SERNOVA CORP.
INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED
JANUARY 31, 2024 AND 2023
NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS
Under National Instrument 51-102 Continuous Disclosure Obligations, if a reporting issuer engaged an auditor to perform a review of the interim financial statements and the auditor was unable to complete the review, the interim financial statements must be accompanied by a notice indicating that the auditor was unable to complete a review of the interim financial statements and the reasons why the auditor was unable to complete the review.
The accompanying unaudited interim condensed consolidated financial statements ("interim financial statements") of the Company have been prepared by and are the responsibility of the Company's management. The Company's independent auditor was engaged to perform a review of the interim financial statements but such review has not been completed due to additional procedures required as a result of the Board's investigations into alleged misconduct as disclosed in the news release disseminated on March 11, 2024. None of the allegations, if substantiated, are expected to materially change or impact the Company's interim financial statements. Upon completion of these additional procedures, the Company will refile these interim financial statements. The Company is not expecting any changes in any material respect to be required and thus the refiling is expected to be limited to the disclosure of the completion of the auditor's review.
1
SERNOVA CORP.
Interim Condensed Consolidated Statements of Financial Position (Expressed in Canadian Dollars)
(Unaudited)
As at | As at | ||||
Note | January 31, 2024 | October 31, 2023 | |||
ASSETS | |||||
Current assets | $ | 6,509,561 | |||
Cash | $ | 8,721,835 | |||
Marketable securities | 9,040,000 | 11,084,000 | |||
Amounts receivable | 1,029,091 | 1,052,991 | |||
Prepaid expenses | 500,057 | 164,664 | |||
Total current assets | 17,078,709 | 21,023,490 | |||
Non-current assets | 223,860 | ||||
Deposits | 259,164 | ||||
Property and equipment, net | 372,516 | 393,224 | |||
Intangible assets, net | 266,710 | 316,719 | |||
Right-of-use asset, net | 4 | 630,734 | 114,218 | ||
Total non-current assets | 1,493,820 | 1,083,325 | |||
TOTAL ASSETS | $ | 18,572,529 | $ | 22,106,815 | |
LIABILITIES | |||||
Current liabilities | |||||
Accounts payable and accrued liabilities | $ | 14,104,144 | $ | 9,456,157 | |
Lease liabilities | 4 | 88,162 | 136,123 | ||
Total current liabilities | 14,192,306 | 9,592,280 | |||
Non-current liabilities | |||||
Lease liabilities | 4 | 546,468 | - | ||
Total liabilities | 14,738,774 | 9,592,280 | |||
SHAREHOLDERS' EQUITY | 110,987,766 | ||||
Common shares | 5 | 110,987,766 | |||
Contributed surplus | 5 | 20,756,095 | 19,693,776 | ||
Deficit | (127,910,106) | (118,167,007) | |||
Total shareholders' equity | 3,833,755 | 12,514,535 | |||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 18,572,529 | $ | 22,106,815 | |
Commitments and Contingencies (Note 8) |
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 | Three months ended | |||||
Note | January 31, 2024 | January 31, 2023 | ||||
EXPENSES | ||||||
Research and development | 7 | $ | 7,241,004 | $ 6,911,250 | ||
General and administrative | 7 | 2,786,678 | 1,697,155 | |||
Total expenses | 10,027,682 | 8,608,405 | ||||
OTHER EXPENSE (INCOME) | ||||||
Interest income | (166,327) | (461,170) | ||||
Finance costs | 10,458 | 9,941 | ||||
Foreign exchange gain | (109,852) | (141,790) | ||||
Gain on disposal of right-of-use asset and | (18,862) | - | ||||
lease liabilities | ||||||
Net other income | (284,583) | (593,019) | ||||
LOSS AND COMPREHENSIVE LOSS | $ | 9,743,099 | $ | 8,015,386 | ||
Weighted average number of common shares | 303,332,686 | |||||
outstanding - basic and diluted | 303,332,686 | |||||
Basic and diluted loss per common share | 9 | $ | 0.03 | $ | 0.03 |
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)
Three months ended | Three months ended | ||||
Note | January 31, 2024 | January 31, 2023 | |||
OPERATING ACTIVITIES | |||||
Loss for the period | $ | (9,743,099) | $ | (8,015,386) | |
Adjustments for items not affecting cash: | 104,250 | ||||
Amortization and depreciation | 106,975 | ||||
Share-based compensation | 5 | 1,062,319 | 941,267 | ||
Interest income accrued on marketable securities | (333,283) | (465,068) | |||
Interest on lease liabilities | 10,459 | 9,942 | |||
Gain on disposal of right-of-use asset and lease | 8 | (18,862) | |||
liabilities | |||||
Changes in non-cash working capital balances: | 357,183 | ||||
Amounts receivable | 532,416 | ||||
Prepaid expenses | (335,393) | (163,266) | |||
Accounts payable and accrued liabilities | 4,647,988 | 1,582,528 | |||
Cash used in operating activities | (4,248,438) | (5,470,592) | |||
INVESTING ACTIVITIES | - | ||||
Purchase of marketable securities | (4,044,000) | ||||
Redemption of marketable securities | 2,044,000 | 28,000,000 | |||
Deposits | 35,304 | - | |||
Purchase of property and equipment | - | (71,835) | |||
Cash provided by investing activities | 2,079,304 | 23,884,165 | |||
FINANCING ACTIVITIES | - | ||||
Grant contribution receipts | 8 | 347,908 | |||
Lease liabilities payments | (43,140) | (42,840) | |||
Cash (used in) provided by financing activities | (43,140) | 305,068 | |||
Net increase (decrease) cash during the period | (2,212,274) | 18,718,641 | |||
Cash, beginning of period | 8,721,835 | 3,776,054 | |||
CASH, END OF PERIOD | $ | 6,509,561 | $ | 22,494,695 | |
SUPPLEMENTAL CASH FLOW DISCLOSURES | $ | - | |||
Income taxes paid | $ | - | |||
Interest received | $ | 152,295 | $ | 358,392 | |
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 | - | - | - | - | (9,743,099) | (9,743,099) | ||||
Transactions with owners of the Company, | ||||||||||
recognized directly in equity: | ||||||||||
Share-based compensation | - | - | - | 1,062,319 | - | 1,062,319 | ||||
Balance, January 31, 2024 | 303,332,686 | $ 110,987,766 | $ | - | $ | 20,756,095 | $(127,910,106) | $ | 3,833,755 | |
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 | - | - | - | - | (8,015,386) | (8,015,386) | ||||
Transactions with owners of the Company, | ||||||||||
recognized directly in equity: | ||||||||||
Share-based compensation | - | - | - | 941,267 | - | 941,267 | ||||
Balance, January 31, 2023 | 303,332,686 | $ 110,987,766 | $ | 3,296,332 | $ | 13,435,321 | $ (87,184,873) | $ | 40,534,546 |
See accompanying notes to the interim condensed consolidated financial statements.
5
SERNOVA CORP.
Notes to the Interim Condensed Consolidated Financial Statements For the three months ended January 31, 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 on March 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 $9,743,099 was incurred during the three months ended January 31, 2024 (2023 - $8,015,386). As at January 31, 2024, the Company had an accumulated deficit of $127,910,106 (October 31, 2023 - $118,167,007) and working capital of $2,886,403 (October 31, 2023 - $11,431,210).
6
SERNOVA CORP.
Notes to the Interim Condensed Consolidated Financial Statements For the three months ended January 31, 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 as required to cover research and development expenditures focused on advancing work planned for the next twelve months. 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.
Expenditures related to the Company's iPSC program, including its strategic partnership with Evotec, have a significant impact on the Company's working capital and cash and marketable securities balances. The Company continues to review the latest project costs, forecasts and timelines provided by Evotec, with a plan to renegotiate selected terms of the agreement. If these negotiations are not successful and adequate financing is not obtained, the Company's cash and marketable securities will enable the support of planned operations through the second quarter of the current fiscal year. Excluding expenditures related to the Evotec partnership, the Company's current cash and marketable securities will enable the support of current planned operations into the fourth quarter of the current fiscal year. Refer to Note 8 - Commitments and Contingencies of these interim condensed consolidated financial statements for further information on the iPSC program and Evotec partnership.
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 None
7
SERNOVA CORP.
Notes to the Interim Condensed Consolidated Financial Statements For the three months ended January 31, 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 | (33,534) | - | |||||
Interest expense | - | 10,459 | |||||
Payments | - | (43,140) | |||||
Balance, January 31, 2024 | $ | 630,734 | $ | 634,630 | |||
January 31, 2024 | October 31, 2023 | ||||||
Lease liabilities - short term portion | $ | 88,162 | $ | 136,123 | |||
Lease liabilities - long term portion | 546,468 | - | |||||
$ | 634,630 | $ | 136,123 | ||||
5. | SHARE CAPITAL | ||||||
(a) | Authorized | ||||||
Unlimited number of common shares, without par value. | |||||||
(b) | Share capital changes |
During the three months ended January 31, 2024 and 2023, there were no changes to the Company's share capital.
- Incentive Plan
The Company initiated its incentive plan in 2015, with the latest amendments thereto approved by shareholders of the Company on June 30, 2021 (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 up to an aggregate fixed maximum of 38,746,536 of the Company's issued and outstanding common shares, representing approximately 12.8% of the common shares outstanding as at January 31, 2024. The remaining balance available for grant under the Incentive Plan as of January 31, 2024 is 819,673 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 months ended January 31, 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 three months ended January 31 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 | 22,770,984 | $ | 0.92 |
Granted | - | - | 120,000 | 0.80 | ||
Conditionally granted | 200,000 | 0.80 | - | - | ||
Cancelled | (24,585) | (1.30) | (225,000) | (0.22) | ||
Balance outstanding, end of period | 30,249,597 | $ | 0.92 | 22,665,984 | $ | 0.93 |
Options exercisable, end of period | 21,263,747 | $ | 0.88 | 16,243,083 | $ | 0.78 |
Stock options outstanding by range of exercise prices as at January 31, 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 | 8,130,000 | 4.2 | $ | 0.23 | 8,130,000 | $ | 0.23 |
$ 0.74 to $ 1.20 | 8,368,613 | 8.2 | 0.93 | 1,765,330 | 1.06 | ||
$ 1.32 to $ 1.42 | 13,750,984 | 2.8 | 1.32 | 11,368,417 | 1.32 | ||
$ 0.21 to $ 1.42 | 30,249,597 | 4.7 | $ | 0.92 | 21,263,747 | $ | 0.88 |
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 months ended January 31, 2024 and 2023 (Expressed in Canadian Dollars)
(Unaudited)
5. SHARE CAPITAL (cont'd…)
- Incentive Plan (cont'd…)
For the stock options granted during the three months ended January 31, 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 | 62.8% | 92.5% |
Risk free interest rate | 4.7% | 3.8% |
Expected life of options | 1.5 years | 3.4 years |
For the three months ended January 31, 2024 and 2023, the Company issued stock options with weighted average grant date fair values of $0.20 and $0.53 per stock option, respectively.
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 three months ended January 31, 2024 and 2023. DSUs have generally vested over a three-year period after the date of grant.
As at January 31, 2024, a total of 5,510,001 DSUs were outstanding (October 31, 2023 - 5,510,001) of which 5,466,669 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. Included in accounts payable and accrued liabilities at January 31, 2024, was $625,263 due to key management personnel (October 31, 2023 - $662,261).
Compensation to key management personnel for the reporting period:
Three months ended January 31, | |||||
2024 | 2023 | ||||
Personnel costs | $ | 793,919 | $ | 269,631 | |
Director fees and costs | 80,110 | 83,761 | |||
Share-based compensation | 999,248 | 770,749 | |||
$ | 1,873,277 | $ | 1,124,141 |
10
Attachments
- Original Link
- Original Document
- Permalink
Disclaimer
Sernova Corp. published this content on 18 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 19 March 2024 19:21:04 UTC.