Financial Statement Bulletin

22.03.2019

BBS-Bioactive Bone Substitutes Plc

Company Announcement March 22, 2019 at 9:00 am

BBS-Bioactive Bone Substitutes Plc (BBS) Interim Report 1.1.-30.6.2018 (unaudited)

January-June shortly (comparison season 1-6/2017)

  • The quality system ISO 13485 has been updated to meet the latest requirements
  • An own customized syringe has been designed for the final product and a prototype replacing the manual filling of the syringes has been constructed
  • The preliminary report of the clinical trial has been completed
  • In the updated European Commission’s product classification manual BBS’s ARTEBONE is mentioned as an example, and can be accepted as a medical device class III
  • The oversight authority (Notified Body) is preparing for Brexit and is relocating its headquarters from London to Amsterdam. In addition, a new MDR (Medical Device Regulation) regulation on medical devices has entered into force. These may affect to the CE-label completion schedule.
  • BBS did not have any sales. Other operating income was EUR 2,224 million due to accord
  • The accords of old loans improved the seasons earnings significantly
  • The cash flow from operations was EUR -1,701 (-1,094) million
  • BBS’s cash assets on 30th June 2018 was EUR 1,685 (0,354) million
  • The company’s financial position strengthened through listing on the NASDAQ First North market places in Helsinki and in Stockholm. EUR 3,5 million new fund was raised for the company in the IPO. The cost of listing during the period was EUR 0,33 million

Key financial figures, concern

1000 eur1-12/20181-12/2017
Other operating income*)2 26220
Personnel expenses669603
Depreciation and impairments2293 162
Other operating expenses757517
Profit (Loss) of the period379-4 466
Cash flow from business operations-1701-1 094
Equity ratio %42,85,5
Earnings per share €0,076-1,037
Earnings per share €, diluted0,073-1,000
The number of the shares at the end of the period5 090 5204 454 001
The average number of the shares during the period4 998 0944 305 725

*)Includes an accord EUR 2,237 million from the loans

1000 euroa31.12.201831.12.2017
Cash and securities168435
Equity4416536
Equity and liability total111569 669

 The equity ratio = equity/equity and liabilities total

Earnings per share = earnings for the period/the average number of the shares during the period

Guidance for 2019
For the year 2019, substantial net sales are not expected to be generated.

Outlook for 2019
BBS will drive forward the CE marking process of the first product and launch sales and marketing preparations.

Pekka Jalovaara, CEO

BBS-Bioactive Bone Substitutes Plc (BBS) is a growing Finnish company that has developed a new bone implant, medical device, for treating of bone traumas, bone losses and bone defects. The company has the headquarters and quality control laboratory in Oulu and the EU-certified production facility at Reisjärvi. The company has a history of over 15 years, during which time the company has developed product and production methods, performed required preclinical and clinical tests, and established a manufacturing line and a quality system for commercial production. The product development phase of a company like BBS is typically 10-15 years and BBS has not been able to fall below this, especially when this is a brand-new product at the interface between a medical device and a medicinal product. Product classification has been challenging and just recently we got a confirmation that our product is acceptable as a medical device. In the updated manual of the European Commission (MANUAL ON BORDERLINE AND CLASSIFICATION IN THE COMMUNITY REGULATORY FRAMEWORK FOR MEDICAL DEVICES), ARTEBONE® is an example case and the approval path is the exactly the same that BBS has followed.

Our company still has no turnover, but the CE marking and FDA approval processes required for the product’s marketing authorization are currently under way. Sales are expected to begin no later than next year as soon as the CE marking is received. Until now, BBS has been a product development company but is now heading for marketing and sales. Sales are expected to start in the Nordic countries and a few Central European countries, while investing heavily in partners.

ARTEBONE® product contains natural bone hard component, tricalcium phosphate mineral granules, as well as proteins including the bone growth factors that are extracted from reindeer bone. The product resorbs from the trauma when it heals. Currently there are products with only one of these components, but BBS has managed to combine these two. Our first product is a ready-to-use paste in the syringe so there is no need to make any mixing on the operating table, which is typical for competing products. ARTEBONE® product is based on its ingredients comparable to bank bone or human DBM (Demineralized Bone Matrix) products. DBM products have been found to poorly induce the formation of new bone. In addition, the quality of human-derived products may vary greatly depending on the age and health of the donor. The reindeer bone protein extract in ARTEBONE® is very homogeneous because bones from about 70 reindeer are used on one batch. Reindeer bone protein extract has been found safe in preclinical trials and no human viral diseases can be transmitted to patients. In clinical trial, ARTEBONE® has proven to be safe and functional.

Based on the studies carried out, the ARTEBONE® product can in future replace the most common currently used own bone grafts in the treatment of bone problems. This brings significant saving to the society, hospitals and patients. Own bone graft needs to be taken from your own body, typically from the iliac crest and this means additional surgery that takes time up to an hour. Surgical harvesting of bone also involves the risk of complications. With ARTEBONE® only one surgery is needed instead of two. Therefore, the hospitalization time is shortened, and the patient recovers more quickly.

Furthermore, our product is ecological because we use renewable materials in our premium products to promote people’s health.

The objective of the Offering was primarily to enable BBS to raise funds to complete ARTEBONE®’s ongoing application processes for the CE marking and FDA approval, begin commercial production and the commercialization of the product. Funds are also needed to continue product development, develop and maintain the patent portfolio, ensure sufficient self-financing for growth investments in accordance with our company’s strategy and hire additional staff for sales and marketing.

Funds raised in the IPO are used to implement the above-mentioned issues. The main objective is to complete the licensing processes, and especially sales and organizational development.

Our first short-term goal is to get marketing approvals and to open sales in the Nordic countries and Europe.  One of our main goals is to find a big partner to ensure global access to the market. Large companies in the industry do not do their own product development; instead they observe the small product development companies.

THE BBS’S product development

As a result of the listing, funds were raised to further develop the company’s ARTEBONE-product towards a marketing authorization and market. The first models of a syringe developed for ARTEBONE-paste were available at the beginning of the year. The models were delievered to Finland in early summer and the designs were approved in October 2018, in which the first batch of syringes for final product validation experiments was ordered. In the previous year, the equipment for the filling of syringes ordered was sent to the test drive in early autumn. Equipment was tested with syringes in December. Hardware qualification and end product validation work has started. For other required packaging, sterilization and protective packaging, tightness monitoring is performed. In addition, sealing equipment was obtained for sealing the packages. The storage hall was repaired and a space for storage and packaging for products for sterilization was built. In addition, premises for clinical packaging and labeling of the final product were built in the Reisjärvi plant. The lyophilizer ordered and delivered last year was installed and qualified. A major refurbishment was made for process cooling in early autumn due to condencer breakage.

One protein exctracting test batch was prepared in spring. The mixers needed in the dialyser were designed and ordered. The final product sterilization validation project was promoted by making preliminary sterilization experiment.

Activities of the quality control laboratory

In addition to the analysis of conventional raw material, production batch, self-life monitoring and product development, the focus of the laboratory in 2018 was on validation of analytical methods and qualification of equipment. Validated two ELISA measurement methods, as well as the determination of total nitrogen from outsourced analyzes and multiple elemental analysis. Thus, validating honey is one more ELISA method in addition to outsourced microbiological analyzes. In the case of hardware, the new equipment was introduced and qualified as force measuring equipment. In the past, this measurement service was outsourced so the materials strength measurements and end-product injectability testing can now be carried out by ourselves.

Regulatory issues

In April 2018, the European Commission published an updated manual ”MANUAL ON BORDERLINE AND CLASSIFICATION IN THE COMMUNITY REGULATORY FRAMEWORK FOR MEDICAL DEVICES”, whereby ARTEBONE-like products can be classified into medical device in the future. The draft-version of the technical documentation was sent to the Notified Body at the end of July 2018 and the questions put to it have been answered at the end of the year. Expected answers from the institution. The ARTEBONE application was also submitted to the notified body in mid-september. The FDA process is in progress.

The company’s GMP operations and the pharmaceutical factory of the Reisjärvi plant are authorized by FIMEA in august. The inspection did not reveal any serious comments and the authorization is therefore still valid. External consultant assistance has been used to resolve regulatory issues.

The company has been in the product development phase so far and the operational cash flow can only start when the company has received the CE-label for the main product, estimated within one year. All the necessary steps have been taken and the material has been submitted to the authority. The CE-marking process is now in the hands of the authorities and it is difficult to estimate the exact timetable. The CE-marking process has been influenced, among other things, by the fact that the supervisory authority (Notified Body) is in the UK and they are moving their headquarters to Amsterdam for Brexit. In addition, a new regulation MDR (Medical Device Regulation) on medical devices, which must be completed by 2020, has entered into force. This creates a lot of extra work for the authorities and companies.

FINANCIAL REVIEW 1th January – 31th December, 2018

Overall

BBS has made for the period 1th January - 31th December 2018 the consolidated financial statement for the first time. BBS owns 100% of the subsidiary Bio Bones Oy, which owns the real estate for production in Reisjärvi. Bio Bones has no other business.

Operating income and development costs

BBS did not have any net sales during the review period and the corresponding period of the previous year. In other income the Tekes decision not to collect old product development loans of EUR 2,237 million has been recorded.

Financing and investments

The company’s cash assets at 10th December 2018 were EUR 1,685 (0,035) million. The company estimates the current funding is enough for about one year from the date of this release. Start-up of production and sales, and hence the production capacity of intangible assets activated in balance sheet, depends on success in obtaining additional funding.

The groups cash flow from operations was EUR -1,701 (-1,094) million in the review period.

Acquisitions and directed share issues

No acquisitions were made during the review period.

BBS was listed in February 2018 on the NASDAQ First North list in Helsinki and Stockholm. Trading in shares BONEH (Helsinki) and BONES (Stockholm) began on 28th February 2019. Issue of the IPO raised a gross of EUR 3,5 million in assets. The cost of the listing was EUR 0,50 million during the review period. More detailed information on the IPO is presented on the companys’s website.

Balance sheet

The consolidated balance sheet total on 10th December 2018 was EUR 11,156 (9,668) million. On the 31th December 2018 the company had a short-term debts EUR 0,93 (1,460) million, long-term loans to financial institutions EUR 5,633 (6,722) million, capital loans of EUR 0,176 (0,95) million. Financial income and expenses amounted to EUR -0,097 (-0,102) million.

Equity

Equity on 31th December 2018 was EUR 4,416 (0,536) million. In the financial year 2017, for the activation of product development was made a write-off of EUR 2,95 million due to the project phase deemed unnecessary for the current product. During the review period on 31th December 2018, the listing on the stock exchange and the accord of the old loans raised the shareholder’s equity.

Staff and administration

The number of employees was 12 at the end of review period on 30th June 2018. Members of the board were Jarmo Halonen (chairman), Päivi Ylä-Kolu, Auvo Kaikkonen, Tomi Numminen, Pekka Jalovaara and Hannu Säynäjäkangas. Pekka Jalovaara is acting as the CEO.

The annual general meeting 2018

The annual general meeting (AGM) of BBS was held in Oulu on 28th March 2018.

The AGM approved the financial statements for 2017 and discharged the members of the board of directors and the CEO from liability. The AGM decided, in accordance with the proposal of the board of directors, that no dividend be paid for the financial year 2017 and that the loss for the financial year is recorded in the profit/loss account.

The AGM approved the remuneration of board members for EUR 500 and for the chairman EUR 750 per meeting.

The AGM decided that a reasonable fee would be paid to the auditor in accordance with the invoice approved by the company. Auditing society Ernst&Young Oy was elected as the auditor of BBS, with KHT Juhani Rönkkö as the principal auditor.

Share-based incentive plan

The company has a valid stock option program for 2012 approved by the AGM in 18th July 2012. The board of directors has decided on options for the 2th January 2013 as authorized by the AGM. Options have been issued to key personnel and by each option can subscribe for one share at the price of one euro until 31th December 2019. The board of directors, on 9th January 2018, continued the subscribe period until 31th December 2023. Stock options may be issued up to 170 000 new shares and this has no perceptible impact on the earnings per share.

Risks and uncertainties

The company’s listing and debt accord have lowered the near future financial risk. The European Commission’s manual on medical devices reduced the risk associated with the classification of ARTEBONE®. According to the company’s management, there are no significant changes in the risks and uncertainties associated with the business of BBS during the first half of 2018.

Significant risk and uncertainties related to the business of BBS have been announced in the listing brochure of 30th January 2018, which can be accessed on the website at www.bbs-artebone.fi .

Shares and shareholders

The BBS’s market capitalization at the end of the review period on 31th December 2018 was EUR 11,7 million. The closing price of the share on 31th December 2018 was EUR 2,30. The highest price for the review period was EUR 4,73 and the lowest was EUR 2,20.

BBS had 991 registered shareholders, including a register of shareholders dated 31th December 2018.

The BBS’s board of directors and the CEO held 31th December 2018 total of 543 650 (532 850) shares including shares held through controlled companies, i.e. 10,7% of the company’s shares. Information about the company’s insider trading in the company’s shares is published on the company’s website.

Event after the review period

The company has no relevant reporting after the review period.

During the review period no capitalized and product investments have been made in balance sheet.

Financial Statement Bulletin’s accounting principles

The annual review has been prepared in accordance with the Finnish Accounting Act and rules of the First North marketplace. Figures for the annual review are unaudited.

Financial information 2019

The financial statement bulletin for 1-6/ 2019 will be published on August 30, 2019, 9 am.

In Oulu March 22, 2019
BBS-Bioactive Bone Substitutes Plc
Board of Directors

For more information:

Pekka Jalovaara, CEO,

puh. 050 5529275, e-mail: pekka.jalovaara@bbs-artebone.fi

Hannu Säynäjäkangas, CFO,

puh. 040 5021092, e-mail: hannu.saynajakangas@bbs-artebone.fi

Certified Advisor:

Stockholm Certified Advisers AB, p. +46 70 5516 729

DISTRIBUTION:

Nasdaq Helsinki Oy

Nasdaq Stockholm AB

Key media

www.bbs-artebone.fi

This is information that BBS-Bioactive Bone Substitutes Plc is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above on 15th Marsh 2019 at 12:00 am (UTC).

BBS-Bioactive Bone Substitutes Plc is the health technology company operating since 2003. Before that there was a background of seven years of product development in the University of Oulu. We have developed a new product for healing of difficult bone fractures and for solving the problems in bone healing. Our mission is to offer new generation medicinal products for the orthopedic surgery. The research and development in the field of medicine requires perseverance and courage to develop new things.  We have over 20 years of expertise in this. Our operations are characterized by top expertise, innovativeness and dedicated and committed employees. The ARTEBONE ®product is ready and the application process for the CE-mark has been initiated. BBS is the company having its headquarters in Oulu. We have our own production plant located in Reisjärvi and it is approved by FIMEA. More information: www.bbs-artebone.fi.

ATTACHMENTS:

Financial Statement 31th December 2018
Cash Flow Statement 31th December 2018
Statement of changes in equity in the year 2018

Distribution: NASDAQ and key media

BBS-Bioactive Bone Substitutes Plc  
 CONSOLIDATED INCOME STATEMENT1.1.-31.12.20181.1.-31.12.2017
       
       
 SALES 0,000,00
  * Other operating income2 262 011,0320 466,26
  Materials and services  
  Raw material and consumables  
    Purchase during the period-58 302,16-26 701,80
    External services-69 956,73-74 540,76
   Raw materials and services total-128 258,89-101 242,56
  Personnel expenses   
   Wages and salaries-576 744,28-524 596,08
   Social security expenses  
    Pension expenses -84 065,19-60 885,63
    Other personnel expenses-9 026,53-17 648,14
  Personnel expenses total-669 836,00-603 129,85
  Depreciation and amortization  
   Depreciation according to plan-229 029,43-212 569,70
   Impairment of non-current assets0,00-2 950 000,00
   Depreciation and amortization total-229 029,43-3 162 569,70
  Other operating expenses-757 410,10-517 346,31
 OPERATING PROFIT (LOSS)477 476,61-4 363 822,16
  Financial income and expenses  
  Other interest income and other financing income  
    From others 1,803,28
   Other interest and financial expenses  
    To others -97 638,60-102 495,89
 Financial income and expenses total-97 636,80-102 492,61
  PROFIT (LOSS) BEFORE APPROPRIATIONS AND TAXES379 839,81-4 466 314,77
  PROFIT (LOSS) OF THE FINANCIAL PERIOD379 839,81-4 466 314,77

*The accord from old loans improved the result by EUR 2,237 million

BBS-Bioactive Bone Substitutes Plc  
 CONSOLIDATED BALANCE SHEET31.12.201831.12.2017
      
 ASSETS  
      
  NON-CURRENT ASSETS  
  Intangible assets  
   Development expenditure7 532 827,557 532 827,55
   Other Intangible assets433 289,14507 323,56
   Intangible assets total7 966 116,698 040 151,11
  Tangible assets  
   Land and water areas  
   Owned buildings83 719,0083 719,00
   Buildings and structures  
   Owned buildings and structures554 321,76596 044,92
  Machinery and equipment773 860,95853 464,68
   Tangible assets total1 411 901,711 533 228,60
  NON-CURRENT ASSETS TOTAL9 378 018,409 573 379,71
      
  CURRENT ASSETS  
  Debtors  
   Short term  
    Other debtors93 416,6957 520,51
    Prepayments and accrued income0,002 494,91
   Short term debtors total93 416,6960 015,42
   Debtors total93 416,6960 015,42
  Cash and equivalents1 684 870,7035 388,02
  CURRENT ASSETS TOTAL1 778 287,3995 403,44
      
  ASSETS TOTAL11 156 305,799 668 783,15


BBS-Bioactive Bone Substitutes Plc  
CONSOLIDATED BALANCE SHEET31.12.201831.12.2017
      
  EQUITY AND LIABILITIES  
      
  CAPITAL AND RESERVES  
   Equity  
    Share capital80 000,0080 000,00
   Equity total80 000,0080 000,00
   Share premium account1 394 957,011 394 957,01
   Other reserves  
    Invested unrestricted equity fund11 337 847,267 836 992,76
    Other reserves total11 337 847,267 836 992,76
   Retained earnings (loss)-8 775 902,76-4 309 587,99
   Profit (loss) of the period379 839,81-4 466 314,77
 CAPITAL AND RESERVES TOTAL4 416 741,32536 047,01
      
  CREDITORS  
  Long term  
   Capital loans175 825,46950 000,00
   Loans from credit institutions5 633 425,336 722 719,60
   Long term loans total5 809 250,797 672 719,60
  Short term  
   Loans from credit institutions521 664,67898 050,40
   Trade creditors20 923,70124 029,05
   Other creditors13 485,30100 730,32
   Accrual and referred income374 240,01337 206,77
  Short term creditors total930 313,681 460 016,54
  CREDITORS TOTAL6 739 564,479 132 736,14
      
 EQUITY AND LIABILITIES TOTAL11 156 305,799 668 783,15

CASH FLOW STATEMENT

BBS-Bioactive Bone Substitutes Plc Concern  
   
[1000 euros]20182017
   
 Cash flow from business operations  
 Profit (loss) before extraordinary items380-4466
 Adjustments  
 Scheduled depreciation and amortization 229213
 Financial income and expenses98102
Other adjustments: Accord of loans-22240
 Other adjustments: Write-downs02950
 Cash flow before changes in working capital-1517-1201
   
 Change in working capital  
 Changes in short-term non-interest-bearing (+) (-)-33-56
Changes in inventory Increase(-)/Decrease(+) 00
 Changes in short-term non-interest-bearing loans Increase(+)/Decrease(-)-45265
 Cash flow from business operations before financial items and taxes -1595-992
   
 Interest paid and other financial expenses from business operations 106102
 Interest received and other financial income from business operations 00
 Cash flow before extraordinary items and taxes-1701-1094
 Cash flow from business operations (A)  -1701-1094
   
Cash flow from investments  
 Investments in tangible and intangible goods -34-52
 Investments in shares in subsidiaries00
 Loans granted00
 Cash flow from investments (B)  -34-52
   
 Cash flow from financing  
 Share issue 3501957
 Raised long-term loans00
 Repayment of long-term loans 160
 Raised short-term loans0100
 Repayment of short-term loans 1000
 Cash flow from financing (C)  33851057
   
 Changes in funds (A+B+C) Increase (+)/Decrease (-)  1650-89
   
 Funds at the beginning of the financial period 35124
 Funds at the end of the financial period 168535

Equity development

Concern     
      
 Share-capitalShare premium accountInvested unrestricted equity fundAccumulated profitsEquity total
Equity 31/12/2017801 3957 837-8 776536
Profit (loss) of the financial year   380 
Paid share issue  3 501  
Equity 31/12/2018801 39511 338-8 3964 417
      
      
Equity 31/12/2016281 3956 977-4 3094 091
Profit (loss) of the financial year   -4 467 
Paid share issue52 860  
Equity 31/12/2017801 3957 837-8 776536