VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 08/10/11 -- Ondine Biomedical Inc. (TSX: OBP)(AIM: OBP) (the "Company" or "Ondine") a medical technology company developing photodisinfection based products, today announced its financial results for the six months ended June 30, 2011.
FINANCIAL RESULTS
The Company's financial results are now reported under International Reporting Standards ("IFRS") and the 2010 comparative results have been restated to conform to IFRS. Please refer to the Company's unaudited interim consolidated financial report for the six months ended June 30, 2011 for a detailed description of Company's significant accounting policies under IFRS and for disclosures and reconciliation of the impact of the change to IFRS on the Company's previously reported comparative financial information.
All amounts herein are stated in Canadian dollars unless otherwise indicated and the number of the Company's securities and the per share amounts disclosed herein have been adjusted, where applicable, to reflect the 15 for 1 share consolidation of the Company's common shares that occurred in October 2010.
For the three months ended June 30, 2011 ("Second Quarter 2011") the Company recorded a loss of $1.2 million, or $0.12 per common share, a increase of $0.27 million when compared with the loss of $0.93 million, or $0.11 per common share, for the three months ended June 30, 2010 (the "Second Quarter 2010"). Product sales revenue for Periowave™ lasers and treatment kits for Second Quarter 2011 was $0.29 million generating a gross margin of $0.07 million (25.2%), compared to product sales of $0.04 million and gross profit margin of $0.02 million (40.8%) for Second Quarter 2010. Consulting revenue for Second Quarter 2011 was $0.33 million compared to $0.18 million for Second Quarter 2010.
For the six months ended June 30, 2011 ("First Half 2011") the Company recorded a loss of $2.21 million, or $0.23 per common share, which is comparable to the loss of $2.16 million, or $0.27 per common share, for the six months ended June 30, 2010 (the "First Half 2010"). Product sales revenue for Periowave™ lasers and treatment kits for First Half 2011 was $0.34 million generating a gross margin of $0.09 million (25.9%), compared to product sales of $0.16 million and gross profit margin of $0.09 million (59.5%) for First Half 2010. Consulting revenue for First Half 2011 was $0.67 million compared to $0.38 million for First Half 2010.
PLAN OF ARRANGEMENT FOR PRIVATIZATION OF ONDINE
As further described in the Company's news releases dated June 28, 2011 and August 4, 2011, the Company and 0902337 B.C. Ltd. (the "Purchaser") have entered into a definitive arrangement agreement (the "Arrangement Agreement") pursuant to which the Purchaser agreed to acquire all of the issued and outstanding equity of Ondine. The Purchaser is a private company whose sole shareholder is Carolyn Cross, Chairman, Chief Executive Officer and a shareholder of Ondine. The transaction will be implemented by way of a court-approved plan of arrangement under British Columbia law (the "Arrangement"). Under the Arrangement, holders ("Shareholders") of Ondine common shares (the "Common Shares") will receive $0.33 in cash per Common Share for an aggregate purchase price of approximately $3.19 million. Under the Arrangement, all outstanding options and warrants of Ondine will be cancelled, and the holders thereof will receive $0.001 for each share issuable thereunder.
The Company has mailed in accordance with regulatory requirements the formal notice, accompanying management information circular, and other related documents (the "Meeting Materials') in connection with the Annual General Meeting of Shareholders and Special Meeting of Securityholders (collectively, the "Meeting") to be held on Tuesday, August 30, 2011. At the Meeting, Ondine's securityholders will vote on, among other things, a resolution to approve the Arrangement. Copies of the Meeting Materials are available on SEDAR at www.sedar.com and on the Company's website at www.ondinebio.com. Completion of the Arrangement is subject to a number of conditions including, among other things, receipt of required securityholder, court, and regulatory approvals.
OTHER DEVELOPMENTS
In April 2011, the Company agreed to supply Vancouver General Hospital (VGH) with Ondine's MRSAid™ Photodisinfection System for nasal pathogen decolonization as part of a thirteen month infection control Quality Improvement Project ("QIP") being conducted at the hospital. This project is being undertaken with the objective of reducing the incidence of surgical site infections (SSIs) in selected surgical populations. The QIP, which is being sponsored by VGH & UBC Hospital Foundation funding of approximately $675,000, will focus on pre-surgical pathogen decolonization using photodisinfection of the nasal passages and full body chlorhexidine wipes for all patients treated under this initiative.
In May 2011, the United States Food and Drug Administration (FDA) approved a human clinical study (the "Study") to investigate the use of photodisinfection for the in situ microbial disinfection of endotracheal tubes as a means to prevent ventilator associated pneumonia (VAP). VAP is the number one cause of healthcare-associated infections in intensive care unit patients. The photodisinfection treatment system to be used in the Study was developed by Ondine's wholly owned subsidiary, Advanced Photodynamic Technologies, Inc. (APT). Funding of the study site and investigator costs as well as all fees incurred to perform all independent clinical study monitoring requirements, data base management and statistical analyses is via the direct payment of these costs by a third party under the terms of a government grant. APT will be responsible for, among other things, providing at its cost the study devices, consisting of the lasers and the photosensitizing agent. The clinical study is expected to commence in the third quarter of 2011 and to take at least one year to complete.
In May 2011, the Company entered into an agreement with Ms. Cross pursuant to which she advanced the Company $1,500,000 (the "May 2011 Cross Loan"). This loan is due on October 1, 2011, is secured by a first charge on the proceeds of any future financing transaction, and is interest free until the due date, but thereafter, the principal amount will accrue interest at a rate of 5% per annum payable monthly.
Under the Arrangement Agreement, the Purchaser and Ondine have entered into a loan agreement (the "Loan Agreement") under which the Purchaser has advanced to the Company a bridge loan of $750,000 (the "Bridge Loan"). The Bridge Loan is due on demand or on termination of the Arrangement Agreement pursuant to its terms. The Bridge Loan is interest free if paid in full on or before October 1, 2011 and thereafter will bear interest at 5% per annum payable at the end of each month commencing on October 31, 2011.
Under the Arrangement Agreement, the May 2011 Cross Loan, together with the other loans to the Company from Ms. Cross aggregating $1.02 million (the "Other Cross Loans") as of the date of this news release and the Bridge Loan plus accrued unpaid interest would become immediately due and payable and be required to be paid on termination of the Arrangement Agreement as a result of a Superior Proposal (as defined in the Arrangement Agreement) or the entering of an Acquisition Proposal (as defined in the Arrangement Agreement).
In addition, if the Arrangement Agreement is terminated other than as a result of a Superior Proposal or the entering of an Acquisition Proposal, the Other Cross Loans and the Bridge Loan described in the plus accrued unpaid interest would become immediately due and payable. Under this circumstance, the Company would seek to renegotiate the repayment terms of these loans in order to enable the Company to pursue other financing alternatives. However, there is no guarantee that the Company will be able to renegotiate these loans or that the Company will be able to make arrangements for subsequent financing.
In connection with the Arrangement, Merrill Biel, who is a director of the Company, his spouse and another party (collectively, the "APT Vendors") have entered into an agreement with the Company (the "APT Amending Agreement") which amends the share purchase agreement among the APT Vendors and the Company made as of November 15, 2009, as previously amended (the "APT SPA"). Under the APT SPA, the Company is obligated to issue up to an additional 528,276 Common Shares on the achievement of certain development and clinical milestones. Under the APT Amending Agreement, if the Arrangement becomes effective, the Company's obligation to issue Common Shares to the APT Vendors on a pro rata basis if all of the remaining six milestones are achieved would be extinguished and replaced by an obligation to make pro rata cash payments instead. The amount of cash payable for reaching each milestone is an amount equal to $0.33 times the number of shares that would have otherwise been issuable on attainment of the milestone. Accordingly, the cash consideration ranges from $20,510 to $41,020 per milestone and would aggregate $174,331 if all of the remaining milestones are met within the specified time frames. Additionally, for two of the milestones in connection with the Company's product for the prevention of ventilator associated pneumonia, the APT Amending Agreement extends the period during which the milestone must occur from five years to eight years from the date of Closing (as defined in the APT SPA).
FINANCIAL REVIEW
The loss for the First Half 2011 was comparable with the loss in the First Half 2010 with increases in general and administration expenses of $0.11 million and in marketing and sales expenses of $0.17 million being offset by an increase in consulting revenue of $0.29 million.
The $0.27 million increase in loss during the Second Quarter 2011, when compared to the loss for the Second Quarter 2010, was primarily due to increases in research and development of $0.11 million, in general and administration expenses of $0.17 million and in marketing and sales expenses of $0.14 which were partially offset by an increase in consulting revenue of $0.15 million.
Sales in the First Half 2011 consisted primarily of sales of cordless hand held lasers ("HHL") and treatment kits. Sales in the First Half 2010 consisted primarily of laser base stations, which is the previous model of the Periowave™ laser product. The increase in sales in the First Half 2011, when compared to the First Half 2010, is primarily due to an increase in the sales of lasers. The lower gross profit margin percentage in the First Half 2011, when compared to the First Half 2010; is primarily due to the sale in the First Half 2010 of laser base stations that had an original cost of $64,000; but, which had previously been written off by the Company. The gross margin percentage for the First Half 2011 is more reflective of the gross margin percentage that the Company expects to earn on future sales of Periowave™ product.
The increase in consulting fee revenue was principally due to fees earned in First Half 2011 in connection with management and research and development services provided to Sinuwave Technologies Corporation, there being no comparable fees in First Half 2010 as the agreement with Sinuwave commenced in August 2010.
Research and development expenses for First Half 2011 were comparable with those expenses for First Half 2010. The increase in general and administration expenses was primarily due to higher consulting and professional fees, primarily due to higher legal fees. The increase in marketing and sales expenses was primarily due to an increase in those activities as the Company expanded its efforts to increase public awareness of its products through the use of social media and as the Company conducted market planning for its MRSAid product and hired marketing staff.
The Company intends to continue to focus its resources on development of a select number of new applications of its platform photodisinfection technology. During First Half 2011 the Company continued to invest in research and development of, among other things, our MRSAid™ product for decolonization of pathogenic bacteria, such as methicillin-resistant Staphylococcus aureus (MRSA) in the anterior nares; our product for the in situ microbial disinfection of endotracheal tubes as a means to prevent ventilator associated pneumonia (VAP) and in the Periowave™ PMA submission. The PMA was submitted by the Company on behalf of PDT Inc. to obtain FDA approval for the sale of the Periowave™ system in the United States for the treatment of periodontitis in adults as an adjunct to standard methods of care. As indicated above, the Company is now also supporting the development of a photodisinfection product to address chronic sinusitis under contract with Sinuwave Technologies Corporation.
As at June 30, 2011 the Company had cash and cash equivalents totaling $0.83 million compared with $0.87 million as at December 31, 2010. Accounts payable and accrued liabilities at June 30, 2011 were $1.49 million compared with $1.4 million at December 31, 2010. During the First Half 2011, the Company used cash of approximately $2.04 million for operating activities and received two loan advances aggregating $2 million from Ms. Cross. Subsequent to June 30, 2011, the Company received from the Purchaser a loan advance of $0.75 million under the Bridge Loan.
If the Arrangement does not become effective, the Company would have to renegotiate the terms of certain of its loans payable and the Company would need to seek additional financing in order to continue the Company's operations. The Company believes that future conditions in the capital markets will make it difficult, dilutive, and costly for companies at its stage of development to secure additional funding. There is a risk that in the third quarter of 2011 the Company could have insufficient cash to operate its business if it is unable to secure further funding. Assurances can not be given that additional funding will be available on terms that are acceptable to the Company or at all. Should the Company be unable to obtain additional cash in a timely manner, it would have to severely curtail or cease its activities and their can be no assurances that the Company would be able to continue in business.
As at June 30, 2011 the Company had 9,661,468 common shares outstanding.
Additional analysis of the Company's financial results for the Second Quarter 2011 is included in our management's discussion and analysis of financial condition and results of operations (MD&A) for the six months ended June 30, 2011, which will be made available on the Company's website and on www.sedar.com.
About Ondine Biomedical Inc.
Ondine is developing non-antibiotic therapies for the treatment of a broad spectrum of bacterial, fungal and viral infections. The Company is focused on developing leading edge products utilizing its patented light-activated technology, primarily for the healthcare-associated infection (HAI) market. Photodisinfection provides broad-spectrum antimicrobial efficacy without encouraging the formation and spread of antibiotic resistance. The Company is based in Vancouver, British Columbia, Canada, with a research and development laboratory in Bothell, Washington, USA. For additional information, please visit the Company's website at: www.ondinebio.com.
Forward-Looking Statements:
Certain statements contained in this release containing words like "believe", "intend", "may", "expect", "would" and other similar expressions, are forward-looking statements that involve a number of risks and uncertainties. This forward-looking information relates to, among other things, the timing and prospects for completion of the Arrangement, which is subject to a number of conditions precedents, such as the approval of the Arrangement by the court, by Ondine's securityholders and by regulatory authorities. Accordingly, there can be no assurances that the Arrangement will be consummated. The forward-looking statements contained in this release reflect the current views of Ondine with respect to future events and are necessarily based upon a number of assumptions and estimates that, while considered reasonable by Ondine, are inherently subject to various risks and uncertainties. Many factors, both known and unknown, could cause actual results, performance or achievements to be materially different from the results, performance or achievements that are or may be expressed or implied by such forward-looking information contained in this news release and Ondine has made assumptions based on or related to many of these factors. Such factors that could cause actual results to differ materially from those projected in the Company's forward-looking statements include, without limitation, the following: litigation, fluctuations in economic and equity market conditions, market acceptance of our technologies and products; our ability to obtain financing; our financial and technical resources relative to those of our competitors; our ability to keep up with rapid technological change; government regulation of our technologies; our ability to enforce our intellectual property rights and protect our proprietary technologies; the ability to obtain and develop partnership opportunities; the timing of commercial product launches; the ability to achieve key technical milestones in key products and other risk factors identified from time to time in the Company's public filings. Investors are cautioned against attributing undue certainty or reliance on forward-looking information. Although Ondine has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated, described or intended. Ondine does not intend, and does not assume any obligation, to update this forward-looking information to reflect changes in assumptions or changes in circumstances or any other events affecting such information, other than as required by applicable law.
Ondine Biomedical Inc.
Incorporated under the laws of British Columbia
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at (Unaudited - expressed in Canadian dollars)
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June 30, December 31,
2011 2010
$ $
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Assets
Current
Cash and cash equivalents 834,854 876,548
Accounts receivable 412,624 256,755
Inventory 238,300 199,379
Prepaid expenses and deposits 163,150 271,258
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Total current assets 1,648,928 1,603,940
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Non-current assets
Property, plant and equipment 401,823 440,964
Intangible assets 346,275 408,762
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Total non-current assets 748,098 849,726
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Total assets 2,397,026 2,453,666
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Liabilities
Current
Accounts payable and accrued liabilities 1,487,668 1,397,407
Deposit payable 63,992 131,860
Income taxes payable 5,510 4,506
Current portion of deferred tenant inducements 1,553 1,553
Loan payable 2,512,500 500,000
Deferred revenue - 64,649
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Total current liabilities 4,071,223 2,099,975
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Non-current liabilities
Deferred tax liabilities 1,085 7,020
Deferred tenant inducements, net of current
portion 144,412 142,883
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Total non-current liabilities 145,497 149,903
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Total liabilities 4,216,720 2,249,878
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Equity
Share capital 55,934,361 55,899,080
Contributed surplus 6,665,089 6,514,008
Accumulated other comprehensive income 101,473 102,515
Deficit (64,520,617) (62,311,815)
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Total equity (1,819,694) 203,788
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Total liabilities and equity 2,397,026 2,453,666
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Ondine Biomedical Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited - expressed in Canadian dollars)
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Three months ended Six months ended
June 30, June 30,
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2011 2010 2011 2010
$ $ $ $
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REVENUE
Product sales 290,320 42,544 337,243 158,708
Cost of sales 217,076 25,196 249,856 64,235
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Gross margin 73,244 17,348 87,387 94,473
Consulting revenue 333,838 181,071 674,007 382,049
Royalty revenue 15,885 9,564 29,767 16,150
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422,967 207,983 791,161 492,672
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EXPENSES
Research and development 984,826 872,481 1,826,053 1,813,068
General and administration 607,608 432,878 1,099,880 987,145
Marketing and sales 144,861 22 174,022 4,990
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(1,737,295) (1,305,381) (3,099,955) (2,805,203)
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Other income/(expense)
Project income 80,452 - 80,452 -
Miscellaneous income - 8,610 11,040 16,610
Gain on debt settlement - 52,123 29,106 52,123
Interest expense (6,250) - (12,500) -
Foreign exchange
gain/(loss) 49,002 110,204 6,527 81,834
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123,204 170,937 114,625 150,567
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Loss before income taxes (1,191,124) (926,461) (2,194,169) (2,161,964)
Current income tax expense (8,708) - (18,533) (7,161)
Deferred income tax
recovery - - 3,900 5,369
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Loss for the period (1,199,832) (926,461) (2,208,802) (2,163,756)
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OTHER COMPREHENSIVE
INCOME/(LOSS)
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Exchange differences on
translating foreign
operations (55,419) (116,495) (1,042) (54,235)
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Total comprehensive loss
for the period (1,255,251) (1,042,956) (2,209,844) (2,217,991)
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Basic and diluted loss per
common share (0.12) (0.11) (0.23) (0.27)
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Weighted average number of
common shares outstanding 9,661,468 8,375,066 9,627,844 7,875,258
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Ondine Biomedical Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited - expressed in Canadian dollars)
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Accumu-
lated
Other
Number Contri- Compre-
of Share buted hensive
Common Capital Surplus Income Deficit Equity
Shares $ $ $ $ $
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Balance,
January
1, 2010 7,369,865 54,767,640 5,583,243 - (59,139,417) 1,211,466
Units
issued
for cash
(net of
issue
costs)
April
2010
Private
Placement 919,998 504,994 314,797 - - 819,791
Common
shares
issued
for
settlement
of debt
(net of
issue
costs) 63,179 58,519 - - - 58,519
Common
shares
issued
for
exercise
of
warrants 100,000 75,000 - - - 75,000
Reallocation
of
contributed
surplus
as a
result of
warrant
exercise - 27,176 (27,176) - - -
Share-
based
compensation - - 304,432 - - 304,432
Total
comprehensive
loss
for the
period - - - (54,235) (2,163,756) (2,217,991)
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Balance,
June 30,
2010 8,453,042 55,433,329 6,175,296 (54,235) (61,303,173) 251,217
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Balance,
January
1, 2011 9,573,267 55,899,080 6,514,008 102,515 (62,311,815) 203,788
Common
shares
issued
for
settlement
of debt 88,201 35,281 - - - 35,281
Share-
based
compensation - - 151,081 - - 151,081
Total
comprehensive
loss
for the
period - - - (1,042) (2,208,802) (2,209,844)
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Balance,
June 30,
2011 9,661,468 55,934,361 6,665,089 101,473 (64,520,617) (1,819,694)
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Ondine Biomedical Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - expressed in Canadian dollars)
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Three months ended Six months ended
June 30, June 30,
------------------------------------------------
2011 2010 2011 2010
$ $ $ $
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OPERATING ACTIVITIES
Loss for the period (1,199,832) (926,460) (2,208,802) (2,163,756)
Add/(deduct) items not
affecting cash:
Gain on debt settlement - (52,123) (29,106) (52,123)
Depreciation and
amortization 59,564 70,920 119,202 143,241
Share-based compensation 112,222 111,444 151,081 304,432
Deferred tenant
inducements (272) 15,329 1,529 28,044
Changes in non-cash working
capital items relating to
operations:
Accounts receivable (263,406) (158,195) (155,869) (14,702)
Inventory 22,782 (69,173) (38,921) (62,645)
Prepaid expenses and
deposits 60,032 51,178 108,108 (121,262)
Accounts payable and
accrued liabilities 114,914 (92,085) 154,648 105,656
Deposit payable (64,068) - (67,868) 190,000
Income taxes payable 1,634 1,082 1,004 1,563
Accrued interest on loan
payable 6,250 - 12,500 -
Deferred revenue (63,024) (29,449) (64,649) (72,233)
Deferred income taxes (345) 3,300 (5,935) (1,799)
Foreign exchange (7,378) (12,012) (14,525) (3,581)
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Cash used in operating
activities (1,220,927) (1,086,244) (2,037,603) (1,719,165)
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FINANCING ACTIVITIES
Loan proceeds 1,500,000 500,000 2,000,000 500,000
Issuance of equity
securities, net of costs - 142,991 - 894,791
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Cash provided by financing
activities 1,500,000 642,991 2,000,000 1,394,791
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INVESTING ACTIVITIES
Purchases of property,
plant and equipment - (47,359) (3,049) (50,422)
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Cash used in investing
activities - (47,359) (3,049) (50,422)
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Effect of foreign exchange
rate changes (55,419) (116,495) (1,042) (54,235)
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Net increase/(decrease) in
cash and cash equivalents 223,654 (607,107) (41,694) (429,031)
Cash and cash equivalents,
beginning of period 611,200 1,233,849 876,548 1,055,773
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Cash and cash equivalents,
end of period 834,854 626,742 834,854 626,742
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The TSX Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.
Contacts:
Ondine Biomedical Inc.
Carolyn Cross
Chairman and CEO
ccross@ondinebio.com
www.ondinebio.com
Canaccord Genuity Limited, Nominated Adviser
Mark Williams/Bhavesh Patel
+4420 7050 6500
