Cash flows from (used in)

Operating activities

Net loss

(6,392 ) (5,806 ) (12,314 ) (10,350 )

Adjustments for:

Depreciation of property and equipment

57 61 113 121

Amortization of intangible assets and other assets

2,015 1,939 4,031 3,800

Amortization of right-of-use assets

113 109 226 218

Share-based compensation for stock option plan and stock appreciation rights

548 454 1,126 819

Write-down of inventories

- 391 - 394

Change in fair value of derivative financial assets

(34 ) 102 (224 ) 249

Change in fair value of liability related to deferred stock unit plan

35 (95 ) 223 (240 )

Interest on convertible unsecured senior notes

833 842 1,635 1,644

Interest income

(54 ) (80 ) (79 ) (246 )

Foreign exchange

(541 ) 23 (634 ) 36

Accretion expense

608 521 1,189 1,023
(2,812 ) (1,539 ) (4,708 ) (2,532 )

Change in operating assets and liabilities

Trade and other receivables

451 (2,301 ) 2,100 (2,071 )

Tax credit and grants receivable

(8 ) - 317 -

Inventories

(1,187 ) (4,424 ) (3,335 ) (4,168 )

Prepaid expenses and deposits

320 (31 ) (330 ) 669

Accounts payable and accrued liabilities

1,968 5,040 (2,016 ) (351 )

Income taxes payable

- - 6 -

Provisions

574 164 2,044 570

Deferred revenue

(22 ) (9 ) (22 ) (42 )
2,096 (1,561 ) (1,236 ) (5,393 )

Cash flows used in operating activities

(716 ) (3,100 ) (5,944 ) (7,925 )

Financing activities

Proceeds from issue of common shares and warrants

9 (a) - - 46,002 -

Share issue costs

9 (a) (305 ) - (3,358 ) -

Proceeds from exercise of stock options

211 145 241 145

Proceeds from exercise of warrants

628 - 628 -

Payments of lease liabilities

(160 ) (135 ) (318 ) (276 )

Interest paid on convertible unsecured senior notes

- - (1,653 ) (1,653 )

Cash flows from (used in) financing activities

374 10 41,542 (1,784 )

Investing activities

Acquisition of bonds and money market funds

(10,432 ) (21 ) (10,434 ) (51 )

Proceeds from sale of bonds and money market funds

203 859 640 2,258

Interest received

(352 ) 107 (320 ) 298

Acquisition of intangible assets

(39 ) - (39 ) -

Acquisition of derivative financial assets

- (17 ) - (17 )

Acquisition of property and equipment

(19 ) (10 ) (46 ) (13 )

Cash flows from (used in) investing activities

(10,639 ) 918 (10,199 ) 2,475

Net change in cash

(10,981 ) (2,172 ) 25,399 (7,234 )

Cash, beginning of period

49,116 23,600 12,737 28,661

Effect of foreign exchange on cash

100 12 99 13

Cash, end of period

38,235 21,440 38,235 21,440

Supplemental cash flow disclosures

10

The accompanying notes are an integral part of these consolidated financial statements.

(4)

THERATECHNOLOGIES INC.

Notes to Interim Consolidated Financial Statements

(Unaudited)

For the three- and six-month periods ended May 31, 2021 and 2020

(in thousands of United States dollars)

Theratechnologies Inc. is a biopharmaceutical company focused on the development and commercialization of innovative therapies addressing unmet medical needs.

The interim consolidated financial statements include the accounts of Theratechnologies Inc. and its wholly-owned subsidiaries (together referred to as the 'Company' and individually as the 'subsidiaries of the Company').

Theratechnologies Inc. is governed by the Business Corporations Act (Québec) and is domiciled in Québec, Canada. The Company is located at 2015 Peel Street, Suite 1100, Montréal, Québec, H3A 1T8.

1

Basis of preparation

a)

Accounting framework

These unaudited interim consolidated financial statements (interim financial statements), including comparative information, have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting.

Certain information, in particular the accompanying notes normally included in the annual consolidated financial statements prepared in accordance with IFRS, has been omitted or condensed. These interim financial statements do not include all disclosures required under IFRS and, accordingly, should be read in conjunction with the annual consolidated financial statements for the year ended November 30, 2020 and the notes thereto.

These interim consolidated financial statements have been authorized for issue by the Company's Audit Committee on July 14, 2021.

b)

Basis of measurement

The Company's interim consolidated financial statements have been prepared on going concern and historical cost bases, except for bonds and money market funds, derivative financial assets, liabilities related to cash-settledshare-based arrangements and derivative financial liabilities, which are measured at fair value. Effective December 1, 2019, lease liabilities are measured at the present value of lease payments not paid at commencement date. Equity-classifiedshared-based payment arrangements are measured at fair value at grant date pursuant to IFRS 2, Share-based Payment.

The methods used to measure fair value are discussed further in Note 12.

(5)

THERATECHNOLOGIES INC.

Notes to Interim Consolidated Financial Statements

(Unaudited)

For the three- and six-month periods ended May 31, 2021 and 2020

(in thousands of United States dollars)

c)

Use of estimates and judgments

The preparation of the Company's interim financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim financial statements, and the reported amounts of revenues and expenses during the reporting periods.

Information about critical judgments in applying accounting policies and assumptions and estimation uncertainties that have the most significant effect on the amounts recognized in the interim financial statements are disclosed in Note 1 of the annual consolidated financial statements as at November 30, 2020.

d)

Functional and presentation currency

The Company's functional currency is the United States dollar (USD).

All financial information presented in USD has been rounded to the nearest thousand.

2

Significant accounting policies

The significant accounting policies as disclosed in the Company's annual consolidated financial statements for the year ended November 30, 2020 have been applied consistently in the preparation of these interim financial statements.

3

Revenue

Net sales by product were as follows:

For the three-month
periods ended May 31,

2021

$

2020

$

EGRIFTA® and EGRIFTA SVTM net sales

10,344 9,269

Trogarzo® net sales

7,443 7,893
17,787 17,162

(6)

THERATECHNOLOGIES INC.

Notes to Interim Consolidated Financial Statements

(Unaudited)

For the three- and six-month periods ended May 31, 2021 and 2020

(in thousands of United States dollars)

For the six-month
periods ended May 31,

2021

$

2020

$

EGRIFTA® and EGRIFTA SVTM net sales

19,032 17,784

Trogarzo® net sales

14,185 15,097
33,217 32,881

Net sales by geography were as follows:

For the three-month

periods ended May 31,

2021

$

2020

$

Canada

148 122

United States

16,893 17,040

Europe

746 -
17,787 17,162

For the six-month

periods ended May 31,

2021

$

2020

$

Canada

287 231

United States

31,469 32,650

Europe

1,461 -
33,217 32,881

(7)

THERATECHNOLOGIES INC.

Notes to Interim Consolidated Financial Statements

(Unaudited)

For the three- and six-month periods ended May 31, 2021 and 2020

(in thousands of United States dollars)

4

Finance income and finance costs

Note For the three-month
periods ended May 31,

2021

$

2020

$

Net foreign currency gain

378 -

Interest income

54 80

Finance income

432 80

Accretion expense

6, 7, 8 (608 ) (521 )

Interest on convertible unsecured senior notes

(833 ) (842 )

Bank charges

(13 ) (16 )

Net foreign currency loss

- (13 )

Loss on financial instruments carried at fair value

(1 ) (7 )

Finance costs

(1,455 ) (1,399 )

Net finance costs recognized in net profit or loss

(1,023 ) (1,319 )
Note For the six-month
periods ended May 31,

2021

$

2020

$

Net foreign currency gain

402 -

Interest income

79 246

Finance income

481 246

Accretion expense

6, 7, 8 (1,189 ) (1,023 )

Interest on convertible unsecured senior notes

(1,635 ) (1,644 )

Bank charges

(13 ) (16 )

Net foreign currency loss

- (25 )

Gain (loss) on financial instruments carried at fair value

1 (9 )

Finance costs

(2,836 ) (2,717 )

Net finance costs recognized in net profit or loss

(2,355 ) (2,471 )

(8)

THERATECHNOLOGIES INC.

Notes to Interim Consolidated Financial Statements

(Unaudited)

For the three- and six-month periods ended May 31, 2021 and 2020

(in thousands of United States dollars)

5

Provisions

Chargebacks
and rebates

$

Returns

$

Other

$

Total

$

Balance as at November 30, 2019

2,182 247 55 2,484

Provisions made

10,314 948 2,973 14,235

Provisions used

(10,818 ) (935 ) (3,019 ) (14,772 )

Balance as at November 30, 2020

1,678 260 9 1,947

Provisions made

4,634 293 1,660 6,587

Provisions used

(3,931 ) (206 ) (406 ) (4,543 )

Balance as at May 31, 2021

2,381 347 1,263 3,991
6

Other obligations

The movement in the other obligations is as follows:

Commercialization
rights - Trogarzo®
North American Territory

$

Commercialization
rights - Trogarzo®
European Territory

$

Total

$

Balance as at November 30, 2019

3,417 4,570 7,987

Payment

(3,500 ) - (3,500 )

Accretion expense

83 96 179

Balance as at November 30, 2020

- 4,666 4,666

Accretion expense

- 197 197

Balance as at May 31, 2021, all current

- 4,863 4,863

(9)

THERATECHNOLOGIES INC.

Notes to Interim Consolidated Financial Statements

(Unaudited)

For the three- and six-month periods ended May 31, 2021 and 2020

(in thousands of United States dollars)

7

Convertible unsecured senior notes

The movement in the carrying value of the convertible unsecured senior notes is as follows:

$

Convertible unsecured senior notes as at November 30, 2019

50,741

Accretion expense

1,662

Convertible unsecured senior notes as at November 30, 2020

52,403

Accretion expense

888

Convertible unsecured senior notes as at May 31, 2021

53,291
8

Lease liabilities

Carrying value

$

Balance as at December 1, 2019

3,192

Accretion expense

215

Lease payments

(568 )

Effect on change in exchange rates

141

Balance as at November 30, 2020

2,980

Accretion expense

104

Lease payments

(318 )

Effect on change in exchange rates

152

Balance as at May 31, 2021

2,918

Current portion

471

Non-current portion

2,447

(10)

THERATECHNOLOGIES INC.

Notes to Interim Consolidated Financial Statements

(Unaudited)

For the three- and six-month periods ended May 31, 2021 and 2020

(in thousands of United States dollars)

9

Share capital and warrants

a)

Public offering

On January 19, 2021, the Company completed a public offering for the sale and issuance of 16,727,900 units at a price of $2.75 per unit for a gross cash consideration of $46,002, including the full exercise of the over-allotment option.

Each unit comprises one common share of the Company and one-half of one common share purchase warrant of the Company (each whole warrant, a Warrant) and is classified in Share Capital and Warrants within equity. As at May 31, 2021, 197,400 Warrants were exercised and there were 8,166,550 Warrants outstanding. Each Warrant entitles the holder thereof to purchase one common share at an exercise price of US$3.18 at any time until January 19, 2024.

b)

Milestone oncology

In March 2021, the Company issued 481,928 common shares under the terms of the acquisition agreement entered into with all of the shareholders of Katana Biopharma Inc. (Katana) for Katana's in-licensed oncology platform. The purchase price for the oncology platform provided for share-based consideration to be issued upon attainment of two milestones. The first milestone consisted in initiating a Phase 1 clinical trial evaluating TH1902 for the treatment of sortilin positive solid tumors. This milestone was achieved in March 2021. The estimated fair value of the share-based consideration of $668 initially recorded in contributed surplus on the date of the acquisition was reclassified to share capital in the second quarter.

c)

Stock option plan

The Company has established a stock option plan (Plan) under which it can grant its directors, officers, employees, researchers and consultants non-transferable options for the purchase of common shares. The exercise date of an option may not be later than 10 years after the grant date. A maximum number of 7,700,000 options can be granted under the Plan. Generally, the options vest at the grant date or over a period of up to three years. As at May 31, 2021, 3,888,536 options could still be granted by the Company (2020 - 1,172,697) under the Plan.

All options are to be settled by the physical delivery of common shares.

(11)

THERATECHNOLOGIES INC.

Notes to Interim Consolidated Financial Statements

(Unaudited)

For the three- and six-month periods ended May 31, 2021 and 2020

(in thousands of United States dollars)

Changes in the number of options outstanding during the past two years were as follows:

Weighted average exercise price per option
Number of
options
CAD USD

Options exercisable in CA$

Options as at November 30, 2019 - CA$

2,415,784 $ 3.93 $ 2.96

Granted - CA$

1,077,721 3.06 2.25

Forfeited - CA$

(130,146 ) 5.08 3.63

Exercised (share price: CA$3.77 (US$2.68))

(60,000 ) 3.38 2.40

Options outstanding as at May 31, 2020 - CA$

3,303,359 3.61 2.62

Options as at November 30, 2020 - CA$

3,203,693 3.59 2.76

Granted - CA$

1,019,331 3.93 3.09

Forfeited - CA$

(17,732 ) 3.59 2.80

Exercised (share price: CA$4.07 (US$3.27))

(400,000 ) 0.75 0.60

Options outstanding as at May 31, 2021 - CA$

3,805,292 $ 3.98 $ 3.30

Options exercisable as at May 31, 2021 - CA$

2,164,924 $ 4.17 $ 3.45

Options exercisable in US$

Options as at November 30, 2020 - US$

12,500 - 2.35

Granted - US$

81,093 - 3.10

Options outstanding as at May 31, 2021 - US$

93,593 - 3.00

Options exercisable as at May 31, 2021 - US$

- - -

During the six-month period ended May 31, 2021, $1,099 (2020 - $818) was recorded as share-based compensation expense for the Plan. The fair value of options granted during the period was estimated at the grant date using the Black-Scholes model and the following weighted average assumptions:

2021 2020

Options exercisable in CA$

Risk-free interest rate

1.36% 0.95%

Expected volatility

71% 70%

Average option life in years

8.5 years 8.5 years

Grant-date share price

$3.10 (CA$3.93) $2.22 (CA$3.06)

Option exercise price

$3.10 (CA$3.93) $2.22 (CA$3.06)

(12)

THERATECHNOLOGIES INC.

Notes to Interim Consolidated Financial Statements

(Unaudited)

For the three- and six-month periods ended May 31, 2021 and 2020

(in thousands of United States dollars)

2021

Options exercisable in US$

Risk-free interest rate

1.40%

Expected volatility

73%

Average option life in years

8.5 years

Grant-date share price

$ 3.10

Option exercise price

$ 3.10

The risk-free interest rate is based on the implied yield on a Canadian government or U.S. zero-coupon issue, with a remaining term equal to the expected term of the option. The volatility is based on weighted average historical volatility adjusted for a period equal to the expected life. The life of the options is estimated taking into consideration the vesting period at the grant date, the life of the option and the average length of time similar grants have remained outstanding in the past. The dividend yield was excluded from the calculation, since it is the present policy of the Company to retain all earnings to finance operations and future growth.

The following table summarizes the measurement date weighted average fair value of stock options granted during the following periods:

Number
of options
Weighted
average grant
date fair value

Options exercisable in CA$

For the three and six-month periods ended
May 31, 2021

1,019,331 $ 2.41 (CA$2.72)

For the six-month period ended
May 31, 2020

1,077,721 $ 1.51 (CA$2.08)

For the three-month period ended
May 31, 2020

499,921 $ 1.30 (CA$1.79)
Number
of options
Weighted
average grant
date fair value

Options exercisable in US$

For the three and six-month periods ended
May 31, 2021

81,093 $ 2.19

There were no options granted in CA$ and US$ for the three-month period ended May 31, 2021. The Black-Scholes model used by the Company to calculate option values was developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which significantly differ from the Company's stock option awards. This model also requires four highly subjective assumptions, including future stock price volatility and average option life, which greatly affect the calculated values.

(13)

THERATECHNOLOGIES INC.

Notes to Interim Consolidated Financial Statements

(Unaudited)

For the three- and six-month periods ended May 31, 2021 and 2020

(in thousands of United States dollars)

d)

Stock appreciation rights (SARs)

On October 4, 2018, the Company's Board of Directors approved a SARs plan for its consultants that entitles the grantee to a cash payment based on the increase in the stock price of the Company's common shares from the grant date to the settlement date. The exercise date of an SAR may not be later than 10 years after the grant date. Generally, the SARs vest over a period of three years.

During the six-month period ended May 31, 2021, $27 (2020 - $1) was recorded as share-based compensation expense for the SARs plan. Since these awards will be cash-settled, the fair value of SARs granted is estimated at each reporting period using the Black-Scholes model and the following weighted average assumptions. No SARs were granted during the six-month period ended May 31, 2021.

Measurement
date as at
May 31, 2021

Risk-free interest rate

1.49%

Expected volatility

65%

Average option life in years

5.7 years

Period-end share price

$ 3.54 (CA$4.28)

SAR exercise price

$ 3.54 (CA$4.28)

The risk-free interest rate is based on the implied yield on a Canadian government zero-coupon issue, with a remaining term equal to the expected term of the SAR. The volatility is based on weighted average historical volatility adjusted for a period equal to the expected life. The life of the SARs is estimated taking into consideration the vesting period at the grant date, the life of the SARs and the average length of time similar grants have remained outstanding in the past. The dividend yield was excluded from the calculation, since it is the present policy of the Company to retain all earnings to finance operations and future growth.

e)

Loss per share

For the three and six-month periods May 31, 2021 and 2020, the weighted average number of common shares outstanding was calculated as follows:

For the three-month periods
ended May 31,
2021 2020

Issued common shares as at March 1

93,841,311 76,953,411

Effect of share options exercised

153,261 32,366

Effect of public issue of common shares

366,684 -

Effect of broker warrants

140,252 -

Weighted average number of common shares, basic and diluted

94,501,508 76,985,777

(14)

THERATECHNOLOGIES INC.

Notes to Interim Consolidated Financial Statements

(Unaudited)

For the three- and six-month periods ended May 31, 2021 and 2020

(in thousands of United States dollars)

For the six-month periods
ended May 31,
2021 2020

Issued common shares as at December 1

77,013,411 76,953,411

Effect of share options exercised

157,143 16,448

Effect of public issue of common shares

12,409,592 -

Effect of broker warrants

70,897 -

Weighted average number of common shares, basic and diluted

89,651,043 76,969,859

For the six-month period ended May 31, 2021, 3,898,885 (2020 - 3,303,359) share options, 8,166,550 Warrants and 3,872,053 common shares potentially issuable from the conversion of the $57,500 aggregate principal amount of notes, that may potentially dilute loss per share in the future, were excluded from the weighted average number of diluted common shares calculation as their effect would have been anti-dilutive.

10

Supplemental cash flow disclosures

The Company entered into the following transactions which had no impact on its cash flows:

May 31,
2021

$

May 31,
2020

$

Additions to property and equipment included in accounts payable and accrued liabilities

14 2

Share issue costs included in accounts payable and accrued liabilities

32 -

Initial recognition of right-of-use assets and lease liabilities

- 3,192

Reclassification of other liabilities to right-ofuse-assets

- 238
11

Financial instruments

The nature and extent of the Company's exposure to risks arising from financial instruments are consistent with the disclosure in the annual consolidated financial statements as at November 30, 2020.

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THERATECHNOLOGIES INC.

Notes to Interim Consolidated Financial Statements

(Unaudited)

For the three- and six-month periods ended May 31, 2021 and 2020

(in thousands of United States dollars)

12

Determination of fair values

Certain of the Company's accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

Financial assets and financial liabilities measured at fair value

In establishing fair value, the Company uses a fair value hierarchy based on levels as defined below:

Level 1:

Defined as observable inputs such as quoted prices in active markets.

Level 2:

Defined as inputs other than quoted prices in active markets that are either directly or indirectly observable.

Level 3:

Defined as inputs that are based on little or no observable market data, therefore requiring entities to develop their own assumptions.

Other financial assets and financial liabilities

The Company has determined that the carrying values of its short-term financial assets and financial liabilities, including cash, trade and other receivables and accounts payable and accrued liabilities, approximate their fair value because of their relatively short period to maturity.

Bonds and money market funds and derivative financial assets and liabilities are stated at fair value, determined by inputs that are primarily based on broker quotes at the reporting date (Level 2).

The fair value of the convertible unsecured senior notes, including the equity portion, as at May 31, 2021, was approximately $52,325 (Level 1) based on market quotes.

Share-based payment transactions

The fair value of the employee stock options are measured based on the Black-Scholes valuation model. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historical volatility adjusted for a period equal to the expected life, weighted average expected life of the instruments (based on historical experience and general option holder behaviour), expected dividends, and the risk-free interest rate (based on government bonds). Service and non-market performance conditions attached to the transactions, if any, are not taken into account in determining fair value.

The deferred stock units liability is recognized at fair value and considered Level 2 in the fair value hierarchy for financial instruments. The fair value is determined using the quoted price of the common shares of the Company.

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THERATECHNOLOGIES INC.

Notes to Interim Consolidated Financial Statements

(Unaudited)

For the three- and six-month periods ended May 31, 2021 and 2020

(in thousands of United States dollars)

13

Operating segments

The Company has a single operating segment. Over 94% (2020 - 97%) of the Company's revenues are generated from one customer, RxCrossroads, which is domiciled in the United States.

For the six-month periods ended
May 31,

2021

$

2020

$

RxCrossroads

31,368 31,826

Others

1,849 1,055
33,217 32,881

All of the Company's non-current assets are located in Canada and Ireland, as is the Company's head office. Of the Company's non-current assets of $31,084, $29,810 as at May 31, 2021 are located in Canada and $1,274 are located in Ireland (November 30, 2020: $35,335, of which $34,006 were in Canada and $1,329 were in Ireland).

14

Subsequent event

Stock options

Between June 1, 2021 and July 13, 2021, 100,000 options were exercised and 100,000 common shares were issued for a cash consideration of $92.

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Theratechnologies Inc. published this content on 15 July 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 15 July 2021 11:38:01 UTC.