2023 Full Year Results and Annual Report
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/.
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, the Company's Annual General Meeting will be held virtually on 28 June 2024.
Enquiries:
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Ondine Biomedical Inc. |
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Carolyn Cross, CEO |
+001 (604) 665 0555 |
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Singer Capital Markets |
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Aubrey Powell, Sam Butcher |
+44 (0)20 7496 3000 |
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RBC Capital Markets (Joint Broker) |
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Rupert Walford, Kathryn Deegan |
+44 (0)20 7653 4000 |
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Vane Percy & Roberts (Media Contact) |
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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.
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Sincerely, Jean Charest Chairman |
Carolyn Cross 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. All amounts are in Canadian Dollars, unless otherwise stated.
Ondine Biomedical Inc.
Consolidated Statements of Financial Position
(In thousands of Canadian dollars)
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Notes |
31 December 2023 $ |
31 December 2022 $ |
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Assets |
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Current assets |
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Cash |
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2,981 |
13,125 |
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Restricted cash |
3 |
157 |
147 |
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Accounts and other receivables |
4, 17 |
326 |
182 |
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Inventory |
5 |
1,066 |
1,294 |
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Prepaid expenses and deposits |
6 |
220 |
381 |
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4,750 |
15,129 |
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Non-current assets |
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Property and equipment |
7 |
949 |
1,404 |
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Other assets |
6 |
35 |
36 |
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984 |
1,440 |
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Total Assets |
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5,734 |
16,569 |
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Liabilities |
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Current liabilities |
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Accounts payable and other liabilities |
8, 17 |
3,108 |
3,548 |
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Current portion of lease liability |
9 |
382 |
359 |
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3,490 |
3,907 |
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Non-current liabilities |
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Lease liability |
9 |
159 |
537 |
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Other long-term liabilities |
10 |
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481 |
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159 |
1,018 |
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Total Liabilities |
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3,649 |
4,925 |
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Equity |
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Share capital |
11 |
239,647 |
235,042 |
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Contributed surplus |
14 |
10,528 |
10,528 |
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Reserves |
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18,244 |
17,996 |
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Deficit |
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(266,334) |
(251,922) |
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Total Shareholders' Equity |
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2,085 |
11,644 |
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Total Liabilities and Shareholders' Equity |
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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)
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Year ended December 31, |
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Notes |
2023 $ |
2022 $ |
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Revenue |
14,16 |
1,203 |
638 |
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Cost of goods sold |
18 |
(500) |
(351) |
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Gross margin |
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703 |
287 |
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Expenses |
19 |
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General and administration |
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8,010 |
10,909 |
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Research and development |
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5,140 |
6,280 |
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Marketing and sales |
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1,788 |
1,401 |
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Depreciation and amortization |
7 |
570 |
460 |
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15,508 |
19,050 |
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Loss from operations |
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(14,805) |
(18,763) |
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Other income (expense) |
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Government loan forgiveness |
10 |
436 |
- |
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Accretion and interest expense |
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(38) |
(30) |
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Interest income |
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242 |
191 |
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Loss on disposal of property and equipment |
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(99) |
(82) |
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Loss on write-down of prepaid expenses |
6 |
- |
(1,330) |
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Other income (expense) |
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(7) |
4 |
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Foreign exchange gain (loss) |
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(141) |
638 |
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393 |
(609) |
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Net loss for the year |
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(14,412) |
(19,372) |
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Other comprehensive loss |
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Exchange differences on translation of foreign operations (1) |
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1 |
(85) |
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Total comprehensive loss |
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(14,411) |
(19,457) |
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Net loss per share |
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Basic and diluted |
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($0.07) |
($0.10) |
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Weighted average number of shares outstanding |
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Basic and diluted |
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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)
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Number of common shares |
Share capital $ |
Contributed surplus $ |
Share-based payment reserve $ |
Currency translation reserve $ |
Accumulated Deficit $ |
Equity $ |
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Balance, January 1, 2022 |
194,584,524 |
235,037 |
10,528 |
17,034 |
(398) |
(232,544) |
29,657 |
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Issuance of share capital for shares of Sinuwave Technologies Corporation |
8,333 |
5 |
- |
- |
- |
(6) |
(1) |
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Share-based payments - Note 12 |
- |
- |
- |
1,445 |
- |
- |
1,445 |
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Total comprehensive loss for the year |
- |
- |
- |
- |
(85) |
(19,372) |
(19,457) |
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Balance, December 31, 2022 |
194,592,857 |
235,042 |
10,528 |
18,479 |
(483) |
(251,922) |
11,644 |
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Balance, January 1, 2023 |
194,592,857 |
235,042 |
10,528 |
18,479 |
(483) |
(251,922) |
11,644 |
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Issuance of share capital upon financing - Note 11 |
31,691,663 |
4,912 |
- |
- |
- |
- |
4,912 |
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Issuance of share capital for services rendered - Note 11 |
390,550 |
370 |
- |
(370) |
- |
- |
- |
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Issuance of share capital for employee compensation - Note 11 |
78,719 |
23 |
- |
- |
- |
- |
23 |
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Share issuance costs - Note 11 |
- |
(700) |
- |
- |
- |
- |
(700) |
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Share-based payments - Note 12 |
- |
- |
- |
617 |
- |
- |
617 |
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Total comprehensive loss for the year |
- |
- |
- |
- |
1 |
(14,412) |
(14,411) |
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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)
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Year ended December 31, |
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|
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Notes |
2023 $ |
2022 $ |
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Cash flows from (used in) operating activities |
|
|
|
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Net loss for the year |
|
(14,412) |
(19,372) |
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Adjustments for non-cash items: |
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|
|
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Depreciation of right-of-use assets |
7 |
375 |
274 |
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Depreciation and amortization of other property and equipment and intangible assets |
7 |
212 |
219 |
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Accretion and interest expense |
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38 |
30 |
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Share-based payments |
12 |
617 |
1,445 |
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Non-cash salary compensation |
14 |
23 |
- |
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Unrealized foreign exchange (gain) loss |
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101 |
(478) |
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Government loan forgiveness |
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(436) |
- |
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Loss on disposal of property and equipment |
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99 |
82 |
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Loss on write-down of prepaid expenses |
6 |
- |
1,330 |
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Other |
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28 |
23 |
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Changes in non-cash working capital |
20 |
(298) |
102 |
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Net cash used in operating activities |
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(13,653) |
(16,345) |
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Cash flows from (used in) financing activities |
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Interest paid |
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- |
(23) |
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Repayment of lease obligations |
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(387) |
(252) |
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Repayment of government loan |
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(40) |
- |
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Proceeds from issuance of common shares |
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4,912 |
- |
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Share issuance costs |
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(700) |
- |
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Net cash from financing activities |
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3,785 |
(275) |
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Cash flows used in investing activities |
|
|
|
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Purchase of property and equipment |
7 |
(177) |
(311) |
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Net cash used in investing activities |
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(177) |
(311) |
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Net decrease in cash and restricted cash |
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(10,045) |
(16,931) |
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Effect of foreign exchange rate change on cash and restricted cash |
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(89) |
335 |
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Cash and restricted cash, beginning of year |
|
13,272 |
29,868 |
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Cash and restricted cash, end of year |
|
3,138 |
13,272 |
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|
|
|
|
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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:
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Year ended December 31, |
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2023 $ |
2022 $ |
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Cash |
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2,981 |
13,125 |
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Restricted cash |
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157 |
147 |
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Cash, cash equivalents and restricted cash, end of year |
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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, 2023 $ |
December 31, 2022 $ |
|
Trade receivables |
|
324 |
133 |
|
Other receivables |
|
2 |
49 |
|
|
|
326 |
182 |
5. Inventory
|
|
|
December 31, 2023 $ |
December 31, 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, 2023 $ |
December 31, 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, 2023 $ |
December 31, 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, 2023 $ |
December 31, 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, 2023 $ |
December 31, 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, 2023 $ |
December 31, 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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