Novoheart Holdings Inc. Reports Fourth Quarter and Fiscal 2019 Financial Results
Novoheart Holdings Inc. reports financial results for the three and twelve months ended June 30, 2019. Amounts, unless specified otherwise, are expressed in Canadian dollars and are in accordance with International Financial Reporting Standards (IFRS).
Financial Results for 2019
The Company recorded net loss of $7,656,520 (loss per share of $0.08) for the year ended June 30, 2019 compared to a net loss of $12,463,044 (loss per share of $0.17) for the year ended June 30, 2018. The decrease in the net loss was mainly due to a non-cash loss on completion of reverse takeover of $5,213,597 for the year ended June 30, 2018, while offset by the increase in operating expenses compared to the year ended June 30, 2018.
Revenue and Cost of Sales
For the year ended June 30, 2019, the Company recorded revenue of $165,031 and cost of sales of $75,487, compared to revenue of $95,124 and cost of sales of $38,208 for the year ended June 30, 2018. The revenue was mainly attributed to a contract with the Global Pharma Partner. The contract required the Company to design a custom tailored high-throughput system with hardware and software for measuring human cardiac tissues engineered by Novoheart. Services for Phase 1 commenced in December 2018 and was completed in July 2019. Cost of sales mainly comprised of labour and material costs. The Global Pharma Partner has recognized a successful outcome of Phase I and the commercial agreement has now advanced to Phase II.
Operating expenses for the year ended June 30, 2019 was $8,327,059 compared to $7,245,780 for the year ended June 30, 2018. The increase in operating expenses was due to the increase in research and development expenses and marketing expenses, while offset by decreases in general and administrative expenses and intellectual property and patent expenses. Research and development expenses increased from $1,647,270 in 2018 to $2,177,271 in 2019 as a result of the expansion of the scientific team resulting in an increase in personnel costs, and the commencement of a sponsored research agreement signed with the Regents of the University of California, Irvine Campus. The increase in marketing expenses from $166,690 to $782,379 was due to the focus of the Company to expand the commercialization of its MyHeartTM platform. The decrease in general and administrative from $3,440,000 in 2018 to $3,093,687 in 2019 was mainly due to the scale down in investor relation services as well as professional and regulatory fees following the completion of the listing. The decrease in the intellectual property and patent expenses from $420,399 to $236,933 was mainly due to a one-time milestone payment made to the Icahn School of Medicine at Mount Sinai for the year ended June 30, 2018.
Financial Results for the Fourth Quarter of 2019
The Company recorded net loss of $2,534,813 (loss per share of $0.03) for the three months ended June 30, 2019 (“Q4 2019”) compared to a net loss of $2,995,770 (loss per share of $0.03) for the three months ended June 30, 2018 (“Q4 2018”). The Company recognized $51,821 in revenue and $24,620 in cost of sales in Q4 2019 relating to a contract with the Global Pharma. Phase I was completed in July 2019 and the Company entered into Phase II of the commercial agreement.
Operating expenses for Q4 2019 was $2,611,560 compared to operating expenses of $2,802,851 for Q4 2018. The decrease in operating expenses was primarily related to a decrease in share-based compensation expenses of $366,222, a decrease in general and administrative expenses of $110,570 while offset by an increase in research and development expenses of $123,912. Share-based compensation expenses decreased due to some of the restricted share units being fully vested. The decrease in general and administrative expenses was a result of the scale down in investor relation services.
Liquidity and Outstanding Share Capital
As at June 30, 2019, the Company had cash and bank balances of $23,173,717. As at September 4, 2019, there were 162,810,239 common shares issued and outstanding, and 6,116,373 of common shares issuable upon the exercise of outstanding stock options at an exercise price range of $0.32 to $0.50 per share and 275,000 of the issuance of vested restricted share units. In connection with the acquisition of Xellera Therapeutics Limited, the Company has issued pre-paid warrants of 25,731,786, which is automatically converted to common shares upon Dr. Katherine Ngan and Mr. Roger Ngan’s personal information forms being cleared by the TSX Venture Exchange. The Company also has 972,037 purchase warrants outstanding with an exercise price of $0.50, expiring in September 2019.
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