Novoheart Holdings Inc. reports financial results for the three and nine months ended March 31, 2018. Amounts, unless specified otherwise, are expressed in Canadian dollars and are in accordance with International Financial Reporting Standards (IFRS).
Financial Results for the Third Quarter of 2018
The Company recorded net loss of C$1,586,471 (loss per share of C$0.02) for the three months ended March 31, 2018 compared to a net loss of C$766,094 (loss per share of C$0.15) for the three months ended March 31, 2017. On a year-to-date basis, the Company recorded a net loss of C$9,519,714 (loss per share of C$0.14) for the nine months ended March 31, 2018 compared to a net loss of C$1,982,323 (loss per share of C$0.38) for the nine months ended March 31, 2017. The increase in net loss on a year-to-date basis was due primarily to an increase of operating expenses and the completion of the reverse takeover transaction, for which the Company incurred a non-cash loss on completion of reverse takeover of C$5,213,597.
For the third quarter of 2018, the Company recorded revenue of C$19,348 and cost of sales of C$7,818. This is the first time the Company recorded revenue, and a corresponding cost of sales. The revenue was recognized from a drug screening services contract that the Company has with Sumocor, a New York based biotechnology company focused on the development of therapeutics for cardiovascular diseases. The drug screening services commenced in March 2018. Cost of sales of $7,818 included labour costs, material costs, and royalties payable for the intellectual property licenses required to perform the drug screening services.
Operating expenses for the third quarter of 2018 was C$1,622,173 compared to operating expense of C$839,422 for the second quarter of 2017. Operating expenses for the nine months ended March 31, 2018 and 2017 were C$4,442,929 and C$2,201,612, respectively. The increase in operating expenses is primarily related to an increase in intellectual property and patent expenses, general and administrative expenses, and share-based compensation expenses. The increase in intellectual property and patent expenses is due to a one-time milestone payment made to a licensor pursuant to the Company’s achievement of a public listing on the TSX-V. The increase in general and administrative expenses is primarily due to increases in professional and regulatory fees due to the reverse takeover listing and the listing on the Frankfurt Stock Exchange, as well as the increase in personnel costs resulting from the build-out of the Company’s management team. As for share-based compensation expenses, the Company’s first stock options were issued on completion of Novoheart’s reverse takeover listing on September 27, 2017, and as such, there were no such expenses for the three and nine months ended March 31, 2017.
The Company earned other income of nil and C$110,665 in the three and nine months ended March 31, 2018 compared to other income of C$70,186 and C$205,457 in the three and nine months ended March 31, 2017. Other Income is earned from the agreement with a global pharmaceutical partner. Work for the agreement was completed in December 2017.
Liquidity and Outstanding Share Capital
As at March 31, 2018, the Company had cash of C$2,855,271. As at May 11, 2018, there were 93,462,025 common shares issued and outstanding, and 4,897,098 common shares issuable upon the exercise of outstanding stock options (of which none are exercisable) at an exercise price of C$0.50 per share. The Company also has 972,037 purchase warrants outstanding with an exercise price of C$0.50, expiring in September 2019.
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