8.  Accounts payable and other liabilities

		June 30, 2022	December 31, 2021
Accounts payable		$         598	$          1,202
Accrued liabilities		714	556
Employee related payables		912	1,424
Accrued interest		74	95
		$        2,298	$       3,277

 

9.   Lease liability

		June 30, 2022	December 31, 2021
Current portion		$                              259	$                        148
Non-current		461	94
Total lease liability		$                              720	$                        242

The Company's leases are for office space and a laboratory property. Interest expense on lease obligations for the six months ended June 30, 2022 was $7 (June 30, 2021 - $7). The expense relating to variable lease payments not included in the measurement of lease obligations was $62 (June 30, 2021 - $55). This consists of variable lease payments for operating costs and property taxes. Total cash outflow for leases was $200 (June 30, 2021- $186), including $131 (June 30, 2021- $124) of principal payments on lease obligations.

As at June 30, 2022, the minimum annual payments under these leases, including an estimate of operational costs for its office premises based on current costs, is provided below.

2022	$                         200
2023	409
Thereafter	503
	$                      1,112

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, 2022	December 31, 2021
Paycheck Protection Program	a	$                              401	$                        394
Other		73	73
Total other long-term liabilities		$                               474	$                         467

 

 

(a) Paycheck Protection Program

In 2020 and 2021, Ondine Research Laboratories, Inc. and Ondine Biomedical U.S., Inc., subsidiaries of the Company received an unsecured advance of US$735 ($919) 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 2021, the Company filed a loan forgiveness application for the advance received in 2020, and the Company was granted full loan forgiveness by the US SBA in 2021 of US$424 ($518) and this portion of the loan balance was released to the consolidated statement of comprehensive income. Subject to the satisfaction of certain conditions, 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, 2022, the loan of US$311 ($401) (December 31, 2021 - US$311 ($394)) 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, 2022, the Company's issued share capital comprised of 194,584,524 common shares (December 31, 2021 - 194,584,524).

 

(b)  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 June 30, 2022, the Company's issued preferred share capital comprised of nil preferred shares (December 31, 2021 - 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 June 30, 2022, the maximum number of total options that can be outstanding are 19,458,452 (December 31, 2021- 19,458,452).

 

A summary of the status of the stock options outstanding is as follows:

	June 30, 2022		June 30, 2021
	Number of options	Weighted average exercise price	Number of options	Weighted average exercise price
Outstanding, beginning of period	6,833,000	$               1.73	9,203,356	$              1.87
Options granted	1,960,000	0.93	-	-
Options exercised	-	-	-	-
Options forfeited	(136,750)	1.75	(707,500)	2.64
Options canceled	(1,261,250)	2.59	(687,500)	2.70
Outstanding, end of period	7,395,000	$               1.37	7,808,356	$              1.86
Exercisable, end of period	6,000,856	$               0.90	2,917,106	$              2.38

Share-based payments expense for the six months ended June 30, 2022, in the amount of $686 (June 30, 2021 - $1,459) was recorded.

The outstanding options for the the six months ended June 30, 2022 is as follows:

Exercise price	Number of options	Remaining life (years)
$      0.01	200,000	4.26
$      0.50	140,000	1.42
$     0.90	4,345,000	2.01
$     0.91	50,000	4.67
$     0.93	1,910,000	4.60
$     2.70	650,000	1.42
$     3.00	100,000	4.05
$     1.06	7,395,000	2.73

 

The fair value of stock options granted during the six months ended June 30, 2022 were estimated with the Black-Scholes model using the following assumptions at the time of grant:

Dividend yield		0%
Annualized volatility		70%
Risk-free interest rate		1.61% - 1.71%
Expected life of options (years)		5.0
Forfeiture rate		16%

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, 2022, was $0.55 per option (June 30, 2021 - $nil). As at June 30, 2022, stock options outstanding had a remaining contractual life of 2.73 years (June 30, 2021 - 2.29 years).

 

(b)        Options issued under separate agreements

On December 15, 2020, the Company granted options entitling the holders to acquire common shares of the Company. A summary of the status of the options outstanding is as follows:

	June 30, 2022	June 30, 2021
	Number of options	Number of options
Outstanding, beginning of period	-	13,036,024
Options granted	-	162,225
Options expired	-	(13,036,024)
Outstanding, end of period	-	162,225
Exercisable, end of period	-	-

The fair value of options granted during the six months ended June 30, 2021 were estimated with the Black-Scholes model with the following assumptions: risk-free weighted-average interest of 0.25%, expected dividend yield of nil, average expected volatility of 70% and expected life term of 6 months.

The expense for the six months ended June 30, 2022 was $nil (June 30, 2021 - $48). The estimation of the assumptions is as described in Note 12(a).

As at June 30, 2022, options outstanding had a remaining contractual life of nil months (June 30, 2021 - 6 months).

(c)        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, 2022		June 30, 2021
	Number of warrants	Weighted average exercise price	Number of warrants	Weighted average exercise price
Outstanding, beginning of period	2,795,845	$                1.42	1,350,000	$              2.33
Warrants granted	-	-	-	-
Warrants cancelled	-	-	-	-
Outstanding, end of period	2,795,845	$                1.42	1,350,000	$              2.33
Exercisable, end of period	2,795,845	$                1.42	350,000	$              2.57

 

The expense for the six months ended June 30, 2022 was $nil (June 30, 2021 - $31). As at June 30, 2022, warrants outstanding had a remaining contractual life of 2.1 years (June 30, 2021 - 2.53 years).

 

13.  Related party transactions

(a)  Revenues, product shipments and expenses

For the six months ended June 30,
		2022	2021
Product sales (i)		$                    5	$                    -
Consulting fee expense (ii)		$                     -	-

(i)   Product sales for the six months ended June 30, 2022 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 six months ended June 30, 2022, there was $8 (June 30, 2021 - $8) of products shipped to a related party company for which revenue was not recognized.

(ii)   Expenses incurred for consulting services provided by companies under the control of an officer and a related party to an officer of the Company.

(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.

For the six months ended June 30,
		2022	2021
Compensation and other short-term benefits		$            896	$             258
Directors' fees		308	77
Share-based payments		164	545
		$         1,368	$             880

The CEO and controlling shareholder of the Company provided her services to the Company without salary compensation, thereby waiving her right to receive a monthly salary as set out in her employment contract for the six months ended June 30, 2021. In the same period, a notional expense of $150 has been recorded to 'contributed surplus' in the consolidated statements of loss and comprehensive loss and charged to reserves in the consolidated statements of changes in equity. Subsequent to June 30, 2021, the CEO and controlling shareholder of the Company had her salary compensation reinstated per the employment contract. As at June 30, 2022, the cumulative notional expense is $10,528 (June 30, 2021 - $10,528).

(c)  Related party balances

		June 30, 2022	December 31, 2021
Included in accounts payable and other liabilities		$        344	$                   1,015

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 $344 in accounts payable and other liabilities consist of bonus payable to the CEO and the current portion of loans payable to related parties.

14.  Commitments and contingencies

Open purchase order commitments as at June 30, 2022 were $1,868 (December 31, 2021 - $1,508) for the purchase of inventory and contracted development and clinical services.

The Company has the following contingencies at June 30, 2022:

(i)         The Company's Barbadian subsidiary holds intellectual property in Barbados. 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. Any of the foregoing 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 sales 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,
		2022	2021
Product revenue
Canada		$           262	$            1,965
Other		-	10
		$           262	$            1,975

 

Revenue from significant customers are as follows:

For the six months ended June 30,
		2022	2021
Customer 1		$           -	$            1,101
Customer 2		-	482
Customer 3		204	202
Customer 4		33	-
Other		25	190
		$         262	$           1,975

A summary of non-current assets (excluding other assets) by geographical area based on the location of the asset is as follows:

		June 30, 2022	December 31, 2021
Canada		$                   343	$                   353
United States		973	248
		$                1,316	$                   601

 

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, 2022, the carrying values of cash, cheques issued in excess of funds in deposit, accounts and other receivables, bank indebtedness, 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, 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, 2022 (December 31, 2021 - $864). During the period ended June 30, 2022, the Company recorded a bad debt expense of $nil (June 30, 2021- $nil).

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 and the United Kingdom and is exposed to foreign exchange risk due to fluctuations in the US$ and GBP 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, 2022, including cash, accounts receivables, accounts payable and other liabilities denominated in US$ and GBP, would result in an increase or decrease of approximately $2,066 (June 30, 2021- $43) in the unaudited condensed consolidated interim statements of loss and comprehensive loss for the six months ended June 30, 2022.

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 was not exposed to fluctuations in interest rates during the years presented as the interest rate on the Company's convertible loan notes and preferred shares is fixed. 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 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, including advance payments from customers, related party loans, debt and equity issuances. The Company projects and monitors its cash requirements to accommodate changes in liquidity needs.

In addition to the commitments in Note 9 and Note 14, the Company has the following contractual financial liabilities as at June 30, 2022:

	Carrying amount	Contractual cash flows	Less than one year	More than one year
Financial liabilities
Accounts payable and other liabilities	$        2,298	$        2,298	$      2,298	$              -
Other long-term liabilities	474	474	-	474
	$       2,772	$        2,772	$      2,298	$          474

17. Cost of sales

For the six months ended June 30,
		2022	2021
Inventory - Note 5		$              90	$           940
Inventory write-off - Note 5		13	2
Depreciation - Note 7		15	28
		$            118	$           970

18.  Expenses by nature

General and administration, research and development, and marketing and sales expenses are comprised of the following expenses by nature:

For the six months ended June 30,
		2022	2021
Salaries and benefits		$          3,958	$         2,060
Professional fees, contractors and consultants		1,646	788
Clinical trial costs		766	16
Office and lab costs		724	584
Share based payment		686	1,538
Depreciation and amortization		223	315
Technology costs		193	128
Travel and entertainment		160	54
Advertising and promotion		125	6
Delivery and logistics		69	83
		$          8,550	$         5,572

 

19.  Supplementary cash flow information

For the six months ended June 30,
		2022	2021
Changes in non-cash working capital items
Accounts and other receivables		$               55	$         431
Inventory		(170)	(627)
Prepaid expenses and deposits		193	(49)
Accounts payable and other liabilities		(978)	457
		$            (900)	$         212

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 55.7% of the issued common shares of the Company as at June 30, 2022 (June 30, 2021 - 72.6%).

21. Subsequent events

Subsequent to June 30, 2022, the following transactions have occurred:

1.  On July 25, 2022, pursuant to a share for share exchange arrangement, the Company acquired 25,000 common shares in Sinuwave Technologies Corporation ("Sinuwave") in return for 8,333 new common shares of the Company ("Consideration Shares"), resulting in an increase of the Company's ownership in Sinuwave from 99.96% to 100%, and an increase in the Company's issued share capital from 194,584,524 common shares to 194,592,857 common shares.

2.  On August 16, 2022, the Company has appointed RBC Capital Markets and Singer Capital Markets as the Company's joint broker, and Arden Partners Plc is no longer the Company's broker. The Company has a prepaid balance of $1,201 with Arden Partners plc as at June 30, 2022.

 

 

 

For more information, please visit:  www.ondinebio.com or contact: 

 

Ondine Biomedical Inc.
Angelika Vance, Corporate Communications	+001 (1) 604 838 2702
Strand Hanson Limited (Nominated and Financial Adviser)
James Harris, James Dance, Richard Johnson	+44 (0) 20 7409 3494
RBC Capital Markets
Rupert Walford, Kathryn Deegan	+44 (0) 20 7653 4000
Singer Capital Markets
Aubrey Powell, Asha Chotai	+44 (0) 20 7496 3000
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 include therapies for a variety of medical indications such as nasal disinfection, sinusitis, ventilator-associated pneumonia, burns, and other indications. Ondine's nasal photodisinfection technology is approved in several jurisdictions under the brand name Steriwave™. It has been awarded the CE mark and, in the US, has been granted Qualified Infectious Disease Product designation and Fast Track status in the UD by the FDA.

About Nasal Photodisinfection

Ondine's nasal photodisinfection is a patented technology using a proprietary methylene blue based formulation. The photodisinfection treatment is carried out by a trained healthcare professional, and is an easy to use, painless, two-step process.  The light-activated formulation is applied to each nostril using a nasal swab, and then the nostrils are illuminated with a specific wavelength of light using a disposable light radiator for less than five minutes. The light excites the formulation causing an oxidative burst which rapidly destroys all types of pathogens without harming human tissue. A key benefit of this technology is that pathogens do not develop resistance to the treatment.

Ondine's nasal photodisinfection has a CE mark and is approved in Canada and several other countries under the name Steriwave™. It has been used in Canada for over ten years, with no serious adverse events reported. In the US, it is currently undergoing clinical trials for regulatory approval.