YE 2016 MDA final - MedMiramedmira.com/wp-content/uploads/2018/05/MedMira_FY2016...Association of...

MedMiraInc.Management’sDiscussion&Analysis

FortheyearendedJuly31,2016

Management’sDiscussion&Analysis July31,2016

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Forwardlookingstatements

Thisdocumentcontains forward lookingstatements,suchasstatementsregardingfuturesalesopportunities invariousglobalregionsandfinancinginitiativesthatarebasedoncurrentexpectationsofmanagement.Thesestatementsinvolveuncertainties and risks, includingMedMira Inc.’s (MedMira or theCompany) ability to obtain and/or access additionalfinancingwith acceptable terms, and delays in anticipated product sales. Such forward-looking statements should begivencarefulconsiderationandunduerelianceshouldnotbeplacedonthesestatements.

The preparation ofManagement’s Discussion and Analysis (MD&A)may requiremanagement tomake estimates andassumptionsthataffectthereportedamountsofassetsandliabilitiesasofthedateofthefinancialstatementsandthereportedamountofrevenueandexpensesduringthereportingperiod.Managementbasesestimatesandjudgmentsonhistoricalexperienceandonvariousotherfactorsthatarebelievedtobereasonableunderthecircumstances,theresultsofwhichformthebasisformakingjudgmentsaboutthecarryingvalueofassetsandliabilities.Actualresultsmaydifferfromtheseestimatesunderdifferentassumptionsorconditions.Managementbelievestheaccountingpolicies,outlinedin theSignificantAccountingPolicies sectionof its consolidated interim financial statements,affect itsmore significantjudgmentsandestimatesusedinthepreparationofitsconsolidatedfinancialstatements.

Introduction

ThefollowingMD&AforthethreemonthsandyearendedJuly31,2016hasbeenpreparedtohelpinvestorsunderstandthe financial performance of MedMira in the broader context of the Company’s strategic direction, the risk andopportunitiesasunderstoodbymanagement,andthekeymetricsthatarerelevanttotheCompany’sperformance.TheAudit Committee of the Board of Directors has reviewed this document and all other publicly reported financialinformationforintegrity,usefulness,reliabilityandconsistency.

AnnualreferencesaretotheCompany’sfiscalyears,whichendonJuly31.AllamountsareexpressedinCanadiandollars(CAD)unlessotherwisenoted.

AdditionalinformationaboutMedMira,thisdocument,andtherelatedquarterlyfinancialstatementscanbeviewedontheCompany’swebsiteatwww.medmira.comandareavailableonSEDARatwww.sedar.com.

AboutMedMira

MedMira is a biotechnology company engaged in the development and commercialization of rapid diagnostics andtechnologyplatforms. TheCompany isheadquartered inHalifax,NovaScotia,Canadaand is listedontheTSXVentureExchange(TSX-V)underthesymbolMIR.

ThepatentedMedMiraRapidVerticalFlow(RVF)Technology™platformisthebasisfortheCompany’slineofrapidtests.Diagnosticapplicationsbasedonthistechnologyarehighlyaccurate,easy-to-use,andproduceinstantresults–astrongadvantageovermostotherrapiddiagnosticsonthemarkettoday. Thesefeaturesareenhancedfurtherwithabilitytodelivermultiplexresultsononetestdevicewithjustonedropofspecimen.TheCompanyhascreatedanewgenerationofrapidteststhatarebasedontheneedtoprovideimmediateanswerswithoutincreasingcosts.

MedMira’s technology platform and growing portfolio of diagnostic tools demonstrate excellence in performance andqualityinthehighlycompetitivediagnosticsindustry.Morethan$30millionhasbeeninvestedinperfectingMedMira’score technology,whichhasproven itself timeand timeagainwith its excellent clinical performance and its success inrigorousevaluationsand inspections, leadingtoregulatoryapprovals for rapiddiagnosticsolutions in theUnitedStates(U.S.FoodandDrugAdministration(FDA)),Canada(HealthCanada),thenotifiedbodyintheEuropeanUnion(CEMark),


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and China (CFDA – formerly known as SFDA) and in a number of countries in Latin America, Africa, and Asia. TheCompany’squalitysystemisISO9001andISO13485certified.

MedMirasells itsrapidteststhroughanetworkofmedicaldistributorsandstrategicbusinessdevelopmentpartnerstocustomersinallsectorsofthehealthcareindustry,includinglaboratories,hospitals,point-of-carefacilities,governments,andpublichealthagencies.

Inadditiontoclinicaldiagnostics,theCompanyofferstheMiriad™productlinetocreatenewopportunitiesinthehighvaluetechnologylicensingsector.ThisbusinesslineallowstheCompanytomonetizeitsawardwinningtechnologyandcorecapabilities, includingR&D,productdevelopment,andregulatoryproficiency. Miriadprovidesaccess toMedMiraRVFTechnology for researchers,developers,andbiotechcompaniesona licensebasis to facilitate thecreationofnewrapid testsor the transitionofexisting tests to thisuniqueplatform. Infiltratingnewanddifferentcore sectorsof thediagnostic industry,suchasveterinaryandenvironmental,withtheCompany’stechnology,enablesMedMiratobuildahigher degree of global awareness, generate new revenue streams, and provide a superior diagnostic platform to themarket.

Intellectualproperty

The Company strives to protect its intellectual property in established and emerging markets around the world aswarranted.MedMira’sintellectualpropertyportfolioforitsRapidVerticalFlowTechnologyandthemethodologybehinditsrapiddiagnosticsincludesthefollowing:

Patent# Title Jurisdiction

9,164,087 RapidDiagnosticDevice,assayandmultifunctionalBuffer UnitedStates

9,086,410 Downwardorverticalflowdiagnosticdeviceandassay UnitedStates

8,025,850 RapidDiagnosticDevice,AssayandMultifunctionalBuffer UnitedStates




D706945 DiagnosticDevice UnitedStates

D706466 DiagnosticDevice UnitedStates

EP1417489 RapidDiagnosticDeviceandAssay Europe

EP1328811 HCVMosaicAntigenComposition Europe

ZL02819646.5 RapidDiagnosticDeviceandAssay China

2,493,616 RapidDiagnosticDevice,AssayandMultifunctionalBuffer Canada

TheCompanyhasotherpatentspendingpatents in theU.S.aswellas twodesignpatents in forceorpending ineightmarkets.


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TheCompany’scorporateandproductbrandnamesareprotectedbytrademarksintheU.S.andCanada.

Corporateupdate

InFY2016,MedMiramaintained its robust rapiddiagnosticsdevelopmentandcommercializationpipelinewithongoingevaluationofemergingtrendsandmarketconditions,newproductconcepts,andprototyping.Additionally,theCompanycontinued its collaborations with world class partners for the creation of new applications on the RVF Technologyplatform.

TheCompanyreceivedFDAapprovalonRevealG4RapidHIV-1AntibodyTest (RevealG4) inQ12016. BuildingonthesolidperformanceofpredecessortestsintheRevealproductline,RevealG4isMedMira’sfirstwholebloodapprovalintheU.S.

MedMira’s sales and marketing focus for FY2016 was the U.S. market, particularly growth in the Reveal and Miriadproductlines.

With Reveal G4 FDA approval received duringQ1, the concentration of activities in subsequent quarterswas productlaunchandsaleschannelactivation.OfficiallyintroducedduringtheNationalHIVPreventionConferenceinAtlanta,GA,in December 2015, Reveal G4 addedwhole blood applications for fingerstick and venipuncturewhole blood samples.Thesenewcapabilitieseffectivelyextendedtheproductlinefromserumandplasmatestinginthelaboratorytopoint-of-care settingswheremore andmoreHIV testing is taking place tomeetU.S. guidelineswhich now advise routineHIVtestingaspartofnormalhealthcareforpersonsaged15-65andallpregnantwomen.

As part of the Reveal G4 market launch, MedMira fully activated its two U.S. sales and distribution channels, VWRInternational LLC and Cardinal Health, with Reveal G4 internal launches, sales and product training sessions, and keyaccount visits. Additionally, MedMira continued to support these sales channels with targeted Reveal G4 marketingeffortsinkeyindustrysectorswhereRevealG4wholebloodtestscouldmeetdemand.TheseeffortsincludedMedMira’sdebutatthe2016AssociationofPublicHealthLaboratoriesAnnualMeeting.

InparallelwiththepromotionandbrandbuildingeffortsforRevealG4intheU.S.market,theCompanyalsoincreaseditspresence in the tissue and eye bank sector, where customers across the U.S. are using theMiriad HBc/HIV/HCV andMiriadHCV/HIVrapidtestsaspartoftissueprocurementprocedures.DuringFY2016,MedMirafocusedonbuildingtheCompany’s profile as an industry partner in this sector. The Company became an affiliatedmember of the AmericanAssociation of Tissue Banks, participated in the AATB Annual Meeting, and sponsored the AATB Quality Donor andSuitability Workshop. MedMira also made its debut at the Eye Bank Association of America’s Annual Meeting andparticipated in internalcustomertraining. Collectively thesetargetedmarketingeffortswithinthetissueandeyebankcommunityweresuccessfulinraisingMedMira’sprofileasanindustrypartner,increasingtheuseofMiriad,andprovidingtheopportunityforMedMiracustomerstospeaktotheircolleaguesabouttheirexperiencewiththeproduct.

Inadditiontothesetwomainareasoffocus,FY2016sawtheincreaseofsalessupportinitiatives. AwebsiterefreshtofocusoncoreareasofbusinessincludingtheRVFTechnologyplatform,RevealG4,andMiriadforthetissueandeyebanksector, and the creation of product specific infographics and sales collateral further supported MedMira’s sales anddistributionchannelsintheU.S.

DuringQ12016,theCompanyreceivedCAD$5millioninequityinvestmentsfromMedMiraHoldingAG(formerlyOnSiteLabHoldingAG).Thisinvestment,fromMedMira’scontrollingshareholder,supportedanincreasedsalesandmarketingdriveintheU.S.marketaswellasongoingresearchanddevelopmentandproductcommercializationactivities.

For the remainder of FY2016, the focus of the Finance team was continued fiscal streamlining, finding a balance inmanagingoperatingexpenseswithongoinginvestmentinsales,marketing,andproductcommercializationinitiatives.


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TheprimaryfocusofMedMiraistheU.S.market,howevertherewerecontinuedsalesandbusinessdevelopmenteffortswithinourglobalsalesanddistributionpartnernetworkwhichgarneredsalesinLatinAmericaandAsiaPacific.

Financialresults

Basisofpreparationandsignificantaccountingpolicies

ThebasisoffinancialstatementpreparationandthesignificantaccountingpoliciesofMedMiraaredescribedinNotes2and3oftheCompany’sJuly31,2016consolidatedfinancialstatements.


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Selectedquarterlyinformation(inthousandsofdollarsexceptpershareamounts)

Incomestatement Q42016 Q32016 Q22016 Q12016 Q42015 Q32015 Q22015 Q12015

$ $ $ $ $ $ $ $

Revenue (957) 230 1370 1614 1,463 1,345 723 521

Costofsales (991) 66 1134 1028 1,028 1,114 403 327

Grossprofit 34 164 236 586 435 231 320 194

Operatingexpenses 1946 1205 1,051 1296 548 904 1,261 939

Otherexpenses(gains) 150 173 167 190 186 179 96 297

Netearnings(loss)beforetax (2,062) (1,214) (982) (900) (299) (852) (1,037) (1,042)

Balancesheet

Q42016 Q32016 Q22016 Q12016 Q42015 Q32015 Q22015 Q12015

$ $ $ $ $ $ $ $

Currentassets 678 1930 3648 4,465 1,520 991 925 1,352

Non-currentassets 192 217 242 256 264 291 313 335

Totalassets 870 2,147 3,890 4,721 1,784 1,282 1,238 1,687

Currentliabilities 8,277 5,746 4,723 3,939 6,993 5,765 5,754 5,061

Non-currentliabilities 255 2,201 3,753 4,412 2,495 2,923 3,159 3,265

Totalliabilities 8,532 7,947 8,476 8,351 9,488 8,688 8,913 8,326

Totalshareholdersdeficiency (7,662) (5,800) (4,586) (3,630) (7,704) (7,406) (7,676) (6,640)

Totalliabilitiesandequity 870 2,147 3,890 4,721 1,784 1,282 1,238 1,687

Netearnings(loss)pershare (0.004) (0.002) (0.001) (0.001) (0.001) (0.001) (0.002) (0.002)


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Fourthquarteranalysis

ThefollowingtablecomparestheresultsofoperationsforthethreemonthsendedJuly31,2016tothethreemonthsendedJuly31,2015.

Forthethreemonthsended

31-Jul-16 31-Jul-15 Better

(worse)

$

$

$

Product

Productsales 222,751 159,428 63,323Royalties -

-

0

Productcostofsales (72,685) (52,431) (20,254)

Grossmarginonproduct 150,066 106,997 43,069

Services Servicesales (1,180,037) 1,303,805 (1,303,805)Servicecostofsales 1,063,632

(975,160)

88,472

Grossmarginonservices (116,405) 328,645 (445,050)

Operatingexpenses

Researchanddevelopment (1,284,564) 330,932 (1,615,496)Salesandmarketing (249,100)

(160,514)

(88,586)Otherdirectcosts (157,001) (159,869) 2,868Generalandadministrative (255,538)

(558,624)

303,086

Totaloperatingexpenses (1,946,203)

(548,073)

(1,398,130)

Operating(expense)income (1,912,542) (112,433) (1,800,109)

Non-operatingexpenses Financing(expense)income (149,457) (185,879) 36,422

NetLoss (2,061,999)

(298,312)

(1,763,687)

Productrevenueandgrossmargin

The Company recorded revenue from product sales and royalties in the quarter ended July 31, 2016 of $222,751 ascomparedto$159,428forthesameperiodlastyear.TheincreaseinrevenuewasduetoadditionalsalesinLatinAmericaandtheUS.Grossprofitforthequarterwas$150,066(67.3%)comparedto$106,997(67.1%)inthesameperiodin2015.Thecostofproductsaleswas$72,685duringthethreemonthsendedJuly31,2016(July31,2015–$52,431).


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Servicerevenueandgrossmargin

TheCompanyrecordedrevenuefromservicesalesof$-1,180,037inthethreemonthsendedJuly31,2016(July31,2015-$1,303,805).TheCompanyearnedrevenueandgrossmarginontworesearchcontractswiththeUnitedStatesmilitary.The decrease in service sales revenue during the fourth quarter was related to the Company derecognizing servicerevenuerecordedinthesecondquarterFY2016forservicesalesrevenuefromthecontractwiththeU.S.military.ThisderecognitionwasnecessaryduetocontinuingreimbursementactivitiesassociatedwiththeU.S.militarycontract.

Operatingexpenses

Totaloperatingexpensesincreasedto$1,912,542inthequarterendedJuly31,2016,comparedto$548,073duringthesameperiodin2015.

− ResearchanddevelopmentexpensesforthequarterendedJuly31,2016were$1,284,564,comparedtoarecoveryof$330,932forthesameperiodlastyear.TheincreaseinresearchanddevelopmentexpensesisrelatedtoongoingcommercializationactivitiesandproductapprovalsubmissionswithFDAintheUnitedStates.

− SalesandmarketingexpensesforthequarterendedJuly31,2016was$249,100comparedto$160,514forthesameperiodlastyear.ThisincreasewasduetoadditionalsalesandmarketingstrategiesimplementedtopromoteitsG4andMiriadproductline.

− Other direct costs for the threemonths ended July 31, 2016were $157,001 compared to $159,869 for the sameperiodlastyear.

− Administrativeexpenseswere$255,538forthequarterendedJuly31,2016,comparedwith$558,624forthesameperiodin2015.Thedecreaseof54.30%wasduetothecostrestructuringmeasuresimplementedduringFY2015.

Non-operatingincomeandexpenses

− TheCompanyhadfinancingexpensesof$149,457incomparisonto$185,879inFY2015.Thedecreasewasduetorepaymentofshort-termloans.


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Yeartodateanalysis

ThefollowingtablecomparestheresultsofoperationsfortheyearendedJuly31,2016totheyearendedJuly31,2015.

Fortheyearended

31-Jul-16

31-Jul-15

Better(worse)

$

$

$

Product Productsales 962,140

1,130,419

(168,279)

Royalties 0

753

(753)

Productcostofsales (284,904)

(443,002)

158,098

Grossmarginonproduct 677,236

688,170

(10,934)

Services Servicesales 1,294,692

2,921,169

(1,626,477)

Servicecostofsales (952,633)

(2,428,973)

1,476,340

Grossmarginonservices 342,059

492,196

(150,137)

Operatingexpenses Researchanddevelopment (2,518,546)

(874,143)

(1,644,403)

Salesandmarketing (792,456)

(503,535)

(288,921)Otherdirectcosts (714,515)

(623,742)

(90,773)

Generalandadministrative (1,472,640)

(1,920,421)

447,781

Totaloperatingexpenses (5,498,157)

(3,921,841)

(1,576,316)

Operating(expense)income (4,478,861)

(2,741,475)

(1,737,386)

Non-operatingexpenses Financing(expense)income (679,539)

(758,090)

78,551

NetLoss (5,158,401)

(3,499,565)

(1,658,836)

Productrevenueandgrossmargin

The Company recorded revenue from product sales in the year ended July 31, 2016 of $962,140 as compared to$1,131,172forthesameperiodlastyear.Grossprofitonproductsalesfortheyearwas$677,236comparedto$688,170inthesameperiodlastyear.Theprofitmarginincreasedto70.4%from60.8%duetotheCompany’sstrategicfocusontheUSmarket.

Servicerevenueandgrossmargin

The Company recorded revenue from service sales in the year ended July 31, 2016 of $1,294,692 as compared to


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$2,921,169forthesameperiodlastyear.TheCompanyearnedrevenueandgrossmarginontworesearchcontractswiththe United States military. The decrease in service revenue is due to the completion of the US military contracts asexpectedbythemanagement.

Operatingexpenses

Totaloperatingexpensesincreasedby$1,576,316from$3,921,841fortheyearendedJuly31,2015to$5,498,157fortheyearendedJuly31,2016.

− Researchanddevelopmentexpenses for theyearended July31,2016were$2,518,546comparedto$874,143 fortheyearendedJuly31,2015.ActualresearchexpensesinJuly31,2016fortheyearwere$3,471,179(July31,2015–$3,033,116 which was offset by reimbursements of research costs (July 31, 2015 – $294,425) and allocation of$952,633 to cost of sales (July 31, 2015 – $2,428,973). The comparative increase in research costs was directlyattributabletogreateractivityrelatedtotheUnitedStatesmilitarycontractsandnewproductdevelopments.

− SalesandmarketingexpensesfortheyearendedJuly31,2016were$792,456comparedto$503,535forthesameperiodlastyear.TheincreaseinsalesandmarketingcostwasduetothelaunchoftheCompany’sFDAapprovedG4rapid test in theUSA inaddition to the increasedbrandawarenessofMedMira’sMiriadproduct line in the tissuebanksector.

− OtherdirectcostsfortheyearendedJuly31,2016were$714,515,comparedto$623,742,forthesameperiodlastyear.

− Generalandadministrativeexpenseswere$1,472,640fortheyearendedJuly31,2016,comparedto$1,920,421forthe same period in 2015. The decrease of 23.30% in administrative expense was due to the cost restructuringimplementedinFY2015.

Non-operatingincomeandexpenses

Totalotherexpenseswere$679,539intheyearendedJuly31,2016,comparedtoanexpenseof$758,090duringthesameperiodinFY2015.

− Financingexpenses,includinginterestexpense,were$679,539fortheyearendedJuly31,2016incomparisonto$758,090inthesameperiodlastyear.


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Geographicinformation

TheCompanyorganizesandrecordsthesalesanddistributionofitsproductsandservicesbasedonmajorgeographicalterritoriesaroundtheworld.Thetablebelowprovidesthethreemonthandannualgeographicbreakdownofrevenue.

Productandservicerevenue

Productandservicerevenue

Forthethreemonthsended

Fortheyearended

31-Jul-16 31-Jul-15 31-Jul-16 31-Jul-15

$

$

$

$

NorthAmerica 131,684 1,452,193 1,974,349 3,591,649LatinAmericaandtheCaribbean 59,398 - 187,523 111,721

Europe 2,161 6,273 33,765 27,130AsiaPacific 29,509

4,518

61,195

82,138

WestAsia - - - 238,663MiddleEast -

-

-

791

Other - 294 - 294

Totalrevenue 222,752 1,463,278 2,256,832 4,052,386

Liquidityandcapitalresources

Cashandworkingcapital

TheCompanyhadacashreserveof$46,120onJuly31,2016,ascomparedto$262,392onJuly31,2015.TheCompany’snetworkingcapitalpositionasofJuly31,2016wasadeficitof$7.6millioncomparedtotheJuly31,2015workingcapitaldeficitof$5.5million. TheCompanyhasincurredlossesandnegativecashflowsonacumulativebasissinceinception.FortheyearendedJuly31,2016,theCompanyincurredanetlossfromoperatingactivitiesofapproximately$5.2millionandnegativecashflowof$4.7million,comparedtoanetlossfromoperationsof$2.9millionandnegativecashflowfromoperationsof$2.6millionforthesameperiodin2015.

Operatingactivities

MedMirageneratednegativecashflowsfromoperationsof$4.7millionfortheyearendedJuly31,2016,comparedtonegativecashflowsof$2.9millionfortheyearendedJuly31,2015.

Financingactivities

Netcashinflowsfromfinancingactivitieswas$3.9millionfortheyearendedJuly31,2016,comparedto$2.7millionforthesameperiodin2015.

Investingactivities

Cashoutflowfrominvestmentswas$27,249duringtheyearendedJuly31,2016,comparedto$-nilforthesameperiodin2015.

Debt

AsatJuly31,2016,theCompanyhadloanspayablewithacarryingvalueof$6.2millioncomparedto$7.0millionatJuly31,2015.ThedecreaseinthecarryingvalueofloanspayablefromJuly31,2015toJuly31,2016isduetoadecreaseinshorttermloans.TheCompany’sloanshaveanaveragepaymenttermof2.5years.


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FurtherdiscussionsonliquidityandcapitalresourcescanbefoundintheLiquidityRisksectionofthisdocument,underNeedforAdditionalCapitalintheRiskandUncertaintiessectioninthisdocumentandinNotes2and11oftheCompany’sJuly31,2016condensedinterimconsolidatedfinancialstatements.

Equity/Shares

TheCompanyisauthorizedtoissueanunlimitednumberofcommonshareswithoutnominalparvalue.Duringfiscalyear2016thecompanyissued100,000,000commonshares. Thenumberof issuedandoutstandingcommonsharesonJuly31,2016was658,364,320. TheCompany isalsoauthorizedto issueanunlimitednumberofSeriesApreferredsharesredeemable at $0.001per share afterMarch31, 2010, convertible into anequal numberof common sharesupon theCompanymeetingcertainmilestones.Therewere5,000,000SeriesApreferredsharesissuedandoutstandingonJuly31,2016.

TheCompanyhad2,094,792outstandingstockoptionsonJuly31,2016.Theoutstandingstockoptionshaveaweightedaverageexercisepriceof$0.10pershareandaweightedaverageremainingtermof1.6year.ThenumberofoutstandingwarrantsonJuly31,2015was266,100,000.Theoutstandingwarrantshaveaweightedaverageexercisepriceof$0.10pershare.

Offbalancesheetarrangements

TheCompanywasnotpartytoanyoffbalancesheetarrangementsasofJuly31,2016.

Financialinstruments–fairvalue

The Company recognizes financial instruments based on classification. Depending on the financial instruments’classification,changesinsubsequentmeasurementsarerecognizedinnetlossorothercomprehensiveloss.TheCompanyhasimplementedthefollowingclassifications:

Financialassets

− Cashandbankbalances:Classifiedasloansandreceivablesandrecordedatamortizedcostusingtheeffectiveinterestmethod.

− Trade and other receivables: After initial fair value measurement, trade and other receivables are measured atamortizedcostusingtheeffectiveinterestmethod.

Financialliabilities

− Totalbankindebtednesslong-termdebt,accountspayableandaccruedliabilities:Afterinitialfairvaluemeasurement,thesefinancialliabilitiesaremeasuredatamortizedcostusingtheeffectiveinterestmethod.

Managementbelievesthecarryingvalueofaccountsreceivable,bank indebtedness,andaccountspayableandaccruedliabilitiesapproximatefairvalueattheyear-endduetotheirshort-termnature.

Fairvalueestimatesaremadeataspecificpointintimebasedonrelevantmarketinformation.Theseestimatesinvolveuncertaintiesandmattersofsignificantjudgementandcannotbedeterminedwithprecision.Changeinassumptionsandestimatescouldsignificantlyaffectfairvalues.

Financialinstruments–riskfactors

MedMirahasexposure to the following risks from its financial instruments: liquidity risk, credit risk, currency risk, andinterestraterisk.Seniormanagementmonitorsrisklevelsandreviewsriskmanagementactivitiesasnecessary.

Liquidityrisk


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The Companymanages liquidity by forecasting andmonitoring operating cash flows and through the use of revolvingcreditfacilitiesandshareissuances.

TheCompanyhasincurredlossesandnegativecashflowsfromoperationsonacumulativebasissinceinception.FortheyearendedJuly31,2016,theCompanyrealizedanetlossof$5.2million(July31,2015-$3.5million),consistingofanetlossfromoperationsof$4.5million(July31,2015-$2.7million),andothernon-operatinglossesof$0.7million(July31,2015-$0.8million).Negativecashflowsfromoperationswere$4.7million(July31,2015-$2.9million).Asat July31,2016, theCompanyhadanaccumulateddeficitof$83.5million (July31,2015 - $78.3million) andanegativeworkingcapitalpositionof$7.6million(July31,2015-$5.5million).Inadditiontoitson-goingworkingcapitalrequirements,theCompanymustsecuresufficientfundingforitsresearchanddevelopmentprogramsforexistingcommitments,includingitscurrentportionof loansofapproximately$6.0million.ThesecircumstancescastsignificantdoubtastotheabilityoftheCompany tomeet itsobligationsas they comedueand,accordingly, theappropriatenessof theuseofaccountingprinciplesapplicabletoagoing-concern.

Management is pursuingother financing alternatives to fund theCompany’s operations so it can continue as a going-concern.Managementplanstosecurethenecessaryfinancingthroughnewequityanddebtarrangements.Nevertheless,thereisnoassurancethatthisinitiativewillbesuccessful.

Creditrisk

CreditriskreferstotheriskthatacounterpartywilldefaultonitscontractualobligationsresultinginfinanciallosstotheCompany.Thecompanymitigatesthisriskbyrequiringa50%downpaymentonmostordersatthetimeofpurchase,andtheremaining50%priortoshipment.TheCompanyderivesapproximately84%(July31,2015—83%)ofitsrevenuefromfour(July31,2015—three)maincustomersand,forthesecustomers,assessestherecoverabilityofeachaccountonaregularbasis.AsofJuly31,2015,91%oftheaccountsreceivablebalanceisduefromtwocustomers(July31,2015—99%duefromthreecustomers)andnoothercustomersaccountformorethan10%oftheaccountsreceivablebalancesasatJuly31,2016.

Currencyrisk

MedMira receivesmost of its revenues in foreign currencies and incurs expenses inUS andCanadian currencies. As aresult,theCompanyissubjecttouncertaintyasforeignexchangeratesfluctuate.Theexchangefluctuationsfromyeartoyearhaveaccountedforasignificantportionofthecompany’sexchangegainandloss.MostsalesareinUSD,however,theyarerecordedattheexchangerateprevailingonornearthetransactiondateandcollectedinatimelymanner.

The Company also experiences currency exposure resulting from balance sheet fluctuations of US-denominated cash,accountsreceivable,accountspayableandUS-denominatedpromissorynotes.

MedMira mitigates this currency risk by maintaining a balance of USD currency which is used to pay down US-denominatedliabilitiesandreplenishesthebalancethroughUS-denominatedrevenues.

Interestraterisk

TheCompanyisnotexposedtointerestrateriskasitborrowsfundsatfixedrates.


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Relatedpartytransactions

ThefollowingtransactionsoccurredwithrelatedpartiesduringtheyearendedJuly31,2016:

• Ashorttermloantotalling$180,000wastorepaidMedMiraHoldingAG(2015-$0).

• Ashorttermloantotalling$350,000wasrepaidtoAndurjaAG(2015-$0).

• Directorfeestotalling$14,166wereincurred(2015-$13,750).

• Ashorttermloantotalling$276,100wasreceivedandrepaidtoRitecAG(2015-$0).

• Alongtermloantotalling$74,796wasrepaidtoanemployee(2015–$5,872).

ThefollowingbalanceswithrelatedpartieswereoutstandingatJuly31,2016:

• Accountspayabletotalling$10,000wasduetodirectors(2015-$10,543).

• Accountspayabletotalling$26,901wasduetoofficers(2015-$193,629).

• Alongtermloantotalling$241,565wasduetotheChiefFinancialOfficer(2015-$229,585).

• Aroyaltypaymentwasestimated/owingtoMedMiraHoldingAGof$31,991(2015-$260,000).

• Alongtermloantotalling$3,495wasowedtoanemployee(2015-$78,291).

SummaryCompensationTable–Officers

NameandPrincipalPosition

Period

Paid

Compensation($)

Accrued

Compensation($)

PaidCompensationrelatedto

previousfiscalyears($)

Share-andOption-based

Awards*($)

Allother

compensation($)(1)

Total

Compensation($)

HermesChanCEO Fiscal2016 188,000 - 66,796 - - 188,000

SingChanCOO

Fiscal2016 101,538 - - - 57,702 159,240

RobynCookCCO

Fiscal2016 108,000 2,000 - - 18,000 128,000

MarkusMeileCFO

Fiscal2016 136,161 17,829 130,123 - - 153,990


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Note:(1)Allothercompensationinclude,pensionfundcontributionsand/orbonusespaidout.

*TheCompanymakescertainestimatesandassumptionswhencalculatingthefairvalueofoption-basedawards.TheCompanyusesanoption-pricingmodelwhichincludessignificantassumptionsincludingestimatesoftheexpectedvolatility,expectedlife,expecteddividendrateandexpectedrisk-freerateofreturn.Changesintheseassumptionsmayresultinamaterialchangetotheamountsrecordedfortheissuanceofstockoptions.SummaryCompensationTable–Directors

NameDesignationPosition(s)

PeriodPaid

Compensation($)

AccruedCompensation

($)

Share-andOption-based

Awards($)*

PaidCompensationrelatedto

previousfiscalyear($)

TotalCompensation

($)

HermesChanDirector

Fiscal2016

- - 8,217 - 8,217

RomanoRobustoDirector/AuditCommitteeChairMemberofNominationandCompensationCommittee

Fiscal2016

2,500 5,000 6,163 - 13,663

MarvynRobarDirector/ChairmanoftheBoard/MemberofAuditandNomination&CompensationCommittee

Fiscal2016

2,500 5,000 7,806 3,750 15,306

MartialLacroixDirector

Fiscal2016

- - - - -

PhilippeDroDirector

Fiscal2016

- - 3,424 - 3,424

*TheCompanymakescertainestimatesandassumptionswhencalculating the fair valueofoption-basedawards. TheCompany uses an option-pricing model which includes significant assumptions including estimates of the expectedvolatility,expectedlife,expecteddividendrateandexpectedrisk-freerateofreturn.Changesintheseassumptionsmayresultinamaterialchangetotheamountsrecordedfortheissuanceofstockoptions.


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Subsequentevents

DuringthefirstquarterofFY2017,theCompanyreceivedaloanof$262,206fromitslargestshareholderinordertosupporttheCompany’sstrategicgoals.Theloanisrepayablein2018andcarriesanannualinterestrateof5%thatisdueuponrepaymentoftheloan.

DuringthefirstquarterofFY2017,theCompanyreceivedloansof$520,000fromitsCFO,inordertosupporttheCompany’sstrategicgoals.Theloansarerepayablein2018andcarryanannualinterestrateof5%thatisdueuponrepaymentoftheloan

Internalcontrolsystemsanddisclosurecontrols

Toensure the integrityandobjectivityof thedata,managementmaintainsa systemof internal controls comprisingofwrittenpolicies,proceduresandaprogramofinternalreviewswhichprovidesreasonableassurancethattransactionsarerecorded and executed in accordance with its authorization that assets are properly safeguarded and that reliablefinancialrecordsaremaintained.

Management iscurrentlyupdatingexistingstandardizedprocesses to improve internalcontrolsandreducecompliancecosts.TheupdatedcontrolswillhelpimprovetimelinessandaccuracyoffinancialrecordsaswellascontinuetoensurethattheCompany’sassetsareproperlysafeguarded.

DisclosurecontrolsandprocedureswithinMedMirahavebeendesignedtoprovidereasonableassurancethatallrelevantinformation is identified to the Disclosure Committee to ensure appropriate and timely decisions aremade regardingpublicdisclosure.

Management, under the supervision of the Chief Executive Officer and Chief Financial Officer, has evaluated theeffectivenessoftheCompany’sinternalcontroloverfinancialreportingandbasedonthisevaluation,hasconcludedthatinternalcontroloverfinancialreportingwaseffectiveasofJuly31,2016.

Duetoinherentlimitations,internalcontroloverfinancialreportinganddisclosurecontrolscanprovideonlyreasonableassurancesandmaynotpreventordetectmisstatements.Furthermore,projectionsofanyevaluationofeffectivenesstofutureperiodsaresubjecttotheriskthatcontrolsmaybecomeinadequatebecauseofchangesinconditions,orthatthedegreeofcompliancewiththepoliciesorproceduresmaydeteriorate.

The Audit Committee of the Board of Directors of MedMira reviewed this MD&A, and the consolidated financialstatementsandMedMira’sBoardofDirectorsapprovedthesedocumentspriortorelease.

Riskanduncertainties

TheCompany’sbaseofactivityhasexpandedtomanufacturingproductsfordistributionininternationalmarkets,makingit difficult to accurately predict future operating results. Actual future results may differ significantly in any forward-lookingstatements.Currently,theCompanyisnotmakingsufficientsalestobeself-sustaining.Asaresult,theCompany’sfinancialcondition,businessandoperations,andintellectualpropertyareexposedtoavarietyofriskfactors.Theserisksinclude,butarenotlimitedto,thefollowing:

RisksanduncertaintiesrelatedtotheCompany’sfinancialcondition

Needforadditionalcapital

Cashgenerated fromoperations is insufficient tosatisfyworkingcapitalandcapitalexpenditurerequirements,andtheCompanyisoperatingwithasubstantialworkingcapitaldeficit.TheCompanywillneedtosecureadditionalfinancingin


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thenearterminordertocontinueasagoingconcernwhichmayincludethesaleofadditionalequityordebtsecuritiesorobtainingadditionalcreditfacilities.Inrecentquarters,theCompanyhasreliedontemporaryfundingadvancedfromkeyinvestors.Therecanbenoassurancethatthissourceoffundingwillcontinuetobeavailableonacceptableterms,andadditional capital may not be available on satisfactory terms, or at all. Management is pursuing other financingalternativestofundtheCompany’soperationssoitcancontinueasagoing-concern.

TheCompanyintendstocontinuetoexploreopportunitiestoenterintosupplyagreements,jointventurerelationships,andotherspecialpurposevehicleswiththirdpartiesfromtimetotimeinordertocontinuetocommercializeitspatentpending technology and other intellectual property. Such arrangements may include the issuance of equity or debtsecuritiesoftheCompany,subjecttocompliancewiththeapplicablerequirementsoftheCanadiansecuritiesregulatoryauthoritiesandtheTSX-V.

Anyadditionalequity financingmay result in thedilutionof shareholders,anddebt financing, if available,may includerestrictive covenants. MedMira’s future liquidity and capital funding requirements will depend on numerous factorsincluding:

− the extent to which new products and products under development are successfully developed, gain marketacceptanceandbecomeandremaincompetitive;

− thecostsandtimingoffurtherexpansionofsales,marketingandmanufacturingactivitiesandfacility’sneeds;

− thetimingandresultsofclinicalstudiesandregulatoryactionsregardingpotentialproducts;and

− the costs and timing associatedwith business development activities, including potential licensing of technologiespatentedbyothers.

Continuedoperationswillbecontingentongeneratingsufficientrevenuesorraisingadditionalcapitalordebtfinancing.Thereisnoassurancethattheseinitiativeswillbesuccessful.

Fluctuationsinrevenue

The Company’s quarterly and annual revenues may fluctuate due to several factors, including seasonal variations indemand, competitive pressure on average selling prices, customer order patterns, the rate of acceptance of theCompany’s products, product delays or production inefficiencies, regulatory uncertainties or delays, costs and timingassociated with business development activities, including potential licensing of technologies, international marketconditionsandvariations inthetimingandvolumeofdistributorpurchases.Thehealthcare industrytraditionally isnotimpactedbyseasonaldemand.The impactofoneoracombinationof severalof these factorscouldhaveasignificantadverseeffectontheoperationsoftheCompany. Inaddition,changes inexistingcollaborativerelationships,aswellastheestablishmentofnewrelationships,product licensingandotherfinancingrelationships,couldmaterially impacttheCompany’sfinancialpositionandresultsfromoperations.

Effectsofinflationandforeigncurrencyfluctuations

AsignificantportionoftheCompany’srevenueandexpensesareinU.S.dollars,andthereforesubjecttofluctuationsinexchangerates.ThereisariskthatsignificantfluctuationsinexchangeratesmayimpacttheCompany’sabilitytosellitsproductsand,thereby,haveamaterialadverseimpactontheCompany’sresultsofoperations.

Possiblevolatilityofshareprice

Thestockmarkethasfromtimetotimeexperiencedsignificantpriceandvolumefluctuationsthatmaybeunrelatedtothe operating performance of the Company. In addition, themarket price of the Company’s common shares, like theshare prices ofmanypublicly tradedbiotechnology companies, has beenhighly volatile. Announcement of technologyinnovationsornewcommercialproductsbytheCompanyoritscompetitors,developmentsordisputesconcerningpatent


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orproprietary rights,publicity regardingactualorpotentialmedical results relating toproductsunderdevelopmentbytheCompanyoritscompetitors,regulatorydevelopmentsinboththeU.S.andforeigncountries,publicconcernastothesafety of biotechnology products and economic and other external factors, aswell as period to period fluctuations infinancialresultsmayhaveasignificant impactonthemarketpriceoftheCompany’scommonshares. It is likelythat insomefuturequarter theCompany’soperating resultswillbebelowtheexpectationsof thepublicmarketanalystsandinvestors.Insuchevent,thepriceoftheCompany’scommonshareswouldlikelybemateriallyadverselyaffected.

RisksanduncertaintiesrelatedtotheCompany’sbusinessandoperations

Lackofmarketacceptance

MedMira’sabilitytomarketitsdiagnosticproductswill,inpart,dependonitsoritspartners’abilitytoconvinceusersthatthese products represent viable and efficacious diagnostic tests. There can be no assurance that MedMira will besuccessfulinthisregard.

Competition

The invitrodiagnosticsmarket inwhichtheCompanyparticipates ishighlycomplexandcompetitive. It iscomprisedofboth largehealthcarecompaniesthathavesubstantiallygreater financial,scientific,andotherresourcesthanMedMiraandavarietyofinternationalcompaniesproducingdiagnosticproductsofvaryingquality.Inthedevelopedregionsoftheworldwithstronghealthcareinfrastructures,theinvitrodiagnosticsmarketforseriousandemerginginfectiousdiseasessuchasHIVandHepatitisChasbeenfocusedondiagnostictestsusinginstrumentbasedplatformsdesignedforclinicallaboratories.Diagnosticproductsdesignedforuseinnon-laboratorysettingsatthepoint-of-careorforuseinlaboratoriesorpublichealthclinicsusingnon-instrumentbasedplatformsfor thescreeninganddiagnosisof infectiousdiseasesarebecomingmoremainstreaminboththedevelopedanddevelopingregionsoftheworld.Competitioninthissectorofthemarketis intenseandisexpectedtoincrease.Manyofthecompanieshavesubstantiallygreaterresourcesavailablefordevelopment,marketinganddistributionoftheseproductsthandoesMedMira.

Significantdevelopmenteffortrequired

ProductscurrentlyunderdevelopmentbyMedMirarequireadditionaldevelopment,testingandinvestmentpriortoanyfinal commercialization. There can be no assurance that these products or any future products will be successfullydeveloped,prove tobesafeandeffective inclinical trials, receiveapplicable regulatoryapprovals,becapableofbeingproduced incommercialquantitiesatreasonablecostsorbesuccessfullymarketed.The long-termsuccessofMedMiramust be considered in light of the expenses, difficulties and delays frequently encountered in connection with thedevelopmentofnewtechnologyandthecompetitiveandhighlyregulatedenvironmentinwhichMedMiraoperates.

Uncertaintiesinsalescyclesintargetmarkets

MedMiramarkets and distributes its products to both developed and developing regions of theworld. Sales cycles indeveloped regions of the world are somewhat conventional, however, timing of registrations and other activitiessurrounding the sale of product into a specific market are unpredictable and highly dependent on third party andgovernmentorganizationstocompletecertainprocessesbeforeasalestransactioncantakeplace.IndevelopingregionsoftheworldwhereMedMiraanditsstrategicpartnersareworkingtoclosedeals,thesalescycletimingishighlyuncertaingiven a number of factors including political and economic turmoil, aswell as bureaucratic processes necessary to dobusinessintheseregions.

Highdegreeofregulation

MedMira operates in a highly regulated industry and is subject to the authority and approvals of certain regulatoryagencies,includingHealthCanada,theFDA,theCFDA,CEMarkandapplicablehealthauthoritiesinothercountries,withregard to the development, testing, manufacture, marketing and sale of its products. The process of obtaining such


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approvalscanbecostlyandtimeconsuming,andtherecanbenoassurancethatregulatoryapprovalswillbeobtainedormaintained. Any failure to obtain (or significant delay in obtaining) ormaintain Health Canada, FDA,Notified Body orCFDAapprovals(or,toalesserextent,approvalofapplicablehealthauthoritiesinothercountries)forMedMira’sneworexisting products could materially adversely affect MedMira’s ability to market its products successfully and couldthereforehaveamaterialadverseeffectonthebusinessofMedMira.

Abilitytoretainandattractkeymanagementandotherexperiencedpersonnel

Since its inception, the Company has been, and continues to be, dependent in its ability to attract andmaintain keyscientificandcommercialpersonneluponwhomtheCompanyrelies for itsproduct innovationsandcommercializationprograms. Loss of key personnel individually or as a group could have significant adverse impact on the Company’simmediateandfutureachievementofoperatingresults.

LimitedsalesandmarketingresourcesandrelianceonkeydistributorstomarketandselltheCompany’sproduct

AnyrevenuesreceivedbytheCompanywillbedependentontheeffortsofthirdpartiesandtherecanbenoassurancethat such effortswill be successful. Failure to establish sustainable and successful sales andmarketing programswitheffectivedistributorsupportprogramsmayhaveamaterialadverseeffectontheCompany.

CommercializationoftheCompany’sproductsisexpensiveandtimeconsuming.IntheUnitedStates,arelationshiphasbeenestablishedwithMyCareSolutiontosupportthelogisticsanddistributionoftheCompany’sproducts.TheCompanywill rely on the joint efforts ofMy Care Solution and distributors Cardinal Health, a Fortune 100 company, and VWRInternationaltodistributeMedMira’sproductline.

Outside the United States, the Company pursues collaborative arrangements with established pharmaceutical anddistributioncompaniesformarketing,distribution,andsaleofitsproducts.

InChina,MedMirahasformedastrategicpartnershipwithTriplextomarketanddistributetheCompany’srapidHIVtestwithin theassigned territory. This strategicpartnershipalsoencompasses theassemblyandpackagingof finalproductcomponents.

If any of the Company’s distribution agreements are terminated and the Company is unable to enter into alternativeagreements,or if theCompanyelects todistributenewproductsdirectly,additional investment insalesandmarketingresourceswouldberequiredwhichwouldincreasefutureselling,generalandadministrativeexpenses.TheCompanyhaslimited experience in direct sales,marketing and distribution of its products. A failure of the Company to successfullymarketitsproductswouldhaveamaterialandadverseeffectontheCompany.

Manufacturingcapabilitiesandscale-up

TheCompanymustmanufactureitsproductsincompliancewithregulatoryrequirements,insufficientquantitiesandonatimely basis, whilemaintaining product quality and acceptablemanufacturing costs. If it is unable tomanufacture orcontract for such capabilities on acceptable terms for its products under development, MedMira’s plans forcommercializationcouldbemateriallyadverselyaffected.

MedMira’smanufacturing facilitiesare,orwillbe, subject toperiodic regulatory inspectionsby theFDA,CE,CFDAandother regulatory agencies and these facilities are subject to Quality System Regulations requirements of the FDA andotherstandardsorganizations.MedMiramaynotsatisfysuchregulatoryorstandardsrequirements,andanyfailuretodosowouldhaveamaterialadverseeffectontheCompany.

In addition, production and scale-up of manufacturing for new products may require the development andimplementationofnewmanufacturingtechnologiesandexpertise.Manufacturingandqualitycontrolproblemsmayarise


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as theCompanyattempts to scale-upmanufacturing and such scale-upmaynotbeachieved in a timelymanneror atcommerciallyreasonablecost,oratall.

Rapidlychangingtechnology

The in vitro diagnostic testing field as a whole is characterized by rapidly advancing technology that could renderMedMira’sproductsobsoleteatanytimeandtherebyadverselyaffectthefinancialconditionandfutureprospectsoftheCompany.

Uncertaintiesregardinghealthcarereimbursementandreform

Thefuturerevenuesandprofitabilityofdiagnosticcompaniesaswellastheavailabilityofcapitalmaybeaffectedbythecontinuingeffortsofgovernmentandthirdpartypayerstocontainorreducecostsofhealthcarethroughvariousmeans.Forexample,incertainforeignmarkets,pricingorprofitabilityissubjecttogovernmentcontrol.IntheUS,therehasbeen,andtheCompanyexpectsthattherewillcontinuetobe,anumberoffederalandstateproposalsto implementsimilargovernment controls.While the Company cannot predict whether any such legislative or regulatory proposals will beadopted,theannouncementoradoptionofsuchproposalscouldhaveamaterialadverseeffectontheCompany’sresultsofoperations.

Productliability

MedMira may be subject to claims of personal injury and could become liable to clinical laboratories, hospitals andpatients for injuries resulting from the use of its products. MedMira could suffer financial loss due to defects in itsproductsandsuchfinanciallosstogetherwithlitigationexpensescouldhaveamaterialadverseeffectonitsoperations.MedMirahasobtainedproductliabilityinsurancetoprotectagainstpossiblelossesofthisnature.However,noassurancecan be given that such insurancewill be adequate to cover all claims or thatMedMirawill be able tomaintain suchinsuranceatareasonablecost.

RisksanduncertaintiesrelatedtotheCompany’sintellectualproperty

Noassuranceofpatentprotection

MedMirahasfiledpatentapplicationsintheUnitedStates,Canada,China,andotherforeigncountriesrelatingtovariousaspectsofitsrapiddiagnosticplatform,processes,reagents,andequipment.Althoughitismanagement’sbeliefthatthepatents forwhich theCompanyappliedmaybe issued, there canbeno suchassurance,nor canMedMiraassure thatcompetitorswillnotdevelopfunctionallysimilarorsuperiordiagnostictestingdevices.Moreover,thereisaquestionastotheextenttowhichbiotechnologydiscoveriesandrelatedproductsandprocessescaneffectivelybeprotectedbypatents.Thelawregardingthebreadthorscopeofbiotechnologypatentsisnewandevolving.Noassurancecanbegiventhat,ifapatentissuedtoMedMiraischallenged,itwillbeheldvalidandenforceableorwillbefoundtohaveascopesufficientlybroadtocovercompetitors’productsorprocesses.ThecostofenforcingMedMira’spatentright,ifany,inlawsuitsthatitmaybringagainstinfringersmaybesignificantandcouldlimitMedMira’soperations.

Possiblepatentinfringement

Theextenttowhichbiotechnologydiscoveriesandrelatedproductsandprocessescanbeeffectivelyprotectedbypatentsandbeenforceableisuncertainandsubjecttointerpretationbythecourts.Thetechnologies,products,andprocessesofMedMiramaybesubjecttoclaimsofinfringementonthepatentsofothersand,ifsuchclaimsaresuccessful,couldresultintherequirementtoaccesssuchtechnologybylicenseagreement.Therecanbenoassurancethatsuchlicenseswouldbeavailableoncommerciallyacceptableterms.IfMedMiraisrequiredtoacquirerightstovalidandenforceablepatentsbut cannot do so at reasonable cost, MedMira’s ability to manufacture or market its products would be materially


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adversely affected. The cost of MedMira’s defence against infringement charges by other patent holders may besignificantandcouldlimitMedMira’soperations.

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