REG - Ondine Biomedical - 2023 Full Year Results and Annual Report
07/06/2024 07:00
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RNS Number : 5943R Ondine Biomedical Inc. 07 June 2024
ONDINE BIOMEDICAL INC.
("Ondine Biomedical", "Ondine" or the "Company")
2023 Full Year Results and Annual Report
Ondine Biomedical Inc. (AIM:OBI), a leading provider of light-activated
antimicrobial technology to treat and prevent hospital infections, is pleased
to announce its audited results for the year ended 31 December 2023.
Note: All figures are expressed in Canadian Dollars, unless otherwise stated.
Carolyn Cross, CEO:
"2023 was a year of rapid commercial growth. Building on successful outcomes
in our initial Canadian beta sites, we achieved our target goal of 10 new
hospital deployments. Of note is the first adoption of Steriwave within the
NHS in the UK at Pontefract Hospital (Mid Yorkshire NHS Teaching Trust). We
also made significant progress towards Phase 3 clinical trial preparation and
US launch readiness. Following a Type C meeting with the US Food & Drug
Administration (FDA), protocols, budgets and timelines have also now been
finalized. Our goal is to secure funding to commence the trial later this
year, while continuing to accelerate our commercial progress in key
territories in Europe and North America."
2023 Highlights:
· Revenues of $1.2 million (2022: $0.6 million).
· Gross margin improved to 58% (2022: 45%).
· Operating loss reduced to $14.8 million (2022: $18.8 million).
· Net earnings (loss) per share of ($0.07) (2022: ($0.10)).
· 10 new hospital deployments over the year (+167%), to a total of 16
hospitals, including the first NHS Trust hospital in the UK. Another 7
hospitals were added in Q1 2024, representing a nearly four-fold increase in
the number of hospital sites deploying Steriwave since the beginning of 2023.
The Company targets 20-25 total new deployments for 2024.
· Manufacturing capacity significantly increased to support the planned
Phase 3 clinical trial and anticipated post-FDA approval sales.
· Appointed senior pharma executive with extensive clinical trials
experience, Dr. Simon Sinclair, as Chief Medical Officer to lead the Phase 3
clinical trial efforts.
Annual Report: the Annual Report for the year ended 31 December 2023 is
available on the company's website at
http://www.ondinebio.com/investors/reports-documentation/
(http://www.ondinebio.com/investors/reports-documentation/) .
Live Presentation: Dr. Nicolas Loebel, President and Chief Technology Officer
of the Company, will provide a live presentation relating to the Full Year
Results via Investor Meet Company on 10 June 2024, 16:30 BST (08:30 Pacific
time). The presentation is open to all existing and potential shareholders.
Questions can be submitted pre-event via your Investor Meet Company dashboard
up until 9 June 2024, 09:00 BST (01:00 Pacific time), or at any time during
the live presentation. The recording and related slides will be made available
after the presentation on the Company's website:
www.ondinebio.com/investors/reports-documentation/.
Annual General Meeting: as per the Notice of AGM
(https://www.londonstockexchange.com/news-article/OBI/notice-of-agm-and-directorate-change/16505915)
, the Company's Annual General Meeting will be held virtually on 28 June 2024.
Enquiries:
Ondine Biomedical Inc.
Carolyn Cross, CEO +001 (604) 665 0555
Singer Capital Markets
(Nominated Adviser and Joint Broker)
Aubrey Powell, Sam Butcher +44 (0)20 7496 3000
RBC Capital Markets (Joint Broker)
Rupert Walford, Kathryn Deegan +44 (0)20 7653 4000
Vane Percy & Roberts (Media Contact)
Simon Vane Percy, Amanda Bernard +44 (0)77 1000 5910
About Ondine Biomedical Inc.
Ondine Biomedical Inc. is a clinical Canadian life sciences company and leader
in light-activated antimicrobial therapies (also known as
'photodisinfection'). Ondine has a pipeline of investigational products, based
on its proprietary photodisinfection technology, in various stages of
development.
Ondine's nasal photodisinfection system has a CE mark in Europe and the UK and
is approved in Canada and several other countries under the name Steriwave®.
In the US, it has been granted Qualified Infectious Disease Product
designation and Fast Track status by the FDA and is currently undergoing
clinical trials for regulatory approval. Products beyond nasal
photodisinfection include therapies for a variety of medical indications such
as chronic sinusitis, ventilator-associated pneumonia, burns and other
indications.
Chair & Chief Executive's statement
We are pleased to share the progress that Ondine Biomedical has made in
advancing our mission to revolutionize infection prevention and control in
healthcare settings. The need and potential for our light-activated
antimicrobial technology has never been greater. Alongside our work to advance
the launch of our Phase 3 clinical trial in the USA, corporate efforts were
focused on driving commercialisation in other approved markets.
The burden of more drug-resistant infections, large and growing surgical
backlogs, and rising demand for healthcare resources due to aging demographics
continue to strain post pandemic, global hospital systems. Society's need for
better infection control and cost avoidance is acute and is galvanising health
practitioners into action. Hospital infections account for as much as 6% of
public sector budgets in the EU, while in the USA, many hospitals have been
operating at a loss and therefore need to mitigate against avoidable, costly
infections that also inhibit patient outcomes.
Against this backdrop, Ondine is introducing an effective new approach to
infection control. We believe that our therapies will become the new standard
of care as they save time, money, and improve patient outcomes without
generating resistance. The challenge with creating new medical therapies that
will become the new standard of care is that the process takes time. In
addition to unequivocal demonstrations of safety and efficacy, there must be
clear evidence of a rapid return on investment through significant costs
savings, ease of use and integration into current workflows, and high
acceptance rates by health professionals and patients. Ondine has already
invested significant time and effort to provide this evidence and continues to
work on all these fronts to support further adoption of its technology.
Over the past decade, Ondine has been able to demonstrate significant cost
savings and improved patient outcomes that yielded rapid return on hospital
investment. Ondine's successful initial large hospital implementations in
Canada are now generating strong endorsements and additional clinical data to
support our high growth goals.
During the year, researchers at Vancouver General Hospital (VGH) published
their 14-year study involving almost 13,500 patients determining that our
Steriwave nasal decolonisation should be included in all elective and emergent
spine presurgical standard of care protocols. Rarely does a study conclude
with a recommendation of a new technology for routine use as standard of care.
It is a finding that we are especially proud of and from which we will
significantly benefit as we get closer to accessing the large US market.
Moreover, the VGH researchers estimated average savings of almost $2,600 per
spine surgery patient as result of the sustained 67% reduction in spine
surgery infection rate. Very few new products come to market with such a long
and impressive track record.
Commercial traction is building
Building on our considerable real world clinical experience and recent
investments in enhancing our sales processes, our commercial momentum has
accelerated.
During the fiscal year 2023, we achieved our target for new hospital
installations, adding 10 new hospitals, marking a 167% growth in total
hospital deployments year-over-year. This momentum continues with the addition
of seven new hospitals through the first quarter of this year, bringing the
total deployments to 23 hospitals-a 44% increase from the year end and nearly
four-fold the number of hospitals at the end of 2022. Additionally, sales per
hospital deployment is increasing as initial pilot deployments in new
hospitals have expanded to other surgical indications with time and
experience. Retention of hospital accounts is 100% to date.
Of the seven new hospitals since year end, four of these are non-Canadian
deployments as the initial pilots in new markets yielded their expected
outcomes. In the UK, strategic inroads were made into the National Health
Service (NHS) with the accelerated adoption by two hospitals-Pontefract and
Pinderfields hospitals-in the Mid Yorkshire NHS Teaching Trust as a result of
strong initial results combined with the excellent responses to Steriwave by
healthcare professionals and patients. This adoption preceded the results of
health economic data from the pilot trial that commenced at the Pontefract
Hospital in 2023. Ondine has partnered with the Trust and Health Innovation
Yorkshire and Humber to conduct a health economic analysis to help support the
adoption of Steriwave across the NHS. Discussions are underway with NHS Supply
Chain to have Steriwave listed as a qualified product, enabling rapid access
for every NHS trust via the electronic purchasing portal. Additionally, HCA
Healthcare UK has approved Steriwave for use in its UK based hospitals. HCA
UK, a leading private world-class healthcare provider in the UK with 30
facilities, is a subsidiary of HCA Healthcare (USA).
In Spain, the first three hospitals are now implementing Steriwave including
at Hospital Universitario La Paz (HULP) a large tertiary hospital in Madrid
with 1,308 beds. The Hospital Universitario La Paz is recognized as a centre
of reference and health excellence and is considered one of the top three
public hospitals with the best reputation in Spain.
Clinical Advancements
Following a Type C meeting with the US Food & Drug Administration (FDA)
last September, the clinical trial protocol for the Steriwave Phase 3 study
has been finalized with regulatory input and in close collaboration with HCA
Healthcare, Ondine's US clinical trial partner. Budgets have been finalized to
run the trial at 14 HCA hospital sites with a circa 5,000-patient
group-randomized crossover study, comparing standard-of-care infection
prevention practices with and without Steriwave.
The company is accelerating its plans to pursue the Intensive Care Unit (ICU)
market with its Steriwave nasal decolonisation therapy following expressions
of interest by hospitals to reduce their high ICU mortality and infection
rates. Having established a solid safety and efficacy profile in over 150,000
patients, healthcare professionals, and enterprise workers, the ICU
application represents an opportunity to significantly increase the
addressable market and further accelerate growth.
Financial Performance
On the financial front, we are striving to attain our profitability goals by
early 2026. To this end, we are pleased to report that in 2023, revenues
nearly doubled and operating costs were reduced by 19%. The cost of goods sold
continued to fall, increasing gross margins, as we improved scale and
efficiencies.
We have implemented capacity and next generation product designs to enable
initial US launch roll-outs and can further reduce COGS at this scale. As
reiterated in our announcement of 8 May 2024, the Company raised over $6
million in capital to support our working capital requirements for our
continued growth. Ondine is in discussions with strategic partners as well as
non-dilutive funding sources to support the clinical trial and commercial
development plans.
We are committed to driving innovation, advancing patient care, and delivering
sustainable value to all our stakeholders. Our heartfelt gratitude goes out to
our shareholders, partners, suppliers, and dedicated employees for their
unwavering support and commitment to our shared vision of a world with
photodisinfection products in every hospital.
Sincerely,
Jean Charest Carolyn Cross
Chairman Chief Executive Officer
Financial Review
Ondine's focus and execution in 2023 were on making significant strides in
both our clinical and commercial endeavors, setting a strong foundation for
future growth. The year showcased notable achievements and included a $4.9
million fundraise towards year-end to support ongoing commercialisation. We
remain steadfast in our commitment to disciplined cost control and a
process-driven approach to growth.
Efficiency and operational excellence are priorities as we continually
optimize resource allocation and seek to maximize returns on investment. This
prudent financial management strategy underscores Ondine's dedication to
sustainable growth and long-term value creation for shareholders.
As we move into 2024, our commercial momentum, strategic investments in
clinical trials and international expansion, alongside disciplined cost
control, position us well for sustained growth and value creation.
Post period end the Company raised a further $6.0 million in gross proceeds
through the issue of new shares.
Revenue
Revenue for the year ended December 31, 2023, was $1.2 million (2022: $0.6
million), almost doubling year-over-year, driven by heightened market adoption
with 10 new hospital deployments, a significant shortening of the sales cycle,
and a tailwind of public health guidelines recommending nasal decolonisation.
Research and development expenditure
Research and development expenses for the year were $5.1 million (2022: $6.3
million). We are currently in the final stages of our Phase 3 preparation
activities having completed the majority of the preparation in 2023. We are
targeting to commence our Phase 3 clinical trial in H2 2024. In 2023, we
substantially completed the development of our 2nd Generation Nasal
Illuminator, and we are preparing for its commercial launch in 2024.
General and administrative expenses
General and administrative expenses were $8.0 million (2022: $10.9 million).
During 2023 we remained focused on disciplined discretionary spending,
emphasising runway extension, which has continued in 2024. 2023 figures
included various credits, such as IRS reimbursements, that management believes
are non-recurring in 2024 ($0.8million). Share-based costs decreased by $0.8
million in 2023 to $0.6 million (2022: $1.4 million).
Marketing and sales expenses
The Company's marketing and sales expenses were $1.8 million (2022: $1.4
million). Our continued investment in refining business processes allowed our
revenue to nearly double year-on-year while Sales & Marketing costs only
increased by 28%. We have seen operational efficiencies resulting in the
shortening of the sales cycle and lower customer acquisition costs, as we
remain disciplined with our spending during this period of rapid growth.
Liquidity, cash and cash equivalents
At year-end, the Company held $3.0 million in cash and cash equivalents and
$0.2 million of restricted cash (2022: $13.1 million and $0.1 million
respectively). During the year, the net cash outflow from operating activities
was $13.7 million (2022: $16.3 million) against an operating loss of $14.8
million (2022: $18.8 million). The Company is in detailed discussions with a
variety of potential sources of capital.
Kwong Choo
Interim Chief Financial Officer
Consolidated Financial Statements
The following are the Company's audited financial statements for the year
ended 31 December 2023. They are also included in the 2023 Annual Report
available for download on the Company's website at
www.ondinebio.com/investors/reports-documentation
(http://www.ondinebio.com/investors/reports-documentation) . All amounts are
in Canadian Dollars, unless otherwise stated.
Ondine Biomedical Inc.
Consolidated Statements of Financial Position
(In thousands of Canadian dollars)
Notes 31 December 31 December
2023 2022
$ $
Assets
Current assets
Cash 2,981 13,125
Restricted cash 3 157 147
Accounts and other receivables 4, 17 326 182
Inventory 5 1,066 1,294
Prepaid expenses and deposits 6 220 381
4,750 15,129
Non-current assets
Property and equipment 7 949 1,404
Other assets 6 35 36
984 1,440
Total Assets 5,734 16,569
Liabilities
Current liabilities
Accounts payable and other liabilities 8, 17 3,108 3,548
Current portion of lease liability 9 382 359
3,490 3,907
Non-current liabilities
Lease liability 9 159 537
Other long-term liabilities 10 481
159 1,018
Total Liabilities 3,649 4,925
Equity
Share capital 11 239,647 235,042
Contributed surplus 14 10,528 10,528
Reserves 18,244 17,996
Deficit (266,334) (251,922)
Total Shareholders' Equity 2,085 11,644
Total Liabilities and Shareholders' Equity 5,734 16,569
Going concern - Note 1; Commitments and contingencies - Note 15; Subsequent
events - Note 23
The accompanying notes are an integral part of these consolidated financial
statements.
Ondine Biomedical Inc.
Consolidated Statements of Loss and Comprehensive Loss
(In thousands of Canadian dollars, except share and per share amounts)
Year ended December 31,
Notes 2023 2022
$ $
Revenue 14,16 1,203 638
Cost of goods sold 18 (500) (351)
Gross margin 703 287
Expenses 19
General and administration 8,010 10,909
Research and development 5,140 6,280
Marketing and sales 1,788 1,401
Depreciation and amortization 7 570 460
15,508 19,050
Loss from operations (14,805) (18,763)
Other income (expense)
Government loan forgiveness 10 436 -
Accretion and interest expense (38) (30)
Interest income 242 191
Loss on disposal of property and equipment (99) (82)
Loss on write-down of prepaid expenses 6 - (1,330)
Other income (expense) (7) 4
Foreign exchange gain (loss) (141) 638
393 (609)
Net loss for the year (14,412) (19,372)
Other comprehensive loss
Exchange differences on translation of foreign operations (1) 1 (85)
Total comprehensive loss (14,411) (19,457)
Net loss per share
Basic and diluted ($0.07) ($0.10)
Weighted average number of shares outstanding
Basic and diluted 197,111,567 194,588,245
(1) May be reclassified to profit or loss in subsequent periods.
The accompanying notes are an integral part of these consolidated financial
statements.
Ondine Biomedical Inc.
Consolidated Statements of Changes in Equity
(In thousands of Canadian dollars, except share amounts)
Number of common shares Share capital Contributed surplus Share-based payment reserve Currency translation reserve Accumulated Deficit Equity
(Note 11)
$ $ $ $ $ $
Balance, January 1, 2022 194,584,524 235,037 10,528 17,034 (398) (232,544)
29,657
Issuance of share capital for shares of Sinuwave Technologies Corporation 8,333 5 - - - (6) (1)
Share-based payments - Note 12 - - - 1,445 - - 1,445
Total comprehensive loss for the year - - - - (85) (19,372) (19,457)
Balance, December 31, 2022 194,592,857 235,042 10,528 18,479 (483) (251,922) 11,644
Balance, January 1, 2023 194,592,857 235,042 10,528 18,479 (483) (251,922) 11,644
Issuance of share capital upon financing - Note 11 31,691,663 4,912 - - - - 4,912
Issuance of share capital for services rendered - Note 11 390,550 370 - (370) - - -
Issuance of share capital for employee compensation - Note 11 78,719 23 - - - - 23
Share issuance costs - Note 11 - (700) - - - - (700)
Share-based payments - Note 12 - - - 617 - - 617
Total comprehensive loss for the year - - - - 1 (14,412) (14,411)
Balance, December 31, 2023 226,753,789 239,647 10,528 18,726 (482) (266,334) 2,085
The accompanying notes are an integral part of these consolidated financial
statements.
Ondine Biomedical Inc.
Consolidated Statements of Cash Flows
(In thousands of Canadian dollars)
Year ended December 31,
Notes 2023 2022
$ $
Cash flows from (used in) operating activities
Net loss for the year (14,412) (19,372)
Adjustments for non-cash items:
Depreciation of right-of-use assets 7 375 274
Depreciation and amortization of other property and equipment and intangible 7 212 219
assets
Accretion and interest expense 38 30
Share-based payments 12 617 1,445
Non-cash salary compensation 14 23 -
Unrealized foreign exchange (gain) loss 101 (478)
Government loan forgiveness (436) -
Loss on disposal of property and equipment 99 82
Loss on write-down of prepaid expenses 6 - 1,330
Other 28 23
Changes in non-cash working capital 20 (298) 102
Net cash used in operating activities (13,653) (16,345)
Cash flows from (used in) financing activities
Interest paid - (23)
Repayment of lease obligations (387) (252)
Repayment of government loan (40) -
Proceeds from issuance of common shares 4,912 -
Share issuance costs (700) -
Net cash from financing activities 3,785 (275)
Cash flows used in investing activities
Purchase of property and equipment 7 (177) (311)
Net cash used in investing activities (177) (311)
Net decrease in cash and restricted cash (10,045) (16,931)
Effect of foreign exchange rate change on cash and restricted cash (89) 335
Cash and restricted cash, beginning of year 13,272 29,868
Cash and restricted cash, end of year 3,138 13,272
Supplemental cash flow information 20
The accompanying notes are an integral part of these consolidated financial
statements.
Ondine Biomedical Inc.
Consolidated Statements of Cash Flows
(In thousands of Canadian dollars)
Cash and restricted cash are comprised
of:
Year ended December 31,
2023 2022
$ $
Cash 2,981 13,125
Restricted cash 157 147
Cash, cash equivalents and restricted cash, end of year 3,138 13,272
The accompanying notes are an integral part of these consolidated financial
statements.
Ondine Biomedical Inc.
Notes to the Consolidated Financial Statements
Year ended December 31, 2023 and 2022
(In thousands of Canadian dollars, except as otherwise indicated)
1. Nature of operations and going concern
Ondine Biomedical Inc. (the "Company") was incorporated under the British
Columbia Business Corporations Act on September 9, 1996. The Company is a
biotechnology company engaged in the development and commercialization of
innovative anti-infective therapies covering a broad spectrum of bacterial,
fungal and viral infections primarily using antimicrobial photodynamic therapy
("aPDT") as a platform technology for its products, which are used as an
alternative to the use of antibiotics. The Company's aPDT products employ
laser-based activation of proprietary compounds to treat a wide range of
medical infections. The address of the Company's corporate office is 888-1100
Melville Street, Vancouver, BC, Canada. The common shares of the Company are
listed on the AIM Market of the London Stock Exchange under the symbol
"OBI.L".
These consolidated financial statements have been prepared on a going concern
basis, which assumes the Company will be able to meet its obligations and
continue its operations in the normal course of business for at least twelve
months from December 31, 2023.
The Company has a history of incurring significant losses and as at December
31, 2023, had an accumulated deficit of $266,334 (December 31, 2022 -
$251,922). As at December 31, 2023, the Company had a cash and cash
equivalents balance of $2,981 (December 31, 2022 - $13,125) and a positive
working capital balance of $1,260 (December 31, 2022 - $11,222). In the year
ended December 31, 2023, cash used in operating activities totaled $13,653
(December 31, 2022 - $16,345).
The Company's ability to continue as a going concern is dependent on its
ability to develop profitable operations and/or to continue to obtain the
necessary financing to meet its corporate expenditures and discharge its
liabilities in the normal course of business. The Company will need to raise
funds through public or private equity and/or debt financings. Although the
Company has been successful in raising finance in the past there can be no
assurance that it will be successful in the future. If the Company is unable
to generate positive cash flows or obtain adequate financing, the Company may
need to curtail operations. These factors give rise to material uncertainty
that may cast significant doubt on the Company's ability to continue as a
going concern. The consolidated financial statements do not give effect to
adjustments to carrying values and to the classification of assets and
liabilities that would be required if the Company were unable to continue as a
going concern and such adjustments could be material.
2. Basis of preparation
(a) Statement of compliance
These consolidated financial statements have been presented in accordance with
International Financial Reporting Standards as issued by the International
Accounting Standards Board ("IFRS Accounting Standards").
Certain comparative figures have been reclassified to conform to the current
year's presentation. The reclassifications have no effect on the previously
reported assets, liabilities and previously reported net loss for the year
ended December 31, 2022.
The consolidated financial statements were approved and authorized for issue
by the Board of Directors on June 6, 2024.
(b) Basis of measurement
The consolidated financial statements have been prepared on a going concern
basis under the historical cost basis as stated in the accounting policies.
The expenses within the consolidated statements of loss and comprehensive loss
are presented by function. Refer to Note 19 for details of expenses by nature.
(c) Functional and presentation currency
These consolidated financial statements are presented in Canadian dollars. The
parent company's functional currency is Canadian dollars while the functional
currency of the Company's subsidiaries are their respective local currencies,
except Ondine International Holdings Ltd and Ondine International A.G. whose
functional currencies are United States dollars.
(d) Use of estimates, assumptions and judgments
The preparation of consolidated financial statements requires management to
make judgments, estimates and assumptions that affect the application of
accounting policies and the amounts reported in the consolidated financial
statements and accompanying disclosures. Although these estimates are based on
management's knowledge of current events and actions the Company may undertake
in the future, actual results may differ from the estimates and the
differences may be material.
Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates, if any, are recognized in the year in which
the estimates are revised and in any future years affected. Significant
judgments, estimates and assumptions used in applying the Company's accounting
policies that have the most significant effects on the amounts in the
consolidated financial statements are summarized below.
Significant judgments:
Going concern
Management applied judgment in determining that there are material
uncertainties related to events or conditions that may cast significant doubt
upon the entity's ability to continue as a going concern. The assessment of
the Company's ability to continue as a going concern and to raise sufficient
funds to pay for its ongoing corporate expenditures, discharge its liabilities
for the ensuing year, and to fund planned development and commercialization of
its products, involves significant judgment based on historical experience and
other factors including expectation of future events that are believed to be
reasonable under the circumstances.
Revenue recognition
Determining whether the goods are considered distinct performance obligations
requires judgment. Management exercises judgment to evaluate these
arrangements to determine whether the goods are considered distinct
performance obligations that should be accounted for separately from each
other. A good is distinct if the customer can benefit from it on its own or
together with other readily available resources and the Company's promise to
transfer the good is separately identifiable from other promises in the
contract. Management has determined that the goods are distinct performance
obligations. Where a contract consists of more than one performance
obligation, revenue is allocated to each based on their standalone selling
price.
Estimates, assumptions, and changes in estimates:
Bonus accrual
During the twelve months ended December 31, 2023, the Company reassessed the
initial estimates of the employees and managements' performance against the
established criteria, leading to a change in estimate of the bonus accrual.
This change primarily reflects the nonperformance of the established criteria.
The effect of these changes on actual bonus expenses, included in 'research
and development' and 'general and administration', in the consolidated
statement of comprehensive income, is a decrease of $300 and $583,
respectively, for 2023.
Provision for excess and obsolete inventory
A significant estimate for the Company is its allowance for excess and
obsolete inventory. The allowance is based upon management's assessment of a
variety of factors, including, among other things, expected selling prices,
technological change, product obsolescence, regulatory clearance timeframes,
and the demand for the Company's products in the market as compared to the
number of units currently on hand.
Share-based payments
Share-based payment charges are determined using the Black-Scholes option
pricing model ("Black-Scholes model") based on estimated fair values of all
share-based awards at the date of grant and are expensed to the statement of
loss and comprehensive loss over each awards' vesting period. The Black
Scholes model utilizes subjective assumptions such as expected fair value of
shares, volatility, expected life of the options, risk free interest rate,
forfeiture rates and applicable future performance conditions and exercise
patterns.
Share-based compensation provided to a consultant takes into account the
number of warrants expected to vest based on achieving different milestones in
relation to regulatory approval. It is reasonably possible that future
estimates of the actual outcome and timing may be different than assumptions
used in the preparation of these consolidated financial statements and a
material change in share-based compensation reflected in the consolidated
statement of loss and comprehensive loss may occur.
Income taxes
The Company's operations are conducted in multiple jurisdictions with complex
tax laws and regulations that can require significant interpretation. As such
is the case, the Company and the tax authorities could disagree on tax filing
positions and any reassessment of the Company's filing positions could result
in material adjustments to tax expense, taxes payable and deferred income
taxes.
3. Material accounting policies
The accounting policies below have been applied consistently by the Company
and all of its subsidiaries.
(a) Basis of consolidation
The consolidated financial statements include the accounts of the Company and
its principal subsidiaries:
Name Place of incorporation Functional currency Percentage of ownership
Ondine Research Laboratories Washington, United States USD 100%
Ondine Biomedical U.S., Inc. Washington, United States USD 100%
Champion ENT Products, Inc. Wyoming, United States USD 100%
Advanced Photodynamic Technologies, Inc. Minnesota, United States USD 100%
Sinuwave Technologies Corporation Nevada, United States USD 100%
Ondine Biomedical Limited United Kingdom GBP 100%
Ondine International Holdings Ltd. Barbados USD 100%
Ondine Bio Inc. Canada CAD 100%
Ondine International AG Switzerland USD 100%
Subsidiaries are entities controlled by the Company. The Company controls an
entity when it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns though
its power over the entity. The financial statements of subsidiaries are
included in the consolidated financial statements from the date that control
commences until the date that control ceases. Intercompany balances and
transactions are eliminated in the consolidated financial statements.
b) Foreign currency
The consolidated financial statements are presented in Canadian dollars.
Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional
currencies of the Company's subsidiaries at exchange rates as at the dates of
the transactions. Monetary assets and liabilities denominated in foreign
currencies are translated to the functional currency at the exchange rates in
effect at the reporting date. Non-monetary assets and liabilities that are
measured at fair value in a foreign currency are translated to the functional
currency at the exchange rate in effect when the fair value was determined.
Foreign currency differences are generally recognized in net income/(loss).
Non-monetary items that are measured based on historical cost in a foreign
currency are translated to the functional currency using the exchange rate in
effect at the date of the transaction giving rise to the item.
Foreign operations
The assets and liabilities of foreign operations are translated to the
presentation currency using exchange rates at the reporting date. The income
and expenses of foreign operations are translated to the presentation currency
using the monthly average exchange rates. Foreign currency differences are
recognized in other comprehensive income/(loss).
(c) Cash and restricted cash
Cash includes cash on hand and restricted cash deposits relating to the
acquisition of common shares of Ondine International A.G.
(d) Inventory
Inventory cost includes expenditures incurred in acquiring the inventories,
production or conversion costs and other costs incurred in bringing them to
their existing location and condition. In the case of manufactured
inventories, cost includes an appropriate share of production under normal
operating capacity.
Raw materials are recorded at the lower of cost, determined on a specific item
basis, and replacement cost. Finished goods are recorded at the lower of
weighted average cost and net realizable value. Net realizable value is the
estimated selling price in the ordinary course of business less the estimated
costs necessary to make the sale. The Company assesses the net realizable
value of inventory at each reporting date.
(e) Financial instruments
(i) Financial assets
All financial assets are initially recorded at fair value and upon initial
recognition are classified as those to be measured subsequently at fair value
(either through other comprehensive income ("FVOCI") or profit or loss
("FVTPL")) or those to be measured at amortized cost. The classification of
financial assets is generally based on the business model in which a financial
asset is managed and its contractual cash flow characteristics. Derivatives
embedded in contracts where the host is a financial asset in the scope of the
standard are never separated. Instead, the hybrid financial instrument as a
whole is assessed for classification.
Financial assets classified as amortized cost are measured using the effective
interest method less any allowance for impairment. The effective interest
method is a method of calculating the amortized cost of a financial asset and
of allocating interest income over the relevant period.
Financial assets classified as FVOCI are measured at fair value with
unrealized gains and losses recognized in other comprehensive income (loss)
except for losses in value that are considered other than temporary or a
significant or prolonged decline in the fair value of that investment below
its cost. Such losses are recorded in the consolidated statements of loss and
comprehensive loss. The Company does not have any financial assets classified
as FVOCI.
Transaction costs associated with FVTPL financial assets are expensed as
incurred while transaction costs associated with all other financial assets
are included in the initial carrying amount of the asset and amortized to
profit or loss as part of the application of the effective interest method.
In accordance with IFRS 9, Financial Instruments ("IFRS 9"), all of the
Company's financial assets, which consist primarily of cash and accounts
receivable, are categorized at amortized cost.
(ii) Financial liabilities
All financial liabilities are initially recorded at fair value and upon
initial recognition are either designated as FVTPL or classified as amortized
cost.
Financial liabilities classified as amortized cost are initially recognized at
fair value less directly attributable transaction costs and, after initial
recognition, are subsequently measured at amortized cost using the effective
interest method. Financial liabilities designated as FVTPL include financial
liabilities designated upon initial recognition as FVTPL. Derivatives are also
classified as FVTPL unless they are designated as effective hedging
instruments. Transaction costs on financial liabilities designated as FVTPL
are expensed as incurred. Fair value changes on financial liabilities
designated as FVTPL are recognized through profit or loss.
(iii) Derecognition of financial assets and liabilities
Financial assets are derecognized when the rights to receive cash flows from
the assets expire or the financial assets are transferred and the Company has
transferred substantially all the risks and rewards of ownership of the
financial assets. On derecognition of a financial asset, the difference
between the asset's carrying amount and the sum of the consideration received
and receivable and the cumulative gain or loss that had been recognized
directly in equity is recognized in profit or loss.
Financial liabilities are derecognized when the obligation specified in the
relevant contract is discharged, cancelled or expired. The difference between
the carrying amount of the financial liability derecognized and the
consideration paid and payable is recognized in profit or loss.
(f) Property and equipment
Items of property and equipment are measured at historical cost less
accumulated depreciation and accumulated impairment losses. Historical cost
includes any expenditure that is directly attributable to bringing the asset
to the location and condition necessary for it to be capable of operating in a
manner intended by management. Gains and losses on the disposal of an item of
property and equipment are determined by comparing the proceeds from disposal
with the carrying amount of property and equipment.
During the twelve months ended December 31, 2023, the Company conducted a
review of its property and equipment and the timing of which economic benefits
are derived from its use. This resulted in a change in estimate for the
Company's depreciation method from declining balance to straight-line for the
assets under the categories of computer equipment, laboratory and office
equipment, furniture and fixtures, and manufacturing equipment and tools. The
estimated useful lives of the assets have not changed. The annual effect of
these changes on actual and expected depreciation expenses, included in
'depreciation and amortization' and 'cost of goods sold' in the consolidated
statement of comprehensive income, is as follows.
2024 2025 2026 2027 Thereafter
(Decrease) increase in depreciation expense 44 (16) (15) (24) (21)
Depreciation is calculated on a straight-line balance basis over their useful
lives and are generally recognized in profit or loss.
Estimated useful lives of property and equipment are as follows:
Computer equipment 3 years
Laboratory and office equipment 3 years
Furniture and fixtures 5 years
Manufacturing equipment and tools 5 years
Demonstration equipment 5 years
Leasehold improvements Term of lease
Right-of-use assets Term of lease
Depreciation methods, useful lives and residual values are reviewed at the
reporting date and adjusted as appropriate.
(g) Impairment
(i) Impairment of financial assets
An expected credit loss ("ECL") model applies to financial assets measured at
amortized cost and debt investments at FVOCI, but not to investments in equity
instruments. The Company's financial assets measured at amortized cost and
subject to the ECL model consist primarily of accounts receivable.
The Company measures the loss allowance on accounts receivable at an amount
equal to the lifetime ECL. To measure ECL on a collective basis, trade
receivables are grouped based on similar credit risk and aging. The expected
loss rates are based on the Company's historical credit losses experienced and
are updated to reflect the effects of the current conditions and forecasts of
future conditions that did not affect the period on which the historical data
is based.
Accounts receivable are written off when there is no reasonable expectation of
recovery. Indicators that there is no reasonable expectation of recovery
include, amongst others, the failure of a debtor to make contractual payments
for a period of greater than 90 days past due.
(ii) Impairment of non-financial assets
Non-financial assets are subject to impairment tests whenever events or
changes in circumstances indicate that their carrying amount may not be
recoverable. Where the carrying value of an asset exceeds its recoverable
amount, which is the higher of value in use and fair value less costs of
disposal, the asset is written down to its recoverable amount. An impairment
loss is charged to profit or loss.
Where an impairment loss subsequently reverses, the carrying amount of the
asset is increased to the revised estimate of its recoverable amount, but only
so that the increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognized for the
asset in prior years. A reversal of an impairment loss is recognized
immediately in profit or loss.
For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows ("cash
generating units" or "CGU"s). These are typically individual properties or
projects.
(h) Share capital
Financial instruments issued by the Company are treated as equity only to the
extent that they do not meet the definition of a financial liability. Common
shares are classified as equity instruments. Costs incurred to issue shares
are deferred until the shares are issued, at which time these costs are
charged against share capital.
(i) Share-based payments
The Company grants stock options and warrants to employees, directors,
officers and consultants pursuant to the stock option plan described in Note
12. The fair value method of accounting for share-based compensation
transactions is used.
For graded vested share options, IFRS 2, Share-based Payment ("IFRS 2")
requires the use of the attribution method, which requires that the Company
treat each installment as a separate share option grant with a different fair
value.
The fair value of share-based payments to non-employees is based on the fair
value of the goods or services received, when these can be measured reliably.
In the event that no reliable measurement can be made, the fair value of the
options and warrants granted will be used.
(j) Income taxes
Income tax expense comprises current and deferred tax. Current tax and
deferred tax are recognized in profit or loss except to the extent that it
relates to items recognized directly in equity or in other comprehensive
income (loss).
Current tax is the expected tax payable or receivable on the taxable income or
loss for the year, using tax rates enacted or substantively enacted at the
reporting date, and any adjustment to tax payable in respect of previous
years.
Deferred tax is recognized in respect of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes. Deferred tax is measured at the
tax rates that are expected to be applied to temporary differences when they
reverse, based on the laws that have been enacted or substantively enacted by
the reporting date. Deferred tax assets and liabilities are offset if there is
a legally enforceable right to offset current tax liabilities and assets, and
they relate to income taxes levied by the same tax authority on the same
taxable entity, or on different tax entities, but they intend to settle
current tax liabilities and assets on a net basis or their tax assets and
liabilities will be realized simultaneously.
A deferred tax asset is recognized for unused tax losses, tax credits and
deductible temporary differences, to the extent that it is probable that
future taxable profits will be available against which they can be utilized.
Deferred tax assets are reviewed at each reporting date and are reduced to the
extent that it is no longer probable that the related tax benefit will be
realized.
(k) Provisions
Provisions are recognized if, as a result of a past event, the Company has a
present legal or constructive obligation that can be estimated reliably, and
it is probable that an outflow of resources will be required to settle the
obligation. Provisions are determined by discounting the expected future cash
outflows at a pre-tax rate that reflects current market assessments of the
time value of money and the risks specific to the liability. Management uses
judgment to estimate the amount, timing and probability of the liability based
on facts known at the reporting date. The unwinding of the discount is
recognized as a finance cost.
(l) Revenue recognition
The Company generates revenues from sales of hardware and consumables.
Hardware sales consist of lasers. Consumable sales consist of single use
disposable treatment kits. Product revenues are derived primarily from
standard direct order product sales. The Company has contracts with customers
to deliver both lasers and consumables as part of a single arrangement.
Revenue is allocated to the respective performance obligation based on
relative transaction prices and is recognized as goods are delivered to the
customer. Revenue is measured as an amount that reflects the consideration to
which the entity expects to be entitled in exchange for those goods or
services.
Revenue from the sale of products in the normal course of activities is
measured at the fair value of the consideration received or receivable, net of
returns and trade discounts. The Company recognizes revenue when customers
obtain control of the product, which is when transfer of title of ownership of
goods have passed and when there is a present right to payment. Invoices are
generated and revenue is recognized at that point in time.
(m) Government grants and subsidies
Government grants related to income are presented as part of profit or loss as
incurred, either as other income or deducted from the related expense. A
forgivable loan from the government is treated as a government grant when
there is reasonable assurance that the entity will meet the terms for
forgiveness of the loan. When the criteria for forgiveness has been satisfied
and forgiveness can be reasonably assured, the loan balance is released to the
consolidated statement of comprehensive income.
(n) Research and development
Expenditure on research activities, undertaken with the prospect of gaining
new scientific or technical knowledge and understanding, is recognized in the
Company's consolidated statements of loss and comprehensive loss as incurred.
Development activities involve a plan or design for the production of new or
substantially improved products and processes. Development expenditure is
capitalized only if development costs can be measured reliably, the product or
process is technically and commercially feasible, future economic benefits are
probable, and the Company intends to and has sufficient resources to complete
development and to use or sell the asset. The expenditure capitalized will
include the cost of materials, direct labor and overhead costs that are
directly attributable to preparing the asset for its intended use. Other
development expenditures are expensed as incurred. Capitalized development
expenditures will be measured at cost less accumulated amortization and
accumulated impairment losses.
To date, all of the research and development ("R&D") costs have been
expensed as all of the criteria for capitalization have not yet been met.
(o) Loss per share
Basic loss per share is calculated by dividing the loss for the year
attributable to common shareholders by the weighted average number of shares
outstanding during the year. Diluted earnings per share reflects the potential
dilution of securities that could share in earnings of an entity. For years,
where the issue of shares upon the exercise of stock options and/or warrants
would be anti-dilutive, diluted loss per common share is the equivalent to
basic loss per common share.
(p) New and amended standards adopted by the group
The Company adopted the narrow-scope amendments to IAS 8 - Accounting
Policies, Change in Accounting Estimates and Errors effective February 1,
2023. These amendments clarify how companies distinguish changes in accounting
policies from changes in accounting estimates. These amendments had no
material impact on the financial statements.
The Company adopted the narrow-scope amendments to IAS 1 - Presentation of
Financial Statements effective February 1, 2023. These amendments improve
accounting policy disclosures. These amendments had no material impact on the
financial statements.
(q) New standards and interpretations not yet adopted
Certain amendments to accounting standards have been published that are not
mandatory for January 1, 2024 reporting periods and have not been early
adopted by the group. These amendments are not expected to have a material
impact on the entity in the current or future reporting periods and on
foreseeable future transactions.
4. Accounts and other receivables
December 31, December 31,
2023 2022
$ $
Trade receivables 324 133
Other receivables 2 49
326 182
5. Inventory
December 31, December 31,
2023 2022
$ $
Raw materials 555 943
Work-in-progress 118 -
Finished goods 393 351
1,066 1,294
During the year ended December 31, 2023, raw materials, work-in-progress and
finished goods included in cost of goods sold amounted to $472 (December 31,
2022 - $252). During the year ended December 31, 2023 and 2022, inventory
valued at $11 and $69, respectively, was written off and reflected within cost
of goods sold.
6. Prepaids and deposits, and non-current assets
December 31, December 31,
2023 2022
$ $
Prepaid insurances 154 252
Lease deposits 35 36
Other prepaid costs 66 129
255 417
Less: Current portion of prepaid expenses and deposits 220 381
Other non-current assets 35 36
During the year ended December 31, 2023, the Company wrote-off $nil of prepaid
assets that are unlikely to be realized (December 31, 2022 - $1,330).
7. Property and equipment
The Company's property and equipment gross carrying amounts and accumulated
depreciation were as follows:
Computer equipment Furniture and fixtures Lab and office equipment Leasehold improvements Manufacturing equipment and tools Demo equipment Right-of-use Total
$ $ $ $ $ $ $ $
Cost
Balance, January 1, 2022 214 224 382 278 571 378 797 2,844
Additions 88 16 30 - 177 - 877 1,188
Transfers and other - - 33 - - 131 - 164
Disposals and derecognition (38) - - - - (335) (630) (1,003)
Exchange adjustment 27 6 27 14 33 (10) 42 139
Balance, December 31, 2022 291 246 472 292 781 164 1,086 3,332
Additions 25 - 62 25 65 - - 177
Transfers and other - - - - - 69 - 69
Disposals and derecognition (176) (193) (275) - (512) - - (1,156)
Exchange adjustment (6) (1) (11) (6) (11) - (21) (56)
Balance, December 31, 2023 134 52 248 311 323 233 1,065 2,366
Accumulated depreciation
Balance, January 1, 2022 171 220 360 278 457 193 564 2,243
Additions 50 6 24 - 55 83 275 493
Transfers and other - - 23 - - (20) - 3
Disposals and derecognition (38) - - - - (225) (630) (893)
Exchange adjustment 10 4 26 14 15 1 12 82
Balance, December 31, 2022 193 230 433 292 527 32 221 1,928
Additions 46 3 36 8 72 47 375 587
Transfers and other - - - - - (7) - (7)
Disposals and derecognition (158) (193) (271) - (435) (1) - (1,058)
Exchange adjustment (4) 1 (8) (5) (7) - (10) (33)
Balance, December 31, 2023 77 41 190 295 157 71 586 1,417
Net book value
December 31, 2022 98 16 39 - 254 132 865 1,404
December 31, 2023 57 11 58 16 166 162 479 949
During the year ended December 31, 2023, depreciation of $17 (December 31,
2022 - $30) was allocated to cost of goods sold, $nil was allocated to
inventory (December 31, 2022 - $3) and $570 to operating expenses (December
31, 2022 - $460).
8. Accounts payable and other liabilities
December 31, December 31,
2023 2022
$ $
Accounts payable 1,363 388
Accrued liabilities 1,605 1,110
Employee related payables 69 1,970
Accrued interest 71 80
3,108 3,548
9. Lease liability
Office spaces and facilities
$
As at January 1, 2022 242
Additions 866
Interest accretion 26
Lease payments (252)
Exchange adjustment 14
As at December 31, 2022 896
As at January 1, 2023 896
Additions -
Interest accretion 46
Lease payments (388)
Exchange adjustment (13)
As at December 31, 2023 541
December 31, December 31,
2023 2022
$ $
Current portion 382 359
Non-current 159 537
Total lease liability 541 896
The Company's leases are for office spaces and a laboratory facility. The
expense relating to variable lease payments not included in the measurement of
lease obligations was $189 (December 31, 2022 - $132). This consists of
variable lease payments for operating costs and property taxes. Total cash
outflow for leases was $577 (December 31, 2022 - $410), including $342
(December 31, 2022 - $252) of principal payments on lease obligations.
As at December 31, 2023, the minimum annual payments under these leases,
including an estimate of operational costs for its office and laboratory
premises based on current costs, is provided below.
$
2024 593
2025 257
850
10. Other long-term liabilities
Other long-term liabilities represent government guaranteed loans received.
The balances of the government loans are as follows:
December 31, December 31,
2023 2022
$ $
Paycheck Protection Program (a) - 421
Other - 60
Total other long-term liabilities - 481
(a) Paycheck Protection Program
In 2021, Ondine Research Laboratories, Inc. and Ondine Biomedical U.S., Inc.,
subsidiaries of the Company received an unsecured advance of US$311 ($416)
under the Paycheck Protection Program ("PPP"), which is guaranteed by the
Small Business Administration ("US SBA"), pursuant to the Coronavirus Aid,
Relief and Economic Security Act. The loan bears interest at 1% per annum and
is repayable, in blended payments, over a two-year term.
The Company was granted full loan forgiveness by the US SBA in 2023 for the
loan related to Ondine Research Laboratories and Ondine Biomedical U.S.,Inc.
of US$311 ($416) and this portion of the loan balance was released to the
consolidated statement of comprehensive income in 2023.
11. Share capital
(a) Common Stock
Authorized
An unlimited number of common shares without par value.
Issued
As at December 31, 2023, the Company's issued share capital consisted of
226,753,789 common shares (December 31, 2022 - 194,592,857).
On May 5, 2023, the Company issued 390,550 common shares in the Company ("the
Consideration Shares") to Hylife pursuant to the services agreement entered
into on December 15, 2020 ("Hylife Service Agreement"). In accordance with the
Hylife Service Agreement, the Consideration Shares being issued at a price of
US$1.53 ($1.94).
On August 23, 2023, the Company issued 78,719 common shares in the Company to
a staff member pursuant to an annual bonus award at a price of US$0.21
($0.29).
On December 8, 2023 and December 15, 2023, the Company issued 31,691,663
common shares at a price of £0.09 ($0.16). The Company incurred accounting,
legal, advisory and disbursement costs of $700 directly related to the
completion of the finance raise. The costs incurred were recorded to equity in
the consolidated statement of financial position.
Preferred Stock
Authorized
An unlimited number of fixed-value, voting, preferred shares, entitled to a
non-cumulative dividend of 6% per annum, redeemable and retractable at
$1/share.
Issued
As at December 31, 2023, the Company's issued preferred share capital
consisted of nil preferred shares (December 31, 2022 - nil).
12. Share-based payments
(a) Stock Option Plan
On November 1, 2021, the Board of Directors approved and adopted an amended
stock option plan for the Company which provides for the grant of stock
options to directors, officers, employees and consultants from time to time at
the discretion of the directors. Under the terms of the amended stock option
plan, the maximum number of options authorized for issuance is 10% of the
issued and outstanding common shares in any 10-year period for any employee'
share scheme and the maximum number of options authorized for issuance is 5%
of the issued and outstanding common shares in any 10-year period for any
executive share scheme. As at December 31, 2023, the maximum number of total
options that can be outstanding are 22,675,379 (December 31, 2022 -
19,459,286).
A summary of the status of the stock options outstanding is as follows:
December 31, 2023 December 31, 2022
Number of options Weighted average exercise price Number of options Weighted average exercise price
$ $
Outstanding, beginning of year 8,070,000 1.07 6,833,000 1.42
Options granted 50,000 0.29 2,890,000 0.77
Options expired (3,705,000) 1.20 (250,000) (0.90)
Options forfeited (508,750) 0.81 (141,750) 1.72
Options cancelled (216,250) 0.91 (1,261,250) 2.59
Outstanding, end of year 3,690,000 0.81 8,070,000 1.07
Exercisable, end of year 1,447,500 0.79 4,371,250 1.13
Share-based payments expense for the year ended December 31, 2023, in the
amount of $617 (December 31, 2022 - $1,693) was recorded.
The outstanding options for the year ended December 31, 2023 is as follows:
Exercise price Number of options Remaining life (years)
$ 0.01 200,000 2.75
$ 0.29 30,000 4.24
$ 0.36 330,000 3.94
$ 0.49 485,000 3.74
$ 0.90 1,070,000 2.38
$ 0.93 1,475,000 3.10
$ 3.00 100,000 2.55
$ 0.81 3,690,000 3.03
The fair value of stock options granted during the year ended December 31,
2023 and 2022 were estimated with the Black-Scholes model using the following
assumptions at the time of grant:
2023 2022
Dividend yield 0% 0%
Annualized volatility 76% 70% - 76%
Risk-free interest rate 2.96% 1.61% - 3.45%
Expected life of options (years) 5 5
Forfeiture rate 17% 14%
Volatility was estimated by using the historical volatility of other companies
that the Company considers comparable that have trading history and volatility
history. The expected life in years represents the period of time that options
granted are expected to be outstanding. The risk-free interest rate is based
on Canadian government benchmark bonds with a term equal to or a remaining
term that approximates the expected life of the options.
The weighted average fair value of stock options granted during the twelve
months ended December 31, 2023, was $0.18 per option (December 31, 2022 -
$0.68). As at December 31, 2023, stock options outstanding had a remaining
contractual life of 3.03 years (December 31, 2022 - 2.58 years).
(b) Warrants
On May 30, 2020 and December 1, 2021, the Company granted warrants entitling
the holders to acquire common shares of the Company as consideration for
ongoing consulting and advisory services. A summary of the status of the
warrants outstanding is as follows:
December 31, 2023 December 31, 2022
Number of warrants Weighted average exercise price Number of warrants Weighted average exercise price
$ $
Outstanding, beginning of year 2,295,845 1.08 2,795,845 1.42
Warrants expired - - (500,000) 3.00
Outstanding, end of year 2,295,845 1.08 2,295,845 1.08
Exercisable, end of year 2,295,845 1.08 2,295,845 1.08
The expense for the year ended December 31, 2023 was $nil (December 31, 2022 -
$nil). As at December 31, 2023, warrants outstanding had a remaining
contractual life of 1.0 year (December 31, 2022- 2.0 years).
13. Income taxes
Income tax expense differs from the amount that would be computed by applying
the federal and provincial statutory tax rates to the earnings before income
taxes. A reconciliation to the effective tax is as follows:
Years ended December 31,
2023 2022
$ $
Loss before income taxes (14,412) (19,372)
Statutory income tax rate 27% 27%
Income tax (recovery) (3,891) (5,230)
Non-deductible expenses (317) 1,326
Tax rate differences 875 383
Other differences 1,209 (151)
Foreign exchange differences 445 (1,047)
True up: adjustment of provision to tax return (340) 8,146
Change in unrecognized deferred tax assets 2,019 (3,427)
Income tax (recovery) - -
Deferred income tax assets are only recognized to the extent that the
realization of tax loss carry-forwards is determined to be probable. As at
December 31, 2023, the Company has not recognized any income tax assets.
Effective January 1, 2019, the Canadian federal and British Columbia
provincial corporate tax rates are 15% and 12%, respectively. All deferred tax
assets and liabilities are measured at the combined 27% tax rate. As a result
of tax legislation enacted in the U.S. at the end of 2017, the federal U.S.
corporate tax rate applicable to years subsequent to 2017 was substantially
reduced.
The Company has unrecognized deferred tax assets and liabilities as follows:
December 31, December 31,
2023 2022
$ $
Deferred tax assets:
Tax losses carried forward 31,599 29,430
General Business Credit 2,020 1,827
Other (127) 27
Amortization of research and development expenses 1,050 803
Share issue costs 982 1,214
Equipment and leasehold improvements 159 140
Intangible assets 430 653
Total deferred tax assets 36,113 34,094
Total deferred tax liabilities - -
Unrecognized deferred tax asset (36,113) (34,094)
Net deferred tax assets - -
The Company has non-capital loss carryforwards in Canada of $64,238, in the
United States of US$43,521 ($57,561), in Barbados of US$4,763 ($6,300), in
Switzerland of US$2,060 ($2,725) and in the United Kingdom of GBP£29 ($48),
all expiring between 2024 - 2043. The losses are available to reduce taxable
income in Canada, the US, Barbados and UK respectively. As at December 31,
2023, the non-capital loss carryforwards that expire on December 31 of each
respective year are as follows:
Expiry date Amount
$
Pre-2033 44,619
2034 7,594
2035 7,078
2036 3,754
2037 2,922
2038 2,878
Thereafter until 2043 62,027
130,872
14. Related party transactions
(a) Revenues, product shipments and expenses
Year ended December 31,
2023 2022
$ $
Product sales (i) 9 9
(i) Product sales for the year ended December 31, 2023 were to a related
company. The revenue associated with product shipments was not recognized due
to revenue recognition conditions not being met, and the cost of the product
shipped to a related company was included in cost of goods sold. The revenue
associated with product shipments will be recognized in a subsequent year(s)
upon invoice payment. For the year ended December 31, 2023, there was $2
(December 31, 2022- $33) of products shipped to a related party company for
which revenue was not recognized.
(b) Compensation of key management personnel
The Company's key management personnel have the authority and responsibility
for planning, directing and controlling activities of the Company and consists
of the Company's executive officers and directors.
Year ended December 31,
2023 2022
$ $
Compensation and other short-term benefits (i),(ii) 752 2,293
Directors' fees (iii) 657 616
Share-based payments 90 296
Consulting expenses (iv) 311 -
1,810 3,205
(i) On December 8, 2023, as part of the Company's finance raise, a bonus
of $34 was paid to a key management personnel in the form of Common Shares.
(ii) During the twelve months ended December 31, 2023, the Company
reassessed the initial estimates of the key managements' performance against
the established criteria, leading to a change in estimate of the bonus accrual
and reduced compensation and other short-term benefits by $625.
(iii) On December 8, 2023, as part of the Company's finance raise,
directors' fees of $136 were paid in the form of Common Shares.
(iv) Expenses incurred for consulting services provided by companies under
the control of an officer and a related party of the Company
(c) Related party balances
December 31, 2023 December 31, 2022
$ $
Included in accounts payable and other liabilities 45 714
Loans payable to related parties are due to the personal holding company of
the Company's controlling shareholder. The loans payable to related parties
are unsecured. No amount payable was in respect of services provided. The
related party balances included in accounts payable and other liabilities
consist of bonus payable and the current portion of loans payable to related
parties.
15. Commitments and contingencies
Open purchase order commitments as at December 31, 2023 were $469 (December
31, 2022 - $887) for the purchase of inventory and contracted development and
clinical services.
The Company and its subsidiaries may, from time to time, be a party to certain
legal disputes and claims arising from employment, environmental or commercial
issues in the normal course of business. The Company has the following
contingency at December 31, 2023:
(i) The Company's Barbadian subsidiary held intellectual
property in Barbados until December 22, 2022. As a result of the Barbados
Companies (Economic Substance) Act passed in 2019, the Barbadian subsidiary
must comply with economic substance requirements set out in the legislation.
If the Barbadian subsidiary cannot establish economic substance in Barbados,
the Barbadian subsidiary could be subject to additional financial penalties
and/or could be struck from the register of companies.
On December 22, 2022, the Company transferred the intellectual property from
the Barbadian subsidiary to a new Swiss subsidiary via an intercompany sale at
a fair value which was determined by an independent third party. Challenges
from Barbadian, Swiss, Canadian or United States authorities regarding any of
the foregoing, which results in an unfavorable outcome, could have a material
impact on the financial position and operating results of the Company.
16. Segmented information
Management has determined that the Company has one reportable operating
segment, aPDT products. This segment accounts for all of the Company's
revenue, cost of goods sold and operating expenses. Determination of the
operating segment was based on the level of financial reporting to the
Company's chief operating decision makers. Revenues are attributed to the
geographic area where the customer is located.
Year ended December 31,
2023 2022
$ $
Product revenue
Canada 1,124 596
Other 79 42
1,203 638
Revenue from significant customers are as follows:
Year ended December 31,
2023 2022
$ $
Customer 1 625 504
Customer 2 193 -
Other 385 134
1,203 638
A summary of non-current assets (excluding other assets) by geographical area
based on the location of the asset is as follows:
Year ended December 31,
2023 2022
$ $
Canada 210 245
United States 739 1,159
949 1,404
17. Financial risk management and financial instruments
All assets and liabilities for which fair value is measured or disclosed in
the consolidated financial statements are categorized within the fair value
hierarchy, described as follows, based on the lowest level input that is
significant to the fair value measurement as a whole:
Level 1 Unadjusted quoted market prices in active markets for
identical assets or liabilities;
Level 2 Valuation techniques for which the lowest level input
that is significant to the fair value measurement is directly or indirectly
observable; and
Level 3 Valuation techniques for which the lowest level input
that is significant to the fair value measurement is not based on observable
market data.
As at December 31, 2023, the carrying values of cash, restricted cash,
accounts and other receivables, and accounts payable and other liabilities
approximate their fair values because of their nature, relatively short
maturity dates.
(a) Management of risks arising from financial instruments
The overall responsibility for the establishment and oversight of the
Company's risk management policies resides with the Board of Directors. The
Company's risk management policies are established to identify, analyze and
manage the risks faced by the Company and to implement appropriate procedures
to monitor risks and adherence to established controls. Risk management
policies and systems are reviewed periodically in response to the Company's
activities and to ensure applicability. The Company, through its financial
assets and liabilities, is exposed to certain risks as follows:
Credit risk
The Company is exposed to credit risk arising from the possibility that cash
held, and accounts receivable are non-recoverable. However, the Company
believes that its exposure to credit risk in relation to the cash and
receivables is low. All of the cash held by the Company and its subsidiaries
was held with reputable financial institutions. Since the majority of the
Company's customers are considered to have low default risk and its historical
default rate and frequency of losses are low, the lifetime expected credit
loss allowance as at December 31, 2023 is shown in the table below. The
Company's maximum exposure to credit risk is limited to the carrying amount of
financial assets recognized as at December 31, 2023 and December 31, 2022
summarized below:
Year ended December 31,
2023 2022
$ $
Classes of financial assets - carrying amounts
Cash and cash equivalents 2,981 13,125
Restricted cash 157 147
Accounts receivable, net of credit loss allowance 326 182
3,464 13,454
The aging of the Company's accounts receivable is as follows:
Year ended December 31,
2023 2022
$ $
Trade accounts receivable, net of credit loss
allowance
Current 231 133
Past due 1 to 30 days 39 -
Past due 31 to 60 days 54 -
324 133
Other receivables 2 49
326 182
The change in the Company's credit loss allowance for provision is as follows:
Year ended December 31,
2023 2022
$ $
Balance - beginning of year 864 864
Credit loss expense - net of reversals 39 -
Balance - end of year 903 864
Foreign currency risk
The results of the Company's operations are subject to currency transaction
and translation risks. The fair value of future cash flows of a financial
instrument will fluctuate because of changes in foreign exchange rates. The
Company operates in Canada, the United States, the United Kingdom, Barbados,
and Switzerland and is exposed to foreign exchange risk due to fluctuations in
the US Dollar ("US$"), Great British Pound ("GBP"), Barbadian Dollar, and
Swiss Franc against the Canadian dollar. Foreign exchange risk arises from
financial assets and liabilities denominated in currencies other than the
functional currency of the respective entities. The Company's primary risk is
associated with fluctuations between the US$ and Canadian dollar, and the GBP
and Canadian dollar.
The Company has determined that the effect of a 10% increase or decrease in
the US$ and GBP against the Canadian dollar on net financial assets and
liabilities, as at December 31, 2023, including cash, accounts receivables,
accounts payable and other liabilities denominated in US$, and GBP would
result in an increase or decrease of approximately $84 (December 31, 2022-
$979) in the consolidated statements of loss and comprehensive loss for the
year ended December 31, 2023.
Interest rate risk
Interest rate risk is the risk that the fair values and future cash flows of
the Company will fluctuate because of changes in market interest rates. The
Company did not incur or have any other interest-bearing assets or
liabilities.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its
obligations as they fall due. The Company's objective is to ensure that
there is sufficient liquidity to meet its short-term business requirements,
taking into account its anticipated cash flows from operations and its
holdings of cash. The Company's principal sources of liquidity are cash
provided by operations, related party loans, debt and equity issuances. The
Company projects and monitors its cash requirements to accommodate changes in
liquidity needs (Note 1).
In addition to the commitments in Note 9 and Note 15, the Company has the
following contractual financial liabilities as at December 31, 2023:
Carrying amount Contractual cash flows Less than one year More than one year
$ $ $ $
Financial liabilities
Accounts payable and other liabilities 3,108 3,108 3,108 -
3,108 3,108 3,108 -
18. Cost of goods sold
Year ended December 31,
2023 2022
$ $
Inventory - Note 5 472 252
Inventory write-off - Note 5 11 69
Depreciation - Note 7 17 30
500 351
19. Expenses by nature
General and administration, research and development, marketing and sales, and
depreciation and amortization expenses are comprised of the following expenses
by nature:
Year ended December 31,
2023 2022
$ $
Salaries and benefits 6,170 9,172
Professional fees, contractors and consultants 4,395 3,929
Office and lab costs 1,228 1,483
Clinical trial costs 1,089 1,248
Technology costs 681 423
Share based payment 617 1,445
Depreciation and amortization 570 451
Travel and entertainment 431 506
Advertising and promotion 178 229
Delivery and logistics 110 164
Bad debt expense 39 -
15,508 19,050
During the year ended December 31, 2023, Ondine Research Laboratories Inc. and
Ondine Biomedical U.S., Inc. received Employee Retention Credit, a refundable
tax credit for businesses that continued to pay employees while shut down due
to the COVID-19 pandemic from the Internal Revenue Service of US$344 ($464)
(2022 - US$123 ($160)) and recorded it to the Comprehensive Statements of Loss
and Comprehensive Loss against salaries and benefits.
During the year ended December 31, 2023, the Company entered into Contribution
Agreement with His Majesty the King in Right of Canada as represented by the
Minister of Agriculture and Agri-Food in which the Company was approved by a
maximum contribution from the Minister of Agriculture and Agri-Food of $735
for eligible approved expenses for research. During the year ended December
31, 2023, the Company received $317 and recorded it to the Comprehensive
Statements of Loss and Comprehensive Loss against salaries and benefits and
professional fees, contractors and consultants.
20. Supplementary cash flow information
Year ended December 31,
2023 2022
Changes in non-cash working capital items
Accounts and other receivables ($142) $66
Inventory 104 (337)
Prepaid expenses and deposits 160 126
Accounts payable and other liabilities (420) 247
($298) $102
21. Ultimate controlling party
The Company's CEO is the ultimate controlling party of the Company, personally
owning and/or controlling through her personal holding company a total of
48.3% of the issued common shares of the Company as at December 31, 2023
(December 31, 2022 - 55.7%).
On December 8, 2023, as part of the Company's finance raise, 1,093,770 Common
Shares were issued to the controlling shareholder.
22. Capital management
The Company's objectives when managing capital are to ensure sufficient
liquidity for operations and adequate funding for growth and capital
expenditures while maintaining an efficient balance between debt and equity.
The Company's capital consists of items included in shareholders' equity, debt
facilities net of cash and restricted cash.
In order to facilitate the management of capital, the Company prepares annual
expenditure budgets that are updated as necessary and dependent on various
factors, including successful deployment of capital and industry conditions.
The annual budgets are approved by the Board of Directors. The Company is not
subject to any externally imposed capital requirements.
Management believes that existing cash resources, together with cash generated
through operations and funds raised through public or private equity and/or
debt financings, will generate sufficient liquidity to meet operating cash
requirements for at least the next twelve months.
23. Subsequent events
1. On January 25, 2024, the Company announced the grant of 8,940,000 stock
options to the Company's employees and consultants at an exercise price of
£0.09 ($0.15) in accordance with the Company's stock option plan. The stock
options are exercisable for a period of 5 years and must meet certain vesting
criteria. Of the total granted stock options, 5,790,000 were granted to key
management personnel.
2. On April 26, 2024, the husband of the controlling shareholder and
substantial shareholder in the Company advanced $350,000 as a related party
loan. The related party loan accrued no interest and was unsecured. On May 21,
2024, the Company repaid the related party loan in full.
3. On May 9, 2024, the Company issued 50,531,970 common shares of the
Company for gross aggregate proceeds of £3.5 million ($6.0 million). As part
of the Company's finance raise, 1,825,650 Common Shares were issued to the
controlling shareholder, and directors' fees of $271 were paid in the form of
Common Shares.
4. On May 9, 2024, the Company announced the grant of 25,265,978 warrants of
the Company at an exercise price of £0.15 ($0.26). 2,039,989 warrants were
granted to key management personnel.
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