Exhibit 99.2
INDEX TO FINANCIAL STATEMENTS
| Page | ||
| MAINZ BIOMED N.V. | ||
| Six Month Ended June 30, 2022 and 2021 | ||
| Financial Statements (Unaudited): | ||
| Condensed Interim Consolidated Statements of Financial Position | F-2 | |
| Condensed Interim Consolidated Statements of Profit and Loss and Comprehensive Loss | F-3 | |
| Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity (Deficit) | F-4 | |
| Condensed Interim Consolidated Statements of Cash Flows | F-5 | |
| Notes to the Unaudited Condensed Interim Consolidated Financial Statements | F-6 |
F-1
Mainz Biomed N.V.
Condensed Interim Consolidated Statements of Financial Position
(Unaudited)
(Expressed in US Dollars).
| June 30, | December 31, | |||||||||
| Note | 2022 | 2021 | ||||||||
| ASSETS | ||||||||||
| Current Assets | ||||||||||
| Cash | $ | $ | ||||||||
| Trade and other receivables, net | 4 | |||||||||
| Inventories | ||||||||||
| Prepaid expenses | 5 | |||||||||
| Total Current Assets | ||||||||||
| Property and equipment | ||||||||||
| Right-of-use asset | 6 | |||||||||
| Other asset | ||||||||||
| Total assets | $ | $ | ||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
| Current Liabilities | ||||||||||
| Accounts payable and accrued liabilities | 7 | $ | $ | |||||||
| Accrued payroll | ||||||||||
| Accounts payable - related party | 13 | |||||||||
| Convertible debt - related party | 8 | |||||||||
| Loans payable | 9 | |||||||||
| Loans payable - related party | 9 | |||||||||
| Silent partnership | 10 | |||||||||
| Silent partnership - related party | 10 | |||||||||
| Lease liabilities | 6 | |||||||||
| Total current liabilities | ||||||||||
| Silent partnerships | 10 | |||||||||
| Silent partnerships - related party | 10 | |||||||||
| Lease liabilities | 6 | |||||||||
| Total Liabilities | ||||||||||
| Shareholder’s equity | ||||||||||
| Share capital | 11 | |||||||||
| Share premium | 11 | |||||||||
| Reserve | 11 | |||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||||
| Accumulated other comprehensive income | ||||||||||
| Total shareholders’ equity | ||||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||||
Nature of operations and going concern (Note 1)
Subsequent events (Note 21)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-2
Mainz Biomed N.V.
Condensed Interim Consolidated Statements of Profit and loss and Comprehensive Loss
(Unaudited)
(Expressed in US Dollars)
| Six months ended | ||||||||||
| June 30, | ||||||||||
| Note | 2022 | 2021 | ||||||||
| Revenue | $ | $ | ||||||||
| Cost of revenue | 12 | |||||||||
| Gross profit | ||||||||||
| Operating expenses | ||||||||||
| General and administrative | 17 | |||||||||
| Sales and marketing | 17 | |||||||||
| Research and development | 17 | |||||||||
| Total operating expenses | ||||||||||
| Loss from operations | ( | ) | ( | ) | ||||||
| Other income (expense) | ||||||||||
| Accretion expense | 8, 9, 10 | ( | ) | ( | ) | |||||
| Government grant – research and development | 14 | |||||||||
| Government grant – below market financing | ||||||||||
| Interest expense | ( | ) | ( | ) | ||||||
| Other income | ||||||||||
| Total other expense | ( | ) | ( | ) | ||||||
| Loss before income tax | ( | ) | ( | ) | ||||||
| Income taxes provision | ||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||||
| Foreign currency translation gain | ||||||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | ||||
| $ | ( | ) | $ | ( | ) | |||||
| Weighted average number of ordinary shares outstanding | ||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-3
Mainz Biomed N.V.
Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity (Deficit)
(Unaudited)
(Expressed in US Dollars)
For the Six Months Ended June 30, 2022
| Accumulated Other | Total | |||||||||||||||||||||||||||||
| Number of | Share | Share | Accumulated | comprehensive | Shareholders’ | |||||||||||||||||||||||||
| Note | shares | Capital | Premium | Reserve | Deficit | Income | Equity | |||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||
| Sale of ordinary shares | 11 | |||||||||||||||||||||||||||||
| Issuance of ordinary shares for exercise of warrants | 11 | ( | ) | |||||||||||||||||||||||||||
| Share based expense | 11 | |||||||||||||||||||||||||||||
| Stock option expense | 11 | - | ||||||||||||||||||||||||||||
| Net loss | - | ( | ) | |||||||||||||||||||||||||||
| Foreign currency translation | - | |||||||||||||||||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||
For the Six Months Ended June 30, 2021
| Accumulated Other | Total | |||||||||||||||||||||||||
| Number of | Share | Share | Accumulated | comprehensive | Shareholders’ | |||||||||||||||||||||
| shares | Capital | Premium | Reserve | Deficit | Income (loss) | Deficit | ||||||||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||
| Issuance of ordinary shares for conversion of debt | ||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||||
| Foreign currency translation | - | |||||||||||||||||||||||||
| Balance, June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-4
Mainz Biomed N.V.
Condensed Interim Consolidated Statements of Cash Flows
(Unaudited)
(Expressed in US Dollars)
| Six months ended | ||||||||||
| June 30, | ||||||||||
| Note | 2022 | 2021 | ||||||||
| Cash Flows From Operating Activities | ||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||
| Stock based compensation | 11 | |||||||||
| Depreciation and amortization | ||||||||||
| Bad debt expense | ||||||||||
| Accretion expense | 8, 9, 10 | |||||||||
| Changes in operating assets and liabilities: | ||||||||||
| Trade and other receivables | ( | ) | ( | ) | ||||||
| Inventory | ( | ) | ||||||||
| Prepaid expenses and other assets | ||||||||||
| Accounts payable and accrued liabilities | ||||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||||
| Cash Flows From Investing Activities | ||||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||||
| Cash Flows From Financing Activities | ||||||||||
| Sale of ordinary shares and warrants | 11 | |||||||||
| Warrant exercise proceeds | 11 | |||||||||
| Proceeds from silent partnerships | 11 | |||||||||
| Repayment of loans payable | 9 | ( | ) | |||||||
| Repayment of lease obligations | 6 | ( | ) | ( | ) | |||||
| 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 | $ | $ | ||||||||
| Issuance of common stock for conversion of debt and accrued interest | $ | $ | ||||||||
| Supplemental Cash Flow Disclosures: | ||||||||||
| Interest paid | $ | $ | ||||||||
| Tax paid | $ | $ | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-5
Mainz Biomed N.V.
Notes to the Condensed Interim Consolidated Financial Statements
(Unaudited)
(Expressed in US dollars)
June 30, 2022
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. 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,
Going Concern
The
Company has recurring losses, accumulated deficit totaling $
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.
F-6
2. BASIS OF PRESENTATION
Basis of Presentation and Statement of Compliance
These condensed interim financial statements, including comparatives, 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, 2021 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 interim financial statements were authorized for issuance by the Audit Committee of the Board of Directors on September 1, 2022.
New Accounting Standards
Standards, interpretations and amendments to standards and interpretations in the reporting period not yet effective and not yet applied
| ● | In February 2021, the International Accounting Standards Board issued narrow-scope amendments to IAS 1, Presentation of Financial Statements, IFRS Practice Statement 2, Making Materiality Judgements and IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors. The amendments are effective for annual periods beginning on or after January 1, 2023, although earlier application is permitted. The amendments will require the disclosure of material accounting policy information rather than disclosing significant accounting policies and clarify how to distinguish changes in accounting policies from changes in accounting estimates. We are currently assessing the impacts of the amended standards, but do not expect that our financial disclosure will be materially affected by the application of the amendments. |
| ● | In May 2021, the International Accounting Standards Board issued targeted amendments to IAS 12, Income Taxes. The amendments are effective for annual periods beginning on or after January 1, 2023, although earlier application is permitted. With a view to reducing diversity in reporting, the amendments will clarify that companies are required to recognize deferred taxes on transactions where both assets and liabilities are recognized, such as with leases and asset retirement (decommissioning) obligations. Based upon our current facts and circumstances, we do not expect our financial performance or disclosure to be materially affected by the application of the amended standard. |
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.
F-7
Reclassifications
Certain prior year amounts have been reclassified for consistency with the current year 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.
F-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; |
| ● | That Mainz Biomed N.V. did not constitute a business at the time of the contribution agreement; and |
| ● | 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. |
4. TRADE AND OTHER RECEIVABLES
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Accounts receivable | $ | $ | ||||||
| Less: allowance for doubtful accounts | ( | ) | ( | ) | ||||
| Accounts receivable, net | ||||||||
| VAT receivable | ||||||||
| Other | ||||||||
| $ | $ | |||||||
5. PREPAID AND OTHER CURRENT ASSETS
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Prepaid insurance | $ | $ | ||||||
| Other prepaid expense | ||||||||
| Security deposit | ||||||||
| $ | $ | |||||||
F-9
6. LEASES
Right-of-Use Assets
The Company’s leases certain assets under lease agreements.
| Office | Laboratory | |||||||||||||||||||
| Equipment | Equipment | Vehicles | Office lease | Total | ||||||||||||||||
| Cost | ||||||||||||||||||||
| Balance at January 1, 2021 | $ | $ | $ | $ | $ | |||||||||||||||
| Additions | ||||||||||||||||||||
| Effects of currency translation | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | $ | $ | |||||||||||||||
| Additions | ||||||||||||||||||||
| Effects of currency translation | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Balance at June 30, 2022 | $ | $ | $ | $ | $ | |||||||||||||||
| Accumulated amortization | ||||||||||||||||||||
| Balance at January 1, 2021 | $ | $ | $ | $ | $ | |||||||||||||||
| Amortization | ||||||||||||||||||||
| Effects of currency translation | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
| Balance at December 31, 2021 | $ | $ | $ | $ | $ | |||||||||||||||
| Amortization | ||||||||||||||||||||
| Effects of currency translation | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Balance at June 30, 2022 | $ | $ | $ | $ | $ | |||||||||||||||
As of June 30, 2022, management assessed that there were no events or changes in circumstances that would require impairment testing.
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, 2022, had an average expected life of
Lease Liabilities
The Company’s lease liabilities consist
of office and laboratory equipment and office space. The present value of future lease payments were measured using an incremental borrowing
rate of
| Total | ||||
| Balance as of January 1, 2021 | $ | |||
| Additions | ||||
| Interest expenses | ||||
| Lease payments | ( | ) | ||
| Effects of currency translation | ( | ) | ||
| As of December 31, 2021 | $ | |||
| Additions | ||||
| Interest expenses | ||||
| Lease payments | ( | ) | ||
| Effects of currency translation | ( | ) | ||
| As of June 30, 2022 | $ | |||
F-10
| Lease liabilities | June
30, | December 31, 2021 | ||||||
| Current portion | $ | $ | ||||||
| Long-term portion | ||||||||
| Total lease liabilities | $ | $ | ||||||
At June 30, 2022, the Company is committed to minimum lease payments as follows:
| Maturity analysis | June 30, 2022 | |||
| 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 | $ | |||
7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Payroll liabilities | ||||||||
| Bonus accrual | ||||||||
| VAT payable | ||||||||
| $ | $ | |||||||
8. 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
In November 2017,
F-11
During the year ended December 31, 2021, the loan
amount of EUR
A continuity of the Company’s Convertible Debt – Related Party is as follows:
| 2019 and 2020 Convertible Loans | 2017 Convertible Loans | Total | ||||||||||
| Balance, January 1, 2021 | $ | $ | $ | |||||||||
| Accretion | ||||||||||||
| Conversion | ( | ) | ( | ) | ( | ) | ||||||
| Effects of currency translation | ( | ) | ( | ) | ( | ) | ||||||
| Balance, December 31, 2021 | $ | $ | $ | |||||||||
| Accretion | ||||||||||||
| Effects of currency translation | ( | ) | ( | ) | ( | ) | ||||||
| Balance, June 30, 2022 | $ | $ | $ | |||||||||
9. LOANS PAYABLE
During the year ended December 31, 2020, the Company
entered into a loan agreement for the principal amount of EUR
Between the years of 2011 to 2013, the Company
received loans from related parties totaling EUR
In 2017, the Company obtained a line of credit
of up to EUR
During the six months ended June 30, 2022, loans payable was fully paid off.
A continuity of the Company’s loans payable is as follows:
| 0.1% Loan | Related
party | Related
party | Total | |||||||||||||
| Balance, January 1, 2021 | $ | $ | $ | $ | ||||||||||||
| Issued during the year | ||||||||||||||||
| Extinguished during the year | ( | ) | ( | ) | ||||||||||||
| Accretion | ||||||||||||||||
| Effects of currency translation | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | ||||||||||||
| Extinguished during the year | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Effects of currency translation | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Balance, June 30, 2022 | $ | $ | $ | $ | ||||||||||||
F-12
10. 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
Between the years of 2013 to 2016, the Company entered into silent partnership agreements for loans totaling EUR 798,694 (approximately $915,383) (the “8.5% SPAs”). Under the 8.5% SPAs, the Company is to repay EUR 398,634 (approximately $408,496) of the loans by June 30, 2023 and EUR 400,000 (approximately $409,859) of the loans matures on December 31, 2025. The Company must pay a minimum of 8.5% interest per annum on the loans. The lenders are entitled to 1.66% of the Company’s net income each year should the Company be profitable and provided that the amount paid does not exceed the principal amount of the debt; the lenders do not partake in the Company’s losses. At maturity, the lenders of the 8.5% SPAs have the option to demand an additional payment equal to 30% of the principal of the loans as a Final Remuneration. The Final Remuneration is considered to be cost of issuing the debt and as such, the initial fair value of the 8.5% SPAs was determined to be EUR 772,568 (approximately $85,440), determined using an estimated effective interest rate of 11.5%. Under the agreements, the lenders also agreed to invest in the Company and contributed EUR 676,366 (approximately $775,183) to acquire 27,752 shares of the Company between the years of 2013 and 2016. During the year ended December 31, 2020, EUR 80,000 (approximately $99,527) of the 8.5% SPAs was extinguished as the lender, who is also a customer of the Company, elected to offset the debt amount against amounts in trade receivables due to the Company. The debtor did not demand the Final Remuneration and the Company recognized a gain on the extinguishment of $8,214.
In 2010, the Company entered into a silent partnership
agreement whereby the lender agreed to lend the Company EUR
F-13
A continuity of the Company’s silent partnerships is as follows:
| 3% SPAs | 3.5% SPAs | 8.5% SPAs | 8% SPAs | Total | ||||||||||||||||
| Balance, January 1, 2021 | $ | $ | $ | $ | $ | |||||||||||||||
| Issued during the year | ||||||||||||||||||||
| Discount | ( | ) | ( | ) | ||||||||||||||||
| Accretion | ||||||||||||||||||||
| Effects of currency translation | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | $ | |||||||||||||||
| Accretion | ||||||||||||||||||||
| Effects of currency translation | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Balance, June 30, 2022 | $ | $ | $ | $ | $ | |||||||||||||||
11. EQUITY
Ordinary shares
The Company has
During the six months ended June 30, 2022, the Company issued ordinary shares as follows:
| ● |
| ● |
| ● |
Warrants
During the year ended December 31, 2021, in conjunction
with private sales of ordinary shares, the Company issued
For the year ended December 31 2021, the estimated fair values of the warrants measured are as follows:
| December 31, | ||||
| 2021 | ||||
| Stock price at time of issuance | $ | |||
| Exercise price | $ | |||
| Expected term | ||||
| Expected average volatility | % | |||
| Expected dividend yield | ||||
| Risk-free interest rate | % | |||
F-14
A summary of activity during the six months ended June 30, 2022 is as follows:
| Warrants | Weighted-Average | Weighted-Average | ||||||||||
| Outstanding | Exercise Price | Life (years) | ||||||||||
| Balance as of December 31, 2021 | $ | |||||||||||
| Grants | ||||||||||||
| Exercised | ( | ) | ||||||||||
| Expired | ||||||||||||
| Balance as of June 30, 2022 | $ | |||||||||||
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 year ended December 31, 2021, the Company
granted
During the six months ended June 30, 2022, the
Company granted
During the six months ended June 30, 2022, the
Company recorded share-based compensation of $
For the six months ended June 30, 2022, the estimated fair values of the stock options are as follows:
| June 30, | ||||
| 2022 | ||||
| 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, 2022 follows:
| Stock Options | Weighted-Average | Weighted-Average | ||||||||||
| Outstanding | Exercise Price | Life (years) | ||||||||||
| Balance as of December 31, 2021 | $ | |||||||||||
| Grants | ||||||||||||
| Exercised | ||||||||||||
| Expiry | ||||||||||||
| Balance as of June 30, 2022 | $ | |||||||||||
| Exercisable as of June 30, 2022 | $ | |||||||||||
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12. COST OF REVENUE
For the six-month periods ended June 30, 2022 and 2021, cost of revenue consisted of test kit materials.
13. 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 and Chief Scientific Officer. The remuneration of directors and key management personnel during the six months ended June 30, 2022 and 2021 was as follows:
| Six months ended | ||||||||
| June 30, | ||||||||
| 2022 | 2021 | |||||||
| Salaries and benefits | $ | $ | ||||||
Remuneration paid to related parties other than key personnel during the six months ended June 30, 2022 and 2021 was as follows:
| Six months ended | ||||||||
| June 30, | ||||||||
| 2022 | 2021 | |||||||
| Salaries and benefits | $ | $ | ||||||
During the six months ended June 30, 2022 and
2021, the Company incurred interest expense of $
During the six months ended June 30, 2022 and
2021, the Company incurred accretion expense of $
As at June 30, 2022, EUR 30,000 (approximately $31,452) with a carrying value of $30,848 (2021 – $33,767) of the 2019 and 2020 Convertible Loans were owing to the Chief Scientific Officer of the Company and a major shareholder of the Company, respectively. The amounts are due on September 30, 2022.
As at June 30, 2022, EUR 350,000 (approximately $366,940) (2021 – EUR 350,000) with a carrying value of $445,174 (2021 – $498,972) of the 8.5% SPAs were owing to major shareholders of the Company. EUR 150,000 of the loan is due on June 30, 2023 and EUR 200,000 of the loan is due on December 31, 2025.
During the six months ended June 30, 2022 and 2021, we recorded expenses of $126,173 and $0, respectively, for the cost of royalties and other associated costs owed to ColoAlert AS, the company from which we exclusively license the ColoAlert product. Our Board Chairman is also a significant equity holder of ColoAlert AS. During the six months ended June 30, 2022 and 2021, we paid ColoAlert AS $27,335 and $0, respectively. On June 30, 2022 and December 31, 2021, we had liabilities recorded for unpaid costs to ColoAlert AS of $104,840 and $84,750, respectively, recorded as Accounts payable – related party.
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14. GOVERNMENT GRANTS
The Company receives government grants related to its research and development activities. The amount of government grants received during the periods ended June 30, 2022 and 2021 and recognized as research grant revenue were as follows:
| Six months ended | ||||||||
| June 30, | ||||||||
| Research and Development Projects | 2022 | 2021 | ||||||
| Rapid detection of antibody-based pathogens | $ | $ | ||||||
| Multi-marker test for the early detection of pancreatic cancer | ||||||||
| $ | $ | |||||||
As of June 30, 2022 and December 31, 2021, 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 $
15. 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 more than 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. The Company has been determined that no credit loss provision is required, as all
amounts outstanding are considered collectible. During the six months ended June 30, 2022, the Company incurred $
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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 at June 30, 2022, the Company
had an unrestricted cash balance of $
Historically, the Company’s primary source of funding has been the issuance of equity securities for cash, primarily through 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.
The following is an analysis of the contractual maturities of the Company’s financial liabilities as at June 30, 2022:
| Within | Between one and | More than | ||||||||||
| one year | five years | five years | ||||||||||
| Accounts payable and accrued liabilities | $ | $ | $ | |||||||||
| Accounts payable - related party | ||||||||||||
| Convertible debt - related party | ||||||||||||
| Silent partnerships | ||||||||||||
| Lease liabilities | ||||||||||||
| $ | $ | $ | ||||||||||
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.
16. CONCENTRATIONS
Major customers are defined as customers that
each individually account for greater than
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17. OPERATING EXPENSES
For the years ended June 30, 2022 and 2021, operating expenses consisted of the follows,
| General and administrative | 2022 | 2021 | ||||||
| Bad Debt | $ | $ | ||||||
| Consulting expenses | ||||||||
| Depreciation and amortization | ||||||||
| Office expenses | ||||||||
| Professional fees | ||||||||
| Salaries and benefits | ||||||||
| Employee stock option expense | ||||||||
| Travel and entertainment | ||||||||
| Royalty expenses | ||||||||
| $ | $ | |||||||
| Sales and marketing | 2022 | 2021 | ||||||
| Marketing and advertising | $ | $ | ||||||
| Consulting expenses | ||||||||
| Depreciation and amortization | ||||||||
| Office expenses | ||||||||
| Salaries and Benefits | ||||||||
| $ | $ | |||||||
| Research and development | 2022 | 2021 | ||||||
| Consulting expenses | $ | $ | ||||||
| Depreciation and amortization | ||||||||
| Lab and office expenses | ||||||||
| Salaries and benefits | ||||||||
| Materials for clinical study | ||||||||
| $ | $ | |||||||
F-19