Interim / Quarterly Report • Sep 21, 2018
Interim / Quarterly Report
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A Public Limited Company (Société anonyme) with share capital of 1,008,053.52 euros Registered office: 9 rue d'Enghien 75010 Paris, France 431 268 028 in the Paris Trade and Companies Register
| Contents 2 | |
|---|---|
| 2018 Half-year activity report3 | |
| Consolidated financial statements prepared in accordance with IFRS, as of June 30, 20187 | |
| Statutory Auditors' Review Report on the half-yearly financial information 25 | |
| Attestation of the person responsible for the half-year financial report 28 |
• Sales declined 18%, primarily attributable to the first quarter with accelerating momentum in the second quarter
• Gross margin of 64% compared to 68% in first half of 2017, due to lag between Q2 2018 placements and usage
| (in € thousands) – IFRS | 1H 2018 (June 30, 2018) |
1H 2017 (June 30, 2017) |
Change % |
|---|---|---|---|
| Operating Revenue | |||
| Sales | 2,707 | 3,285 | (18%) |
| Other Income | 525 | 469 | 12% |
| Total Revenue | 3,232 | 3,753 | (14%) |
| Operating Expenses | |||
| Cost of Sales | (987) | (1,040) | (5%) |
| Gross Margin (%) | 64% | 68% | |
| Research & Development | (2,235) | (2,196) | 2% |
| Sales & Marketing | (4,376) | (4,211) | 4% |
| Administrative Expenses | (2,069) | (1,664) | 24% |
| Share-Based Payments | (43) | (183) | (426%) |
| Total Operating Expenses | (9,712) | (9,294) | 4% |
| Operating Profit (Loss) | (6,479) | (5,540) | 17% |
| Net Profit (Loss) | (6,836) | (5,787) | 18% |
As previously reported, the Company saw an 18% decline in sales in the first half of 2018, primarily attributable to a 35% decline in the first quarter, which was partially offset by accelerating momentum in the second quarter. While second quarter 2018 sales were stable compared to the same period prior year, we demonstrated 60% sequential growth driven by a significant increase in second quarter consumable sales. The Company shipped 25 Cellvizio systems in the first half of 2018, including 16 systems placed under consignment, compared to 22 systems in the first half of 2017, including 8 systems under consignment. The 16 systems consigned in the first half of 2018 not only represent a 100% increase compared to first half 2017 placements of 8 systems, but also exceed the 13 systems placed for all of 2017. In the first half of the year, revenue generated by the pay-per-use program declined by 14% compared to the same period prior year, as the limited number of sales representatives operating in the United States in the first quarter resulted in low utilization.
Clinical sales in the US & Canada in the first half of 2018 were €1.3 million, a decrease of 7% compared to the same period last year. A total of 16 systems were consigned to the U.S. & Canada in the first half of the year, of which 11 systems were placed during the second quarter in addition to the five placed during the first quarter, reflecting the U.S. sales team's early ability to execute.
Clinical sales increased by 29% in the Asia-Pacific region as the Company continued generating topline growth in China, driven by our partner's activities. This was offset by a 48% decline in EMEA coupled with an 87% decline in LATAM as the Company continued to focus its resources on the growth of its core clinical business in the U.S.
As stated in prior quarters, pre-clinical sales are by nature less recurring than clinical ones, resulting in a difficult comparison from one period to another. Pre-clinical sales declined by 23% in the first half 2018 compared to the year-ago period.
Gross margin in the first half of 2018 was 64% compared to gross margin of 68% in first half of 2017 due to the time lag between the production and delivery costs of the pay-per-use probes and the associated recurring 3 revenues. This effect is accentuated by the strong investment in pay-per-use probes at the end of the second quarter, which has not yet had a corresponding impact on sales.
Sales and marketing expenses in the first half of 2018, including spending on clinical affairs, regulatory and reimbursement, were €4,376 thousand, a 4% increase compared to €4,211 thousand in the prior year. This increase was anticipated following the restructuring of our U.S. sales team, which was completed in the first quarter of 2018, and reflects the Company's commercial and marketing investments required to support the deployment of the pay-per-use model in the U.S.
Research and development expenses in the first half of 2018 were €2,235 thousand, an increase of 2% compared with €2,196 thousand in the prior year. Taking into account the research tax credit, net research and development expenses amounted to €1,726 thousand for the first half of 2018.
General and administrative expenses in the first half of 2018 were €2,069 thousand, a 24% increase compared with €1,664 thousand in the prior year. This increase reflects unfilled positions in 2017 (Finance and HR) as well as recruitment costs in the United States as part of the reconstitution of our American sales team in 2018.
Total operating expenses, including cost of sales, amounted to €9,712 thousand in first half of 2018, compared with €9,294 thousand in the same period last year. This amount includes €936 thousand in depreciation and provisions, up €355 thousand from first half of 2017.
Operating loss in the first half of 2018 was €6,479 thousand compared to €5,540 thousand in the prior year, reflecting the impact of decreased sales [of €578 thousand] coupled with the increase in depreciation and provisions [of €355 thousand].
Net loss in the first half of 2018 was €6,836 thousand compared to €5,787 thousand in the prior year.
As of June 30, 2018, the Company had €15.1 million in available cash.
Cash burn (total cash flows excluding cash flows from financing activities) remained stable at €5,860 thousand in the first half of 2018 compared to €5,689 thousand in first half 2017.
Mauna Kea Technologies had 98 employees as of June 30, 2018, compared to 90 as of December 31, 2017 and 81 as of June 30, 2017.
Cellvizio® obtains positive assessment from the Korean National Evidence-based healthcare Collaborating Agency (NECA). New Health Technology Assessment (nHTA) Committee recognizes confocal laser endomicroscopy as "safe and effective technology in application for esophagus, stomach, bile duct". New Health Technology status enables specific reimbursement codes for Cellvizio® procedures in South Korea, third largest medical market in Asia
Avril 2018
Cellvizio® Demonstrates Superior Identification of Patients at Risk for Esophageal Cancer Compared to Current Diagnostic Standard. Results from new clinical study that enrolled 172 patients at 8 nonacademic centers in the United-States was presented at 2018 World Congress of Endoscopic Surgery hosted by SAGES and CAGS on Thursday, April 12, 2018
In Vivo Confocal Laser Endomicroscopy with Cellvizio® allows the discovery of a previously unknown human structure, the interstitium, a study conducted on the initiative of researchers who used Cellvizio® to characterize an unknown structure of the human body, the "interstitium", up to know identified by standard histological techniques. The article, titled "Structure and Distribution of unrecognized Interstitium in Human Tissue" was published in Nature Group's Scientific Reports. According to the publication in Scientific Reports, this discovery may have significance in cancer metastasis and other diseases and could lead to new therapeutic approaches for cancer
Mai 2018
20 Presentations Highlighting Cellvizio's® Clinical Value in Evaluating IBDs and Pancreatic Cysts at DDW 2018. These abstracts focus on Barrett's esophagus, Inflammatory Bowel Disease / Syndrome (IBD / IBS), pancreatic cyst and other gastrointestinal diseases.
June 2018
Publication of a prospective multicenter study (ClinicalTrials.gov Identifier: NCT01033201) that demonstrates the potential of Cellvizio to aid in the diagnosis of acute cellular rejection in lung transplant patients. Cellvizio's optical biopsy could become a safe and effective alternative to invasive biopsies in transplanted patients
Obtaining U.S. Food and Drug Administration (FDA) 510(k) clearance of the Cellvizio® 100 series F400 and F800 with a new Confocal MiniprobeTM, the CranioFlexTM, to be used during neurosurgical procedures. This marks the 15th U.S. FDA 510(k) clearance of Cellvizio® and the firstever FDA clearance for CLE applications in neurosurgery.
The Company is mainly focusing its efforts first on the American market, where conditions have improved significantly and particularly the transition to a consignment sale.
Furthermore, the implementation of our "Vision 2020" strategic plan, which is set to make Mauna Kea Technologies a leading player in the digital transformation of medicine and surgery, is now well underway. After successfully bringing microscopes into the patient's body, the Company is now on the verge of bringing in vivo the connected laboratory of the future, harnessing the full power of the latest artificial intelligence techniques now available in the Cloud and the advent of next-generation molecular markers.
No significant events occurred after the 2018 half-year closing.
The risks faced by the company are specified in Chapter 4 "Risk Factors" of the Company's 2017 Registration Document.
Relationships with related parties are covered in Note 21 to the 2018 half-yearly financial statements.
Public Limited Company (Société anonyme) with share capital of 1,008,053.52 euros Registered office: 9 rue d'Enghien 75010 Paris, France 431 268 028 in the Paris Trade and Companies Register
| Note | 06/30/18 | 12/31/17 | |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Intangible assets | 3 | 1,873 | 2,100 |
| Property, plant, and equipment | 4 | 1,813 | 1,466 |
| Non-current financial assets | 140 | 138 | |
| Total non-current assets | 3,825 | 3,704 | |
| Current assets | |||
| Inventories & Work in progress | 5 | 2,251 | 1,969 |
| Trade receivables | 6 | 1,618 | 2,034 |
| Other current assets | 6 | 2,333 | 2,462 |
| Current financial assets | 40 | 125 | |
| Cash and cash equivalents | 7 | 15,132 | 17,453 |
| Total current assets | 21,374 | 24,043 | |
| TOTAL ASSETS | 25,199 | 27,747 |
| Note | 06/30/18 | 12/31/17 | |
|---|---|---|---|
| EQUITY AND LIABILITIES | |||
| Equity | |||
| Issued capital | 8 | 1,008 | 974 |
| Share premium | 8 | 91,738 | 87,973 |
| Reserves | (72,189) | (61,896) | |
| Foreign currency translation on reserves | 17 | (61) | |
| Profit / (loss) | (6,836) | (10,245) | |
| Total equity | 13,738 | 16,744 | |
| Non-current liabilities | |||
| Long-term loans and borrowings | 9 | 2,749 | 2,567 |
| Non-current provisions | 10 | 379 | 283 |
| Total non-current liabilities | 3,128 | 6,850 | |
| Current liabilities | |||
| Short-term loans and borrowings | 9 | 4,333 | 386 |
| Trade payables | 1,910 | 1,663 | |
| Other current liabilities | 11 | 2,091 | 2,104 |
| Total current liabilities | 8,334 | 4,153 | |
| TOTAL EQUITY AND LIABILITIES | 25,199 | 27,747 |
| Note | 06/30/18 | 06/30/17 | |
|---|---|---|---|
| Operating Revenue | |||
| Sales | 12 | 2,707 | 3,285 |
| Other income | 12 | 525 | 469 |
| Total revenue | 3,232 | 3,753 | |
| Operating Expenses | |||
| Cost of sales | (987) | (1,040) | |
| Gross margin | 64% | 68% | |
| Research & Development | 15 | (2,235) | (2,196) |
| Sales & Marketing | 15 | (4,376) | (4,211) |
| Administrative expenses | 15 | (2,069) | (1,664) |
| Share-based payments | 8 | (43) | (183) |
| Total expenses | (9,712) | (9,294) | |
| Current operating profit | |||
| (6,479) | (5,540) | ||
| Financial revenue | 16 | 38 | 111 |
| Financial expenses | 16 | (393) | (359) |
| Profit before tax | (6,836) | (5,787) | |
| Income tax expense | 17 | ||
| Profit / (loss) | (6,836) | (5,787) | |
| Other comprehensive income | |||
| Items that will not be reclassified to profit or loss | |||
| Actuarial differences on defined benefit plans | 10 | (5) | (11) |
| Total items that will not be reclassified to profit or loss | (5) | (11) | |
| Items that will be reclassified subsequently to profit or loss | |||
| Exchange differences on translation of foreign operations | 78 | (76) | |
| Total items that will be reclassified subsequently to profit or loss | 78 | (76) | |
| Other comprehensive income for the year, net of tax | |||
| 73 | (87) | ||
| Comprehensive income | (6,763) | (5,874) | |
| Weighted average number of shares outstanding (in thousands) | 25,092 | 20,474 | |
| Basic earnings per share (EUR/share) | 19 | (0.27) | (0.28) |
| Weighted average number of potential shares (in thousands) | 27,183 | 22,324 |
| Issued capital |
Share premium |
Treasury shares |
Reserves | Foreign currency translation on reserves |
Profit / (loss) |
Total equity |
||
|---|---|---|---|---|---|---|---|---|
| Equity as of | 12/31/16 | 800 | 72,382 | (72) | (52,322) | 113 | (9,744) | 11,157 |
| Allocation of the profit / (loss) | (9,744) | 9,744 | ||||||
| Capital transactions | 174 | 15,591 | 15,765 | |||||
| Share-based payment transactions | 285 | 210 | ||||||
| Treasury share transactions | (13) | 44 | 31 | |||||
| Comprehensive income as of | 12/31/17 | (174) | (10,245) | (10,419) | ||||
| Equity as of | 12/31/17 | 974 | 87,973 | (84) | (61,812) | (61) | (10,245) | 16,744 |
| Allocation of the profit / (loss) | (10,245) | 10,245 | ||||||
| Capital transactions | 34 | 3,765 | 3,799 | |||||
| Share-based payment transactions | 43 | 43 | ||||||
| Treasury share transactions | (44) | (42) | (86) | |||||
| Comprehensive income as of | 06/30/18 | (5) | 78 | (6,836) | (6,763) | |||
| Equity as of | 06/30/18 | 1,008 | 91,738 | (129) | (72,061) | 17 | (6,836) | 13,738 |
| Note | 06/30/18 | 06/30/17 | |
|---|---|---|---|
| Cash flows from operating activities | |||
| Profit / (loss) | (6,836) | (5,787) | |
| Elimination of amortization, depreciation and provisions | 597 | 580 | |
| Share-based payment transaction expense and revenue | 8 | 43 | 183 |
| Other items excluded from the auto-financing capacity | 312 | 75 | |
| Revenue and expenses related to the discounting of repayable advances | 12/16 | 33 | 35 |
| Revenue and expenses related to the bond | 12/16 | 39 | 30 |
| Financial interest | 16 | 236 | 157 |
| Other non-cash items | 4 | (147) | |
| Capital gain or loss from asset sales | 4 | 0 | 4 |
| Auto-financing capacity | (5,906) | (4,946) | |
| Change in WCR related to business activities | 268 | (163) | |
| Inventories & Work in progress | (521) | (28) | |
| Trade receivables | 433 | (81) | |
| Other current assets | 151 | 817 | |
| Trade payables | 238 | (843) | |
| Other current liabilities | (33) | (28) | |
| Net cash flows from operating activities (A) | (5,638) | (5,109) | |
| Cash flows from investing activities | |||
| Purchase of property, plant and equipment and intangible assets | 3/4 | (308) | (628) |
| Proceeds from sale of property, plant and equipment and intangible assets | 1 | 1 | |
| Change in loans and advances granted | 85 | 46 | |
| Net cash flows from investing activities (B) | (222) | (581) | |
| Cash flows from financing activities | |||
| Proceeds from exercise of share options | 8 | 3,799 | 2,740 |
| Repurchases and resales of treasury shares | (86) | (37) | |
| Net financial interest paid | 16 | (175) | (110) |
| Other cash flows from financing operations | 9 | (4) | 3,662 |
| Net cash flows from financing activities (C) | 3,534 | 6,255 | |
| Net foreign exchange difference (D) | 5 | (22) | |
| Change in cash (A) + (B) + (C) + (D) | (2,321) | 544 | |
| Cash at the beginning of the period | 7 | 17,453 | 9,053 |
| Cash at the end of the period | 7 | 15,132 | 9,596 |
| Change in cash | (2,321) | 544 |
| Note 1: Accounting principles13 | |
|---|---|
| Note 2: Company and scope 14 | |
| Note 3: Long-term intangible assets 15 | |
| Note 4: Property, plant, and equipment 15 | |
| Note 5: Inventories and work in progress 16 | |
| Note 6: Trade receivables and other current assets 16 | |
| Note 7: Cash and cash equivalents 17 | |
| Note 8: Share capital 17 | |
| Note 9: Loans and financial debts 18 | |
| Note 10: Non-current provisions 19 | |
| Note 11: Other current liabilities 19 | |
| Note 12: Sales and operating revenue20 | |
| Note 13: Financial instruments on balance sheet 21 | |
| Note 14: Employee benefits expense 22 | |
| Note 15: External expenses 22 | |
| Note 16: Financial revenue and expenses 23 | |
| Note 17: Income tax expense 23 | |
| Note 18: Commitments 23 | |
| Note 19: Net earnings per share 24 | |
| Note 20: Management of financial risk24 | |
| Note 21: Related party transactions24 | |
| Note 22: Subsequent events24 |
The financial statements are presented in thousands of euros.
The condensed consolidated financial statements of the first half-year 2018, approved by the Board of Directors' meeting on September 19, 2018, have been prepared in accordance with International Financial Reporting Standard IAS 34 "Interim Financial Reporting".
The going concern assumption was applied by the Board of Directors, taking into account the cash available as of June 30, 2018, which amounted to €15 million, and according to its expected cash flow. These elements should cover the Group's cash requirements until June 30, 2019, including in the event of the early repayment of the loan contracted with IPF in the amount of €4 million due to the non-compliance at June 30, 2018 with the financial ratios set out in the loan agreement (see notes 18 and 9)". The Company intends also to implement the appropriate financing solutions to cover its cash requirements beyond that date.
Since they are condensed financial statements, the half-year consolidated financial statements do not include all the financial disclosures required in a full set of annual financial statements. They should therefore be read in conjunction with the Group's financial statements for the year ended December 31, 2017, subject to the specific characteristics for the preparation of interim financial statements, described below.
Aside from the specific characteristics for the preparation of interim financial statements set out in Note 1.3 "Basis of preparation of half-year financial statements", the significant accounting policies used are the same as those used for the preparation of the consolidated financial statements for the financial year ended December 31, 2016, with the exception of the following new standards, revised standards and interpretations adopted by the European Union and mandatory for financial years beginning on or after January 1, 2018:
The new standards, amendments to existing standards and interpretations whose application is mandatory for financial years beginning on or after January 1, 2018 have no material impact on the Group's financial statements and earnings. This pertains to the following standards:
IFRS 9 changes the conditions for the recognition of hedging operations and the main accounting categories of financial assets and liabilities. It also modifies the recognition of the credit risk relating to financial assets by basing this on the expected losses approach rather than on losses incurred.
The Group has not identified any significant impact from the application of these new principles on opening equity at January 1, 2018. The Group does not expect any significant impact in fiscal year 2018.
IFRS 15, which replaces IAS 18 and IAS 11, is applicable from January 1, 2018.
IFRS 15 specifies as a new basic principle the recognition of income when control is transferred to the customer. IFRS 15 also sets out specific guidance regarding the disaggregation of contracts into performance obligations and the measurement of revenue in certain cases.
Following a full analysis of the changes in the standards across all its activities, the Group has not identified any significant impact from the application of these new principles on opening equity at January 1, 2018. The Group does not expect any significant impact in fiscal year 2018.
1.2.2. Standards and interpretations adopted by the European Union and subject to early application
The new standard, adopted by the European Union on October 31, 2017, is applicable on January 1, 2019. The Group has not opted for the early application of this standard. The impact of IFRS 16 is currently being assessed by the Management team.
1.2.3. Standards and interpretations published by IASB but not yet adopted by the European Union
The Group has not opted for the early application of the standards and interpretations published by IASB but not yet adopted by the European Union as of June 30, 2018, in particular:
1.3 Basis of preparation of the interim financial statements
The half-year income tax expense is calculated for each country based on an estimated average effective rate calculated on an annual basis and applied to the country's half-year profit. Where applicable, this estimate takes into account the use of tax loss carry forwards and whether or not they have been recognized.
No income tax expense was recorded at June, 30 2018.
1.3.2 Impairment tests
The change in the business model results in lower sales, but the Company does not consider this to be an indication of impairment as of June 30, 2018 and, in accordance with the provisions of IAS 36, the Group has not conduced impairment tests on property, plant and equipment and intangible assets.
1.3.3 Commitments related to lump-sum compensation paid upon retirement
The Company does not finance its pension plan provision. The discount rate comes from iBoxx Corporate AA10+ references adjusted for the term of the Company's plan estimated at 23 years. No retirements took place in the first half 2018.
Founded in May 2000, Mauna Kea Technologies SA ("the Company") develops and markets medical devices, particularly optical instruments for medical imaging.
As part of its development in the United States, the Company created Mauna Kea Technologies Inc. on January 3, 2005
| 06/30/2018 | 12/31/2017 | Consolidation method | |||
|---|---|---|---|---|---|
| Entities | % of interests | % of control | % of interests | % of control | |
| Mauna Kea Technologies SA (1) | 100% | 100% | 100% | 100% | Full consolidation |
| Mauna Kea Technologies Inc | 100% | 100% | 100% | 100% | Full consolidation |
(1) Parent company
No change in scope took place during the period.
INTANGIBLE ASSETS
The changes in intangible assets break down as follows:
| (Amounts in thousands of euros) | |||||
|---|---|---|---|---|---|
| 12/31/17 | Increase | Decrease | Reclassification | 06/30/18 | |
| Development costs | 3,623 | 3,623 | |||
| Patents, licenses and trademarks | 1,674 | 16 | 4 | 1,694 | |
| Software packages | 664 | 25 | 689 | ||
| Patents, licenses and trademarks in progress |
546 | 29 | (4) | 572 | |
| Total gross intangible assets | 6,508 | 70 | 6,578 | ||
| Amort. of development costs | (3,135) | (206) | (3,342) | ||
| Amort. of patents, licenses and trademarks |
(789) | (59) | (848) | ||
| Amort. of software packages | (483) | (31) | (515) | ||
| Total amort. of intangible assets | (4,408) | (297) | (4,705) | ||
| Total net intangible assets | 2,100 | (227) | 1,873 | ||
No development costs was capitalized at 30 June 2018 and during the previous year.
The changes in property, plant and equipment break down as follows:
12/31/17 Increase Decrease / Scrapping Exchange differences Reclass. 06/30/18 Industrial equipment 2,061 10 6 349 2,426 Fixtures in buildings 51 51 Other tangible assets 1,601 228 (7) 5 (32) 1,794 Total gross property, plant and equipment 3,713 238 (7) 11 317 4,272 Dep. of industrial equipment (1,325) (30) (5) (116) (1,477) Dep. of fixtures in buildings (49) (1) (50) Dep. of other tang assets (873) (63) 7 (3) (932) Total dep. of property, plant and equipment (2,248) (94) 7 (9) (116) (2,459) Total net property, plant and equipment 1,466 144 0 3 201 1,813
In the first half-year, property, plant and equipment reclassifications primarily included systems placed under consignment or made available. All of the systems produced by the company are initially recognized in inventory and then reclassified as fixed assets as they are subjected to consignment (in the United States) or made available (in France)
This reclassification has been made following a management analysis based on the final destination of the systems. They are amortized over their remaining life.
The inventories and work in progress break down as follows:
INVENTORIES & WORK IN PROGRESS (Amounts in thousands of euros)
| 06/30/18 | 12/31/17 | |
|---|---|---|
| Inventories of raw materials | 1,028 | 610 |
| Inventories & work in progress of finished goods |
1,369 | 1,465 |
| Total gross inventories & work in progress | 2,398 | 2,075 |
| Dep. of inventories of raw materials | (54) | (54) |
| Dep. of inventories & work in progress of finished goods |
(92) | (52) |
| Total dep. of inventories & work in progress | (146) | (106) |
| Total net inventories & work in progress | 2,251 | 1,969 |
The first half-year recorded a €418 thousand increase in the gross value of raw materials inventories, mainly due to the increase in anticipated purchase volumes to meet future production, notably in relation to the U.S. market.
TRADE RECEIVABLES
(Amounts in thousands of euros)
| 06/30/18 | 12/31/17 | |
|---|---|---|
| Trade receivables | 3,103 | 3,215 |
| Dep. of trade receivables | (1,484) | (1,181) |
| Total net trade receivables | 1,618 | 2,034 |
The decrease in net trade receivables reflects an additional impairment provision of €303 thousand over the first half year 2018.
Trade receivables past due and not impaired amounted to €338 thousand as of June 30, 2018 compared with €961 thousand as of December 31, 2017.
Other current assets breaks down as follows:
OTHER CURRENT ASSETS (Amounts in thousands of euros)
| 06/30/18 | 12/31/17 | |
|---|---|---|
| Personnel and related accounts | 35 | 0 |
| Research Tax Credit | 1,598 | 1,917 |
| Other tax receivables | 275 | 257 |
| Other receivables | 178 | 176 |
| Prepaid expenses | 247 | 112 |
| Total gross other current assets | 2,333 | 2,462 |
| Dep. of other current assets | ||
| Total net other current assets | 2,333 | 2,462 |
The changes in the Research Tax Credit were as follows:
| CHANGES IN THE RESEARCH TAX CREDIT RECEIVABLE |
||||
|---|---|---|---|---|
| (Amounts in thousands of euros) | ||||
| 12/31/17 | Operating revenue |
Payment received |
Capitalized portion |
06/30/18 |
The estimated Research Tax Credit for the first half of 2018 was €509 thousand, compared with €448 thousand as of June 30, 2017. The 2016 Research Tax Credit was redeemed in February 2018.
Research Tax Credit 1,917 509 (828) 1,598
The amount remaining in the balance sheet corresponds to the 2017 Research Tax Credit and the estimated amount for the first half of 2018.
Cash and cash equivalents break down as follows:
CASH AND CASH EQUIVALENTS (Amounts in thousands of euros)
| 06/30/18 | 12/31/17 | |
|---|---|---|
| Short-term bank deposits | 15,132 | 17,453 |
| Total cash and cash equivalents | 15,132 | 17,453 |
The share capital is set at one million seven thousand nine hundred and ninety-three euros and fifty-two cents (€1,008,053.52). It is divided into 25,201,338 ordinary shares, fully subscribed and paid up, each with a par value of €0.04.
This figure does not include stock warrants (BSAs), founders' warrants (BSPCEs) or stock options (SOs) granted to certain investors and natural persons, who may or may not be employees of the Company, and free performance share units (PSUs).
The table below shows the history of the Company's share capital since June 30, 2018:
| Type of transaction | Issued Capital (€K) |
Share Premium (€K) |
Number of shares comprising the issued capital (K) |
|---|---|---|---|
| 974 | 87 973 | 24 347 | |
| Exercise of BSA Plan of December 1, 2017 |
34 | 3 746 | 850 |
| Exercise of SO | 0 | 10 | 4 |
| Other | 0 | 9 | 0 |
| Total | 1 008 | 91 738 | 25 201 |
At June 30, 2018, 850,000 shares were subscribed via the financing lines with Kepler dated December 1, 2017.
Since its formation, the Company has issued "Stock Warrants" (BSA) and stock subscription warrants for its employees ("BSPCE" and other), as well as stock options (SO) and free performance shares (PS), for which the changes since December 31, 2017 are presented below.
In 2018, the Company issued a new stock option plan and two new "Stock Warrant" plans:
| Type | Date of grant |
Exercise price |
Outstanding as of 12/31/17 |
Granted | Exercised | Cancelled | Outstanding as of 06/30/18 |
Potential number of shares |
|---|---|---|---|---|---|---|---|---|
| 2018 | Options granted before January 1, | 3,491,426 | 854,000(*) | 907,011 | 1,730,415 | 1,701,087 | ||
| SO | 02/28/2018 | 300,000 | 15,000 | 285,000 | 285,000 | |||
| BSA | 02/28/2018 | 55,000 | 55,000 | 55,000 | ||||
| BSA | 03/22/2018 | 50,000 | 50,000 | 50,000 | ||||
| 3,491,426 | 405,000 | 854,000 | 922,011 | 2,120,415 | 2,091,087 |
* Of which 850,000 BSA exercised as part of the PACEO financing line implemented in December 2017
The payment for the options is settled in stock shares. As of June 30, 2018, exercisable warrants entitle their holders to 935,687 shares.
DETAILS OF THE RESTATEMENT OF SHARE-BASED PAYMENTS (Amounts in thousands of euros)
| 06/30/18 | 06/30/17 | |
|---|---|---|
| Share-based payments (capitalized portion) | 0 | 0 |
| Share-based payments (expense in the period) | 43 | 183 |
| Total share-based payments | 43 | 183 |
Share-based payment expenses decreased by €140 thousand, from €183 thousand in June 2017 to €43 thousand on June 30, 2018. This decrease in expenses is mainly due to workforce movements, the absence of any new plan, changes in the stock price and stock volatility.
As of June 30, 2018, the Company held 46,507 Mauna Kea Technologies shares acquired at an average price of €2,76 representing an amount of €128,582. Their acquisition cost was €115,337.
The changes in loans and borrowings break down as follows:
SHORT-TERM LOANS AND BORROWINGS (Amounts in thousands of euros)
| 12/31/17 | Receipt | Repayment | Capitalized interests |
Reclass. | Other | 06/30/18 | |
|---|---|---|---|---|---|---|---|
| Coface | 154 | 2 | 155 | ||||
| Bond issues | 232 | 61 | 3,848 | 39 | 4,179 | ||
| Total short-term loans and borrowings |
386 | 61 | 3,848 | 40 | 4,333 |
(Amounts in thousands of euros)
| 12/31/17 | Receipt | Repayment | Capitalized interests |
Reclass. | Other | 06/30/18 | |
|---|---|---|---|---|---|---|---|
| Repayable advances OSEO Funding |
2,699 | 32 | 2,731 | ||||
| Deposits and guarantees received |
16 | 12 | (16) | 12 | |||
| Shareholders' accounts | 5 | 5 | |||||
| Bond issues | 3,848 | (3,848) | 0 | ||||
| Total long-term loans and borrowings |
6,567 | 12 | (16) | (3,848) | 32 | 2,749 |
Given the non-compliance with the covenants set out in the loan agreement with IPF, the total amount of the debt was reclassified to short-term loans and borrowings at June 30, 2018
NON-CURRENT PROVISIONS (Amounts in thousands of
euros)
| 12/31/17 | Allowance | Unused reversals |
Used reversals |
Other | 06/30/18 | |
|---|---|---|---|---|---|---|
| Pension plan provision | 184 | 12 | (15) | 5 | 184 | |
| Provisions for personnel disputes |
28 | 57 | 85 | |||
| Provision for software update | 15 | 15 | ||||
| Other provisions for expenses | 58 | 37 | 95 | |||
| Total non-current provisions | 283 | 106 | (15) | 5 | 379 |
Provisions for personnel disputes in the balance sheet concerns a dispute which arose in 2014 for €65 thousand and €20 thousand for new litigation which ended in June 2018.
"Other provisions for expenses" corresponds to the provision for the risk of repair of systems sold under the statutory one-year guarantee granted on the sale of a Cellvizio.
Other current liabilities break down as follows:
OTHER CURRENT LIABILITIES (Amounts in thousands of euros)
| 06/30/18 | 12/31/17 | |
|---|---|---|
| Tax payables | 77 | 106 |
| Staff and social security payables | 1,436 | 1,438 |
| Deferred revenue | 579 | 560 |
| Total other current liabilities | 2,091 | 2,104 |
Tax liabilities mainly concern payroll taxes, sales tax and value added tax.
Payroll-related liabilities represent provisions for paid leave, provisions for bonuses and commissions and social security contributions.
Deferred income essentially comprises maintenance contracts on systems sold (maintenance periods of one to three years).
Sales and operating revenue consists of the following:
SALES AND OPERATING REVENUE
(Amounts in thousands of euros)
| 06/30/18 | 06/30/17 | |
|---|---|---|
| Sales | 2,707 | 3,285 |
| Research Tax Credit and other tax credits | 525 | 469 |
| Total revenue | 3,232 | 3,753 |
The Group's sales comprise sales of Cellvizio® products and accessories (probes, software, and other), together with services.
The competitiveness and employment tax credit is recognized under Research Tax Credit and other tax credits.
(Amounts in thousands of euros)
| 06/30/18 | 06/30/17 |
|---|---|
| 990 | 1,522 |
| 1,197 | 1,098 |
| 520 | 664 |
| 2,707 | 3,285 |
Sales by geographical area as of June 30, 2018 break down as follows:
(Amounts in thousands of euros)
| 06/30/18 | 06/30/17 | |
|---|---|---|
| EMEA (Europe, Middle-East, Africa) | 630 | 1,049 |
| of which France | 99 | 384 |
| United States and Canada | 1326 | 1,379 |
| of which USA | 1,320 | 1,361 |
| Latin America | 23 | 180 |
| Asia | 728 | 677 |
| of which China | 506 | 156 |
| of which Japan | 42 | 79 |
| Total sales by geographical area | 2,707 | 3,285 |
Sales in the United States and Canada were previously reported with sales for the Latin America region under the Americas item.
For the purposes of geographical analysis, the management of the Group allocates sales revenue according to the place of delivery, or, in the case of services, according to the location of the customer's registered office
As of June 30, 2018, one of the Group's customers in the APAC area accounted for more than 18% of sales revenue.
FINANCIAL INSTRUMENTS ON THE BALANCE SHEET AND THEIR IMPACT ON PROFIT OR (LOSS) (Amounts in thousands of euros)
| As of June 30, 2018 | Value on the balance sheet |
Fair value through profit or loss |
Fair value through equity |
Loans and receivables |
Debt at amortized cost |
|---|---|---|---|---|---|
| Assets | |||||
| Non-current financial assets | 140 | 140 | |||
| Trade receivables | 1,618 | 1,618 | |||
| Other current assets (2) | 1,987 | 1,987 | |||
| Current financial assets (1) | 40 | 40 | |||
| Cash | 15,132 | 15,132 | |||
| Total assets | 18,917 | 15,132 | 3,785 | ||
| Liabilities | |||||
| Long-term loans and borrowings | 2,749 | 2,749 | |||
| Short-term loans and borrowings | 4,333 | 4,333 | |||
| Trade payables | 1,910 | 1,910 | |||
| Other current liabilities (2) | 1,513 | 1,513 | |||
| Total liabilities | 10,505 | 10,505 |
FINANCIAL INSTRUMENTS ON THE BALANCE SHEET AND THEIR IMPACT ON PROFIT OR (LOSS)
(Amounts in thousands of euros)
| As of December 31, 2017 | Value on the balance sheet |
Fair value through profit or loss |
Fair value through equity |
Loans and receivables |
Debt at amortized cost |
|---|---|---|---|---|---|
| Assets | |||||
| Non-current financial assets | 138 | 138 | |||
| Trade receivables | 2,034 | 2,034 | |||
| Other current assets (2) | 2,256 | 2,256 | |||
| Current financial assets (1) | 125 | 125 | |||
| Cash | 17,453 | 17,453 | |||
| Total assets | 22,007 | 17,453 | 4,553 | ||
| Liabilities | |||||
| Long-term loans and borrowings | 6,799 | 6,799 | |||
| Short-term loans and borrowings | 154 | 154 | |||
| Trade payables | 1,663 | 1,663 | |||
| Other current liabilities (2) | 1,544 | 1,544 | |||
| Total liabilities | 10,160 | 10,160 |
(1) The assessment of the fair value of these financial assets on profit refers to an active market (Level 1 category according to IFRS 7).
(2) Advances paid and received that are not repaid in cash, and deferred income and prepaid expenses that are not defined as financial liabilities, are not included.
The Group employed 98 people as of June 30, 2018 compared with 81 as of June 30, 2017.
The employee benefits expense breaks down as follows:
EMPLOYEE BENEFITS EXPENSE (Amounts in thousands of euros)
| 06/30/18 | 06/30/17 | |
|---|---|---|
| Wages and salaries, social security costs | 5,206 | 4,834 |
| Net pension costs Share-based payment transaction |
(3) | 12 |
| expenses | 43 | 183 |
| Total employee benefits expense | 5,246 | 5,028 |
Employee benefits expense was up €372 thousand, mainly due to the recruitment of a sales team in the United States and the internalization of certain previously sub-contracted services.
RESEARCH & DEVELOPMENT
(Amounts in thousands of euros)
| 06/30/18 | 06/30/17 | |
|---|---|---|
| Purchases consumed | 44 | 10 |
| Employee benefits expenses | 1,253 | 1,309 |
| External expenses | 590 | 556 |
| Net change in amortization and depreciation |
348 | 321 |
| Other | (1) | 0 |
| Total Research & Development expenses |
2,235 | 2,196 |
(Amounts in thousands of euros)
| 06/30/18 | 06/30/17 | |
|---|---|---|
| Purchases consumed | (14) | 32 |
| Employee benefits expenses | 2,701 | 2,561 |
| External expenses | 1,161 | 1,434 |
| Net change in amortization and depreciation |
504 | 184 |
| Other | 25 | 0 |
| Total Sales & Marketing expenses | 4,376 | 4,211 |
The sales and marketing expenses recorded an increase of €165 thousand due to the expansion in the sales force in the United States.
(Amounts in thousands of euros)
| 06/30/18 | 06/30/17 | |
|---|---|---|
| Purchases consumed | 32 | 22 |
| Employee benefits expenses | 952 | 689 |
| External expenses | 904 | 786 |
| Taxes | 48 | 31 |
| Net change in amortization and depreciation |
67 | 78 |
| Other | 65 | 58 |
| Total Administrative expenses | 2,069 | 1,664 |
In the first half of 2018, the Company recorded a significant increase of €403 thousand in administrative expenses, mainly due to wages and salaries, social security costs and external expenses.
The increase in wages and salaries and social security costs is due to the internalization of certain services that were sub-contracted as of June 30, 2017.
The increase in external expenses is mainly due to activity.
Financial income and expenses break down as follows:
FINANCIAL INCOME AND EXPENSES
(Amounts in thousands of euros)
| 06/30/18 | 06/30/17 |
|---|---|
| 38 | 86 |
| 0 | 25 |
| 38 | 111 |
| (85) | (111) |
| (236) | (183) |
| (72) | (65) |
| (393) | (359) |
| (356) | (247) |
The Group did not capitalize its tax losses.
The Company had the following commitments as of June 30, 2018:
Obligations pursuant to ordinary rental agreements
Commitments under other contracts
Commitments to suppliers totaled €1,771 thousand for terms of less than one year as of June 30, 2018, compared with €2,518 thousand as of December 31, 2017, and €423 thousand for terms of one to five years as of June 30, 2018, compared with €85 thousand as of December 31, 2017. This decrease in commitments is due to the renegotiation of a supply contract at the beginning of the period.
The company is required to comply with certain financial ratios as part of its loan agreement with IPF. Given its non-compliance with these ratios at June 30, 2018, the total amount of IPF debt has been reclassified under short-term loans and borrowings at June 30, 2018.
Instruments that grant rights to the share capital on a deferred basis (BSAs, BSPCEs or stock options) are considered anti-dilutive because they cause an increase in earnings per share. Thus, diluted earnings per share are identical to basic earnings per share.
There was no material change to the management of financial risk over the past half-year.
The related-party transactions shown below were recognized as expenses during the periods presented:
RELATED-PARTY TRANSACTIONS (Amounts in thousands of euros)
| 06/30/18 | 06/30/17 | |
|---|---|---|
| Wages and salaries - General management | 110 | 156 |
| Share-based payments – General management | 0 | 66 |
| Retirement commitments – General management |
2 | 2 |
| Attendance fees – Executive officers | 114 | 113 |
| Share-based payments - Executive officers | 18 | 11 |
No significant events occurred after the closing of the half-year financial statements.
Exco Socodec ERNST & YOUNG et Autres
This is a free translation into English of the statutory auditors' review report on the half-yearly financial information issued in French and is provided solely for the convenience of English-speaking users. This report includes information relating to the specific verification of information given in the half-yearly management report.
This report should be read in conjunction with, and construed in accordance with, French law and professional standards applicable in France.
Period from January 1 to June 30, 2018
51, avenue Françoise Giroud – Parc Valmy – BP 16601 21066 Dijon Cedex S.A.R.L. au capital de €3,200,000
Commissaire aux Comptes Membre de la compagnie régionale de Dijon
1/2, place des Saisons 92400 Courbevoie – Paris – La Défense 1 S.A.S. à capital variable
Commissaire aux Comptes Membre de la compagnie régionale de Versailles
Mauna Kea Technologies Period from January 1 to June 30, 2018
Statutory auditors' review report on the half-yearly financial information
To the Shareholders,
In compliance with the assignment entrusted to us by your annual general meetings and in accordance with the requirements of article L.451-1-2 III of the French monetary and financial code ("Code monétaire et financier"), we hereby report to you on:
These condensed half-yearly consolidated financial statements are the responsibility of the board of directors. Our role is to express a conclusion on these financial statements based on our review.
We conducted our review in accordance with professional standards applicable in France. A review of half-yearly financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with professional standards applicable in France and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed half-yearly consolidated financial statements are not prepared, in all material respects, in accordance with IAS 34 – standard of the IFRSs, as adopted by the European Union applicable to interim financial information.
Without qualifying the opinion expressed above, we draw your attention to note 1 « Accounting principles » to the half-year consolidated financial statements related to conditions of the continuing operation principle of Mauna Kea Technologies.
We have also verified the information presented in the half-yearly management report in respect of the condensed half-yearly consolidated financial statements subject to our review.
We have no matters to report as to its fair presentation and its consistency with the condensed halfyearly consolidated financial statements.
Paris and Paris-La Défense, September, 20, 2018
The statutory auditors
French original signed by
Exco Socodec ERNST & YOUNG et Autres
Olivier Gallezot Cédric Garcia
I attest that, to my knowledge, the condensed consolidated financial statements for the last halfyearly period were prepared in accordance with the applicable accounting standards (IFRS standards as adopted by the European Union) and give a fair representation of the company's assets, financial position and results, and all companies including in the scope of consolidation, and that the halfyearly activity report presents an accurate picture of the significant events occurring during the first six months of the fiscal year, their impact on the financial statements and the principal transactions between related parties, along with a description of the principal risks and the principal uncertainties for the remaining six months of the year.
Alexandre Loiseau
Chief Executive Officer
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