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:
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;
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
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.