Company

Sophiris Bio Inc., or the Company, or Sophiris, is a clinical-stage biopharmaceutical company currently developing PRX302 for treatment of the symptoms of benign prostatic hyperplasia, or BPH, commonly referred to as an enlarged prostate and for the treatment of localized low to intermediate risk prostate cancer. The Company is governed by the British Columbia Business Corporations Act. The Company’s operations were initially located in Vancouver, British Columbia until April 2011, when its core activities and headquarters relocated from Vancouver, British Columbia to San Diego, California.

The consolidated financial statements include the accounts of Sophiris Bio Inc. and its wholly-owned subsidiaries, Sophiris Bio Corp. and Sophiris Bio Holding Corp., both of which are incorporated in the State of Delaware.

Liquidity

The consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The Company has incurred significant operating losses since inception and has relied on its ability to fund its operations through private and public equity financings and a debt financing. For the year ended December 31, 2014 and 2013 the Company incurred a net loss of $30.7 million and $11.1 million, respectively, and used $26.2 million and $13.2 million of cash in operations, respectively. At December 31, 2014 and 2013, the Company had $22.7 million and $48.1 million, respectively, in cash, cash equivalents and securities available-for-sale. Any clinical development efforts beyond the Company’s ongoing Phase 3 clinical trial in BPH and its planned Phase 2 clinical trial in localized low to intermediate risk prostate cancer will require additional funding. The Company has historically financed its operations through public or private equity offerings, debt financings or strategic partnerships and alliances and licensing arrangements, as well as through interest income earned on cash balances. Subject to limited exceptions, the Company’s Oxford Finance LLC, or Oxford, Loan and Security Agreement prohibits the Company from incurring indebtedness without the prior written consent of Oxford. If the Company is unable to raise additional capital to fund its development program efforts beyond its ongoing Phase 3 clinical trial in BPH and its planned Phase 2 clinical trial in localized low to intermediate risk prostate cancer in sufficient amounts or on terms acceptable to it, the Company may have to significantly delay, scale back or discontinue the development or commercialization of PRX302.

Share Consolidation

On August 9, 2013, the Company’s board of directors approved a 52-for-1 share consolidation of the Company’s issued and outstanding common shares. Accordingly, all share and per share amounts for all periods presented in these financial statements and notes thereto have been adjusted retroactively to reflect the share consolidation. The Company’s stock option plan and outstanding warrants provide for a pro-rata adjustment to the number of shares issuable upon the exercise of outstanding stock options and warrants in the event of a share consolidation. The effects of the share consolidation have been given retroactive effect to the related disclosures of outstanding stock options and warrants.