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Onward Medical N.V.
Quarterly Report • Sep 19, 2023
3870_ir_2023-09-19-065256_03a28038-d9a8-444b-9ccf-fb5a890b4bbc.pdf
Quarterly Report
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Half Year Report 2023
ONWARD Half Year Report 3
Table of Contents
1 Message from the CEO 4
2 Business Review 6
3 Financial Review 12
4 2023 Outlook 16
In this Half Year Report 'ONWARD', 'the Company', 'the Group', 'we', 'us' and 'our' are sometimes used for convenience in contexts where reference is made to ONWARD Medical N.V. and/or any of its subsidiaries in general or where no useful purpose is served by identifying the particular company.
TOC 1 2 3 4 5 6 7 8 9 10 TOC
5 Condensed Consolidated Interim Financial Statements 20 Profit & Loss 22 Comprehensive Income 26 Financial Position 28 Changes in Equity 32 Cash Flows 34 Notes to the Condensed
Consolidated Interim 6 Financial Statements 38
Board's Statements 52 Overview of Risks 54 Forward-Looking Information / Statements 56 Definitions & Abbreviations 58
ONWARD Half Year Report 5
Dear Shareholders, Colleagues, Partners, and Collaborators,
It is a privilege to lead this company, working to make a difference in the lives of the nearly 7 million people worldwide with spinal cord injury (SCI). In the first half of 2023, we continued to execute well against our strategy – advancing development of our technology, enlarging our IP portfolio, validating our therapies through clinical milestones, and strengthening our organizational capabilities.
I would like to highlight several key achievements from the first half of this year:
- In May, we announced a publication in Nature showing that an investigational implanted wireless brain-computer interface (BCI) can use thought to modulate ARC Therapy. A research consortium that included ONWARD reported that when paired with ARC Therapy, an implanted BCI allowed an individual to gain augmented control over when and how he moved his paralyzed legs.
- Also in May, we announced the successful first-in-human use of our investigational ARCIM Lead. The ARCIM Lead delivers targeted electrical pulses to the spinal cord and is a key component of the ONWARD ARCIM system, an innovative platform engineered to deliver ARC Therapy to address multiple indications. The ARCIM Lead is designed to be used with the ARCIM neurostimulator (IPG) and is purpose-built for placement along the spinal cord to restore movement and function in people with SCI.
Shortly before publication of this report and for the first time in human history, an investigational implanted wireless brain-computer interface was paired with our ARCIM system to enable a person with SCI to restore control of paralyzed upper limbs with thought-driven movement.
We have also taken the difficult but correct decision to update the ARCEX system circuit board assembly. While we share the disappointment of the SCI community that this decision will impact launch timing, now expected in 2H 2024, our cash guidance remains unchanged. We are also increasingly well prepared for launch after recent agreements with a third-party logistics partner that provides rapid access to US government procurement vehicles.
Thank you for your continued support as we work passionately to help the SCI community.
Dave Marver
In the first half of 2023, we continued to execute on our strategy to research, develop and commercialize novel therapies that restore movement and other functions in people with SCI. Our key operational highlights for the first half of 2023 include the following:
Science & Intellectual Property
- Together with our research partners at EPFL and Lausanne University Hospital (CHUV), we made dramatic new discoveries that have the promise to help people with SCI and other movement disabilities.
- The Company was issued 39 new patents in 1H, bringing its total number of issued or pending patents to more than 360 and strengthening our first-mover advantage.
Clinical Development
The first half of 2023 also marked several key milestones on our clinical roadmap:
• The Company was awarded three new Breakthrough Device Designations (BDD) from the U.S. Food and Drug Administration (FDA). In February, the Company announced BDDs awarded for the use of its ARCEX platform for bladder control, alleviation of spasticity, and blood pressure regulation in people with SCI. In May, the Company received an additional BDD for its ARCIM platform for spasticity in people with SCI. Breakthrough Device Designation is an FDA program aimed at helping patients and their clinicians receive timely access to new treatments. The Company now has a total of 9 BDDs, which affords it priority FDA review and the opportunity to interact with FDA experts throughout the pre-market review phase as the technology moves toward commercialization.
Business Review
- In April 2023, at the American Academy of Neurology Annual Meeting, Dr. James Guest, Professor of Neurological Surgery at the University of Miami and the Miami Project to Cure Paralysis, shared additional results from the Up-LIFT pivotal study that investigated ARCEX Therapy for improving upper extremity strength and function after SCI. In addition to meeting all primary safety and effectiveness endpoints, the study demonstrated that 72% of participants responded to ARCEX Therapy.
- May marked the first-in-human use of the Company's ARCIM Lead, which was used with our investigational implantable ARCIM system as part of the ongoing HemON study to evaluate use of ARCIM Therapy to better regulate blood pressure after SCI. ONWARD is developing a portfolio of ARCIM Leads in a range of sizes, shapes, and electrode arrays for the many indications the Company is developing or exploring, such as improved blood pressure management, mobility, upper extremity function, and bladder control. The ARCIM Lead was specifically designed to stimulate the spinal cord anatomy responsible for restoring movement and function in people with SCI.
- In May, the Company also announced its ARC Therapy was paired with the use of an investigational implanted wireless brain-computer interface (BCI) to enable an individual to gain augmented control over when and how he moved his paralyzed legs. This breakthrough was published in the journal Nature and highlighted in major media outlets around the globe.
2
Corporate
We continued to enhance our organizational capabilities and augment our leadership team in preparation for commercialization of our first-ever therapy, expected in 2H 2024:
- In January, the Company strengthened its leadership team, appointing Erika Ross Ellison as Vice President, Global Clinical & Regulatory, and Sarah Moore as Vice President, Global Marketing. Erika came to ONWARD from Abbott Neuromodulation, where she was Director, Global Clinical & Applied Research. She also served as Deputy Director, Medical Device Innovation Accelerator, Department of Surgery and Assistant Professor, Department of Neurologic Surgery at the Mayo Clinic. Sarah came to ONWARD from Nevro, an implantable neuromodulation company, and has more than 20 years of experience in new product development and commercial marketing in the medical device industry, including at Johnson & Johnson.
- In May, the Company confirmed its expectation that it had sufficient cash runway through the end of 2024.
- Also in May, Bryan, Garnier & Co, a leading investment bank focused on growth companies, reinitiated research coverage on the Company with a Buy rating. The Company is also covered by equity research at Degroof Petercam and Kepler Cheuvreux.
| Cash positions at end of period | 43.8 | 61.8 |
|---|---|---|
| Interest-bearing loans | (14.3) | (12.7) |
| Equity | 34.3 | 52.6 |
| At | 30 June 2023* | 31 December 2022 |
| Net loss for the Period | (19.2) | (16.0) |
| Operating Loss for the Period | (18.8) | (15.1) |
| Net Finance Expenses | (0.4) | (0.9) |
| Income Tax Expense | (0.0) | (0.0) |
| Total Operating Expenses | (19.7) | (16.1) |
| Patent Fees & Related Expenses | (1.0) | (0.7) |
| Quality Assurance Expenses | (0.8) | (0.5) |
| General & Administrative Expenses | (6.5) | (4.8) |
| Research & Development Expenses | (7.6) | (6.2) |
| Clinical & Regulatory Expenses | (2.2) | (3.0) |
| Marketing & Market Access Expenses | (1.6) | (0.9) |
| Total Revenues & Other Incomes | 0.9 | 1.0 |
| EUR' Million | 2023 | 2022 |
| For the six-month period ended, 30 June | Unaudited | Unaudited |
Financial Review
Total Revenues & Other Income
Other income totaled EUR 0.9 million in 1H 2023, consisting of royalties and income recognized for ongoing grants.
Total Operating Expenses
TOC 1 2 3 4 5 6 7 8 9 10 3
1H 2023 Operating Expenses of EUR 19.7 million came in EUR 3.6 million above prior year. Research & Development expenses increased by EUR 1.4M due to advancements made on our ARCEX and ARCIM platforms. As the company prepares for FDA submission and commercialization of ARCEX, costs for Quality, Operations (included in General & Administrative), Marketing, and Market Access increased by EUR 2.5 million. Clinical & Regulatory expenses decreased by EUR 0.7 million since H1 2022 following the completion of the Up-LIFT pivotal and LIFT Home clinical trials in H2 2022.
Net Finance Expense
Net Finance Expense decreased during the first six months of 2023 by EUR 0.5 million compared to H1 2022. The expense for the first half of 2022 relates to the innovation loan from RVO NL and bank interest paid on the positive cash balance. In the second half of 2022 the Company adopted a strategy to invest excess cash in short-term EUR deposits, resulting in positive interest earned on the cash balance, which offset costs for the RVO NL loan in 2023.
Net Cash Position
The Company ended the six-month period with a positive cash balance of EUR 43.8 million on 30 June 2023 (31 December 2022: EUR 61.8 million). The decrease in cash of EUR 18 million compared to 31 December 2022 is due to cash outflows for operating activities.
Interest-bearing Loans
Interest-bearing Loans increased from 31 December 2022 by EUR 1.6 million to EUR 14.3 million. The increase is due to an increase in the loan capital amount of EUR 1 million and the interest that accumulated on the innovation loan from RVO NL (Dutch government).
Equity
| TOC 1 |
2 3 3 4 |
5 6 7 |
8 9 |
10 | Financial Review | |
|---|---|---|---|---|---|---|
| ---------- | ------------------ | ------------- | -------- | ---- | ------------------ | -- |
The Company's positive Equity position of EUR 52.6 million on 31 December 2022 decreased to EUR 34.3 million on 30 June 2023. The decrease related to the operating loss for the period of EUR 19.2 million and the foreign currency translation impact of US and Swiss operations. This is offset by an increase in the reserve related to share-based payment of EUR 1.2 million.
We expect to continue the steady and consistent execution of our strategy in the second half of 2023.
- August marked the successful first-in-human use of our investigational ARCIM BCI platform. This also marked the start of a clinical feasibility study with our partners at CEA-Clinatec, CHUV, and EPFL to investigate the ability of a brain-computer interface (BCI) to communicate with our ARCIM system to enable a person with SCI to control when and how they move their upper limbs. This program, supported by a grant from the European Innovation Council, will continue through 2024.
- The Company plans to submit a de novo application for FDA clearance for the ARCEX system in 2024 and is continuing to prepare for launch of this therapy, which would be the Company's first commercial offering. In Q3, we forged agreements with a US Service-Disabled Veteran-Owned Small Business (SDVOSB) third-party logistics (3PL) provider which will provide ONWARD with rapid access to US government purchasing vehicles shortly after FDA clearance.
- With a strong balance sheet, we expect our current cash position to fuel operations through the end of 2024. In 2H 2023, we plan to explore opportunities to further strengthen our cash position to support future investments in product development, clinical trials, and operational & commercial capabilities.
2023 Outlook
Condensed Consolidated Interim Financial Statements
| TOC 1 2 3 4 5 6 7 8 9 |
10 | |||
|---|---|---|---|---|
| -------------------------------------------------- | -- | ---- | -- | -- |
Profit & Loss
| For the six-month period ended, 30 June | ||||
|---|---|---|---|---|
| 2023 | 2022 | |||
| All amounts in EUR '000 | Notes | Unaudited | Unaudited | |
| Grants & Other Income | 928 | 963 | ||
| Total Revenues & Other Income | 928 | 963 | ||
| Research & Development Expenses | (7,638) | (6,215) | ||
| Clinical & Regulatory Expenses | (2,177) | (3,034) | ||
| Marketing & Market Access Expenses | (1,568) | (867) | ||
| Patent Fees & Related Expenses | (950) | (689) | ||
| Quality Assurance Expenses | (799) | (466) | ||
| General & Administrative Expenses | (6,576) | (4,796) | ||
| Total Operating Expenses | (19,708) | (16,068) | ||
| Operating Loss for the Period | (18,780) | (15,105) | ||
| Financial Expense | (457) | (855) | ||
| Net Finance Cost | (457) | (855) |
| TOC 1 2 3 4 5 6 7 8 9 |
10 | ||||
|---|---|---|---|---|---|
| -------------------------------------------------- | -- | ---- | -- | -- | -- |
| Loss for the Period Before Taxes | (19,237) | (15,960) | |
|---|---|---|---|
| Income tax expense | 11 | (45) | (35) |
| Net Loss for the Period | (19,282) | (15,995) | |
| Attributable to: | |||
| Equity holders of the parent | (19,282) | (15,995) | |
| (19,282) | (15,995) | ||
| Earnings Per Share (€): | 9 | ||
| Basic earnings per ordinary share attributable to shareholders | (0.64) | (0.53) | |
| Diluted earnings per ordinary share attributable to shareholders | (0.64) | (0.53) |
Condensed Consolidated Interim Statement of Profit & Loss
| For the six-month period ended, 30 June | |||
|---|---|---|---|
| All amounts in EUR '000 | Notes | 2023 Unaudited |
2022 Unaudited |
| Net Loss for the Period Other comprehensive income that will not be reclassified to profit or loss in subsequent periods |
(19,282) – |
(15,995) – |
|
| Other comprehensive income Currency translation differences |
– (250) |
801 587 |
|
| Other comprehensive income that will be reclassified to profit or loss in subsequent periods |
(250) | 1,388 | |
| Total Comprehensive Result for the Year, Net of Tax |
(19,532) | (14,607) | |
| Attributable to: Equity holders of the parent |
(19,532) | (14,607) | |
| (19,532) | (14,607) |
Comprehensive Income
Condensed Consolidated Interim Financial Statements
| TOC 1 2 3 4 5 6 7 8 9 |
10 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| -------------------------------------------------- | ---- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- | -- |
| All amounts in EUR '000 | Notes | 30 June 2023 Unaudited |
31 December 2022 Audited |
|---|---|---|---|
| Assets | |||
| Non-Current Assets | 12,294 | 12,417 | |
| Intangible fixed assets | 6 | 9,996 | 10,158 |
| Property, plant and equipment | 609 | 415 | |
| Right of use assets | 1,521 | 1,681 | |
| Deferred tax assets | 168 | 163 | |
| Current Assets | 46,734 | 64,176 | |
| Indirect tax receivables | 540 | 709 | |
| Receivable from related parties | 13 | 228 | 251 |
| Other current assets | 2,177 | 1,456 | |
| Fixed term deposits | 25,000 | 20,000 | |
| Cash and cash equivalents | 18,788 | 41,760 | |
| 59,027 | 76,593 |
Financial Position
Condensed Consolidated Interim Financial Statements
| TOC 1 2 3 4 5 6 7 8 9 |
10 |
|---|---|
| -------------------------------------------------- | ---- |
The above balance sheet should be read in conjunction with the accompanying notes.
| Equity & Liabilities | |||
|---|---|---|---|
| Equity & Reserves | |||
| Issued capital | 9 | 3,622 | 3,622 |
| Share premium | 155,248 | 155,249 | |
| Other reserves | 9, 8 | 3,000 | 2,079 |
| Retained earnings | (127,601) | (108,319) | |
| Total Equity Attributable to Shareholders | 34,270 | 52,631 | |
| Non-Current Liabilities | 17,180 | 15,741 | |
| Interest-bearing loans | 7 | 14,282 | 12,656 |
| Deferred tax liability | 662 | 670 | |
| Lease liability | 1,085 | 1,294 | |
| Post-employment benefits | 1,151 | 1,121 | |
| Current Liabilities | 7,577 | 8,221 | |
| Income tax liabilities | 76 | 219 | |
| Lease liability | 485 | 427 | |
| Trade payables | 12 | 2,321 | 1,909 |
| Other payables | 12 | 4,695 | 5,666 |
59,027 76,593
Condensed Consolidated Interim Statement of Financial Position
| TOC 1 |
2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
|---|---|---|---|---|---|---|---|---|---|
| ---------- | --- | --- | --- | --- | --- | --- | --- | --- | ---- |
For the six-month period ended, June 30
| All amounts in EUR '000 | Notes | Issued Capital | Share Premium | Other Reserves | Retained Earnings | Total Equity |
|---|---|---|---|---|---|---|
| At 1 January 2023 | 3,622 | 155,249 | 2,079 | (108,319) | 52,631 | |
| Loss for the period | – | – | – | (19,282) | (19,282) | |
| Other comprehensive income | – | – | (250) | – | (250) | |
| Total comprehensive result | – | – | (250) | (19,282) | (19,532) | |
| Share based payments | – | – | 1,171 | – | 1,171 | |
| At June 30, 2023 (Unaudited) | 9 | 3,622 | 155,249 | 3,000 | (127,601) | 34,270 |
For the six-month period ended, June 30
| All amounts in EUR '000 | Notes | Issued Capital | Share Premium | Other Reserves | Retained Earnings | Total Equity |
|---|---|---|---|---|---|---|
| At 1 January 2022 | 3,622 | 155,249 | (214) | (75,974) | 82,683 | |
| Loss for the period | – | – | – | (15,995) | (15,995) | |
| Other comprehensive income | – | – | 587 | 801 | 1,388 | |
| Total comprehensive result | – | – | 587 | (15,194) | (14,607) | |
| Share based payments | – | – | 779 | – | 779 | |
| At June 30, 2022 (Unaudited) | 9 | 3,622 | 155,249 | 1,152 | (91,168) | 68,854 |
Changes in Equity
| For the six-month period ended 30 June | ||
|---|---|---|
| All amounts in EUR '000 | 2023 Notes Unaudited |
2022 Unaudited |
| Loss for the Period Before Taxes | (19,237) | (15,960) |
| Adjusted for: | ||
| • Depreciation and impairment of property, plant and equipment and right-of-use assets |
329 | 343 |
| • Share based payment transaction expense |
1,171 | 779 |
| • Post-employment benefits |
22 | 98 |
| • Net finance costs |
404 | 844 |
| • Net foreign exchange differences |
– | (11) |
| • Other non-cash items |
61 | 103 |
| Changes in working capital: | ||
| Increase in Trade and other receivables | (566) | (545) |
| (Decrease) / Increase in Trade and other payables | (713) | 2,493 |
| Interest received | 237 | – |
| Interest paid | - | (246) |
| Bank charges paid | (9) | (35) |
| Income tax paid | (91) | (12) |
| Net cash used in operating activities | (18,391) | (12,147) |
| TOC 1 2 3 4 5 5 6 7 8 9 10 Condensed Consolidated Interim Financial Statements |
|
|---|---|
| -------------------------------------------------------------------------------------------------------------------- | -- |
Cash Flows
| TOC 1 2 3 4 5 6 7 8 9 |
10 |
|---|---|
| -------------------------------------------------- | ---- |
| Cash flows from investing activities | ||
|---|---|---|
| Investments in fixed assets | (287) | (154) |
| Investments in intangible fixed assets | (16) | (12) |
| Investments in fixed term deposits | (5,000) | – |
| Net cash generated/(used) from investing activities | (5,303) | (166) |
| Cash flows from financing activities | ||
| Proceeds from borrowings | 1,037 | – |
| Payment of principal portion of lease liabilities | (263) | (315) |
| Net cash generated/(used) from financing activities | 775 | (315) |
| Movement in cash and cash equivalents | ||
| Cash and cash equivalents at 1 January | 41,760 | 89,443 |
| Effect of exchange rates on cash and cash equivalents | 52 | 26 |
| Changes in cash and cash equivalents during the period | (22,920) | (12,629) |
| Cash and cash equivalents at 30 June | 18,788 | 76,841 |
Condensed Consolidated Interim Statement of Cash Flows
1. General Information
ONWARD Medical B.V. was a Dutch private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid), incorporated on 20 November 2015. On 21 October 2021 (the First Trading Date) the Company completed a corporate conversion, converting into a public limited company under Dutch law (naamloze vennootschap). The legal name changed to ONWARD Medical N.V. ("ONWARD"). The registered office is located at Schimmelt 2, Eindhoven, the Netherlands. ONWARD Medical N.V. is registered in the Commercial Register of the Chamber of Commerce under number 64598748.
ONWARD and its subsidiaries (the "Group") are developing implantable and non-invasive neuromodulation systems to deliver the company's proprietary therapies to the spinal cord.
These Condensed Consolidated Interim Financial Statements are comprised of statements for ONWARD and its two wholly owned subsidiaries: ONWARD Medical SA (incorporated in Switzerland) and ONWARD Medical Inc. (incorporated in the United Stated of America).
The interim financial statements of ONWARD Medical N.V. and its subsidiaries for the six months ended 30 June 2023 have not been audited or reviewed. The interim consolidated financial statements were authorized for publication by the Board on 18 September 2023.
Notes
2. Basis of Preparation
The Company's Condensed Consolidated Interim Financial Statements ("Interim Financial Statements" or "Interim Report") for the six-month period ended 30 June 2023 have been prepared in accordance with International Accounting Standard 34 – Interim Financial Reporting as endorsed by the European Union ("IFRS") and should be read in conjunction with the Company's last annual consolidated financial statements as at and for the year ended 31 December 2022.
The significant accounting policies used in the preparation of the Interim Financial Statements are consistent with those followed in the preparation of the Company's annual consolidated financial statements as of and for the year ended 31 December 2022.
The Interim Financial Statements are presented in thousands of euros and all values are rounded to the nearest thousand (€000), except when otherwise indicated, and for the number of shares and the per share amount. Due to rounding, amounts may not add up to totals provided.
The preparation of the Interim Financial Statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company's accounting policies. The areas involving a higher degree of judgment or complexity, are areas where assumptions and estimates are significant to the Consolidated Financial Statements. The critical accounting estimates used in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Company's annual consolidated financial statements as of and for the year ended 31 December 2022.
6 Notes to the Condensed Consolidated Interim Financial Statements
3. Continuity of the Group
As of 30 June 2023 the Company had a net cash position of EUR 43.8 million. Based on cash flow forecasts for the years 2023 and 2024, which include significant expenses and cash outflows in relation to commercial readiness, the continuation of research and development projects and upcoming clinical trials, the Company believes that this cash position will be sufficient to meet the Company's capital requirements and fund its operations for at least 12 months as from the date of this Interim Report.
Inherent uncertainties in these forecasts may have an impact on the Company's cash position. To continue development and commercialization as planned, the Company will likely need to attract additional funding in future. Please note that the Company's long-term success is contingent on achieving FDA clearance or approval and CE mark for its therapies.
In view of the above, and notwithstanding a loss brought forward of EUR 127.6 million as of 30 June 2023, the application of the valuation rules in the assumption of a going concern is justified. As a result, the Interim Financial Statements have been prepared on a going concern basis.
4. Standards Issued but not yet Effective
The accounting policies adopted in the preparation of the Interim Condensed Consolidated Financial Statements are consistent with those followed in the preparation of the Group's Annual Consolidated Financial Statements for the year ended 31 December 2022, except for the adoption of new standards effective as of 1 January 2023. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.
Several amendments apply for the first time in 2023, but do not have an impact on the Interim Financial Statements of the Group.
5. Segment Reporting
Based on the organizational structure, as well as the nature of financial information available and reviewed by the Company's chief operating decision-makers to assess performance and make decisions about resource allocations, the Company has concluded that its total operations represent one reportable segment and that the consolidated disclosures address the requirements.
6. Intangible Fixed Assets
| 30 June 2023 Unaudited |
31 December 2022 Audited |
|
|---|---|---|
| Goodwill | 1,869 | 1,902 |
| In-Process R&D | 5,771 | 5,873 |
| License fees | 2,356 | 2,383 |
| Closing net book value | 9,996 | 10,158 |
The Company has reviewed whether changes in market conditions require an update to the impairment assessment performed in December 2022 and concluded that no update is required.
6 Notes to the Condensed Consolidated Interim Financial Statements
7. Financial Liabilities
7.1 Interest Bearing Loans
Innovation Loan
On 5 February 2016, the Group was granted a loan from RVO NL (Dutch Government) of EUR 10 million payable according to a set repayment scheme.
| 30 June 2023 | |
|---|---|
| Unaudited | |
| Loan opening balance (at 31 December 2022) | 12,656 |
| Loan amount received | 1,037 |
| Interest accrued during the period | 589 |
| Closing net book value | 14,282 |
The loan carries interest at 10%.
The current repayment plan for the loan is as presented below:
| Date | % of Loan amount | |
|---|---|---|
| 1 January 2026 | 15.0 | |
| 1 April 2026 | 15.0 | |
| 1 July 2026 | 17.5 | |
| 1 October 2026 | 17.5 | |
| 1 January 2027 | 17.5 | |
| 1 April 2027 | 17.5 | |
| 1 July 2027 | All due interest |
Certain assets, including Intellectual Property and In-process R&D, have been pledged to RVO NL in case of default of repayment of the loan. These patents have not been capitalized as of 30 June 2023.
7.2 Financial Risk Management
The Group's financial risk management objectives and policies are consistent with those disclosed in the Consolidated Financial Statements for the year ended 31 December 2022.
Fair Value Hierarchy
The valuation techniques and inputs used to develop measurements for financial liabilities are consistent with those disclosed in the Consolidated Financial Statements for the year ended 31 December 2022.
The carrying amounts and fair values of the Group's financial instruments are as follows, including its fair value hierarchy:
| Balance at 30 June 2023 | Carrying Amount | Fair Value |
|---|---|---|
| Financial liabilities Innovation credit loan (Level 2) |
14,282 | 15,388 |
| Total financial liabilities | 14,282 | 15,388 |
| Balance at 31 December 2022 | Carrying Amount | Fair Value |
| Financial liabilities Innovation credit loan (Level 2) |
12,656 | 13,689 |
| Total financial liabilities | 12,656 | 13,689 |
6 Notes to the Condensed Consolidated Interim Financial Statements
There were no changes in the Group's valuation processes, valuation techniques, and types of inputs used in the fair value measurements during the period.
Management has assessed that the fair values of cash and cash equivalents, accounts payable, taxes and social securities and other payables approximate to their carrying amounts largely due to the short-term maturities of these instruments.
During the period, there were no transfers of fair value measurements between Level 1 and Level 2 and no transfers into or out of Level 3 for both financial assets and financial liabilities.
The following table details the remaining undiscounted contractual maturity for the Company's financial liabilities with agreed repayment periods, including both interest and principal cash flows:
At 30 June 2023
| Less than 1 Year |
1-3 Years |
3-5 Years |
More than 5 Years |
Total | |
|---|---|---|---|---|---|
| Innovation loan | – | 3,000 | 17,829 | – | 20,829 |
| Lease liability | 543 | 1,266 | – | – | 1,809 |
| Trade payables | 2,321 | – | – | – | 2,321 |
| Total (Unaudited) | 2,864 | 4,266 | 17,829 | – | 24,959 |
At 31 December 2022
| Less than 1 Year |
1-3 Years |
3-5 Years |
More than 5 Years |
Total | |
|---|---|---|---|---|---|
| Innovation loan | – | – | 19,298 | – | 19,298 |
| Lease liability | 512 | 1,452 | – | – | 1,964 |
| Trade payables | 1,909 | – | – | – | 1,909 |
| Total | 2,421 | 1,452 | 19,298 | – | 23,171 |
Notes to the Condensed Consolidated Interim Financial Statements
| TOC 1 2 3 4 5 6 6 7 8 9 |
10 | |
|---|---|---|
| ------------------------------------------------------- | -- | ---- |
8. Issued Capital & Reserves
The authorized share capital ("maatschappelijk kapitaal") amounts to EUR 12.225 million divided into 50,937,500 Ordinary Shares and 50,937,500 Preferred Shares with a nominal value of EUR 0.12 each. At 30 June 2023, 30,184,388 Ordinary Shares were issued (31 December 2022: 30,184,388 shares). All of the issued Ordinary Shares are fully paid-up and represent capital in the Company. No Shareholders have any voting rights different from any other Shareholder.
Other Reserves
Balance at 1 January 2023
| Share-based Payments |
Currency Translation Differences |
Total | |
|---|---|---|---|
| Balance at 1 January 2023 | 1,760 | 319 | 2,079 |
| Share based payment expense | 1,171 | – | 1,171 |
| for the period | |||
| Currency translation differences | – | (250) | (250) |
| Balance at 30 June 2023 (Unaudited) | 2,931 | 69 | 3,000 |
| Balance at 1 January 2022 | 69 | (283) | (214) |
| Share based payment expense | 779 | – | 779 |
| for the period | |||
| Currency translation differences | – | 587 | 587 |
| Balance at 30 June 2022 (Unaudited) | 848 | 304 | 1,152 |
9. Loss per Share
The objective of determining diluted EPS is to reflect the maximum possible dilutive effect arising from potential ordinary shares outstanding during the period. The Group has stock option plans that may be settled in ordinary shares of the Group, and which are considered anti-dilutive considering the Group is currently loss making. Therefore, diluted EPS is disregarded.
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of authorization of these Interim Condensed Consolidated Financial Statements.
The following tables reflect the income and share data used in the EPS calculation:
Profit (Loss) Attributable to Ordinary Shareholders
| 2023 | 2022 | |
|---|---|---|
| Unaudited | Unaudited | |
| Profit (loss) for the year, attributable to equity holders of the parent |
(19,282) | (15,995) |
Weighted-average Number of Ordinary Shares
| 2023 Thousands |
2022 Thousands |
|
|---|---|---|
| Weighted average number of ordinary shares for basic EPS |
30,184 | 30,184 |
| Weighted average number of ordinary shares for basic EPS (adjusted*) |
30,184 | 30,184 |
10. Share-based Payments
| 30 June 2023 Unaudited |
30 June 2022 Unaudited |
|
|---|---|---|
| Opening balance Addition to the reserve |
1,760 1,171 |
69 779 |
| Closing balance | 2,931 | 848 |
Notes to the Condensed Consolidated Interim Financial Statements
Long-term incentive Plan (LTIP)
| TOC 1 2 3 4 5 6 6 7 8 9 |
10 |
|---|---|
| ------------------------------------------------------- | ---- |
The LTIP plan aims to align the Employee's interest with the interests of the Shareholders and to allow the employee to participate in the long-term growth of the Company. The LTIP is an omnibus plan with the flexibility to issue different type of equity incentives. ONWARD awarded options over its ordinary shares to participants (referred to as the "Award" or "Grant') on the Grant Dates as specified in the table below. Each option represents the right to receive one ordinary share of ONWARD against payment of the exercise price. The options expire 10 years after the Grant Date and become exercisable on vesting. The Grant is subject to continued provision of services to the Company under a graded vesting schedule, with 25% of the Grant vesting on the first anniversary of the Grant Date, and the remaining 75% of the Grant vesting in equal, monthly tranches over the 3 years following the first anniversary of the Grant Date (2.083% per month). The number of Options that will vest and become unconditional is only subject to a continued service condition. All options granted have the same conditions. Options do not settle automatically and are exercised at the option of the participant.
| Financial Year |
Grant Date |
Type of Security |
Number of Options Granted |
Exercise Price |
Expiration Date |
Fair Value |
|---|---|---|---|---|---|---|
| 2021 | 15/12/2021 | Stock Options |
612,000 | EUR 9.70 | 15/12/2031 | EUR 4.89 |
| 2022 | 01/04/2022 | Stock Options |
169,800 | EUR 7.64 | 01/04/2032 | EUR 4.18 |
| 2022 | 26/09/2022 | Stock Options |
166,350 | EUR 5.70 | 26/09/2032 | EUR 3.19 |
| 2023 | 03/01/2023 | Stock Options |
978,050 | EUR 6.12 | 03/01/2033 | EUR 3.37 |
| 2023 | 28/02/2023 | Stock Options |
132,000 | EUR 4.95 | 28/02/2033 | EUR 2.72 |
| TOC 1 2 3 4 5 6 7 8 9 |
10 |
|---|---|
| -------------------------------------------------- | ---- |
The following parameters were used in the option model for the calculation of the fair value of the options per grant in 2023:
| 2023 – 01 | 2023 – 02 | |
|---|---|---|
| Fair value on date of measurement (EUR) | 3.37 | 2.72 |
| Share price (EUR) | 6.12 | 4.97 |
| Exercise price (EUR) | 6.12 | 4.95 |
| Expected volatility | 57.8% | 57.2% |
| Term of the option | 4a | 4a |
| Expected dividend | – | – |
| Risk-free interest rate | 2.4% | 2.4% |
| Time to expiration | 10 | 10 |
The weighted average fair value of the options granted during the six months ended 30 June 2023 was EUR 3.29 (year ended 31 December 2022: EUR 3.69).
For the six months ended 30 June 2023, the Group has recognised EUR 1.17 million of sharebased payment expense in the statement of profit or loss (30 June 2022: EUR 0.78 million).
Notes to the Condensed Consolidated Interim Financial Statements
11. Income Taxes
Income tax expense is recognized at an amount determined by multiplying the profit (loss) before tax for the interim reporting period by management's best estimate of the weighted-average annual income tax rate expected for the full financial year, adjusted for the tax effect of certain items recognized in full in the interim period. As such, the effective tax rate in the interim financial statements may differ from management's estimate of the effective tax rate for the annual financial statements.
The Group's consolidated effective tax rate in respect of continuing operations for the six months ended 30 June 2023 was (0.2%) (six months ended 30 June 2022: (0.2%)).
The major components of income tax expense in the interim condensed consolidated statement of profit or loss are:
Current income tax Deferred income tax
| 2022 | 2023 |
|---|---|
| (35) – |
(46) 1 |
Total corporate income tax in profit and loss (45) (35)
12. Trade & Other Payables
The increase in trade payables is driven by R&D activities relating to ARCEX in preparation for FDA de novo clearance and other activities across the organization for commercial readiness.
The decrease in other payables is due to the recognition of grants received in advance over time and the bonus accrual for six months at the end of June 2023 as opposed to a full year at the end of December 2022.
13. Related Party Transactions
Receivables from related parties result from the settlement of withholding taxes on behalf of employees related to the EIP (Employee Investment Plan).
Except as disclosed, there are no material changes to the Group's related parties, related party transactions (including their terms and conditions) and future obligations towards related parties, compared to 31 December 2022. Transactions between the Company and its subsidiaries have been eliminated on consolidation and are not disclosed in the notes.
Remuneration of Key Management
| 30 June 2023 Unaudited |
30 June 2022 Unaudited |
|
|---|---|---|
| Salary, bonuses and other (short-term employee benefits) | 2,392 | 2,054 |
| Pension premiums (post-employment benefits) | 86 | 76 |
| Share based payments | 1,235 | 698 |
| Net liability | 3,713 | 2,827 |
14. Commitments & Contingencies
Legal Claim Contingencies
At 30 June 2023, the Group had no legal claim contingencies.
Guarantees
The Group has provided a guarantee to Wincasa for EUR 290k and EUR 8k to SPACES as collateral for the lease of its office spaces.
Royalties
The Group has entered into three license agreements with EPFL that will require royalty payment in the event the Company is able to generate revenues in the future for products directly linked to these licenses. The royalty scheme with EPFL is based on net sales.
On 27 September 2019 Neurorecovery Technologies Inc. (now ONWARD Medical Inc.) entered into a license agreement with the Regents of the University of California acting through Technology Development Group UCLA Campus granting an exclusive license on certain patents in certain fields of neuromodulation and spinal cord stimulation and a
| TOC | 1 | 2 | 3 | 4 | 5 | 6 6 |
7 | 8 | 9 | 10 |
|---|---|---|---|---|---|---|---|---|---|---|
| ----- | --- | --- | --- | --- | --- | -------- | --- | --- | --- | ---- |
Notes to the Condensed Consolidated Interim Financial Statements
non-exclusive license on certain other patent rights. Various revenue milestone payments are due under the exclusive license and fixed royalty payments are due under the nonexclusive license. The agreement contains various milestone and diligence obligations ranging from USD 10k to USD 50k payable upon entering a phase III clinical trial, regulatory approval and/or first commercial sale.
On 8 October 2019 Neurorecovery Technologies Inc. (now ONWARD Medical Inc.) entered into a license agreement with the California Institute of Technology ("Caltech"), the latter on behalf of various intellectual property owners, including UCLA, University of Louisville, DEI and USC, granting an exclusive license on certain technology in certain fields of epidural and transcutaneous neuromodulation and a non-exclusive license of certain other intellectual property. Various revenue milestone payments, diligence obligations and fixed royalty payments are due under the license. These payments range from USD 20k to USD 75k payable upon FDA approval, CE mark and/or first commercial sale.
15. Events after the Reporting Period
On 3 July 2023 the Group granted 268,175 stock options to employees with an exercise price of EUR 5.18. The conditions of the existing plan as explained in Note 10 applies to this grant.
Board's Statements on the Interim Consolidated Financial Statements
Board's Statements on the Interim Condensed Consolidated Financial Statements for the 6 Months Ended 30 June 2023
We have prepared the interim condensed consolidated financial statements for the six months ended 30 June 2023 of ONWARD Medical N.V..
To the best of our knowledge:
- The interim condensed consolidated financial statements prepared in accordance with IAS 34, "Interim Financial Reporting"as adopted by the European Union, give a true and fair view of the assets, liabilities and financial position at 30 June 2023, and of the results of our consolidated operations for the first half year of 2023.
- The half year report related to the first half year 2023 gives a fair review of the information required pursuant to section 5:25d, subsections 8 and 9 of the Dutch Act on Financial Supervision.
Lausanne, 18 September 2023 – Board of Directors
In the Directors' Report in our Annual Report 2022 we set out an overview of our primary strategic, operational, legal and compliance and financial risks. Financial risks are also described in more detail in the notes to the Consolidated Financial Statements 2022 (Note 4.3).
Risk management policies of the Group are established to identify and analyze the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits.
In the first six months of 2023, there has been no material change in the identified risks as described in the Annual Report 2022 and we have no indication this will significantly change during the remaining six months of the financial year 2023.
Overview of Risks
Certain statements, beliefs, and opinions in this document are forward-looking, which reflect the Company's or, as appropriate, the Company directors' current expectations and projections about future events. In particular, the words 'expect', 'anticipate', 'estimate', 'may', 'should', 'could', 'would', 'believe', 'outlook', 'potential', 'will', 'planned', 'pipeline', 'seek' and similar expressions are intended to identify forwardlooking statements. By their nature, forward-looking statements involve several risks, uncertainties, and assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements.
TOC 1 2 3 4 5 6 7 8 9 10 9
These risks, uncertainties, and assumptions could adversely affect the outcome and financial effects of the plans and events described herein. A multitude of factors including, but not limited to, changes in demand, supplier performance, competition, regulatory review timelines and outcomes, and technology, can cause actual events, performance, or results to differ significantly from any anticipated development. For a discussion of factors that could cause future results to differ from such forward-looking statements, see also the Risk management and control section of the 2022 Annual Report. Forward-looking statements contained in this Half Year Report regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. As a result, the Company expressly disclaims any obligation or undertaking to release any update or revisions to any forward-looking statements
in this press release as a result of any change in expectations or any change in events, conditions, assumptions, or circumstances on which these forward-looking statements are based. Neither the Company nor its advisers or representatives nor any of its
Forward-Looking Information / Statements
subsidiary undertakings or any such person's officers or employees guarantees that the assumptions underlying such forward-looking statements are free from errors nor does either accept any responsibility for the future accuracy of the forward-looking statements contained in this document or the actual occurrence of the forecasted developments. You should not place undue reliance on forward-looking statements, which speak only as of the date of this document. All ONWARD devices and therapies referenced here, including but not limited to ARCIM, ARCEX, and ARC Therapy, alone or in combination with BCI, are investigational and not available for commercial use.
TOC 1 2 3 4 5 6 7 8 9 10
BCI
Brain-Computer Interface - a device that records brain signals and sends them to a computer which can also be a spinal cord stimulator such as ARCIM which uses the brain signals to restore and control movement
Caltech
California Institute for Technology
CE Conformité Européenne
CHUV Centre Hospitalier Universitaire Vaudois
EPFL École Polytechnique Fédérale de Lausanne
Epidural Placed or administered outside the dura mater
FDA
U.S. Food and Drug Administration
Hypotension Lower blood pressure than normal range
IPG ONWARD implantable pulse generator
LTIP Long-Term Incentive Plan
Net cash
Net cash is defined as the sum of cash and cash equivalents and fixed term deposits included in the current assets as included in consolidated statement of financial position in the Financial Statements
Neuromodulation
Field of bioengineering implicating technologies impacting neural interfaces
Definitions & Abbreviations
RVO
Rijksdienst voor Ondernemend Nederland
SCI
Spinal Cord Injury – damage to the nerves in the spine that circulate signals from the brain to and from the body that can be caused by a trauma or a disease and may lead to temporary or permanent dysfunction
Transcutaneous
Penetrating through the skin transcutaneous stimulation is stimulation delivered through the skin via electrodes placed on the skin
UCLA
University of California, Los Angeles
Up-LIFT
Title of a pivotal trial using the Company's ARCEX System
