Consolidated Financial Statements Consolidated Statements of Financial Position The company's financial position weakened significantly by June 30, 2024, as total assets fell 45% and shareholders' equity turned into a $4.14 million deficit Consolidated Statements of Financial Position (Unaudited) | | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $2,389,703 | $8,979,896 | | Total Assets | $8,454,030 | $15,409,028 | | Total Current Liabilities | $10,013,944 | $9,236,936 | | Total Liabilities | $12,592,730 | $12,159,802 | | Total Shareholders' Equity (Deficit) | ($4,138,700) | $3,249,226 | | Total Liabilities and Shareholders' Equity (Deficit) | $8,454,030 | $15,409,028 | - Cash decreased drastically from $7,070,925 at the end of 2023 to $977,764 at June 30, 20242 - The accumulated deficit increased from $(69,328,021) to $(80,351,783) during the first six months of 20242 Consolidated Statements of Comprehensive Loss The company reported an improved net loss of $11.02 million for H1 2024, down from $14.81 million YoY, driven by a 31.1% reduction in operating expenses Six Months Ended June 30, Performance Comparison | Metric | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Revenue | $520,773 | $499,049 | +4.4% | | Gross Margin | $319,038 | $287,739 | +10.9% | | Total Operating Expenses | $10,126,366 | $14,701,385 | -31.1% | | Loss from Operations | ($9,807,328) | ($14,413,646) | +32.0% | | Net Loss | ($11,023,762) | ($14,812,643) | +25.6% | | Basic and Diluted Loss per Share | ($0.49) | ($1.00) | +51.0% | - The reduction in operating expenses was driven by decreases in Sales and Marketing ($2.36M vs $3.99M YoY), Research and Development ($3.24M vs $5.48M YoY), and General and Administrative ($4.52M vs $5.23M YoY) costs4 Consolidated Statement of Changes in Shareholders' Equity (Deficit) Shareholders' equity shifted from a $3.25 million surplus to a $4.14 million deficit, primarily due to the period's $11.02 million net loss Changes in Shareholders' Equity (Deficit) for the Six Months Ended June 30, 2024 | Description | Amount (USD) | | :--- | :--- | | Balance, December 31, 2023 | $3,249,226 | | Sale of ordinary shares | $515,262 | | Issuance of ordinary shares for conversion of debt | $2,154,557 | | Stock option expense | $1,028,383 | | Net loss | ($11,023,762) | | Foreign currency translation | ($62,366) | | Balance, June 30, 2024 | ($4,138,700) | Consolidated Statements of Cash Flows The company experienced a net cash decrease of $6.09 million in H1 2024, driven by an $8.14 million operating cash burn not fully offset by financing activities Cash Flow Summary (Six Months Ended June 30) | Cash Flow Category | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | ($8,144,745) | ($10,778,125) | | Net cash used in investing activities | ($420,660) | ($1,524,555) | | Net cash provided by financing activities | $2,551,325 | $6,192,507 | | Net change in cash | ($6,093,161) | ($6,230,688) | | Cash at end of period | $977,764 | $10,911,087 | - Non-cash financing activities included the issuance of $2,154,557 in ordinary shares for the conversion of debt9 Notes to the Condensed Consolidated Financial Statements Note 1: Nature of Operations and Going Concern The company's recurring losses and negative cash flow raise substantial doubt about its ability to continue as a going concern, prompting significant cost-cutting measures - The company's flagship product, ColoAlert, is marketed in Europe, and a next-generation product is in development for the US and European markets12 - Recurring losses, an accumulated deficit of $80.4 million, and negative operating cash flow of $8.1 million raise substantial doubt about the company's ability to continue as a going concern14 - Management plans to fund operations through future financing and has implemented cost reductions, including a 65% reduction in personnel and the sale of its European Oncology Lab15 Note 2: Basis of Presentation The interim financial statements are prepared under IAS 34 and should be read with the 2023 annual report, with the company assessing the future impact of IFRS 18 - The financial statements are prepared in accordance with IAS 34, "Interim Financial Reporting" and IFRS17 - The company is assessing the impact of the new IFRS 18 standard, which will require changes to the presentation of the statement of operations and cash flows1920 Note 3: Summary of Significant Accounting Policies and Use of Estimates and Judgments Key accounting policies include deferring revenue until test results are delivered and expensing all R&D costs, with significant judgments on going concern and asset valuation - Revenue from sales to patients is deferred until the test sample is returned to the lab and results have been delivered31 - All research and development costs are expensed as incurred as they do not meet capitalization criteria under IAS 383369 - Critical accounting judgments include the assessment of the company's ability to continue as a going concern, determination of lease terms, and impairment testing of long-lived assets69 Note 12: Convertible Debt The company holds significant convertible debt with a carrying amount of $5.8 million, primarily from a Pre-Paid Advance Agreement with a variable conversion price - On April 18, 2024, the company sold a third Promissory Note for $3.3 million in principal, receiving $2.97 million in net proceeds96 - The Promissory Notes are convertible at a price equal to the lower of a fixed price or 92% of the average of the two lowest daily VWAPs during the eight trading days prior to conversion, with a floor price of $2.0098 Convertible Promissory Notes Activity (H1 2024) | Description | Face Value | Carrying Amount (Fair Value) | | :--- | :--- | :--- | | Balance at Dec 31, 2023 | $6,400,000 | $4,859,000 | | Issuance of notes | $3,300,000 | $2,970,000 | | Repayments | ($787,633) | ($787,633) | | Conversion to shares | ($1,770,577) | ($1,770,577) | | Change in fair value | - | $528,210 | | Balance at June 30, 2024 | $7,141,790 | $5,799,000 | Note 14: Equity The company increased authorized shares and issued new shares for cash and debt conversion, with 6.6 million warrants and 2.7 million stock options outstanding - Shareholders approved an increase of authorized ordinary shares from 45 million up to a potential 225 million109 - During H1 2024, the company issued 1,055,000 ordinary shares for $515,262 and 3,366,093 ordinary shares for the conversion of debt valued at $2,154,557111 Warrants and Stock Options Outstanding at June 30, 2024 | Security | Outstanding | Weighted Avg. Exercise Price | Weighted Avg. Life (years) | | :--- | :--- | :--- | :--- | | Warrants | 6,597,500 | $1.86 | 2.90 | | Stock Options | 2,727,150 | $6.89 | 7.89 | Note 17: Financial Instrument Risk Management The company faces significant liquidity risk due to its low cash balance, alongside credit and foreign exchange risks, while focusing on raising capital for growth - The company faces significant liquidity risk, with a cash balance of only $977,764 as of June 30, 2024, and its ability to meet obligations depends on uncertain future capital raises129131 - Capital management strategy relies on raising funds through the sale of ordinary shares and other forms of equity and debt financing to fund continued growth134 - The company is exposed to foreign exchange risk as it operates in Germany (functional currency is Euro) but its reporting currency is the U.S. Dollar132 Note 19: Operating Expenses Total operating expenses decreased significantly to $10.1 million in H1 2024, driven by major reductions in clinical study, marketing, and advertising costs Operating Expenses Breakdown (Six Months Ended June 30) | Expense Category | 2024 | 2023 | | :--- | :--- | :--- | | Sales and marketing | $2,361,105 | $3,992,975 | | Research and development | $3,242,622 | $5,481,229 | | General and administrative | $4,522,639 | $5,227,181 | | Total Operating Expenses | $10,126,366 | $14,701,385 | - Clinical study costs within R&D dropped significantly from $2,162,000 in H1 2023 to $322,000 in H1 2024136 - Marketing and advertising expenses were more than halved, decreasing from $2,176,808 in H1 2023 to $885,051 in H1 2024136 Note 20: Subsequent Events Post-period, the company initiated a major restructuring including a 65% personnel reduction and continued to raise capital through its PPA and a new promissory note - The company implemented significant cost-reduction efforts, including a 65% reduction of personnel, reduction of external consulting costs, and the sale/closure of its European Oncology Lab business139 - The salaries of the CEO and CFO were reduced to 60% and 50% of their original salaries, respectively, effective November 1, 2024139 - On October 8, 2024, the company issued a fourth promissory note under its PPA for a principal amount of $1,500,000 with a 10% original issue discount141
Mainz Biomed(MYNZ) - 2024 Q2 - Quarterly Report