Financial Results for the three and six months ended June 30, 2020

The Company recorded a net loss after tax of $1,901,944 (loss per share of $0.01) for the three months ended June 30, 2020 compared to a net loss after tax of $2,582,062 (loss per share of $0.03) for the three months ended June 30, 2019. On a year-to-date basis, the Company recorded a net loss of $4,738,984 (loss per share of $0.03) for the six months ended June 30, 2020 compare to a net loss of $3,761,260 (loss per share of $0.04) for the six months ended June 30, 2019.

Revenue and Cost of Sales

For the three months ended June 30, 2020, the Company recorded revenue of $39,662 and cost of sales of $17,683 compared to revenue of $51,821 and cost of sales of $24,620 for the three months ended June 30, 2019. The Company recorded revenue of $49,782 and cost of sales of $21,537 for the six months ended June 30, 2020 compared to revenue of $159,776 and cost of sales of $73,743 for the six months ended June 30, 2019. Starting in March 2020, COVID-19 has a global impact which impacted a number of the Company’s partners. The impact continued to be felt by Novoheart and its partners throughout Q2 2020, causing delays in communication and contract execution.

Operating Expenses

Operating expenses decreased from $2,611,560 for the three months ended June 30, 2019 to $2,411,107 for the three months ended June 30, 2020. The decrease in operating expenses primarily relates to depreciation expense, share-based compensation expense, general and administration expense, and marketing expense. The decrease was offset by increases in research and development expense, and intellectual and patent expenses.

During the three months ended June 30, 2020, depreciation expense decreased due to the write-off of leasehold improvements capitalized in Phase 3 of Hong Kong Science Park; previously capitalized leasehold improvements were removed in order to convert the space into a GMP facility. Share-based compensation expense decreased because most of the Company’s options were vested and recognized in previous periods. General and administrative expenses decreased mainly due to expenses incurred in the comparative quarter which were not in the current quarter; specifically, bonuses to personnel and professional fees related to the acquisition of Xellera Therapeutics Limited (the “Acquisition”) in June 2019. Marketing expenses decreased primarily due to the termination of the Company’s former Senior Vice President of Commercial Operations.

For the three months ended June 30, 2020 research and development expenses increased primarily due to the expansion of the Company’s scientific team and the Acquisition which was completed in June 2019. Intellectual property and patent expense increased due to filing of new patents as well as licensing agreements signed with Harvard University effective November 2019.

Operating expenses increased from $4,351,365 for the six months ended June 30, 2019 to $5,059,344 for the six months ended June 30, 2020. The increases in operating expenses is primarily related to general and administrative expense, research and development, and intellectual and patent expenses as compared to the six months ended June 30, 2019. The increase was offset by decreases in depreciation expense, share-based compensation expense, and marketing expense.

The increase in general and administrative expense for the six months ended June 30, 2020 is primarily due to increases in occupancy cost as a result of the lab and office expense and build-out of the GMP facility. Research and development expense and intellectual property and patent expense increased during the six months ended June 30, 2020 for the same reasons noted above for the three months ended June 30, 2020.

The primary reasons for decreases in depreciation expense, share-based compensation expense, and marketing expenses for the six months ended June 30, 2020 are the same reasons noted above for the three months ended June 30, 2020.

Liquidity and Outstanding Share Capital

As at June 30, 2020, the Company had cash and cash equivalents of $13,236,527. As at August 31, 2020, there were 188,640,774 common shares issued and outstanding, and 8,272,373 common shares issuable upon the exercise of outstanding stock options at an exercise price range from $0.32 to $0.50 per share.

For more detailed press release, please click here.