Ontario Genomics Institute /
2012 Annual Report

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The genetic blueprint for all living organisms is encoded in DNA, a sequence of molecules made up of adenine (A), cytosine (C), guanine (G) and thymine (T).

Notes to Consolidated Financial Statements
Year ended March 31, 2012

The Ontario Genomics Institute (the "Corporation" or "OGI") was incorporated without share capital on October 18, 2000 under the Canada Corporations Act as a not-for-profit organization. OGI's role is to drive the life sciences industry in Ontario through the use of genomics to increase the quality of life for all Ontarians through better health outcomes, a healthier environment and sustainable agriculture. This is accomplished by concentrating on three strategic areas:

  1. through Research Program Management, to identify and cultivate emerging Ontario-led, pioneering research projects in genomics and related fields, and work with them to identify, attract, and support funding;

  2. through Business Development, to catalyze access to and the impact of research outcomes, helping scientists market their discoveries and the resulting products, and also work to ensure that access to leading-edge technologies makes genomics research in Ontario more competitive; and

  3. through Outreach, to establish initiatives that increase awareness of genomics research and facilitate informed public dialogue about genomics and its impact on society.

1. Significant accounting policies

(a) Basis of presentation

These consolidated financial statements include the results of OGI with those of the Corporation's wholly owned subsidiary, Genomics Ontario Inc. All significant intercompany accounts and transactions have been eliminated upon consolidation.

(b) Revenue recognition

The Corporation follows the deferral method of accounting for contributions, which include funds from Genome Canada and the Government of Ontario's Ministry of Economic Development and Innovation. Unrestricted contributions are recognized as revenue when received or receivable if the amount to be received can be reasonably estimated and collection is reasonably assured.

Externally restricted contributions are recognized as revenue in the year in which the related expenses are incurred. Investment income earned on unspent externally restricted contributions is recognized in the year in which it is earned.

(c) Advances to/amounts due to genomics research projects

Advances to genomics research projects comprise of amounts provided by the Corporation to approved research projects which have not been expensed. Amounts due to genomics research projects comprise amounts payable by the Corporation to projects for expenses already approved and incurred.

(d) Financial instruments

OGI designates its cash as held-for-trading, which is measured at fair value. Accounts receivable and advances to genomic research projects are classified as receivables, which are measured at amortized cost. Accounts payable and accrued liabilities and amounts due to genomic research projects are classified as other financial liabilities, which are measured at amortized cost.

OGI has adopted The Canadian Institute of Chartered Accountants' ("CICA") Handbook Section 3861, Financial Instruments – Disclosure and Presentation. In accordance with the Accounting Standards Board's ("AcSB") decision to exempt not-for-profit organizations from the disclosure requirements with respect to financial instruments contained within Section 3862, Financial Instruments – Disclosures, and Section 3863, Financial Instruments – Presentation, OGI has elected not to adopt these standards in its consolidated financial statements.

The carrying values of cash, accounts receivable, advances to genomic research projects, accounts payable and accrued liabilities and amounts due to genomic research projects approximate fair values due to the relatively short-term maturity of these financial instruments.

The long-term advances are classified as available-for-sale and stated at fair value.

(e) Capital assets

Capital assets are recorded at cost less accumulated amortization. Leasehold improvements are amortized on a straight-line basis over the lesser of estimated useful life or the term of the lease. Furniture and fixtures are amortized on a straight-line basis over five years. Computer equipment is amortized on a straight-line basis over three years.

(f) Use of estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the year. Amounts subject to significant estimates and assumptions include the carrying value of capital assets, fair value of long term advances and accruals. Actual results could differ from those estimates.

(g) Foreign exchange

The Corporation's assets and liabilities denominated in foreign currencies are translated into Canadian dollars using exchange rates in effect at the statement of financial position date. Revenue and expense items are translated at the rate of exchange prevailing on the date of the transaction.

2. Accounts receivable

  2012 2011
Grants receivable – Genome Canada 102,399
Harmonized Sales Tax ("HST") 43,419 63,849
Interest and other 17,532 6,450
60,951 172,698

3. Long-term advances

Pursuant to its commercialization policy, the Corporation advances funds for certain projects or opportunities in genomics-related research where traditional sources of financing are unavailable and the Corporation believes the technology may be of commercial interest in the future.

Additional advances of $175,000 (2011 – $225,000) were made during the year. The advances are made for a period of up to two years, bearing interest at rates ranging from 0% to 15%. Three advances were written off, reducing the carrying amount by $300,000 (2011 – one – $100,000), and one previous advance of $50,000 was repaid (2011 – nil). The write off is included in commercialization expenses for the current year.

4. Capital assets

      2012 2011
Cost Accumulated
amortization
Net book
value
Net book
value
Leasehold improvements 305,465 305,465
Furniture and fixtures 64,957 63,133 1,824 10,143
Computer equipment 18,692 3,116 15,576 5,771
389,114 371,714 17,400 15,914

5. Accounts payable and accrued liabilities

  2012 2011
Accrued liabilities 187,067 199,872
Accounts payable 62,895 44,312
Deferred rent 11,118 11,118
261,080 255,302

Deferred rent represents a rent-free period provided annually to the Corporation by its lessor. The amount is deferred and is recorded as a decrease in rent expense on a straight-line basis.

6. Deferred contributions

The Corporation receives funding from Genome Canada, the Government of Ontario's Ministry of Economic Development and Innovation ("MEDI") and other parties to be administrated and distributed in accordance with the related funding agreements.

Deferred contributions related to expenses of future periods represent unspent externally restricted funding to be used for the purposes of providing funds to eligible recipients and the payment of operating and capital expenditures in future periods.

The changes in the deferred contributions balances are as follows:

  2012 2011
Opening balance 267,259,132 247,836,239
Contributions received or receivable during the year:
Genome Canada – Research 17,799,372 17,899,259
Genome Canada – Operations 1,381,396 1,278,983
Government of Ontario – MEDI 1,000,000
Other 84,836 244,651
287,524,736 267,259,132
Amount amortized to revenue (282,999,907) (263,416,988)
Amount amortized to revenue 4,524,829 3,842,144

7. Internally restricted net assets

Internally restricted net assets represent net assets invested in capital assets.

8. Related party transactions and balances

In October 2003, the Corporation acquired the common shares of Genomics Ontario Inc., a for-profit entity which provides an investment vehicle for certain commercialization activities. During the year, an intercompany loan of $2,970 (2011 – $2,970) was provided to Genomics Ontario Inc. to fund operations. The loan is non-interest bearing, unsecured and payable on demand. Genomics Ontario Inc. also repaid $52,664 (2011 – nil) to the Corporation. These transactions have been eliminated upon consolidation.

9. Financial instruments

Interest rate risk arises from interest income on the cash balance. The effect on revenue of an increase or decrease in interest rates is not significant.

It is management's opinion that OGI is not exposed to significant interest rate risk or credit risk arising from financial instruments.

10. Capital disclosures

The Corporation considers its total assets to be its capital.

The Corporation's objectives in managing capital are to safeguard the assets and maintain liquidity. The Corporation maintains its liquidity by monitoring actual and projected cash disbursements against funding received or to be received for operations.

11. Commitments

(a) Funding

The Corporation has committed to the following:

    Less amount paid for  
Commitments expenses incurred advances
(due to)
Residual
commitments
    (000's)  
Applied Genomics Research in
Bioproducts or Crops Competition

7,881

4,453

924

2,504
Advancing Technology Innovation
through Discovery Competition

1,225

852

115

258
2010 Large-Scale Applied Research
Project Competition

11,327

909

798

9,620
Entrepreneurship Education in
Genomics Program

243


81

162
International Barcode of
Life project

8,599

6,866

(267)

2,000
Science and Technology
Innovation Centres

5,124

2,074

295

2,755
International Consortium Initiatives
("ICI")

43,786

34,886


8,900
78,185 50,040 1,946 26,199

Genome Canada has entered into an agreement with the Corporation regarding financial commitments totalling $7,880,929 for the Applied Genomics Research in Bioproducts or Crops Competition, $1,224,948 for the Advancing Technology Innovation through Discovery Competition, $11,327,125 for the 2010 Large-Scale Applied Research Project Competition, $243,000 for the Entrepreneurship Education in Genomics Program, and $8,599,199 for the International Barcode of Life project. Under the agreement, the Corporation agreed, among other things, to obtain financial support from other parties.

Genome Canada has entered into an agreement with the Corporation, under which Genome Canada agreed to provide the Corporation with financial contributions up to $30,719,858 for disbursement to the Structural Genomics Consortium and $13,066,518 to the Cancer Stem Cell Consortium, collectively referred to as the ICI. Under the agreement, the Corporation disburses funds to the projects but expenditures are reported directly to Genome Canada; therefore, the Corporation treats these funds as unrestricted and expenses when they are disbursed.

In fiscal 2012, OGI entered into an agreement with the Ministry of Economic Development and Innovation regarding the development of several translation projects. The Ministry has agreed to provide up to $5,500,000 to fund the development of these projects. The funding proceeds are to be paid out to OGI in installments which are based upon the achievement of specific project milestones as defined in the agreement. As at March 31, 2012, OGI has received $1,000,000 from the Ministry for this project and this amount is included in deferred contributions.

(b) Operating lease

The Corporation is committed under a five-year operating lease expiring December 31, 2015. Minimum payments for the next four fiscal years are as follows:

2013 193,539
2014 193,539
2015 193,538
2016 156,271
736,887

(c) Management services

In December 2010, OGI entered into a two-year agreement for the provision of management services, at a cost of $280,000 (plus HST) per year.

(d) Support services

In September 2011, OGI entered into a one-year agreement for the provision of accounting services at a cost of $30,000 (plus HST). Effective April 2012, the agreement was amended to end March 2013, at a cost of $24,000 (plus HST) per year.

12. Comparative figures

Certain comparative figures have been reclassified to conform with the financial statement presentation adopted in the current year.