25 September 2023
ONDINE BIOMEDICAL INC.
("Ondine Biomedical", "Ondine" or the "Company")
Interim results for the six months to 30 June 2023
Significant operational progress
Ondine Biomedical Inc (AIM: OBI), the Canadian life sciences company developing non-antibiotic photodisinfection therapies to prevent and treat healthcare-associated and drug-resistant infections announces its unaudited results for the six months that ended 30 June 2023 and provides an update on commercial progress in approved markets and next steps for its planned Phase 3 study being finalised to seek US regulatory approval.
Unless otherwise specified, all financial figures throughout this interim report are in Canadian dollars.
Operating results for the first half year were in line with management expectations despite a challenging economic backdrop and unfavorable stock markets which contributed to the deferral of 2023 fundraising plans. The Company has made solid progress toward its two key 2023 corporate objectives:
· Preparing for the upcoming Phase 3 clinical study-a critical component for US market approval of the Company's nasal photodisinfection. ( Steriwave)
· Advancing commercial efforts and geographic footprint into the Canadian, British, Spanish, and Mexican markets.
Financial highlights
· Loss from operations in H1 2023 of $8.03 million (H1 2022: $8.41 million), a 7% loss decrease year-over-year. This loss largely comprises the costs associated with clinical and regulatory efforts for the US market, public company-related costs, and expanding commercialization reach.
· Total revenues in H1 2023 were $0.43 million (H1 2022: $0.26 million) a 63% increase during the period, reflecting the additional hospital clinical deployments.
· Cash, cash equivalents and restricted cash of $4.59 million as at 30 June 2023 (31 December 2022: $13.27 million).
Other advances (including post-period)
I. Clinical & regulatory
· Submission of pivotal Phase 3 file to FDA for review.
· Review meeting held with the FDA on September 22, 2023 confirmed that the Company has satisfied the FDA's pre-clinical and safety requirements and will be working closely with the FDA on specific details of the Phase 3 protocol. Finalising preparations with HCA Healthcare for Phase 3 clinical trial.
· Appointed senior pharma executive as Chief Medical Officer.
II. Commercial
· Significant expansion into new Canadian hospitals, with Steriwave® nasal disinfection technology now deployed in 12 hospitals across all four of Canada's largest provinces, including Vancouver General Hospital, The Ottawa Hospital, the Montreal Heart Institute and the Mazankowski Alberta Heart Institute.
· Outstanding results at Canada's second-largest hospital, The Ottawa Hospital, demonstrated significant clinical outcomes from the universal pre-surgical photodisinfection (Steriwave) protocol:
o 48% shorter mean length of stay among those treated compared with those not treated (P<0.001)
o 51% fewer readmissions compared with the pre-intervention period (P<0.001)
o 33% fewer instances of return to the Emergency Department compared with the pre-intervention period (P=0.005)
o Only 12.8% of patients who received Steriwave treatment required antibiotics between 72 hours and 30 days post-surgery compared with 23.1% of patients who had not received treatment (P<0.001)
· Commencement of first UK NHS pilot at Pontefract Hospital, Mid Yorkshire Teaching NHS Trust, announced in August 2023.
· Development of targeted sales and distributor onboarding processes to support commercialization efforts.
III. Data and wider recognition
· Ondine presented Phase 2 results at the 33rd European Congress of Clinical Microbiology and Infectious Diseases (ECCMID) in Denmark - significant reductions in S. aureus colonisations and 66% fewer surgical site infections than the US national average.
· Release of University Hospital Zurich publication demonstrated Ondine's Steriwave photodisinfection technology eradicates biofilms (>99.99%) associated with periprosthetic joint infections.
· In July 2023, Ondine received the Tayyaba Hasan IMPACT Award at the International Photodynamic Association's biennial 18th World Congress for anti-infective clinical work.[1]
· In September 2023, Ondine presented research at the 2023 International Consortium on Prevention & Infection Control (ICPIC) in Geneva demonstrating Steriwave's strong efficacy against extensively drug-resistant (XDR) bacteria.[2]
· The COVID study run by the University of Navarra (Spain) was published in Frontiers in Cellular and Infection Microbiology, and met its primary endpoint, with a highly significant decrease in viral infectivity (p<0.0001).
· Increased media attention including BBC News and Bloomberg.
IV. Operational
· Planning and organisation of production capacity ahead of schedule to prepare for expected launch post FDA approval. Cost reduction measures implemented post period end to extend cash runway.
· Completed development of a new, injection-molded, low-cost light diffuser to reduce COGS for the USA commercialization.
Ondine CEO, Carolyn Cross, said:
"We continue to build on the momentum of previous years' work and the solid foundation of demonstrated safety and efficacy of our nasal photodisinfection technology proven in leading Canadian hospitals. We have invested a great deal of time and effort in hospital integration workflows which are now assisting in our commercialization expansion plans. With respect to the key US market, we are in detailed discussions with FDA on our Phase 3 protocol, and are coordinating site and other details with our partner HCA Healthcare. We look forward to reporting on the progress of this groundbreaking study."
| Ondine Biomedical Inc. |
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| Carolyn Cross, CEO | +001 (604) 665 0555 |
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| Singer Capital Markets (Nominated Adviser and Joint Broker) |
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| Aubrey Powell, Asha Chotai, 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) | |
| Simon Vane Percy, Amanda Bernard | +44 (0)77 1000 5910 |
About Ondine Biomedical Inc.
Ondine Biomedical Inc. is a Canadian headquartered company innovating in the field of photodisinfection therapies. Ondine has a pipeline of investigational products, based on its proprietary photodisinfection platform, in various stages of development. Products beyond nasal photodisinfection include therapies for a variety of medical indications such as chronic sinusitis, ventilator-associated pneumonia, burns, and other indications.
Chief Executive Officer's Statement
In an era of growing concern over antimicrobial resistance (AMR) and high costs of healthcare-associated infections, our patented photodisinfection technology is uniquely positioned to address the significant and growing threat that AMR poses to global healthcare systems. AMR is already killing more than a million people worldwide each year, and without alternative treatments that figure could rise to tens of millions a year.[3] The emergence and spread of extensively drug-resistant microbes are of particular concern as infections caused by these pathogens are proving virtually untreatable.[4],[5] This rise in resistance underscores the need for the swift adoption of non-antibiotic alternatives like photodisinfection, which has already been proven highly effective at reducing hospital infection rates. [6]
The Company's lead product, Steriwave®, is a nasal disinfection therapy used to decolonize the nose - a major reservoir of pathogens - prior to surgery. Its main application is to prevent healthcare-associated infections (HAIs). HAIs are recognised as the most deadly and costly adverse events in hospitals around the world, consuming up to 6% of global public hospital budgets.[7] In the United States each day, one in 31 hospital patients suffers from one or more HAI's, representing a significant cost to both the patients and the healthcare providers.
We have made substantial progress towards our key objectives over the first half of the year and are continuing to build momentum.
FDA approval
We are continuing to work with FDA as well as our partner HCA Healthcare on the planning and execution of the pivotal Phase 3 study. Following a recent review meeting held with FDA on September 22, 2023, we can confirm that FDA has agreed that Ondine's summary of the extensive safety data is sufficient to proceed into the Phase 3. We are now working closely with FDA on specifics of the Phase 3 protocol.
Preparing for the US market
To prepare for the major effort of addressing the US market, we have substantially improved our infrastructure and are continuing to enhance our processes to scale our business to meet post-FDA approval demands. From this platform and using the same core technology and know-how, we plan to widen the applications for photodisinfection-based solutions, including in ICU, dialysis, chemotherapy, healthcare workers during disease outbreaks, and immunocompromised patients.
Alongside our focus on achieving our US regulatory approval milestone, we have initiated a scientific awareness program in North America to drive awareness and uptake as we get closer to approval.
Commercial expansion
In 2023, our primary objective was to extend our presence to 10-12 additional hospitals, and we are on track to realize this goal. Building upon our initial hospital implementations, which have yielded positive results, we are proud to report substantial progress in Canada, where we will soon see Steriwave deployments in hospitals coast-to-coast. Currently, Steriwave is being used in 12 hospitals across Canada (including in pilots/evaluations), with plans for additional deployments later this year.
In the UK we have marked a significant milestone by securing our first placement at the Mid Yorkshire Teaching NHS Trust. We are in discussions with several other NHS Trusts and have further evaluation deployments in the pipeline in the near future. We are also engaging, via distributors, with several other hospital groups both in Spain and Mexico where we are in advanced discussions on Steriwave deployments. Mexico, we believe, is an important market for our nasal photodisinfection therapy, as medical tourism from the US now exceeds more than four million patient procedures annually.
To facilitate our broader commercialization efforts, we have made strategic investments in leveraging the expertise of external specialists in innovation sales and marketing. This strategic move will allow us to develop and refine sales processes, ensuring the optimization of productivity and effectiveness across our commercial endeavors.
Fundraising
We are confident in our plans to raise capital to fund the key Phase 3 clinical trial, our ongoing commercial expansion plans, and to fund the Company's operating expenses more generally as we seek to attain short-term milestone objectives and prepare to scale further.
The rise of antimicrobial resistance ("AMR") is driving governments and research institutes to seek new solutions to combat antimicrobial-resistant pathogens and help prevent millions of deaths. Because of the demonstration of efficacy against ESKAPE and extremely drug-resistant pathogens of major concern to global health authorities, we are accelerating our pursuit of non-dilutive funding opportunities and numerous AMR-related government initiatives.
Pipeline
Beyond our initial focus on nasal decolonization, the possible application areas for photodisinfection are vast - anywhere our proprietary photosensitive compound can be applied and activated with our specifically-dosed light. Ondine has a pipeline of products that we believe will address a number of substantial infection concerns, including chronic sinusitis, ventilator-associated pneumonia, burns, wounds catheter-associated urinary tract infections (CA-UTI), and others. These additional pipeline products will leverage the current clinical and regulatory efforts and will be taken forward as resourcing permits.
Outlook
There is a huge need and growing international support for novel technologies that can address rising rates of AMR, and we are in the unique position of having a simple, cost-effective solution that does not generate resistance.
Our vision, mission, and purpose remain steadfast and clear: to bring photodisinfection to hospitals around the world to better respond to the growing antimicrobial resistance threat. With significant progress through recent and ongoing data delivery, I am excited for the months ahead and confident that we will be successful in the upcoming FDA-related and commercial milestones.
Carolyn Cross
CEO
Unaudited condensed consolidated interim financial statements
Ondine Biomedical Inc.
For the six months ended June 30, 2023 and 2022
Ondine Biomedical Inc.
Unaudited condensed consolidated interim statements of financial position
(In thousands of Canadian dollars)
| | Note | June 30, 2023 | December 31, 2022 |
| Assets | |
| |
| Current assets | |
| |
| Cash | | $ 4,439 | $ 13,125 |
| Restricted cash | | 147 | 147 |
| Accounts and other receivables | 4 | 97 | 182 |
| Inventory | 5 | 1,088 | 1,294 |
| Prepaid expenses and deposits | 6 | 437 | 381 |
| | | 6,208 | 15,129 |
| Non-current assets | |
| |
| Property and equipment | 7, 15 | 1,163 | 1,404 |
| Other assets | 6 | 35 | 36 |
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| | 1,198 | 1,440 |
| Total Assets | | $ 7,406 | $ 16,569 |
| Liabilities | |
| |
| Current liabilities | |
| |
| Accounts payable and other liabilities | 8 | 2,250 | 3,548 |
| Current portion of lease liabilities | 9 | 401 | 359 |
| | | 2,651 | 3,907 |
| Non-current liabilities | |
| |
| Lease liabilities | 9 | 329 | 537 |
| Other long-term liabilities | 10 | 281 | 481 |
| Total Liabilities | | 3,261 | 4,925 |
| Equity | |
| |
| Share capital | 11 | 235,412 | 235,042 |
| Contributed surplus | | 10,528 | 10,528 |
| Reserves | | 18,027 | 17,996 |
| Deficit | | (259,822) | (251,922) |
| Total Shareholders' Equity | | 4,145 | 11,644 |
| Total Liabilities and Shareholders' Equity | | $ 7,406 | $ 16,569 |
Going concern - Note 1; Commitments and contingencies - Note 14; Subsequent events - Note 21
| Approved on behalf of the Board:
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| "Carolyn Cross" | | "Jean Charest" | |
Ondine Biomedical Inc.
Unaudited condensed consolidated interim statements of loss and comprehensive loss
(In thousands of Canadian dollars, except share and per share amounts)
| For the six months ended June 30, | ||||
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| Note | 2023 | 2022 |
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| Revenue | | 13,15 | $ 428 | $ 262 |
| Cost of goods sold | | 17 | (177) | (118) |
| Gross margin | | | 251 | 144 |
| Expenses | | 18 |
| |
| General and administration | | | 4,747 | 5,082 |
| Research and development | | | 2,185 | 2,642 |
| Marketing and sales | | | 1,055 | 603 |
| Depreciation and amortization | | 7 | 294 | 223 |
| | | | 8,281 | 8,550 |
| Loss from operations | | | (8,030) | (8,406) |
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| | |
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| Other income (expense) | | |
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| Government loan forgiveness | | 10 | 151 | - |
| Accretion and interest expense | | | (20) | (9) |
| Interest income | | | 204 | 25 |
| Loss on disposal of property and equipment | | | (95) | |
| Other expense | | | (5) | (4) |
| Foreign exchange loss | | | (105) | (176) |
| | | | 130 | (164) |
| Net loss for the period | | | (7,900) | (8,570) |
| Other comprehensive loss | | |
| |
| Exchange differences on translation of foreign operations(1) | | (16) | 45 | |
| Total comprehensive loss for the period | | | $ (7,916) | $ (8,525) |
Net loss per share
| Basic and diluted |
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| $ (0.04) | $ (0.04) |
Weighted average number of shares outstanding
| Basic and diluted |
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| 194,715,848 | 194,584,524 |
(1) May be reclassified to profit or loss in subsequent periods.
Ondine Biomedical Inc.
Unaudited condensed consolidated interim statements of changes in equity
(In thousands of Canadian dollars, except share amounts)
| | Number of common shares (Note 11) | Share capital | Contributed surplus | Share-based payment reserve | Currency translation reserve | Accumulated Deficit | Equity |
| Balance, January 1, 2022 | 194,584,524 | $ 235,037 | $ 10,528 | $ 17,034 | $ (398) | (232,544) |
$ 29,657 |
| Share-based payments - Note 12 | - | - | - | 686 | - | - | 686 |
| Total comprehensive loss for the period | - | - | - | - | 45 | (8,570) | (8,525) |
| Balance, June 30, 2022 | 194,584,524 | 235,037 | 10,528 | 17,720 | (353) | (241,114) | 21,818 |
| Balance, January 1, 2023 | 194,592,857 | 235,042 | 10,528 | 18,479 | (483) | (251,922) | 11,644 |
| Issuance of share capital | 390,550 | 370 | - | (370) | - | - | - |
| Share-based payments - Note 12 | - | - | - | 417 | - | - | 417 |
| Total comprehensive loss for the period | - | - | - | - | (16) | (7,900) | (7,916) |
| Balance, June 30, 2023 | 194,983,407 | $ 235,412 | $ 10,528 | $ 18,526 | $ (499) | $ (259,822) | $ 4,145 |
Ondine Biomedical Inc.
Unaudited condensed consolidated interim statements of cash flows
(In thousands of Canadian dollars)
| | For the six months ended June 30, | ||
| | Note | 2023 | 2022 |
| Cash flows from (used in) operating activities |
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| Net loss for the period | | $ (7,900) | $ (8,570) |
| Adjustments for non-cash items: | |
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| Depreciation of right-of-use assets | 7 | 187 | 122 |
| Depreciation and amortization of other property and equipment and intangible assets | 7 | 118 | 116 |
| Accretion and interest expense | | 20 | 9 |
| Share-based payments | 12 | 417 | 686 |
| Unrealized foreign exchange loss | | 111 | 171 |
| Government loan forgiveness | | (151) | - |
| Loss on disposal of property and equipment | | 95 | - |
| Other | | 24 | (28) |
| Changes in non-cash working capital | 19 | (1,095) | (900) |
| Net cash used in operating activities | | (8,174) | (8,394) |
| Cash flows from (used in) financing activities | |
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| Interest paid | | - | (23) |
| Repayment of lease obligations | | (171) | (138) |
| Repayment of government loans | | (40) | - |
| Net cash used in financing activities | | (211) | (161) |
| Cash flows used in investing activities | |
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| Purchase of property and equipment | 7 | (174) | (269) |
| Net cash used in investing activities | | (174) | (269) |
| Net decrease in cash, cash equivalents and restricted cash | | $ (8,559) | $ (8,824) |
| Effect of foreign exchange rate change on cash, cash equivalents and restricted cash | | (127) | (118) |
| Cash, cash equivalents and restricted cash, beginning of period | | 13,272 | 29,868 |
| Cash, cash equivalents and restricted cash, end of period | | $ 4,586 | $ 20,926 |
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| Supplemental cash flow information | 19 | | |
Cash, cash equivalents and restricted cash are comprised of:
| | For the six months ended June 30, | ||
| | | 2023 | 2022 |
| Cash | | $ 4,439 | $ 20,926 |
| Restricted cash | | 147 | - |
| Cash, cash equivalents and restricted cash, end of period | | $ 4,586 | $ 20,926 |
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 June 30, 2023.
The Company has a history of incurring significant losses and as at June 30, 2023, had an accumulated deficit of $259,822 (December 31, 2022 - $251,922). As at June 30, 2023, the Company had a cash and cash equivalents balance of $4,439 (December 31, 2022 - $13,125) and a positive working capital balance of $3,557 (December 31, 2022 - $11,222). In the six months ended June 30, 2023, cash used in operating activities totaled $8,174 (June 30, 2022 - $8,394).
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 unaudited condensed consolidated interim financial statements have been presented in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB') as applicable to the preparation of consolidated financial statements, as set out in International Accounting Standard ("IAS") 34, Interim Financial Reporting. They do not include all the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Company's financial position and performance since the last annual consolidated financial statements as at and for the year ended December 31, 2022.
The unaudited condensed consolidated interim financial statements were approved and authorized for issue by the Board of Directors on September 21, 2023.
(b) Basis of measurement
The unaudited condensed consolidated interim financial statements have been prepared on a 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 18 for details of expenses by nature.
(c) Use of estimates, assumptions and judgments
The preparation of unaudited condensed consolidated interim financial statements in conformity with IFRS 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.
Information about the judgments, estimates and assumptions made by management in preparing these condensed consolidated interim financial statements are as described under "Basis of presentation - Judgments and estimates" in the Company's consolidated financial statements for the year ended December 31, 2022.
3. Significant accounting policies and changes in estimates
The accounting policies in these unaudited condensed consolidated interim financial statements are as described under "Significant accounting policies" in the Company's consolidated financial statements for the year ended December 31, 2022 with the exception of property and equipment and bonus expense:
During the six months ended June 30, 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.
| | 2023 | 2024 | 2025 | 2026 | 2027 | Thereafter |
| (Decrease) increase in depreciation expense | 7 | 44 | (16) | (15) | (24) | (21) |
During the six months ended June 30, 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 expense, included in 'general and administration' and 'research and development', in the consolidated statement of comprehensive income, is a decrease of $290 and $583, respectively, for 2023.
4. Accounts and other receivables
| | | June 30, 2023 | December 31, 2022 |
| Trade receivables | | $ 97 | $ 133 |
| Other receivables | | - | 49 |
| | | $ 97 | $ 182 |
The following table reflects the loss allowance for trade receivables balance:
| | | June 30, 2023 | December 31, 2022 |
| Gross carrying value |
| $ 961 | $ 997 |
| Expected credit loss allowance |
| (864) | (864) |
| Trade receivables - net |
| $ 97 | $ 133 |
5. Inventory
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| June 30, 2023 | December 31, 2022 |
| Raw materials |
| $ 560 | $ 943 |
| Work-in-progress |
| 147 | - |
| Finished goods |
| 381 | 351 |
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| $ 1,088 | $ 1,294 |
During the six months ended June 30, 2023, raw materials and finished goods included in cost of goods sold amounted to $157 (June 30, 2022 - $90). During the six months ended June 30, 2023 and 2022, inventory valued at $9 and $13, respectively, was written off and reflected within cost of goods sold.
6. Prepaids and deposits, and non-current assets
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| June 30, 2023 | December 31, 2022 |
| Prepaid insurance | $ 217 | $ 252 |
| Lease deposits | 35 | 36 |
| Other prepaid costs | 220 | 129 |
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| $ 472 | $ 417 |
| Less: Current portion of prepaid expenses and deposits | $ 437 | $ 381 |
| Other non-current assets | $ 35 | $ 36 |
7. Property and equipment
The Company's property and equipment gross carrying amounts and accumulated depreciation were as follows:
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| 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 | 22 | - | 62 | 25 | 65 | - | - | 174 |
| Transfers and other | - | - | - | - | - | 25 | - | 25 |
| Disposals and derecognition | (171) | (193) | (275) | - | (506) | (15) | - | (1,160) |
| Exchange adjustment | (11) | (1) | (11) | (6) | (17) | - | (20) | (66) |
| Balance, June 30, 2023 | $ 131 | $ 52 | $ 248 | $ 311 | $ 323 | $ 174 | $ 1,066 | $ 2,305 |
| Accumulated depreciation |
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| 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 | 27 | 2 | 20 | 2 | 43 | 24 | 187 | 305 |
| Transfers and other | - | - | - | - | - | (6) | - | (6) |
| Disposals and derecognition | (152) | (193) | (271) | - | (429) | - | - | (1,045) |
| Exchange adjustment | (10) | - | (8) | (4) | (12) | - | (6) | (40) |
| Balance, June 30, 2023 | $ 58 | $ 39 | $ 174 | $ 290 | $ 129 | $ 50 | $ 402 | $ 1,142 |
| Net book value |
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| December 31, 2022 | $ 98 | $ 16 | $ 39 | $ - | $ 254 | $ 132 | $ 865 | $ 1,404 |
| June 30, 2023 | $ 73 | $ 13 | $ 74 | $ 21 | $ 194 | $ 124 | $ 664 | $ 1,163 |
During the six months ended June 30, 2023, depreciation of $11 (June 30, 2022 - $15) was allocated to cost of goods sold (Note 17), and $294 to operating expenses (June 30, 2022 - $223).
8. Accounts payable and other liabilities
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| June 30, 2023 | December 31, 2022 |
| Accounts payable |
| $ 233 | $ 388 |
| Accrued liabilities |
| 1,521 | 1,110 |
| Employee related payables |
| 419 | 1,970 |
| Accrued interest |
| 77 | 80 |
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| $ 2,250 | $ 3,548 |
9. Lease liabilities
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| 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 | | | 21 |
| Lease payments | | | (171) |
| Exchange adjustment | | | (16) |
| As at June 30, 2023 |
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| $ 730 |
| |
| June 30, 2023 | December 31, 2022 |
| Current portion | | $ 401 | $ 359 |
| Non-current | | 329 | 537 |
| Total lease liabilities |
| $ 730 | $ 896 |
The Company's leases are for office spaces and facilities. Interest expense on lease obligations for the six months ended June 30, 2023 was $21 (June 30, 2022 - $7). The expense relating to variable lease payments not included in the measurement of lease obligations was $86 (June 30, 2022 - $62). This consists of variable lease payments for operating costs and property taxes. Total cash outflow for leases was $257 (June 30, 2022 - $200), including $150 (June 30, 2022- $131) of principal payments on lease obligations.
As at June 30, 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.
| 2023 | $ 265 |
| 2024 | 500 |
| 2025 | 218 |
| | $ 983 |
10. Other long-term liabilities
Other long-term liabilities represent government guaranteed loans received. The balances of the government loans are as follows:
| |
| June 30, 2023 | December 31, 2022 |
| Paycheck Protection Program (a) |
| $ 281 | $ 421 |
| Other | | - | 60 |
| Total other long-term liabilities |
| $ 281 | $ 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 ($412) 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.
In 2022, the Company filed a loan forgiveness application for the advance received in 2021, and the Company was granted full loan forgiveness by the US SBA in 2023 for the loan related to Ondine Biomedical U.S.,Inc. of US$99 ($131) and this portion of the loan balance was released to the consolidated statement of comprehensive income in 2023.
Subject to the satisfaction of certain conditions, the remainder of the loan may be forgiven if the proceeds are used to fund qualifying expenditures such as payroll and benefits costs, rent, and utilities costs over an elected coverage period. As at June 30, 2023, the loan of US$212 ($281) (December 31, 2022 - US$311 ($421)) was recorded as part of "other long-term liabilities' in the consolidated statement of financial position.
11. Share capital
(a) Common Stock
Authorized
An unlimited number of common shares without par value.
Issued
As at June 30, 2023, the Company's issued share capital comprised of 194,983,407 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 are being issued at a price of US$1.53 ($1.94).
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 June 30, 2023, the maximum number of total options that can be outstanding are 19,498,341 (December 31, 2022 - 19,459,286).
A summary of the status of the stock options outstanding is as follows:
| | June 30, 2023 | June 30, 2022 | ||
| | Number of options | Weighted average exercise price | Number of options | Weighted average exercise price |
| Outstanding, beginning of period | 8,070,000 | $ 1.07 | 6,833,000 | $ 1.73 |
| Options granted | 50,000 | 0.29 | 1,960,000 | 0.93 |
| Options forfeited | - | - | (136,750) | 1.75 |
| Options cancelled | (75,000) | 0.90 | (1,261,250) | 2.59 |
| Outstanding, end of period | 8,045,000 | $ 1.07 | 7,395,000 | $ 1.37 |
| Exercisable, end of period | 4,785,000 | $ 1.11 | 6,000,856 | $ 0.90 |
Share-based payments expense for the six months ended June 30, 2023, in the amount of $417 (June 30, 2022 - $686) was recorded.
The outstanding options for the the six months ended June 30, 2023 is as follows:
| Exercise price | Number of options | Remaining life (years) |
| $ 0.01 | 200,000 | 3.26 |
| $ 0.29 | 50,000 | 4.75 |
| $ 0.36 | 330,000 | 4.44 |
| $ 0.49 | 600,000 | 4.25 |
| $ 0.50 | 140,000 | 0.42 |
| $ 0.90 | 4,020,000 | 1.10 |
| $ 0.91 | 50,000 | 3.67 |
| $ 0.93 | 1,905,000 | 3.60 |
| $ 2.70 | 650,000 | 0.42 |
| $ 3.00 | 100,000 | 3.05 |
| $ 0.99 | 8,045,000 | 2.11 |
The fair value of stock options granted during the six months ended June 30, 2023 were estimated with the Black-Scholes model using the following assumptions at the time of grant:
| Dividend yield |
| 0% |
| Annualized volatility |
| 76% |
| Risk-free interest rate | | 2.96% |
| Expected life of options (years) |
| 5 |
| Forfeiture rate |
| 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 six months ended June 30, 2023, was $0.18 per option (June 30, 2022 - $0.55). As at June 30, 2023, stock options outstanding had a remaining contractual life of 2.11 years (June 30, 2022 - 2.73 years).
(b) Warrants
On May 30, 2020, December 23, 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:
| | June 30, 2023 | June 30, 2022 | ||
| | Number of warrants | Weighted average exercise price | Number of warrants | Weighted average exercise price |
| Outstanding, beginning and end of period | 2,295,845 | $ 1.08 | 2,795,845 | $ 1.42 |
| Exercisable, end of period | 2,295,845 | $ 1.08 | 2,795,845 | $ 1.42 |
The expense for the six months ended June 30, 2023 was nil (June 30, 2022 - $nil). As at June 30, 2023, warrants outstanding had a remaining contractual life of 1.5 years (June 30, 2022- 2.1 years).
13. Related party transactions
(a) Revenues, product shipments and expenses
| For the six months ended June 30, | |||
|
| | 2023 | 2022 |
| Product sales (i) | | $ - | $ 5 |
(i) Product sales for the six months ended June 30, 2023 were to a related company (which is not a related party under the AIM Rule for Companies). 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 six months ended June 30, 2023, there was $5 (June 30, 2022- $8) 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 the activities of the Company and consists of the Company's executive officers and directors.
| For the six months ended June 30, | |||
|
|
| 2023 | 2022 |
| Compensation and other short-term benefits |
| $ 98 | $ 896 |
| Directors' fees |
| 327 | 308 |
| Share-based payments |
| 52 | 164 |
| Consulting expenses (i) |
| 74 | - |
| |
| $ 551 | $ 1,368 |
(i) 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
|
|
| June 30, 2023 | December 31, 2022 |
| Included in accounts payable and other liabilities |
| $ 102 | $ 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. The related party balances included in accounts payable and other liabilities consist of bonus payable, the current portion of loans payable to related parties and amounts payable for services provided.
14. Commitments and contingencies
Open purchase order commitments as at June 30, 2023 were $668 (December 31, 2022 - $887) for the purchase of inventory and contracted development and clinical services.
The Company has the following contingency at June 30, 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.
(ii) The Company and certain of its affiliates have also been named as defendants in certain legal actions in the normal course of business, none of which management believes singularly or cumulatively, will have a material impact on the results of operations and financial position of the Company.
15. 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.
| For the six months ended June 30, | |||
|
|
| 2023 | 2022 |
| Product revenue |
| | |
| Canada |
| $ 390 | $ 262 |
| Other |
| 38 | - |
| |
| $ 428 | $ 262 |
Revenue from significant customers are as follows:
| For the six months ended June 30, | |||
|
|
| 2023 | 2022 |
| Customer 1 |
| $ 290 | $ 204 |
| Customer 2 |
| 46 | 33 |
| Other |
| 92 | 25 |
| |
| $ 428 | $ 262 |
A summary of non-current assets (excluding other assets) by geographical area based on the location of the asset is as follows:
| |
| June 30, 2023 | December 31, 2022 |
| Canada |
| $ 204 | $ 245 |
| United States |
| 959 | 1,159 |
| |
| $ 1,163 | $ 1,404 |
16. Financial risk management and financial instruments
All assets and liabilities for which fair value is measured or disclosed in the unaudited condensed consolidated interim 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 June 30, 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) anagement 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:
i. Credit risk
The Company is exposed to credit risk arising from the possibility that cash held, receivables and amounts due from related parties 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. The Company has evaluated accounts receivable and determined an expected credit loss allowance of $864 for the six months ended June 30, 2023 (December 31, 2022 - $864). During the period ended June 30, 2023, the Company recorded a bad debt expense of $nil (June 30, 2022- $nil).
ii. Foreign currency risk
The results of the Company's operations are subject to currency transaction and translation risks. The fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company operates in Canada, the United States, the United Kingdom, Barbados, and Switzerland and is exposed to foreign exchange risk due to fluctuations in the US$, 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 June 30, 2023, including cash, accounts receivables, accounts payable and other liabilities denominated in US$, and GBP would result in an increase or decrease of approximately $261 (June 30, 2022- $2,066) in the unaudited condensed consolidated interim statements of loss and comprehensive loss for the six months ended June 30, 2023.
iii. 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.
iv. Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its obligations as they fall due. The Company ensures 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 14, the Company has the following contractual financial liabilities as at June 30, 2023:
|
| Carrying amount | Contractual cash flows | Less than one year | More than one year |
| Financial liabilities |
| | | |
| Accounts payable and other liabilities | $ 2,250 | $ 2,250 | $ 2,250 | $ - |
| Other long-term liabilities | 281 | 281 | - | 281 |
|
| $ 2,531 | $ 2,531 | $ 2,250 | $ 281 |
17. Cost of goods sold
| For the six months ended June 30, | |||
|
|
| 2023 | 2022 |
| Inventory - Note 5 |
| $ 157 | $ 90 |
| Inventory write-off - Note 5 |
| 9 | 13 |
| Depreciation - Note 7 |
| 11 | 15 |
| |
| $ 177 | $ 118 |
18. 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:
| For the six months ended June 30, | |||
|
|
| 2023 | 2022 |
| Salaries and benefits |
| $ 2,909 | $ 3,958 |
| Professional fees, contractors and consultants |
| 2,985 | 1,646 |
| Office and lab costs |
| 676 | 724 |
| Share based payment |
| 417 | 686 |
| Clinical trial costs |
| 148 | 766 |
| Technology costs |
| 352 | 193 |
| Travel and entertainment |
| 325 | 160 |
| Depreciation and amortization |
| 294 | 223 |
| Advertising and promotion |
| 127 | 125 |
| Delivery and logistics |
| 48 | 69 |
|
|
| $ 8,281 | $ 8,550 |
During the six months ended June 30, 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$343 ($462) (June 30, 2022 - US$123 ($156)) and recorded it to the Comprehensive Statements of Loss and Comprehensive Loss against salaries and benefits.
During the six months ended June 30, 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 subsequent to the 12 months ended December 31, 2022 resulting in a recovery of bonus expense of $873 recorded in the Comprehensive Statements of Loss and Comprehensive Loss against salaries and benefits.
19. Supplementary cash flow information
| For the six months ended June 30, | |||
|
|
| 2023 | 2022 |
| Changes in non-cash working capital items |
| | |
| Accounts and other receivables |
| $ 84 | $ 55 |
| Inventory |
| 153 | (170) |
| Prepaid expenses and deposits |
| (60) | 193 |
| Accounts payable and other liabilities |
| (1,272) | (978) |
| |
| $ (1,095) | $ (900) |
20. 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 55.6% of the issued common shares of the Company as at June 30, 2023 (June 30, 2022 - 55.7%).
21. Subsequent events
Subsequent to June 30, 2023, the following transaction had occurred:
1. On August 23, 2023, the Company issued 78,719 common shares pursuant to an annual bonus award for an employee at a price of US$0.21 ($0.29).
[1] https://www.londonstockexchange.com/news-article/OBI/ondine-receives-impact-award-at-ipa-world-congress/16043800
[2] https://www.londonstockexchange.com/news-article/OBI/steriwave-proven-effective-against-xdr-bacteria/16124940
[3] Antimicrobial Resistance Collaborators (2022). Global burden of bacterial antimicrobial resistance in 2019: a systematic analysis. Lancet (London, England), 399(10325), 629-655. https://doi.org/10.1016/S0140-6736(21)02724-0
[4] Ryding, S. "What are Extensively Drug Resistant (XDR) Bacteria?" News Medical Life Sciences. Nov. 16, 2021. https://www.news-medical.net/health/What-are-Extensively-Drug-Resistant-(XDR)-Bacteria.aspx
[5] CDC. COVID-19: U.S. Impact on Antimicrobial Resistance, Special Report 2022. Atlanta, GA: U.S.
Department of Health and Human Services, CDC; 2022.
[6] https://ondinebio.com/steriwave-cuts-ssi-risk-by-47-at-major-hospital
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