SERNOVA CORP.
INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED
APRIL 30, 2024 AND 2023
1
SERNOVA CORP.
Interim Condensed Consolidated Statements of Financial Position (Expressed in Canadian Dollars)
(Unaudited)
As at | As at | ||||
Note | April 30, 2024 | October 31, 2023 | |||
ASSETS | |||||
Current assets | $ | 3,437,794 | |||
Cash | $ | 8,721,835 | |||
Marketable securities | 5,040,000 | 11,084,000 | |||
Amounts receivable | 1,226,487 | 1,052,991 | |||
Prepaid expenses | 670,211 | 164,664 | |||
Total current assets | 10,374,492 | 21,023,490 | |||
Non-current assets | 223,860 | ||||
Deposits | 259,164 | ||||
Property and equipment, net | 351,806 | 393,224 | |||
Intangible assets, net | 216,702 | 316,719 | |||
Right-of-use asset, net | 4 | 598,662 | 114,218 | ||
Total non-current assets | 1,391,030 | 1,083,325 | |||
TOTAL ASSETS | $ | 11,765,522 | $ | 22,106,815 | |
LIABILITIES | |||||
Current liabilities | |||||
Accounts payable and accrued liabilities | $ | 16,655,261 | $ | 9,456,157 | |
Lease liabilities | 4 | 92,446 | 136,123 | ||
Total current liabilities | 16,747,707 | 9,592,280 | |||
Non-current liabilities | |||||
Lease liabilities | 4 | 521,340 | - | ||
Total liabilities | 17,269,047 | 9,592,280 | |||
SHAREHOLDERS' EQUITY (DEFICIT) | 111,014,766 | ||||
Common shares | 5 | 110,987,766 | |||
Contributed surplus | 5 | 21,335,299 | 19,693,776 | ||
Deficit | (137,853,590) | (118,167,007) | |||
Total shareholders' equity (deficit) | (5,503,525) | 12,514,535 | |||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) | $ | 11,765,522 | $ | 22,106,815 | |
Commitments and Contingencies (Note 8) | |||||
Going concern (Note 2(c)) |
See accompanying notes to the interim condensed consolidated financial statements.
2
SERNOVA CORP.
Interim Condensed Consolidated Statements of Loss and Comprehensive Loss (Expressed in Canadian Dollars)
(Unaudited)
Three months ended April 30, | Six months ended April 30, | ||||||||
Note | 2024 | 2023 | 2024 | 2023 | |||||
EXPENSES | |||||||||
Research and development | 7 | $ | 7,709,017 | $ | 7,027,751 | $ | 14,950,021 | $ | 13,939,001 |
General and administrative | 7 | 2,089,500 | 2,780,178 | 4,876,178 | 4,477,333 | ||||
Total expenses | 9,798,517 | 9,807,929 | 19,826,199 | 18,416,334 | |||||
OTHER EXPENSE (INCOME) | |||||||||
Interest income | (115,332) | (403,486) | (281,659) | (864,656) | |||||
Finance costs | 21,186 | 8,693 | 31,644 | 18,634 | |||||
Foreign exchange loss (gain) | 239,113 | (66,364) | 129,261 | (208,154) | |||||
Gain on disposal of right-of-use | - | - | (18,862) | - | |||||
asset and lease liabilities | |||||||||
Net other expense (income) | 144,967 | (461,157) | (139,616) | (1,054,176) | |||||
LOSS AND COMPREHENSIVE | $ | 9,943,484 | $ | 9,346,772 | $ | 19,686,583 | $ | 17,362,158 | |
LOSS | |||||||||
Weighted average number of common | |||||||||
shares outstanding - basic and | 303,402,630 | 303,366,889 | |||||||
diluted | 303,332,686 | 303,332,686 | |||||||
Basic and diluted loss per common | 9 | $ | 0.03 | $ | 0.03 | $ | 0.06 | $ | 0.06 |
share |
See accompanying notes to the interim condensed consolidated financial statements.
3
SERNOVA CORP.
Interim Condensed Consolidated Statements of Cash Flows (Expressed in Canadian Dollars)
(Unaudited)
Six months ended | Six months ended | ||||
Note | April 30, 2024 | April 30, 2023 | |||
OPERATING ACTIVITIES | |||||
Loss for the period | $ (19,686,583) | $ (17,362,158) | |||
Adjustments for items not affecting cash: | 207,041 | ||||
Amortization and depreciation | 215,637 | ||||
Share-based compensation | 5 | 1,652,773 | 1,880,427 | ||
Research collaboration advances recognized as cost | 8 | - | (62,092) | ||
recoveries | |||||
Interest income accrued on marketable securities | (238,961) | (539,574) | |||
Interest on lease liabilities | 31,645 | 18,633 | |||
Gain on disposal of right-of-use asset and lease | 8 | (18,862) | - | ||
liabilities | |||||
Changes in non-cash working capital balances: | (127,573) | ||||
Amounts receivable | 431,269 | ||||
Prepaid expenses | (505,547) | (91,710) | |||
Accounts payable and accrued liabilities | 7,199,104 | 997,107 | |||
Cash used in operating activities | (11,486,963) | (14,512,461) | |||
INVESTING ACTIVITIES | - | ||||
Purchase of marketable securities | (12,938,500) | ||||
Redemption of marketable securities | 6,044,000 | 36,018,953 | |||
Deposits | 35,304 | - | |||
Purchase of property and equipment | - | (89,551) | |||
Cash provided by investing activities | 6,079,304 | 22,990,902 | |||
FINANCING ACTIVITIES | 193,038 | ||||
Grant contribution receipts | 8 | 347,908 | |||
Research collaboration advances | 8 | - | 165,222 | ||
Proceeds from exercise of stock options | 5 | 15,750 | - | ||
Lease liabilities payments | (85,170) | (85,680) | |||
Cash provided by financing activities | 123,618 | 427,450 | |||
Net increase (decrease) cash during the period | (5,284,041) | 8,905,891 | |||
Cash, beginning of period | 8,721,835 | 3,776,054 | |||
CASH, END OF PERIOD | $ | 3,437,794 | $ | 12,681,945 | |
SUPPLEMENTAL CASH FLOW DISCLOSURES | $ | - | |||
Income taxes paid | $ | - | |||
Interest received | $ | 372,427 | $ | 689,622 | |
Right-of-use asset additions | $ | 641,424 | $ | - |
See accompanying notes to the interim condensed consolidated financial statements.
4
SERNOVA CORP.
Interim Condensed Consolidated Statements of Changes in Equity (Expressed in Canadian Dollars)
(Unaudited)
Common Shares | Warrants | Contributed | Deficit | Total | ||||||
Surplus | ||||||||||
(Note 5) | (Note 5) | (Note 5) | ||||||||
Balance, October 31, 2023 | 303,332,686 | $ 110,987,766 | $ | - | $ | 19,693,776 | $(118,167,007) | $ 12,514,535 | ||
Loss and comprehensive loss for the period | - | - | - | - | (19,686,583) | (19,686,583) | ||||
Transactions with owners of the Company, | ||||||||||
recognized directly in equity: | ||||||||||
Exercise of stock options | 75,000 | 27,000 | - | (11,250) | - | 15,750 | ||||
Share-based compensation | - | - | - | 1,652,773 | - | 1,652,773 | ||||
Balance, April 30, 2024 | 303,407,686 | $ 111,014,766 | $ | - | $ | 21,335,299 | $(137,853,590) | $ (5,503,525) | ||
Balance, October 31, 2022 | 303,332,686 | $ 110,987,766 | $ | 3,296,332 | $ | 12,494,054 | $ (79,169,487) | $ | 47,608,665 | |
Loss and comprehensive loss for the period | - | - | - | - | (17,362,158) | (17,362,158) | ||||
Transactions with owners of the Company, | ||||||||||
recognized directly in equity: | ||||||||||
Expiry of warrants | (3,296,332) | 3,296,332 | - | - | ||||||
Share-based compensation | - | - | - | 1,880,427 | - | 1,880,427 | ||||
Balance, April 30, 2023 | 303,332,686 | $ 110,987,766 | $ | - | $ | 17,670,813 | $ (96,531,645) | $ | 32,126,934 |
See accompanying notes to the interim condensed consolidated financial statements.
5
SERNOVA CORP.
Notes to the Interim Condensed Consolidated Financial Statements For the three and six months ended April 30, 2024 and 2023 (Expressed in Canadian Dollars)
(Unaudited)
1. DESCRIPTION OF BUSINESS
Sernova Corp. (the "Company") is a clinical stage cell therapeutics company focused on developing and commercializing its proprietary Cell Pouch System™ platform and associated technologies, including Cell Pouch™ and immune-protected therapeutic cells. The Cell Pouch™ is a scalable, implantable medical device designed to create a highly vascularized organ-like environment for the transplantation and engraftment of therapeutic cells, which then release proteins, hormones or other factors into the bloodstream for the long-term treatment of multiple chronic diseases such as type 1 diabetes, hypothyroid disease, and rare diseases such as hemophilia A.
Sernova Corp. was incorporated under the Company Act (British Columbia) on August 19, 1998. Effective May 29, 2001, the Company was continued under the Canada Business Corporations Act.
The Company's head office is located at 700 Collip Circle, Suite 114, London, Ontario, N6G 4X8. The Company's registered address is Suite 1500 - 1055 West Georgia Street, Vancouver, British Columbia, V6E 2N7. The Company's common shares are listed and trade on the Toronto Stock Exchange (the "Exchange") under the symbol SVA. The Company's shares are also listed on the OTCQB Venture Market under the symbol SEOVF and on the Frankfurt and Xetra Exchanges under the symbol PSH.
2. BASIS OF PRESENTATION
- Statement of compliance
These interim condensed consolidated financial statements have been prepared in accordance with IFRS Accounting Standards ("IFRS"), as issued by the International Accounting Standards Board ("IASB"). Accordingly, these interim condensed consolidated financial statements do not include all disclosures required for annual financial statements.
These interim condensed consolidated financial statements were approved and authorized for issue by the Company's Audit Committee of the Board of Directors on June 14, 2024.
(b) Basis of measurement
These interim condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Sernova (US) Corp. The financial statements of the subsidiary is prepared for the same reporting period as the Company using consistent accounting policies. Intercompany transactions, balances and gains and losses on transactions between the Company and its subsidiary are eliminated.
These interim condensed consolidated financial statements have been prepared on a historical cost basis, except for financial instruments classified as financial instruments at fair value though profit or loss, which are stated at their fair value, or at amortized cost.
These interim condensed consolidated financial statements are presented in Canadian dollars, which is the functional currency of the Company.
- Going concern
These interim condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred losses and generated negative cashflow since inception. A loss and comprehensive loss of $19,686,583 was incurred during the six months ended April 30, 2024 (2023 - $17,362,158). As at April 30, 2024, the Company had an accumulated deficit of $137,853,590 (October 31, 2023 - $118,167,007) and working capital deficit of $6,373,215 (October 31, 2023 - working capital of $11,431,210).
6
SERNOVA CORP.
Notes to the Interim Condensed Consolidated Financial Statements For the three and six months ended April 30, 2024 and 2023 (Expressed in Canadian Dollars)
(Unaudited)
2. BASIS OF PRESENTATION (cont'd…)
- Going concern (cont'd…)
Until the Company's biotechnology therapeutic products are approved and available for sale and profitable operations are developed, the Company's liquidity requirements will be dependent on its ability to continue to secure additional funding to meet its current short term financial obligations and to fund research and development expenditures. Failure to do so could have a material adverse effect on the Company's financial condition. Until sufficient financing is obtained, the Company plans to defer or reduce planned expenditures. At this time, no assurance can be given that such financing will be available or that, if available, it can be obtained on favorable terms. As a result, material uncertainty exists which may cast significant doubt on the Company's ability to continue as a going concern and realize its assets and discharge its liabilities in the normal course of business. To address this uncertainty, Management's plans include seeking additional funding through sources such as loans and strategic alliances, and or equity financings, but there can be no assurance as to when or whether the Company will secure additional funding or complete any strategic alliances.
If the going concern assumption was not appropriate for these interim condensed consolidated financial statements, then adjustments would be necessary to the carrying values of assets and liabilities, the reported expenses, and the classifications used in the interim condensed consolidated statements of financial position, which could be material. The interim condensed consolidated financial statements do not include adjustments that would be necessary if the going concern assumption was not appropriate.
(d) Use of significant estimates and judgments
In preparing these interim condensed consolidated financial statements, the significant judgements made by management in applying the Company's accounting policies and key sources of estimation uncertainty were the same as those applied to the audited consolidated financial statements for the year ended October 31, 2023.
3. MATERIAL ACCOUNTING POLICIES
The Company's material accounting policies are outlined in the Company's audited consolidated financial statements for the years ended October 31, 2023 and 2022, and have been applied consistently in these interim condensed consolidated financial statements.
- New accounting standards and interpretations adopted during the current period None
- New accounting standards and interpretations issued but not yet effective
A number of new standards, and amendments to standards and interpretations, have been issued but are not yet effective. None of these are expected to have a material effect on future financial statements.
7
SERNOVA CORP.
Notes to the Interim Condensed Consolidated Financial Statements For the three and six months ended April 30, 2024 and 2023 (Expressed in Canadian Dollars)
(Unaudited)
4. RIGHT-OF-USE ASSET AND LEASE LIABILITIES
Right-of-use asset and lease liabilities carrying amounts and changes during the period were as follows:
Right-of-use asset | Lease liabilities | ||||||
Balance, October 31, 2022 | $ | 251,280 | $ | 275,979 | |||
Depreciation | (137,062) | - | |||||
Interest expense | - | 32,075 | |||||
Payments | - | (171,931) | |||||
Balance, October 31, 2023 | 114,218 | 136,123 | |||||
Derecognition on early termination | (91,374) | (110,236) | |||||
Additions | 641,424 | 641,424 | |||||
Depreciation | (65,606) | - | |||||
Interest expense | - | 31,645 | |||||
Payments | - | (85,170) | |||||
Balance, April 30, 2024 | $ | 598,662 | $ | 613,786 | |||
April 30, 2024 | October 31, 2023 | ||||||
Lease liabilities - short term portion | $ | 92,446 | $ | 136,123 | |||
Lease liabilities - long term portion | 521,340 | - | |||||
$ | 613,786 | $ | 136,123 | ||||
5. | SHARE CAPITAL | ||||||
(a) | Authorized | ||||||
Unlimited number of common shares, without par value. | |||||||
(b) | Share capital changes |
During the six months ended April 30, 2024, the Company received proceeds of $15,750 from the exercise of stock options and the corresponding issuance of 75,000 common shares.
There were no changes to the Company's share capital during the comparative six months ended April 30, 2023.
- Incentive Plan
The Company initiated its incentive plan in 2015, with the latest amendments thereto approved by shareholders of the Company on April 30, 2024 (the "Incentive Plan"). Under the Incentive Plan, the Board of Directors may grant stock options to directors, officers, employees or consultants of the Company and deferred share units to directors and officers of the Company. The total number of common shares available for issuance under the Company's Incentive Plan is 45,511,153. The remaining balance available for grant under the Incentive Plan as of April 30, 2024 is 14,159,882 which is reserved for the issuance of stock options.
Options granted under the Incentive Plan have a term of up to ten years from the date of grant. The vesting schedule of all granted options is determined at the discretion of the Board of Directors. The exercise price of any stock options granted is no less than the price pursuant to the policies of the Exchange.
8
SERNOVA CORP.
Notes to the Interim Condensed Consolidated Financial Statements For the three and six months ended April 30, 2024 and 2023 (Expressed in Canadian Dollars)
(Unaudited)
5. SHARE CAPITAL (cont'd…)
- Incentive Plan (cont'd…)
Changes in the number of stock options outstanding during the six months ended April 30 were as follows:
2024 | 2023 | |||||
Weighted | Weighted | |||||
Number of | average | Number of | average | |||
exercise | exercise | |||||
options | price | options | price | |||
Balance outstanding, beginning of period | 30,074,182 | $ | 0.92 | 22,245,984 | $ | 0.92 |
Granted | 400,000 | 0.73 | 3,905,613 | 0.91 | ||
Exercised | (75,000) | (0.21) | - | - | ||
Forfeited | (1,351,508) | (1.17) | (320,000) | (0.88) | ||
Cancelled | (5,448,669) | (1.15) | (225,000) | (0.22) | ||
Balance outstanding, end of period | 23,599,005 | $ | 0.85 | 25,606,597 | $ | 0.92 |
Options exercisable, end of period | 18,038,816 | $ | 0.84 | 17,816,864 | $ | 0.82 |
Stock options outstanding by range of exercise prices as at April 30, 2024:
Weighted | Weighted | Weighted | |||||
average | |||||||
remaining | average | average | |||||
Range of | Number | contractual | exercise | Number | exercise | ||
exercise prices | outstanding | life (years) | price | exercisable | price | ||
$ 0.21 to $ 0.26 | 7,305,000 | 1.56 | $ | 0.23 | 7,305,000 | $ | 0.23 |
$ 0.65 to $ 0.96 | 5,721,750 | 7.58 | 0.83 | 1,084,460 | 0.84 | ||
$ 1.18 to $ 1.32 | 10,572,255 | 1.46 | 1.30 | 9,649,356 | 1.31 | ||
$ 0.21 to $ 1.32 | 23,599,005 | 2.97 | $ | 0.85 | 18,038,816 | $ | 0.84 |
Option grants vest either i) immediately or ii) quarterly or annually over periods of up to four years.
The Black-Scholes option pricing model is used to estimate fair value for the purpose of recording share-based compensation expense. Historical data is used to estimate the expected dividend yield and volatility of the Company's common shares in determining the fair value of the stock options. The risk-free interest rate is based on the Government of Canada benchmark bond yield rates in effect at the time of grant and the expected life of the options represents the estimated length of time the options are expected to remain outstanding.
9
SERNOVA CORP.
Notes to the Interim Condensed Consolidated Financial Statements For the three and six months ended April 30, 2024 and 2023 (Expressed in Canadian Dollars)
(Unaudited)
5. SHARE CAPITAL (cont'd…)
- Incentive Plan (cont'd…)
For the stock options granted during the six months ended April 30, the share-based compensation expense was determined based on the fair value of the stock options on the grant date (date of measurement) using the Black- Scholes option pricing model using the following weighted average assumptions:
2024 | 2023 | |
Dividend yield | 0% | 0% |
Expected volatility | 59.4% | 86.5% |
Risk free interest rate | 4.7% | 3.1% |
Expected life of options | 1.3 years | 5.1 years |
For the six months ended April 30, 2024 and 2023, the Company issued stock options with weighted average grant date fair values of $0.16 and $0.59 per stock option, respectively.
During the three and six months ended April 30, 2024, the terms of 1,548,302 options were modified to be fully vested on an accelerated basis. The modification resulted in the accelerated recognition of $949,098 of share-based compensation expense in these periods, but no incremental fair value recognition.
The Company's Incentive Plan allows for the issuance of DSUs to directors and officers of the Company and settlement in the form of a cash payment or issuance of shares at the time the DSU holder leaves the Company. Since the method of settlement of the DSUs is at the discretion of the Company, it has been accounted for as an equity- settled plan. There were no DSUs granted, cancelled, or equity settled during the six months ended April 30, 2024 and 2023. DSUs have generally vested over a three-year period after the date of grant.
As at April 30, 2024, a total of 5,510,001 DSUs were outstanding (October 31, 2023 - 5,510,001) of which 5,477,502 had vested (October 31, 2023 - 5,455,836).
6. RELATED PARTY TRANSACTIONS
The key management personnel of the Company are the Directors, Executive Officers and Vice Presidents. Amounts due to related parties, including amounts due to key management personnel, at the end of the reporting period are unsecured, interest free and settlement generally occurs in cash. For the three and six months ended April 30, 2024, compensation to key management personnel includes termination benefits of $400,000. Included in accounts payable and accrued liabilities at April 30, 2024, was $733,742 due to key management personnel (October 31, 2023 - $662,261).
Compensation to key management personnel for the reporting period:
Three months ended April 30, | Six months ended April 30, | ||||||||
2024 | 2023 | 2024 | 2023 | ||||||
Personnel costs | $ | 845,119 | $ | 452,050 | $ | 1,639,038 | $ | 721,681 | |
Director fees and costs | 80,339 | 99,322 | 160,509 | 183,083 | |||||
Share-based compensation | 537,453 | 872,435 | 1,536,701 | 1,643,184 | |||||
$ | 1,462,911 | $ | 1,423,807 | $ | 3,336,248 | $ | 2,547,948 |
10
Attachments
- Original Link
- Original Document
- Permalink
Disclaimer
Sernova Corp. published this content on 17 June 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 June 2024 13:28:04 UTC.