Exhibit 99.2
Mainz Biomed N.V.
Condensed Interim Consolidated Statements of Financial Position
(Unaudited)
(Expressed in US Dollars).
| June 30, | December 31, | |||||||||||
| Note | 2023 | 2022 | ||||||||||
| ASSETS | ||||||||||||
| Current Assets | ||||||||||||
| Cash | $ | $ | ||||||||||
| Trade and other receivables, net | 4 | |||||||||||
| Inventories | ||||||||||||
| Prepaid expenses | 5 | |||||||||||
| Total current assets | ||||||||||||
| Property and equipment, net | 6 | |||||||||||
| Intangible assets | 7 | |||||||||||
| Right-of-use assets | 8 | |||||||||||
| Other assets | ||||||||||||
| Total assets | $ | $ | ||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
| Current Liabilities | ||||||||||||
| Accounts payable and accrued liabilities | 9 | $ | $ | |||||||||
| Convertible loan | 11 | |||||||||||
| Convertible promissory note at fair value | 11 | |||||||||||
| Convertible debt - related party | 10 | |||||||||||
| Silent partnership | 12 | |||||||||||
| Silent partnership - related party | 12 | |||||||||||
| Payable for acquisition of intangible asset current portion – related party | 7 | |||||||||||
| Lease liabilities | 8 | |||||||||||
| Total current liabilities | ||||||||||||
| Silent partnerships | 12 | |||||||||||
| Silent partnerships - related party | 12 | |||||||||||
| Lease liabilities | 8 | |||||||||||
| Intellectual property acquisition liability - related party | 7 | |||||||||||
| Total liabilities | ||||||||||||
| Shareholders’ equity | ||||||||||||
| Share capital | 13 | |||||||||||
| Share premium | 13 | |||||||||||
| Reserve | 13 | |||||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||||||
| Accumulated other comprehensive income (loss) | ( | ) | ||||||||||
| Total shareholders’ equity | ||||||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
Mainz Biomed N.V.
Condensed Interim Consolidated Statements of Profit and Loss and Comprehensive Loss
(Unaudited)
(Expressed in US Dollars)
| Three months ended | Six months ended | |||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||
| Note | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||||||
| Cost of revenue | 14 | |||||||||||||||||||
| Gross profit | ||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Sales and marketing | 19 | |||||||||||||||||||
| Research and development | 19 | |||||||||||||||||||
| General and administrative | 19 | |||||||||||||||||||
| Total operating expenses | ||||||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Other income (expense) | ||||||||||||||||||||
| Other income | 16 | |||||||||||||||||||
| Other expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Total other income (expense) | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Loss before income tax | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Income taxes provision | ||||||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||
| Foreign currency translation gain (loss) | ( | ) | ( | ) | ||||||||||||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||
| Weighted average number of ordinary shares outstanding | ||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
Mainz Biomed N.V.
Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity (Deficit)
(Unaudited)
(Expressed in US Dollars)
For the Three and Six months ended June 30, 2023
| Accumulated | Total | |||||||||||||||||||||||||||||||
| Number of | Share | Share | Accumulated | Other Comprehensive | Shareholders’ Equity | |||||||||||||||||||||||||||
| Note | Shares | Capital | Premium | Reserve | Deficit | Income (loss) | (Deficit) | |||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||
| Sale of ordinary shares | 13 | |||||||||||||||||||||||||||||||
| Share based expenses | 13 | |||||||||||||||||||||||||||||||
| Stock option expense | 13 | - | ||||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Foreign currency translation | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
| Sale of ordinary shares | 13 | |||||||||||||||||||||||||||||||
| Share based expenses | 13 | |||||||||||||||||||||||||||||||
| Ordinary shares issued for acquisition of intangible asset | 7, 13 | |||||||||||||||||||||||||||||||
| Ordinary shares issued for commission of issuance of convertible debt | 11, 13 | |||||||||||||||||||||||||||||||
| Ordinary shares issued for cashless exercise of warrants | 13 | ( | ) | |||||||||||||||||||||||||||||
| Stock option expense | 13 | - | ||||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Foreign currency translation | - | ( | ) | ( | ) | |||||||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
3
Mainz Biomed N.V.
Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity (Deficit)
(Unaudited)
(Expressed in US Dollars)
For the Three and Six months ended June 30, 2022
| Accumulated | Total | |||||||||||||||||||||||||||
| Number of | Share | Share | Accumulated | Other Comprehensive | Shareholders’ Equity | |||||||||||||||||||||||
| Shares | Capital | Premium | Reserve | Deficit | Income (loss) | (Deficit) | ||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||
| Sale of ordinary shares | ||||||||||||||||||||||||||||
| Issuance of ordinary shares for exercise of warrants | ( | ) | ||||||||||||||||||||||||||
| Share based expense | ||||||||||||||||||||||||||||
| Stock option expense | - | |||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Foreign currency translation | - | |||||||||||||||||||||||||||
| Balance, March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||
| Issuance of ordinary shares for exercise of warrants | ( | ) | ||||||||||||||||||||||||||
| Share based expense | - | |||||||||||||||||||||||||||
| Stock option expense | - | |||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Foreign currency translation | - | |||||||||||||||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Mainz Biomed N.V.
Condensed Interim Consolidated Statements of Cash Flows
(Unaudited)
(Expressed in US Dollars)
| Six months ended | ||||||||||||
| June 30, | ||||||||||||
| Note | 2023 | 2022 | ||||||||||
| Cash Flows From Operating Activities | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||||||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||||||
| Share based compensation | 13 | |||||||||||
| Depreciation and amortization | ||||||||||||
| Bad debt expense | ||||||||||||
| Accretion expense | 7,12 | |||||||||||
| Change in fair value of convertible debt | ( | ) | ||||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Trade and other receivables | ( | ) | ||||||||||
| Inventory | ( | ) | ( | ) | ||||||||
| Prepaid expenses and other assets | ||||||||||||
| Accounts payable and accrued liabilities | ||||||||||||
| Deferred revenue | ( | ) | ||||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||||||
| Cash Flows From Investing Activities | ||||||||||||
| Purchase of intangible asset | ( | ) | ||||||||||
| Purchase of property and equipment | 6 | ( | ) | ( | ) | |||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||||||
| Cash Flows From Financing Activities | ||||||||||||
| Sale of ordinary shares | 13 | |||||||||||
| Warrant exercise proceeds | ||||||||||||
| Proceeds from issuance of convertible debt | ||||||||||||
| Repayment of loans payable | ( | ) | ( | ) | ||||||||
| Payment of lease obligations | 8 | ( | ) | ( | ) | |||||||
| Net cash provided by financing activities | ||||||||||||
| Effect of changes in exchange rates | ( | ) | ( | ) | ||||||||
| Net change in cash | ( | ) | ||||||||||
| Cash at beginning of period | ||||||||||||
| Cash at end of period | $ | $ | ||||||||||
| Non-Cash Investing And Financing Activities | ||||||||||||
| Right of use asset additions | 8 | $ | $ | |||||||||
| Acquisition of intangible asset for payable and stock payable | 7 | $ | $ | |||||||||
| Interest expense paid | $ | $ | ||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
Mainz Biomed N.V.
Notes to the Condensed Interim Consolidated Financial Statements
(Unaudited)
(Expressed in US dollars)
June 30, 2023
NOTE 1. NATURE OF OPERATIONS AND GOING CONCERN
Mainz Biomed N.V. (the “Company”) is domiciled in the Netherlands. The Company’s registered office is at Keizersgracht 391A, EJ Amsterdam and its headquarters are in Mainz, Germany. The Company was formed to acquire the business of Mainz Biomed Germany GmbH (f/k/a PharmGenomics GmbH (“PharmaGenomics”, “PG”)). In September 2021, the Company completed such acquisition.
We develop in-vitro diagnostic (“IVD”) tests for clinical diagnostics in the area of human genetics, focusing in the areas of personalized medicine, led by our flagship ColoAlert™ product in European markets. We additionally operate a clinical diagnostic laboratory. We develop and distribute our IVD kits to third-party laboratories and through our on-line store.
Throughout these consolidated financial statements, Mainz Biomed N.V. and its wholly owned subsidiaries, Mainz Biomed USA, Inc. and Mainz Biomed GmbH (f/k/a PharmGenomics GmbH), are referred to, collectively and individually as “Mainz”, “Mainz Biomed”, or the “Company”.
Share Exchange
On August 3, 2021, the Company entered into
a contribution agreement (the “Contribution Agreement”) between Mainz Biomed B.V. (“Mainz”), which was a private
company with limited liability under Dutch law incorporated for the purpose of acquiring PharmGenomics. Under the Contribution Agreement,
IPO and Follow-on Equity Offering
In November 2021, the Company completed its initial
public offering (“IPO”) of its ordinary shares on the Nasdaq Capital Market, selling
Going Concern
The Company has recurring losses, accumulated
deficit totaling $
The Company plans to fund its cash flow and working
capital needs through current cash on hand and future debt and/or equity financings which it may obtain through one or more public or
private equity offerings, debt financings, government or other third-party funding, strategic alliances or collaboration agreements. In
December 2022, the Company entered into a $
6
Management believes that the availability of its Controlled Equity Offering and/or Pre Paid Advance Agreement, combined with the potential to execute a financing after the reporting of results from its clinical studies, will provide the financing necessary to fund the Company’s working capital needs for the foreseeable future.
These financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. These financial statements do not reflect the adjustments to the carrying values of assets and liabilities, the reported revenues and expenses, and the statement of financial position classifications used, that would be necessary if the Company were unable to realize its assets and settle its liabilities as a going concern in the normal course of operations. Such adjustments could be material.
COVID-19 Impact
On March 11, 2020, the outbreak of the novel strain of coronavirus specifically identified as “COVID-19” was declared a pandemic by the World Health Organization. The outbreak has resulted in governments worldwide enacting emergency measures to combat the spread of the virus which in turn have caused material disruption to business globally. Global equity markets have experienced significant volatility and weakness. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. The duration and impact of the COVID-19 outbreak is unknown at this time, as is the efficacy of the government and central bank interventions and the severity and frequency of new strains of the coronavirus. It is not possible to reliably estimate the length and severity of these developments and the impact on the financial results and condition of the Company in future periods.
NOTE 2. BASIS OF PRESENTATION
Basis of Presentation and Statement of Compliance
These condensed interim financial statements have been prepared in accordance with International Accounting Standards (“IAS”) 34, “Interim Financial Reporting” using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and International Financial Reporting Interpretations Committee (“IFRIC”). These condensed interim financial statements do not include all of the information required of a full set of annual financial statements and are intended to provide users with an update in relation to events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the end of the last annual reporting period. It is therefore recommended that these condensed interim financial statements be read in conjunction with the annual financial statements of the Company for the year ended December 31, 2022 and notes thereto contained in the Company’s Form 20-F.
These condensed interim financial statements have been prepared on a historical cost basis, modified where applicable. In addition, these condensed interim financial statements have been prepared using the accrual basis of accounting except for cash flow information.
The condensed unaudited interim financial statements were authorized for issuance by the Audit Committee of the Board of Directors on August 11, 2023.
NOTE 3. ACCOUNTING POLICIES, ESTIMATES AND SIGNIFICANT MANAGEMENT JUDGMENTS
Inventories
Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on a weighted average cost and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
7
Reclassifications
Certain prior year amounts have been reclassified for consistency with the current period presentation.
Critical Accounting Estimates and Significant Management Judgments
The preparation of financial statements in accordance with IFRS requires the Company to use judgment in applying its accounting policies and make estimates and assumptions about reported amounts at the date of the financial statements and in the future. The Company’s management reviews these estimates and underlying assumptions on an ongoing basis, based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are adjusted for prospectively in the period in which the estimates are revised.
Useful lives of property and equipment
Estimates of the useful lives of property and equipment are based on the period over which the assets are expected to be available for use. The estimated useful lives are reviewed annually and are updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence, not electing to exercise renewal options on Leases, and legal or other limits on the use of the relevant assets. In addition, the estimation of the useful lives of the relevant assets may be based on internal technical evaluation and experience with similar assets. It is possible, however, that future results of operations could be materially affected by changes in the estimates brought about by changes in the factors mentioned above. The amounts and timing of recorded expenses for any period would be affected by changes in these factors and circumstances. A reduction in the estimated useful lives of the property and equipment would increase the recorded expenses and decrease the non-current assets.
Provision for expected credit losses on trade receivables
The provision for expected credit losses on trade receivables are estimated based on historical information, customer concentrations, customer solvency, current economic and geographical trends, and changes in customer payment terms and practices. The Company will calibrate its provision matrix to adjust the historical credit loss experience with forward-looking information. The assessment of the correlation between historical observed default rates, forecast economic conditions and expected credit losses is a significant estimate. The amount of expected credit losses is sensitive to changes in circumstances and of forecast economic conditions. The Company’s historical credit loss experience and forecast of economic conditions may also not be representative of customer’s actual default in the future.
Estimating the incremental borrowing rate on leases
The Company cannot readily determine the interest rate implicit in leases where it is the lessee. As such, it uses its incremental borrowing rate (“IBR”) to measure lease liabilities. The IBR is the rate of interest that the Company would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of comparable value to the right-of-use asset in a similar economic environment. IBR therefore reflects what the Company “would have to pay”, which requires estimation when no observable rates are available or where the applicable rates need to be adjusted to reflect the terms and conditions of the lease. The Company estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates.
Estimating the fair value of share-based payment transactions
The Company utilizes a Black-Scholes model, or where appropriate, a Monte-Carlo Simulation to estimate the fair value of its share-based payments. In applying these models, management must estimate the expected future volatility of the Company’s estimated share price and makes such assumptions based on a proxy of publicly-listed entities under an expectation that historical volatility is representative of the expected future volatility. Additionally, estimates have been made by management, in respect of the performance warrants, regarding the length of the vesting period as well as the number of performance warrants that are likely to vest.
8
Estimating the fair value of financial instruments
When the Company recognizes a financial instrument, where there is no active market for such instrument, the Company utilizes alternative valuation methods. The Company utilizes inputs from observable markets to the extent that an appropriate market can be identified, but when there is a lack of such a market, the Company applies judgment to determine a fair value. Such judgments require those such as risk and volatility, of which changes in such assumptions may impact the fair value of the financial instrument.
Other significant judgments
The preparation of these financial statements in accordance with IFRS requires the Company to make judgments, apart from those involving estimates, in applying accounting policies. The most significant judgments in applying the Company’s financial statements include:
| ● | The assessment of the Company’s ability to continue as a going concern and whether there are events or conditions that may give rise to significant uncertainty; |
| ● | The determination of the lease term of contracts with renewal and termination options; |
| ● | Determination of the extent to which it is probable that future taxable income will be available to allow all or part of the temporary differences and net operating losses to be utilized; |
| ● | Whether there are indicators of impairment of the Company’s long-lived assets; |
| ● | Development costs do not meet the conditions for capitalization in accordance with IAS 38 and therefore all research and development costs have been expensed as incurred. |
NOTE 4. TRADE AND OTHER RECEIVABLES
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Accounts receivable | $ | $ | ||||||
| Less: allowance for doubtful accounts | ( | ) | ( | ) | ||||
| Accounts receivable, net | ||||||||
| VAT receivable, net | ||||||||
| Other | ||||||||
| $ | $ | |||||||
For the six months ended June 30, 2023, the Company
recorded bad debt reserve of $
NOTE 5. PREPAID AND OTHER CURRENT ASSETS
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Prepaid insurance | $ | $ | ||||||
| Other prepaid expense | ||||||||
| Security deposit | ||||||||
| $ | $ | |||||||
9
NOTE 6. PROPERTY AND EQUIPMENT
| Laboratory equipment | Office equipment | Construction in progress | Total | |||||||||||||
| Cost | ||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | ||||||||||||
| Additions | ||||||||||||||||
| Disposal | ||||||||||||||||
| Effects of currency translation | ||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | $ | ||||||||||||
| Accumulated depreciation | ||||||||||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | ||||||||||||
| Depreciation | ||||||||||||||||
| Disposal | ||||||||||||||||
| Effects of currency translation | ||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | $ | ||||||||||||
| Net book value at June 30, 2022 | $ | $ | $ | $ | ||||||||||||
| Net book value at June 30, 2023 | $ | $ | $ | $ | ||||||||||||
NOTE 7. INTANGIBLE ASSET
Our flagship product is ColoAlert, a colorectal
cancer (“CRC”) screening test. On January 1, 2019, we entered into an exclusive licensing agreement (the “Licensing
Agreement”) with ColoAlert AS to license the intellectual property related to the ColoAlert test. On February 11, 2021, we obtained
an option exercisable for three years to acquire the intellectual property for the ColoAlert test for (i) either a one-time cash payment
of €
On February 15, 2023, we entered into an Intellectual
Property Asset Purchase Agreement (“IPA”), which supersedes the Licensing and Options Agreements. Pursuant to the IPA, we
acquired the intellectual property underlying the ColoAlert test. Pursuant to the IPA, we were able to reduce the price paid for the intellectual
property to (i) $
NOTE 8. LEASES
Right-of-Use Assets
| Office | Laboratory | Lab and | ||||||||||||||||||
| Equipment | Equipment | Vehicle | Office Space | Total | ||||||||||||||||
| Cost | ||||||||||||||||||||
| Balance as of December 31, 2022 | $ | $ | $ | $ | $ | |||||||||||||||
| Additions | ||||||||||||||||||||
| Effects of currency translation | ||||||||||||||||||||
| Balance as of June 30, 2023 | $ | $ | $ | $ | $ | |||||||||||||||
| Accumulated amortization | ||||||||||||||||||||
| Balance as of December 31, 2022 | $ | $ | $ | $ | $ | |||||||||||||||
| Depreciation | ||||||||||||||||||||
| Effects of currency translation | ||||||||||||||||||||
| Balance as of June 30, 2023 | $ | $ | $ | $ | $ | |||||||||||||||
| Net book value at June 30, 2022 | $ | $ | $ | $ | $ | |||||||||||||||
| Net book value at June 30, 2023 | $ | $ | $ | $ | $ | |||||||||||||||
As of June 30, 2023, management assessed that there were no events or changes in circumstances that would require impairment testing.
10
The carrying amount of the right-of-use assets
is amortized on a straight-line basis over the life of the leases, which at June 30, 2023, had an average expected life of
Lease Liabilities
| Total | ||||
| Balance as of December 31, 2022 | $ | |||
| Additions | ||||
| Interest expenses | ||||
| Lease payments | ( | ) | ||
| Effects of currency translation | ||||
| Balance as of June 30, 2023 | $ | |||
| Lease liabilities | June 30, 2023 | December 31, 2022 | ||||||
| Current portion | $ | $ | ||||||
| Long-term portion | ||||||||
| Total lease liabilities | $ | $ | ||||||
| Maturity analysis | June 30, 2023 | |||
| Less than one year | $ | |||
| One to two years | ||||
| Two to three years | ||||
| Three to four years | ||||
| Four to five years | ||||
| More than five years | ||||
| Total undiscounted lease liabilities | $ | |||
| Amount representing implicit interest | ( | ) | ||
| Lease obligations | $ | |||
11
NOTE 9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Payroll liabilities | ||||||||
| $ | $ | |||||||
NOTE 10. CONVERTIBLE DEBT – RELATED PARTY
During the years ended December 31, 2019 and 2020,
the Company entered into loan agreements with related parties totaling EUR
The 2019 and 2020 Convertible Loans were determined
to be a financial instrument comprising an equity classified conversion feature with a host debt component. On initial recognition, the
Company used the residual value method to allocate the principal amount of the 2019 and 2020 Convertible Loans between the two components.
The host debt component was valued first, based on similar debt securities without an embedded conversion feature and the residual was
allocated to the equity-classified conversion feature. The Company recognized debt discounts totaling EUR
As of June 30, 2023 and December 31, 2022, the
Company’s Convertible Debt – Related Party is $
NOTE 11. CONVERTIBLE DEBT
Convertible Loans
In November 2017, the Company entered into
loan agreements with two shareholders of the Company for loans totaling EUR
Convertible Promissory Note
On June 28, 2023, we
entered into a Pre-Paid Advance Agreement (the “PPA”) with YA II PN, Ltd. (“Holder”). Pursuant to the PPA, we
may request that the Holder purchase from us up to $
12
Each Promissory Notes
matures
The Promissory Notes
are convertible at the Holder’s discretion into our ordinary shares at a conversion price (the “Conversion Price”) equal
to the lower of (a) (I) $
Under the Promissory
Notes, a “Trigger Event” occurs if the trading price of an ordinary share is lower than the applicable Floor Price for any
five of seven consecutive trading days. Within five trading days of a Trigger Event, we must make a monthly cash payment to the Holder
in connection with the Promissory Notes (the “Monthly Payment”) equal to the lesser of (i) $
In connection
with the execution of the PPA, we agreed to pay a commitment fee of $
The Company elected to
account for the Promissory Note at fair value as of the June 28, 2023 issuance date. Management believes that the fair value option appropriately
reflects the underlying economics of the Promissory Notes. Under the fair value election, changes in fair value will be reported in the
consolidated statements of operations, under change in fair value of debt instrument, in each reporting period subsequent to the issuance
of the Promissory Note. The Initial Promissory Note has a face value of $
We classified this fair value as a Level 3 fair value measurement and used a fair value pricing model to calculate the fair value as of June 28, 2023 and June 30, 2023. Key inputs for the fair value model are summarized below.
| June 28, | June 30, | |||||||
| 2023 | 2023 | |||||||
| Stock price | $ | $ | ||||||
| Expected life in years | ||||||||
| Risk free rate | % | % | ||||||
| Expected volatility | % | % | ||||||
| Discount rate | % | % | ||||||
13
NOTE 12. SILENT PARTNERSHIPS
During the year ended December 31, 2020,
During the year ended December 31, 2020, the Company
entered into silent partnership agreements whereby the lender agreed to lend a total of EUR
In 2010, the Company entered into a silent partnership
agreement whereby the lender agreed to lend the Company EUR
14
| 3% SPAs | 3.5% SPAs | 8.5% SPAs | 8% SPAs | Total | ||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | $ | $ | |||||||||||||||
| Issued during the year | ||||||||||||||||||||
| Extinguished during the year | ( | ) | ( | ) | ( | ) | ||||||||||||||
| Discount | ||||||||||||||||||||
| Accretion | ||||||||||||||||||||
| Interest expense | ||||||||||||||||||||
| Effects of currency translation | ||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | $ | $ | |||||||||||||||
NOTE 13. EQUITY
Ordinary shares
The Company has
Controlled Equity Offering
In December 2022, the Company entered into a Controlled
Equity Offering, known as an “ATM” facility. Pursuant to the ATM, the Company at its discretion and subject to an effective
registration statement with the U.S. Securities and Exchange Commission, may sell through its agent ordinary shares at market prices,
for a fee of
In addition, during the six months ended June 30, 2023, the Company issued ordinary shares as follows:
| ● |
| ● |
| ● |
| ● |
Warrants
During the year ended December 31, 2021, in conjunction
with private sales units, which included ordinary shares and warrants, the Company issued
| Stock price at time of issuance | $ | |||
| Exercise price | $ | |||
| Expected term | ||||
| Expected average volatility | % | |||
| Expected dividend yield | ||||
| Risk-free interest rate | % |
15
| Warrant | Weighted-Average | Weighted-Average | ||||||||||
| Outstanding | Exercise Price | Life (years) | ||||||||||
| Balance as of December 31, 2022 | $ | | ||||||||||
| Grants | ||||||||||||
| Exercised | ( | ) | ||||||||||
| Expired | ||||||||||||
| Balance as of June 30, 2023 | $ | |||||||||||
Stock options
During 2021, we adopted our 2021 Omnibus Incentive
Plan, and on June 28, 2022 we adopted our 2022 Omnibus Incentive Plan (the “Plans”). Under the Plans, we are authorized to
issue equity incentives in the form of incentive stock options, non-statutory stock options, restricted shares, restricted share units,
share appreciation rights, performance units or performance shares under separate award agreements. Under the Plans, the aggregate number
of shares underlying awards that we could issue cannot exceed
During the six months ended June 30, 2023, the
Company granted
During the six months ended June 30, 2023, the
Company recorded stock based compensation of $
For the six months ended June 30, 2023, the estimated fair values of the stock options are as follows:
| June 30, | ||||
| 2023 | ||||
| Exercise price | $ | | ||
| Expected term | ||||
| Expected average volatility | % | |||
| Expected dividend yield | - | |||
| Risk-free interest rate | % |
A summary of activity during the six months ended June 30, 2023 follows:
| Stock options | Weighted-Average | Weighted-Average | ||||||||||
| Outstanding | Exercise Price | Life (years) | ||||||||||
| Balance as of December 31, 2022 | $ | | | |||||||||
| Grants | ||||||||||||
| Exercised | ||||||||||||
| Forfeited | ( | ) | ||||||||||
| Expired | ||||||||||||
| Balance as of June 30, 2023 | $ | |||||||||||
| Exercisable as of June 30, 2023 | $ | |||||||||||
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NOTE 14. COST OF REVENUE
For the six months ended June 30, 2023 and 2022, cost of revenue consisted of test kit materials, both patient collection kits and lab based PCR kits.
NOTE 15. RELATED PARTY TRANSACTIONS
Key management personnel include those persons
having authority and responsibility for planning, directing and controlling the activities of the Company as a whole. The Company has
determined that key management personnel consist of members of the Company’s Board, its Chief Executive Officer, Chief Financial
Officer, Chief Operating Officer, Chief Commercial Officer and Chief Scientific Officer.
| Six months ended | ||||||||
| June 30, | ||||||||
| 2023 | 2022 | |||||||
| Salaries and benefits | $ | $ | ||||||
| Six months ended | ||||||||
| June 30, | ||||||||
| 2023 | 2022 | |||||||
| Salaries and benefits | $ | $ | ||||||
During the six months ended June 30, 2023 and
2022, the Company incurred interest expense of $
During the six months ended June 30, 2023 and
2022, the Company incurred accretion expense of $
During the six months ended June 30, 2023 and
2022, we recorded expenses of $
NOTE 16. GOVERNMENT GRANTS
The Company receives government grants related
to its research and development activities.
| Six months ended | ||||||||
| June 30, | ||||||||
| Research and Development Projects | 2023 | 2022 | ||||||
| Rapid detection of antibody-based pathogens | $ | $ | ||||||
| Multi-marker test for the early detection of pancreatic cancer | ||||||||
| $ | $ | |||||||
As of June 30, 2023 and December 31, 2022, the
grants for rapid detection of antibody-based pathogens and a multi-marker test for the early detection of pancreatic cancer had remaining
grant balances of approximately $
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NOTE 17. FINANCIAL INSTRUMENT RISK MANAGEMENT
Basis of Fair Value
Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are:
| ● | Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities; |
| ● | Level 2 — Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and |
| ● | Level 3 — Inputs that are not based on observable market data. |
The Company’s financial instruments consist of cash, trade and other receivables, accounts payable and accrued liabilities, lease liabilities, convertible debentures, and loans payable. With the exception of convertible debentures and loans payable, the carrying value of the Company’s financial instruments approximate their fair values due to their short-term maturities. The fair value of convertible debentures and notes payable approximate their carrying value, excluding discounts, due to minimal changes in interest rates and the Company’s credit risk since issuance of the instruments.
The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board of Directors approves and monitors the risk management processes, inclusive of documented investment policies, counterparty limits, and controlling and reporting structures.
Credit Risk
The Company’s principal financial assets
are cash and trade receivables. The Company’s credit risk is primarily concentrated in its cash which is held with institutions
with a high credit worthiness. The Company carries cash balances at US financial institutions that exceed the federally insured limit
of $
Management believes that the Company is not exposed to any significant credit risk with respect to its cash.
The Company mitigates its credit risk on receivables
by actively managing and monitoring its receivables. During the six months ended June 30, 2023, the Company incurred $
Liquidity Risk
Liquidity risk is the risk that the Company will
not be able to meet its financial obligations as they fall due. The Company has a planning and budgeting process in place to help determine
the funds required to support the Company’s normal operating requirements on an ongoing basis. As of June 30, 2023, the Company
had an unrestricted cash balance of $
Historically, the Company’s primary source of funding has been the issuance of ordinary shares and credit facility borrowings. The Company’s access to financing is always uncertain. There can be no assurance of continued access to equity or debt financing.
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| Within | More than | More than | ||||||||||
| one year | one year | five years | ||||||||||
| Accounts payable and accrued liabilities | $ | $ | $ | |||||||||
| Convertible promissory note to be settled with ordinary shares | ||||||||||||
| Convertible loans | ||||||||||||
| Silent partnerships | ||||||||||||
| Lease liabilities | ||||||||||||
| Payable for acquisition of intangible asset - related party | ||||||||||||
| $ | $ | $ | ||||||||||
Foreign Exchange Risk
Foreign currency risk is the risk that the fair
values of future cash flows of a financial instrument will fluctuate because they are denominated in currencies that differ from the respective
functional currency.
Interest Rate Risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is not exposed to interest rate risk as its financial liabilities carry interest at fixed rates.
Capital Management
In the management of capital, the Company includes components of stockholders’ equity. The Company aims to manage its capital resources to ensure financial strength and to maximize its financial flexibility by maintaining strong liquidity and by utilizing alternative sources of capital including equity, debt and bank loans or lines of credit to fund continued growth. The Company sets the amount of capital in proportion to risk and based on the availability of funding sources. The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. As a young growth company, issuance of equity has been the primary source of capital to date. Additional debt and/or equity financing may be pursued in future as deemed appropriate to balance debt and equity. To maintain or adjust the capital structure, the Company may issue new shares, take on additional debt or sell assets to reduce debt.
NOTE 18. CONCENTRATIONS
Major customers are defined as customers that
each individually account for greater than
19
NOTE 19. OPERATING EXPENSES
| Six months Ended | ||||||||
| June 30, | ||||||||
| Research and development | 2023 | 2022 | ||||||
| Payroll expenses | $ | $ | ||||||
| Clinical study expenses | ||||||||
| Depreciation and amortization | ||||||||
| Travel expenses | ||||||||
| Lab consumables | ||||||||
| Other expenses | ||||||||
| $ | $ | |||||||
| Six months Ended | ||||||||
| June 30, | ||||||||
| Sales and marketing | 2023 | 2022 | ||||||
| Payroll | $ | $ | ||||||
| Consulting services | ||||||||
| Product and brand advertising | ||||||||
| Other expenses | ||||||||
| $ | $ | |||||||
| Six months Ended | ||||||||
| June 30, | ||||||||
| General and administrative | 2023 | 2022 | ||||||
| Payroll | $ | $ | ||||||
| Stock option expense | ||||||||
| Depreciation and amortization | ||||||||
| Travel and car expenses | ||||||||
| Consulting services | ||||||||
| IT expense | ||||||||
| Training | ||||||||
| Insurance and taxes | ||||||||
| Rent and Premises | ||||||||
| Other expenses | ||||||||
| $ | $ | |||||||
NOTE 20. SUBSEQUENT EVENTS
Subsequent to June 30, 2023, pursuant to the PPA
(see Note 11), the Holder converted $
20