0001144204-16-089877.txt : 20160323
0001144204-16-089877.hdr.sgml : 20160323
20160323172222
ACCESSION NUMBER: 0001144204-16-089877
CONFORMED SUBMISSION TYPE: POS AM
PUBLIC DOCUMENT COUNT: 73
FILED AS OF DATE: 20160323
DATE AS OF CHANGE: 20160323
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: Bionik Laboratories Corp.
CENTRAL INDEX KEY: 0001508381
STANDARD INDUSTRIAL CLASSIFICATION: ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842]
IRS NUMBER: 271340346
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: POS AM
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-204491
FILM NUMBER: 161524670
BUSINESS ADDRESS:
STREET 1: 483 BAY STREET
STREET 2: N105
CITY: TORONTO
STATE: A6
ZIP: M5G2C9
BUSINESS PHONE: 1.416.640.7887
MAIL ADDRESS:
STREET 1: 483 BAY STREET
STREET 2: N105
CITY: TORONTO
STATE: A6
ZIP: M5G2C9
FORMER COMPANY:
FORMER CONFORMED NAME: Drywave Technologies, Inc.
DATE OF NAME CHANGE: 20130814
FORMER COMPANY:
FORMER CONFORMED NAME: Strategic Dental Management Corp.
DATE OF NAME CHANGE: 20101220
POS AM
1
v434931_posam.htm
POS AM
As filed with the
Securities and Exchange Commission on March 23, 2016
Registration no. 333- 204491
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
Post-Effective Amendment No. 1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
BIONIK LABORATORIES CORP.
(Exact name of Registrant as specified in its
charter)
Delaware
3842
27-1340346
(State or Other Jurisdiction of
(Primary Standard Industrial
(I.R.S. Employer
Incorporation or Organization)
Classification Code Number)
Identification No.)
483 Bay Street, N105
Toronto, ON M5G 2C9
(416) 640-7887
(Address, including zip code, and telephone
number, including area code, of Registrant’s executive offices)
Peter Bloch, CEO
Bionik Laboratories Corp.
483 Bay Street, N105
Toronto, ON M5G 2C9
(416) 640-7887
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
Stephen E. Fox, Esq.
Ruskin Moscou Faltischek, P.C.
1425 RXR Plaza
Uniondale, New York 11556
(516) 663-6600
(516) 663-6601 (Facsimile)
Approximate date of commencement of proposed
sale to the public:
From time to time after the Registration
Statement becomes effective.
If any of the securities being registered on
this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following
box. þ
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number
of the earlier effective registration statement for the same offering. ¨
If this Form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement number for the same offering. ¨
If this Form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering. ¨
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company þ
CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities
to be Registered
Amount
to be
Registered (1)
Proposed
Maximum
Offering Price
Per Share (2)
Proposed
Maximum
Aggregate
Offering Price (2)
Amount of
Registration Fee
Common Stock, $.001 par value
32,816,500
(3)
$
1.90
$
62,351,350
$
7,245.23
(4)
(1)
Pursuant to Rule 416 under the Securities Act, the shares of common stock being registered hereunder
include such indeterminate number of shares as may be issuable as a result of stock splits, stock dividends or similar transactions.
(2)
Estimated solely for purposes of determining the registration fee pursuant to Rule 457(c) under
the Securities Act, computed based upon the high and low selling prices per share of the registrant’s common stock on July
10, 2015 on the OTC Pink marketplace. The closing price for such shares on July 10, 2015 was $1.90.
(3)
Represents (a) 16,408,250 shares of the registrant’s common stock and (b) 16,408,250 shares
of common stock issuable upon the exercise of outstanding warrants.
(4)
Previously paid.
The Registrant hereby amends this Registration
Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment
which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
The information
in this preliminary prospectus is not complete and may be changed. The Selling Stockholders may not sell these securities
until the registration statement filed with the Securities and Exchange Commission becomes effective. This preliminary
prospectus is not an offer to sell these securities nor does it seek offers to buy these securities in any state where the
offer or sale is not permitted.
Subject To Completion,
Dated March 23, 2016
PRELIMINARY PROSPECTUS
BIONIK LABORATORIES CORP.
32,816,500 Shares of Common Stock
This prospectus relates to the offer and sale
from time to time of up to 32,816,500 shares of our common stock by the persons described in this prospectus, whom we call the
“selling stockholders.” Of such shares, 16,408,250 shares may be issued upon exercise of warrants held by the selling
stockholders.
We are registering these shares as required
by the terms of registration rights agreements between the selling stockholders and us. Such registration does not mean that the
selling stockholders will actually offer or sell any of these shares. The selling stockholders may offer the shares of our common
stock at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined
at the time of sale or at negotiated prices. See “Plan of Distribution” for additional information.
We are not offering any shares of common stock
for sale under this prospectus and we will not receive any proceeds from sales of shares of our common stock by the selling stockholders; however,
we will receive a total of approximately $22,971,550 if all the warrants are exercised in full.
Our common stock trades on the OTCQX marketplace
under the symbol “BNKL.” The closing price of our common stock on March 21, 2016 was $1.00 per share.
These are speculative securities. See “Risk
Factors” beginning on Page 5 for the factors you should consider before buying shares of our common stock.
Neither the Securities and Exchange Commission
nor any state securities commission or other regulatory body has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
We are responsible for the information contained
in this prospectus. We have not, and the selling stockholders have not, authorized anyone to give you any other information, and
neither we nor any selling stockholder take any responsibility for any other information that others may give you. The selling
stockholders are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and
sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless
of the time of delivery of this prospectus or of any sale of our common stock.
BASIS OF PRESENTATION
Unless otherwise noted, references in this prospectus
to “Bionik,” the “Company,” “we,” “our,” or “us” means Bionik Laboratories
Corp., the registrant, and, unless the context otherwise requires, together with its wholly-owned subsidiary, Bionik Laboratories,
Inc., a Canadian corporation (“Bionik Canada”). References to Bionik Canada refer to such company prior to its acquisition
by the Company on February 26, 2015.
The information contained
in this prospectus includes some statements that are not purely historical and that are “forward-looking statements.”
Such forward-looking statements include, but are not limited to, statements regarding the Company and its management’s expectations,
hopes, beliefs, intentions or strategies regarding the future, including its financial condition and results of operations. In
addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including
any underlying assumptions, are forward-looking statements. The words “anticipates,” “believes,” “continue,”
“could,” “estimates,” “expects,” “intends,” “may,” “might,”
“plans,” “possible,” “potential,” “predicts,” “projects,” “seeks,”
“should,” “will,” “would” and similar expressions, or the negatives of such terms, may identify
forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.
The forward-looking
statements contained in this prospectus are based on current expectations and beliefs concerning future developments. There can
be no assurance that future developments actually affecting the Company will be those anticipated. These forward-looking statements
involve a number of risks, uncertainties (some of which are beyond the parties’ control) or other assumptions that may cause
actual results or performance to be materially different from those expressed or implied by these forward-looking statements, some
of which are described in the section of this prospectus entitled “Risk Factors”.
i
Should one or more
of these risks or uncertainties materialize, or should any of the Company’s assumptions prove incorrect, actual results may
vary in material respects from those projected in these forward-looking statements. The Company undertakes no obligation to update
or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be
required under applicable securities laws.
CAUTIONARY NOTE
REGARDING INDUSTRY DATA
Unless otherwise indicated,
information contained in this prospectus concerning our company, our business, the services we provide and intend to provide, our
industry and our general expectations concerning our industry are based on management estimates. Such estimates are derived from
publicly available information released by third party sources, as well as data from our internal research, and reflect assumptions
made by us based on such data and our knowledge of the industry, which we believe to be reasonable.
ii
PROSPECTUS SUMMARY
This summary highlights information contained
elsewhere in this prospectus. This summary may not contain all of the information that may be important to you. You should read
the entire prospectus carefully together with our financial statements and the related notes appearing elsewhere in this prospectus
before you decide to invest in our common stock. This prospectus contains forward-looking statements, which involve risks and uncertainties.
Our actual results could differ materially from those anticipated in such forward-looking statements as a result of certain factors,
including those discussed under the heading “Risk Factors” and other sections of this prospectus.
Our Business
Description of Business
We are a medical device company, specializing
in the designing, developing and commercializing of cost-effective physical rehabilitation technologies, prosthetics, and assisted
robotic products. We strive to innovate and build devices that improve an individual’s health, comfort, accessibility and
quality of life through the use of advanced algorithms and sensing technologies that anticipate a user’s every move.
Our first product is the ARKE lower body exoskeleton.
We plan to develop other biomechatronic solutions through internal research and development and we may further augment our product
portfolio through strategic and accretive acquisition opportunities in the future.
We also have two early stage development technologies:
APOLLO, an intelligent prosthetic knee; and Chronos, a cloud-based intelligent patient queuing system. We are continuing development
and exploring markets and pricing for Chronos to determine if the market justifies further investment. We currently do not have
the financial capability or personnel to develop APOLLO and the ARKE at the same time, so our investment in APOLLO is on hold in
order to focus on the ARKE. We intend to continue to revisit developing our technologies and the markets for our technologies as
we grow.
Since our founding, we have partnered with industry
partners in manufacturing and design and have also expanded our development team through partnerships with researchers and academia.
From inception to immediately prior to the First Closing, we have secured cash funding of approximately $5.5 million, which includes
grants as well as Scientific Research and Experimental Development tax refunds provided through the Canadian government that support
our creation of technologies that could lower the costs of medical devices and medical care.
We currently hold an intellectual property portfolio
that includes 5 U.S. and international patents pending, 13 U.S. provisional patents, and other patents under development. The provisional
patents may not be filed as full patents and new provisional patents may be filed as the technology evolves or changes.
Through December 31, 2015, we have not generated
any revenue and have a history of net losses.
Recent Developments
Merger Agreement with Interactive Motion Technologies,
Inc.
On March 1, 2016, we entered into an Agreement
and Plan of Merger (the “Merger Agreement”) with Interactive Motion Technologies, Inc. (“Interactive Motion”
or “IMT”), a Massachusetts corporation, and Bionik Mergerco Inc., a Massachusetts corporation, our wholly owned subsidiary,
providing for the merger of Bionik Mergerco with and into Interactive Motion, with Interactive Motion surviving as our wholly-owned
subsidiary. Interactive Motion is a Massachusetts-based private company that provides robotic tools for neurorehabilitation professionals.
Subject to the indemnification and escrow arrangements
described in the Merger Agreement, at the effective time of the merger, we will issue (or reserve for issuance) an aggregate of
23,650,000 shares of our common stock in exchange for all shares of Interactive Motion common stock and Interactive Motion preferred
stock outstanding immediately prior to the effective time (other than shares (i) held in treasury or (ii) held by persons who properly
exercise appraisal rights under Massachusetts law).
1
Because the consummation of the merger will
constitute a sale event under the terms of the Articles of Organization, as amended, of Interactive Motion, at the effective time
of the merger, first holders of the Interactive Motion preferred stock will receive payment of their liquidation preference out
of the merger consideration prior to any payment or allocation of merger consideration to holders of Interactive Motion common
stock. Following payment of the liquidation preference to the holders of Interactive Motion preferred stock, the remaining merger
consideration, subject to the indemnification and escrow arrangements described in the Merger Agreement, will be paid to the holders
of Interactive Motion common stock.
Additionally, we will assume each of the 3,897,500
options to acquire Interactive Motion common stock granted under its equity incentive plan or otherwise issued by Interactive Motion.
At the effective time of the merger, these options will represent the right to purchase an aggregate of 3,000,000 shares of our
common stock, of which 1,000,000 will have an exercise price of $0.25, 1,000,000 will have an exercise price of $0.95 and 1,000,000
will have an exercise price of $1.05.
Consummation of the merger is subject to customary
conditions, including without limitation, the affirmative vote or consent of the holders of a majority of the issued and outstanding
shares of Interactive Motion preferred stock voting as a separate class, and a majority of the issued and outstanding shares of
Interactive Motion preferred stock and common stock voting together as a single class. If the law permits, we or Interactive Motion
may each waive conditions for their benefit and their stockholders’ benefit and complete the merger even though one or more
of these conditions has not been met.
The Merger Agreement contains certain termination
rights, including that upon termination of the Merger Agreement for any reason except our breach, Interactive Motion must pay us
a fee of $80,000, all other amounts we may have advanced to Interactive Motion subsequent to March 1, 2016 through the termination
date (including the loan as described below), and all amounts loaned to Interactive Motion by us prior to the date of the Merger
Agreement of $300,000 plus interest, shall be immediately due and payable.
As of March 14, 2015, we entered into a Waiver
and Amendment Agreement with Bionik Mergerco Inc., Hermano Igo Krebs, and IMT. The Amendment amends the Merger Agreement and waives
any and all potential or actual breaches and/or defaults by the Company of its representations, warranties and/or covenants in
the Merger Agreement as a result of the restatements referred to below under “-Restatement of Unaudited Financial Statements.”
The foregoing summary of the Merger Agreement
and the Amendment does not purport to be complete and is qualified in its entirety by the Merger Agreement and the Amendment, which
are attached hereto as Exhibit 2.2 and 2.3 and incorporated herein by reference.
Loan Agreement with Interactive Motion
On March 7, 2016, we loaned $68,750 to Interactive
Motion, pursuant to a Loan and Security Agreement, to fund certain Interactive Motion expenses in contemplation of the closing
of the merger. The loan matures upon the earlier to occur of (a) the termination date of the Merger Agreement and (b) the effective
date of the Merger.
Interest on the loan is 6% per annum. The loan
is secured by a lien on the asset of Interactive Motion, subject to our company having a second position on all accounts and inventory
of Interactive Motion. Bionik may call an event of default upon the failure of Interactive Motion to make a payment when due of
any principal or interest on the loan.
This loan is in addition to a May 5, 2015 loan
to Interactive Motion of $150,000 and an August 25, 2015 loan to Interactive Motion of $150,000.
2
Restatement of Unaudited Financial Statements
On March 11, 2016, we announced that, during
the preparation of our financial statements for the year-end December 31, 2015, we were advised by MNP LLP, our independent registered
public accounting firm, to re-evaluate our accounting relating to the common stock purchase warrants issued in 2015 as part of
the Offering, and to consider restating our previously issued reviewed, unaudited condensed consolidated financial statements included
in our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2015, June 30, 2015 and September 30, 2015.
Management promptly engaged outside advisors
to consult on this matter, including a Big 4 accounting firm, and on March 9, 2016, management, with and upon advice of such advisors
and further discussions with its auditors, determined that the financial statements included in such Quarterly Reports should no
longer be relied upon and would be restated due to non-cash errors identified in the accounting for the warrants.
As a result, we filed restated Quarterly Reports
on Form 10-Q for the quarterly periods ended March 31, 2015, June 30, 2015 and September 30, 2015.
Please see “Management’s Discussion
and Analysis of Financial Condition and Results of Operations,” and our audited financial statements later in this prospectus.
History
Bionik Laboratories Corp. was incorporated on
January 8, 2010 in the State of Colorado. At the time of our incorporation the name of our company was Strategic Dental Management
Corp. On July 16, 2013, we changed our name from Strategic Dental Management Corp. to Drywave Technologies, Inc. and changed our
state of incorporation from Colorado to Delaware. Effective February 13, 2015, we filed with the Secretary of State of Delaware
a Certificate of Amendment to our Articles of Incorporation (the “Certificate of Amendment”) whereby, among other things,
we changed our name to Bionik Laboratories Corp. and reduced the authorized number of shares of Common Stock from 200,000,000 to
150,000,000. Additionally, on September 24, 2014, our stockholders approved a 1-for-0.831105 reverse stock split of the issued
and outstanding shares of our Common Stock, and adopted an equity incentive plan. The reverse stock split was implemented on February
13, 2015.
Bionik Canada was incorporated on March 24,
2011 under the Canada Business Corporations Act.
On February 26, 2015, we entered into an Investment
Agreement with Bionik Acquisition Inc., a company existing under the laws of Canada and our wholly owned subsidiary and Bionik
Canada whereby we acquired 100 Class 1 common shares of Bionik Canada representing 100% of the outstanding Class 1 common shares
of Bionik Canada. After giving effect to this and related transactions, we commenced operations through Bionik Canada.
Corporate Information
Our principal executive office is located at
483 Bay Street, N105, Toronto, ON M5G 2C9. Our telephone number is (416) 640-7887. Our website is www.bioniklabs.com. Information
on our website does not constitute a part of this prospectus.
3
The Offering
Common stock offered by the selling stockholders
32,816,500 shares of our issued and outstanding shares of common stock consisting of 16,408,250 shares and up to 16,408,250 shares that may be issued upon the exercise of outstanding warrants to purchase our common stock. The warrants have an exercise period of 4 years from their respective dates of issuance from February 26, 2015 to June 30, 2015, and an exercise price per share of $1.40.
Common stock to be outstanding after the offering
Up to 88,999,542 shares of common stock, based on our issued and outstanding shares of common stock and Exchangeable Shares as of March 21, 2016, and assuming full exercise of our outstanding warrants issued to investors for cash. This does not assume the exercise of any other options or warrants that may be outstanding.
Use of proceeds
We will not receive any proceeds from the sale of common stock by the selling stockholders participating in this offering. The selling stockholders will receive all of the net proceeds from the sale of their respective shares of common stock in this offering. However, we will receive a total of approximately $22,971,550 if all the warrants are exercised in full, which will be added to our working capital. See “Use of Proceeds” on page 18 of this prospectus for more information.
Risk factors
See “Risk Factors” on page 5 of this prospectus for a discussion of factors you should carefully consider before deciding to invest in our common stock.
4
RISK FACTORS
The securities offered by the Selling Stockholders
involve a high degree of risk and should only be purchased by persons who can afford to lose their entire investment. Prospective
purchasers should carefully consider, among other things, the following risk factors and the other information in this prospectus,
including our financial statements and the notes to those statements, prior to making an investment decision.
We have a limited operating history upon
which investors can evaluate our future prospects.
We have a limited operating history upon which
an evaluation of its business plan or performance and prospects can be made. The business and prospects of the Company must be
considered in the light of the potential problems, delays, uncertainties and complications encountered in connection with a newly
established business and creating a new industry. The risks include, but are not limited to, the possibility that we will not be
able to develop functional and scalable products and services, or that although functional and scalable, our products and services
will not be economical to market; that our competitors hold proprietary rights that preclude us from marketing such products; that
our competitors market a superior or equivalent product; that we are not able to upgrade and enhance our technologies and products
to accommodate new features and expanded service offerings; or the failure to receive necessary regulatory clearances for our products.
To successfully introduce and market our products at a profit, we must establish brand name recognition and competitive advantages
for our products. There are no assurances that we can successfully address these challenges. If it is unsuccessful, we and our
business, financial condition and operating results could be materially and adversely affected.
The current and future expense levels are based
largely on estimates of planned operations and future revenues rather than experience. It is difficult to accurately forecast future
revenues because our business is new and our market has not been developed. If our forecasts prove incorrect, the business, operating
results and financial condition of the Company will be materially and adversely affected. Moreover, we may be unable to adjust
our spending in a timely manner to compensate for any unanticipated reduction in revenue. As a result, any significant reduction
in revenues would immediately and adversely affect the business, financial condition and operating results of the Company.
We have had no revenues since inception,
and we cannot predict when we will achieve profitability.
We have not been profitable and cannot predict
when we will achieve profitability. We have experienced net losses since our inception in 2011. We have had no revenues since inception.
We do not anticipate generating significant revenues until we successfully develop, commercialize and sell products derived from
our technologies, of which we can give no assurance. We are unable to determine when we will generate significant revenues, if
any, from the sale of any of such products.
We cannot predict when we will achieve profitability,
if ever. Our inability to become profitable may force us to curtail or temporarily discontinue our research and development programs
and our day-to-day operations. Furthermore, there can be no assurance that profitability, if achieved, can be sustained on an ongoing
basis. As of December 31, 2015, we had an accumulated deficit of $10,647,888.
We may never complete the development
of the ARKE lower body exoskeleton or any of our other proposed products into marketable products.
We do not know when or whether we will successfully
complete the development of the ARKE lower body exoskeleton or any other proposed, developmental or contemplated product, for any
of our target markets. We continue to seek to improve our technologies before we are able to produce a commercially viable product.
Failure to improve on any of our technologies could delay or prevent their successful development for any of our target markets.
Developing any technology into a marketable
product is a risky, time consuming and expensive process. You should anticipate that we will encounter setbacks, discrepancies
requiring time consuming and costly redesigns and changes and that there is the possibility of outright failure.
5
We may not meet our product development,
manufacturing, regulatory and commercialization milestones.
We have established milestones, based upon
our expectations regarding our technologies at that time, which we use to assess our progress toward developing our products.
These milestones relate to technology and design improvements as well as to dates for achieving development goals and regulatory
approvals. If our products exhibit technical defects or are unable to meet cost or performance goals or for any other reason,
our commercialization schedule could be delayed and potential purchasers of our initial commercial products, may decline to purchase
such products or may opt to pursue alternative products. We have updated our schedule for the commercialization of the ARKE and
plan to begin clinical tests in Canada in 2016.
We can give no assurance that our commercialization
schedule will be met as we further develop the ARKE or any of our other proposed products.
Customers will be unlikely to buy the
ARKE or any of our other proposed, developmental or contemplated products unless we can demonstrate that they can be produced for
sale to consumers at attractive prices.
To date, we have focused primarily on research
and development of the ARKE. Consequently, we have no experience in manufacturing these products on a commercial basis. We may
manufacture products through third-party manufacturers. We can offer no assurance that either we or our manufacturing partners
will develop efficient, automated, low-cost manufacturing capabilities and processes to meet the quality, price, engineering, design
and production standards or production volumes required to successfully mass market our products. Even if we or our manufacturing
partners are successful in developing such manufacturing capability and processes, we do not know whether we or they will be timely
in meeting our product commercialization schedule or the production and delivery requirements of potential customers. A failure
to develop such manufacturing processes and capabilities could have a material adverse effect on our business and financial results.
The proposed price of our products is in part
dependent on material and other manufacturing costs. We are unable to offer any assurance that either we or a manufacturing partner
will be able to reduce costs to a level which will allow production of a competitive product or that any product produced using
lower cost materials and manufacturing processes will not suffer from a reduction in performance, reliability and longevity. Furthermore,
although we have estimated a pricing structure for the ARKE, we can give no assurance that these estimates will be correct in light
of any manufacturing process we adopt or distribution channels we use.
Our products may not be accepted in the
market.
We cannot be certain that our current products
or any other products we may develop or market will achieve or maintain market acceptance. Market acceptance of our products depends
on many factors, including our ability to convince key opinion leaders to provide recommendations regarding our products, convince
distributors and customers that our technology is an attractive alternative to other technologies, demonstrate that our products
are reliable and supported by us in the field, supply and service sufficient quantities of products directly or through marketing
alliances, and price products competitively in light of the current macroeconomic environment, which, particularly in the case
of the medical device industry, are becoming increasingly price sensitive.
The ARKE can only be used by disabled
persons with upper body strength, which limits potential users to a narrower subset of the disabled.
The ARKE has been developed for use by patients
that have the upper body strength to properly use forearm crutches. Patients who cannot use forearm crutches, even if the patient
would otherwise be a candidate for the ARKE, cannot use the ARKE for rehabilitation. Additionally, the ARKE needs to properly fit
each patient, and those potential users who are too small or large to fit the product, may not be able to use the product because
of their size. Accordingly, this limits potential users of the ARKE to a narrower subset of the disabled.
6
We are subject to extensive governmental
regulations relating to the manufacturing, labeling and marketing of our products.
Our medical technology products and operations
are or are expected to be subject to regulation by the U.S. Food and Drug Administration (the “FDA”), Health Canada
and other governmental authorities both inside and outside of the United States. These agencies enforce laws and regulations that
govern the development, testing, manufacturing, labeling, advertising, marketing and distribution, and market surveillance of our
medical products.
Under the United States Federal Food, Drug,
and Cosmetic Act, medical devices are classified into one of three classes — Class I, Class II or Class III — depending
on the degree of risk associated with each medical device and the extent of control needed to ensure safety and effectiveness.
We believe the ARKE will be a Class II medical device in the United States, however, it has been designated as the equivalent to
a Class I device with Health Canada. Class II devices require a 510(k) premarket submission to the US FDA.
In addition to regulations in the United States,
we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our products
in foreign countries. Whether or not we obtain FDA approval for a product, we must obtain approval of a product by the comparable
regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries.
The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval.
The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country
to country.
The policies of the FDA and foreign regulatory
authorities may change and additional government regulations may be enacted which could prevent or delay regulatory approval of
our products and could also increase the cost of regulatory compliance. We cannot predict the likelihood, nature or extent of adverse
governmental regulation that might arise from future legislative or administrative action, either in the United States or abroad.
Following the introduction of a product, these
agencies will also periodically review our manufacturing processes and product performance. The process of complying with the applicable
good manufacturing practices, adverse event reporting, clinical trial and other requirements can be costly and time consuming,
and could delay or prevent the production, manufacturing or sale of our products. In addition, if we fail to comply with applicable
regulatory requirements, it could result in fines, delays or suspensions of regulatory clearances, closure of manufacturing sites,
seizures or recalls of products and damage to our reputation. Recent changes in enforcement practice by the FDA and other agencies
have resulted in increased enforcement activity, which increases the compliance risk for the Company and other companies in our
industry. In addition, governmental agencies may impose new requirements regarding registration, labeling or prohibited materials
that may require us to modify or re-register products already on the market or otherwise impact our ability to market our products
in those countries. Once clearance or approval has been obtained for a product, there is an obligation to ensure that all applicable
FDA, Health Canada and other regulatory requirements continue to be met.
We may be subject to penalties and may
be precluded from marketing our products if we fail to comply with extensive governmental regulations.
We believe that the ARKE will be categorized
as a Class II device in the U.S. Class II devices require a 510(k) premarket submission to the US FDA. However, the FDA has not
made any determination about whether our medical products are Class II medical devices and, from time to time, the FDA may disagree
with the classification of a new Class II medical device and require the manufacturer of that device to apply for approval as a
Class III medical device. In the event that the FDA determines that our medical products should be reclassified as a Class III
medical device, we could be precluded from marketing the devices for clinical use within the United States for months, years or
longer, depending on the specific changes to the classification. Reclassification of our products as Class III medical devices
could significantly increase our regulatory costs, including the timing and expense associated with required clinical trials and
other costs.
7
The FDA and non-U.S. regulatory authorities
require that our products be manufactured according to rigorous standards. These regulatory requirements may significantly increase
our production costs and may even prevent us from making our products in amounts sufficient to meet market demand. If we change
our approved manufacturing process, the FDA may need to review the process before it may be used. Failure to comply with applicable
regulatory requirements discussed could subject us to enforcement actions, including warning letters, fines, injunctions and civil
penalties, recall or seizure of our products, operating restrictions, partial suspension or total shutdown of our production, and
criminal prosecution.
Federal, state and non-U.S. regulations regarding
the manufacture and sale of medical devices are subject to future changes. The complexity, timeframes and costs associated with
obtaining marketing clearances are unknown. Although we cannot predict the impact, if any, these changes might have on our business,
the impact could be material.
Certain of our competitors have reported injuries
caused by the malfunction of human exoskeleton devices (in at least one case to the FDA). Injuries caused by the malfunction or
misuse of human exoskeleton devices, even where such malfunction or misuse occurs with respect to one of our competitor’s
products, could cause regulatory agencies to implement more conservative regulations on the medical human exoskeleton industry,
which could significantly increase our operating costs.
If we are not able to both obtain and
maintain adequate levels of third-party reimbursement for our products, it would have a material adverse effect on our business.
Healthcare providers and related facilities
are generally reimbursed for their services through payment systems managed by various governmental agencies worldwide, private
insurance companies, and managed care organizations. The manner and level of reimbursement in any given case may depend on the
site of care, the procedure(s) performed, the final patient diagnosis, the device(s) utilized, available budget, or a combination
of these factors, and coverage and payment levels are determined at each payer’s discretion. The coverage policies and reimbursement
levels of these third-party payers may impact the decisions of healthcare providers and facilities regarding which medical products
they purchase and the prices they are willing to pay for those products. Thus, changes in reimbursement levels or methods may either
positively or negatively impact sales of our products.
We have no direct control over payer decision-making
with respect to coverage and payment levels for our medical device products. Additionally, we expect many payers to continue to
explore cost-containment strategies (e.g., comparative and cost-effectiveness analyses, so-called “pay-for-performance”
programs implemented by various public and private payers, and expansion of payment bundling schemes such as Accountable Care Organizations,
and other such methods that shift medical cost risk to providers) that may potentially impact coverage and/or payment levels for
our current products or products we develop.
As our product offerings are expected to be
diverse across healthcare settings, they will likely be affected to varying degrees by the many payment systems. Therefore, individual
countries, product lines or product classes may be impacted by changes to these systems.
Changes in reimbursement practices of
third-party payers could affect the demand for our products and the prices at which they are sold.
The sales of our proposed products could depend,
in part, on the extent to which healthcare providers and facilities or individual users are reimbursed by government authorities,
private insurers and other third-party payers for the costs of our products or the services performed with our products. The coverage
policies and reimbursement levels of third-party payers, which can vary among public and private sources and by country, may affect
which products are purchased by customers and the prices they are willing to pay for those products in a particular jurisdiction.
Reimbursement rates can also affect the acceptance rate of new technologies. Legislative or administrative reforms to reimbursement
systems in the United States or abroad, or changes in reimbursement rates by private payers, could significantly reduce reimbursement
for procedures using the Company’s products or result in denial of reimbursement for those products, which would adversely
affect customer demand or the price customers may be willing to pay for such products.
8
Clinical outcome studies regarding our
products may not provide sufficient data to either cause third-party payers to approve reimbursement or to make human exoskeletons
a standard of care.
Our business plan relies on broad adoption of
human exoskeletons to provide neuro-rehabilitation in the form of gait training to individuals who have suffered a neurological
injury or disorder. Although use of human exoskeletons in neuro-rehabilitation is new, use of robotic devices to provide gait training
has been going on for over a decade and the clinical studies relating to such devices have had both positive and negative outcomes.
Much of the rehabilitation community has rejected the use of such devices based on the data from some of these studies. Although
we believe that human exoskeletons will outperform such robotic equipment, this has not been proven. Furthermore, it may prove
impossible to prove an advantage in a timely manner, or at all, which could prevent broad adoption of our products.
Part of our business plan relies on broad adoption
of our products to provide “early mobilization” of individuals who have been immobilized by an injury, disease, or
other condition. Although the health benefits of other methods of “early mobilization” have been demonstrated in clinical
studies in fields such as stroke, those studies did not test early mobilization with human exoskeletons directly. It may be necessary
to provide outcome studies on early mobilization with exoskeletons directly in order to convince the medical community of their
effectiveness. Such studies have not been designed at this time, and may be too large and too costly for us to conduct.
Product defects could adversely affect
the results of our operations.
The design, manufacture and marketing of our
products involve certain inherent risks. Manufacturing or design defects, unanticipated use of our products, or inadequate disclosure
of risks relating to the use of our products can lead to injury or other adverse events. These events could lead to recalls or
safety alerts relating to our products (either voluntary or required by the FDA, Health Canada or similar governmental authorities
in other countries), and could result, in certain cases, in the removal of a product from the market. A recall could result in
significant costs, as well as negative publicity and damage to our reputation that could reduce demand for our products. Personal
injuries relating to the use of our products could also result in product liability claims being brought against us. In some circumstances,
such adverse events could also cause delays in new product approvals.
We could be exposed to significant liability
claims if we are unable to obtain insurance at acceptable costs and adequate levels or otherwise protect ourselves against potential
product liability claims.
The testing, manufacturing, marketing and sale
of medical devices entail the inherent risk of liability claims or product recalls. Product liability insurance is expensive and
may not be available on acceptable terms, if at all. A successful product liability claim or product recall could inhibit or prevent
the successful commercialization of our products, cause a significant financial burden on the Company, or both, which in either
case could have a material adverse effect on our business and financial condition.
We may require additional capital to support
our present business plan and our anticipated business growth, and such capital may not be available on acceptable terms, or at
all, which would adversely affect our ability to operate.
We will likely require additional funds to further
develop our business plan, including the business plan of Interactive Motion after the consummation of that transaction. Based
on our current operating plans, the resources of the Company are expected to be sufficient to fund our planned operations necessary
to introduce the ARKE into the rehabilitation and ambulation market. If we are unable to generate sufficient revenues from our
operating activities, we may need to raise additional funds through equity offerings or otherwise in order to meet our expected
future liquidity requirements, including, introducing other products or pursuing new product opportunities. Any such financing
that we undertake will likely be dilutive to current stockholders.
We intend to continue to make investments to
support our business growth, including patent or other intellectual property asset creation, the merger with IMT and other businesses
and assets. In addition, we may also need additional funds to respond to business opportunities and challenges, including ongoing
operating expenses, protecting our intellectual property, satisfying debt payment obligations, developing new lines of business
and enhancing our operating infrastructure. While we may need to seek additional funding for such purposes, we may not be able
to obtain financing on acceptable terms, or at all. In addition, the terms of our financings may be dilutive to, or otherwise adversely
affect, holders of our common stock. We may also seek additional funds through arrangements with collaborators or other third parties.
We may not be able to negotiate any such arrangements on acceptable terms, if at all. If we are unable to obtain additional funding
on a timely basis, we may be required to curtail or terminate some or all of our business plans.
9
We cannot predict our future capital needs
and we may not be able to secure additional financing.
We may need to raise additional funds in the
future to fund our working capital needs, to fund more aggressive expansion of our business or for strategic acquisitions. We may
require additional equity or debt financings, collaborative arrangements with corporate partners or funds from other sources for
these purposes. No assurance can be given that necessary funds will be available for us to finance our development on acceptable
terms, if at all. Furthermore, such additional financings may involve substantial dilution of our stockholders or may require that
we relinquish rights to certain of our technologies or products. In addition, we may experience operational difficulties and delays
due to working capital restrictions. If adequate funds are not available from operations or additional sources of financing, we
may have to delay or scale back our growth plans.
The results of our research and development
efforts are uncertain and there can be no assurance of the commercial success of our products.
We believe that we will need to incur additional
research and development expenditures to continue development of our existing proposed products as well as research and development
expenditures to develop new products and services. The products and services we are developing and may develop in the future may
not be technologically successful. In addition, the length of our product and service development cycle may be greater than we
originally expected and we may experience delays in product development. If our resulting products and services are not technologically
successful, they may not achieve market acceptance or compete effectively with our competitors’ products and services.
If we fail to retain certain of our key
personnel and attract and retain additional qualified personnel, we might not be able to pursue our growth strategy.
Our future success will depend upon the continued
service of Peter Bloch, our Chief Executive Officer, and his executive team or any qualified replacement of those individuals.
There can be no assurance that the services of any of these individuals will continue to be available to us in the future. We do
not carry any key man life insurance policies on any of our existing or proposed executive officers. The failure to retain, or
attract replacement, qualified personnel could have a material adverse effect on our business and our ability to pursue our growth
strategy.
The impact of the Patient Protection and
Affordable Care Act remains uncertain.
In 2010, significant reforms to the health care
system were adopted as law in the United States. The law includes provisions that, among other things, reduce or limit Medicare
reimbursement, require all individuals to have health insurance (with limited exceptions) and impose increased taxes. These factors,
in turn, could result in reduced demand for our products and increased downward pricing pressure. Specifically, the law requires
the medical device industry to subsidize health care reform in the form of a 2.3% excise tax on United States sales of most medical
devices. The excise tax will increase our operating expenses. Because other parts of the 2010 health care law remain subject to
implementation, the long-term impact on us is uncertain. The new law or any future legislation could reduce medical procedure volumes,
lower reimbursement for our products, and impact the demand for our products or the prices at which we sell our products. Accordingly,
while it is too early to understand and predict the ultimate impact of the new law on our business, the legislation and resulting
regulations could have a material adverse effect on our business, cash flows, financial condition and results of operations.
10
Our operations in international markets
involve inherent risks that we may not be able to control.
Our business plan includes the marketing and
sale of our proposed products in international markets. Accordingly, our results could be materially and adversely affected by
a variety of uncontrollable and changing factors relating to international business operations, including:
·
macroeconomic conditions adversely affecting geographies where we intend to do business;
·
foreign currency exchange rates;
·
political or social unrest or economic instability in a specific country or region;
·
higher costs of doing business in foreign countries;
·
infringement claims on foreign patents, copyrights or trademark rights;
·
difficulties in staffing and managing operations across disparate geographic areas;
·
difficulties associated with enforcing agreements and intellectual property rights through foreign legal systems;
·
trade protection measures and other regulatory requirements, which affect our ability to import or export our products from
or to various countries;
·
adverse tax consequences;
·
unexpected changes in legal and regulatory requirements;
·
military conflict, terrorist activities, natural disasters and medical epidemics; and
·
our ability to recruit and retain channel partners in foreign jurisdictions.
Our financial results may be affected
by fluctuations in exchange rates and our current currency hedging strategy may not be sufficient to counter such fluctuations.
Our financial statements are presented in U.S.
dollars, while a significant portion of our business is conducted, and a substantial portion of our operating expenses are payable,
in currencies other than the U.S. dollar. Due to the substantial volatility of currency exchange rates, exchange rate fluctuations
may have an adverse impact on our future revenues or expenses presented in our financial statements. We consider using financial
instruments, principally forward foreign currency contracts, in our management of foreign currency exposure, as required. These
contracts primarily require us to purchase and sell certain foreign currencies with or for U.S. dollars at contracted rates. We
may be exposed to a credit loss in the event of non-performance by the counterparties of these contracts. In addition, these financial
instruments may not adequately manage our foreign currency exposure. Our results of operations could be adversely affected if we
are unable to successfully manage currency fluctuations in the future.
Our acquisition of other companies or
technologies in the future could prove difficult to integrate and may disrupt our business and harm our operating results and prospects.
Potential future acquisitions, including the
merger with Interactive Motion, will likely involve risks associated with our assumption of some or all of the liabilities of an
acquired company, which may be liabilities that we were or are unaware of at the time of the acquisition, potential write-offs
of acquired assets and potential loss of the acquired company’s key employees or customers.
11
We may encounter difficulties in successfully
integrating our operations, technologies, services and personnel with that of the acquired company, including Interactive Motion,
and our financial and management resources may be diverted from our existing operations. Offices outside of Canada or in multiple
states or provinces, including Interactive Motion’s offices in Massachusetts, could create a strain on our ability to effectively
manage our operations and key personnel. If we elect to consolidate our facilities, we may lose key personnel unwilling to relocate
to the consolidated facility, may have difficulty hiring appropriate personnel at the consolidated facility and may have difficulty
providing continuity of service through the consolidation.
End-user satisfaction or performance problems
with any future acquired business, technology, service or device, including Interactive Motion, could also have a material adverse
effect on our reputation. Additionally, potential disputes with the seller of an acquired business or its employees, suppliers
or customers and amortization expenses related to intangible assets could adversely affect our business, operating results and
financial condition. If we fail to properly evaluate and execute acquisitions, our business may be disrupted and our operating
results and prospects may be harmed.
Risks Related to Our Industry
The industries in which we operate are
highly competitive and subject to rapid technological change. If our competitors are better able to develop and market products
that are safer, more effective, less costly, easier to use, or are otherwise more attractive, we may be unable to compete effectively
with other companies.
The medical technology industry is characterized
by intense competition and rapid technological change, and we will face competition on the basis of product features, clinical
outcomes, price, services and other factors. Competitors may include large medical device and other companies, some of which have
significantly greater financial and marketing resources than we do, and firms that are more specialized than we are with respect
to particular markets. Our competition may respond more quickly to new or emerging technologies, undertake more extensive marketing
campaigns, have greater financial, marketing and other resources than ours or may be more successful in attracting potential customers,
employees and strategic partners.
Our competitive position will depend on multiple,
complex factors, including our ability to achieve market acceptance for our products, develop new products, implement production
and marketing plans, secure regulatory approvals for products under development and protect our intellectual property. In some
instances, competitors may also offer, or may attempt to develop, alternative therapies that may be delivered without a medical
device or a medical device superior to ours. The development of new or improved products, processes or technologies by other companies
may render our products or proposed products obsolete or less competitive. The entry into the market of manufacturers located in
low-cost manufacturing locations may also create pricing pressure, particularly in developing markets. Our future success depends,
among other things, upon our ability to compete effectively against current technology, as well as to respond effectively to technological
advances, and upon our ability to successfully implement our marketing strategies and execute our research and development plan.
We face competition from other medical
device companies that focus on robotic exoskeleton devices and other devices we intend to commercialize and market.
We face competition from other companies that
also focus on robotic exoskeleton devices such as Argo Medical Technologies, Ekso Bionics, Parker Hannifin and Rex Bionics. Additionally,
with respect to our products that we intend to market to patients with stroke-related conditions, Cyberdyne is developing an over-ground
exoskeleton and Hocoma, AlterG, Aretech and Reha Technology are each currently selling treadmill-based walking gait therapies that
will directly compete with such products. These companies have longer operating histories and may have greater name recognition
and substantially greater financial, technical and marketing resources than us. Many of these companies also have FDA or other
applicable governmental approval to market and sell their products, and more extensive customer bases, broader customer relationships
and broader industry alliances than us, including relationships with many of our potential customers. Increased competition from
any of these sources could result in our failure to achieve and maintain an adequate level of customers and market share to support
the cost of our operations.
12
We expect similar strong competition with respect
to any other product or technology we develop or acquire.
Our industry is experiencing greater scrutiny
and regulation by governmental authorities, which may lead to greater governmental regulation in the future.
In recent years, the medical device industry
has been subject to increased regulatory scrutiny, including by the FDA, Health Canada and numerous other federal, state, provincial
and foreign governmental authorities. This has included increased regulation, enforcement, inspections, and governmental investigations
of the medical device industry and disclosure of financial relationships with health care professionals. We anticipate that governments
will continue to scrutinize our industry closely, and that additional regulation by governmental authorities, both foreign and
domestic, may increase compliance costs, exposure to litigation and other adverse effects to our operations.
Unsuccessful clinical trials or procedures
relating to products under development could have a material adverse effect on our prospects.
The regulatory approval process for new products
and new indications for existing products requires extensive clinical trials and procedures, including early clinical experiences
and regulatory studies. Unfavorable or inconsistent clinical data from current or future clinical trials or procedures conducted
by us, our competitors, or third parties, or perceptions regarding this clinical data, could adversely affect our ability to obtain
necessary approvals and the market’s view of our future prospects. Such clinical trials and procedures are inherently uncertain
and there can be no assurance that these trials or procedures will be completed in a timely or cost-effective manner or result
in a commercially viable product. Failure to successfully complete these trials or procedures in a timely and cost-effective manner
could have a material adverse effect on our prospects. Clinical trials or procedures may experience significant setbacks even after
earlier trials have shown promising results. Further, preliminary results from clinical trials or procedures may be contradicted
by subsequent clinical analysis. In addition, results from our clinical trials or procedures may not be supported by actual long-term
studies or clinical experience. If preliminary clinical results are later contradicted, or if initial results cannot be supported
by actual long-term studies or clinical experience, our business could be adversely affected. Clinical trials or procedures may
be suspended or terminated by us, the FDA or other regulatory authorities at any time if it is believed that the trial participants
face unacceptable health risks.
Intellectual property litigation and infringement
claims could cause us to incur significant expenses or prevent us from selling certain of our products.
The industries in which we operate, including,
in particular, the medical device industry, are characterized by extensive intellectual property litigation and, from time to time,
we might be the subject of claims by third parties of potential infringement or misappropriation. Regardless of outcome, such claims
are expensive to defend and divert the time and effort of our management and operating personnel from other business issues. A
successful claim or claims of patent or other intellectual property infringement against us could result in our payment of significant
monetary damages and/or royalty payments or negatively impact our ability to sell current or future products in the affected category
and could have a material adverse effect on its business, cash flows, financial condition or results of operations.
If we are unable to protect our patents
or other proprietary rights, or if we infringe on the patents or other proprietary rights of others, our competitiveness and business
prospects may be materially damaged.
We own 5 U.S. and international patents pending
and 13 U.S. provisional patents. We intend to continue to seek legal protection, primarily through patents, for our proprietary
technology. Seeking patent protection is a lengthy and costly process, and there can be no assurance that patents will be issued
from any pending applications, or that any claims allowed from existing or pending patents will be sufficiently broad or strong
to protect our proprietary technology. There is also no guarantee that any patents we hold will not be challenged, invalidated
or circumvented, or that the patent rights granted will provide competitive advantages to us. Our competitors have developed and
may continue to develop and obtain patents for technologies that are similar or superior to our technologies. In addition, the
laws of foreign jurisdictions in which we develop, manufacture or sell our products may not protect our intellectual property rights
to the same extent as do the laws of the United States.
13
Adverse outcomes in current or future legal
disputes regarding patent and other intellectual property rights could result in the loss of our intellectual property rights,
subject us to significant liabilities to third parties, require us to seek licenses from third parties on terms that may not be
reasonable or favorable to us, prevent us from manufacturing, importing or selling our products, or compel us to redesign our products
to avoid infringing third parties’ intellectual property. As a result, we may be required to incur substantial costs to prosecute,
enforce or defend our intellectual property rights if they are challenged. Any of these circumstances could have a material adverse
effect on our business, financial condition and resources or results of operations.
Our ability to develop intellectual property
depends in large part on hiring, retaining and motivating highly qualified design and engineering staff with the knowledge and
technical competence to advance our technology and productivity goals. To protect our trade secrets and proprietary information,
generally we have entered into confidentiality agreements with our employees, as well as with consultants and other parties. If
these agreements prove inadequate or are breached, our remedies may not be sufficient to cover our losses.
Dependence on patent and other proprietary
rights and failing to protect such rights or to be successful in litigation related to such rights may result in our payment of
significant monetary damages or impact offerings in our product portfolios.
Our long-term success largely depends on our
ability to market technologically competitive products. If we fail to obtain or maintain adequate intellectual property protection,
we may not be able to prevent third parties from using our proprietary technologies or may lose access to technologies critical
to our products. Also, our currently pending or future patent applications may not result in issued patents, and issued patents
are subject to claims concerning priority, scope and other issues.
Furthermore, we have not filed applications
for all of our patents internationally and we may not be able to prevent third parties from using our proprietary technologies
or may lose access to technologies critical to our products in other countries.
Risks Related to this Offering, Our Securities and Governance
Matters
Our executive officers, through their
ownership of common stock and/or Convertible Shares, can substantially influence the outcome of matters requiring shareholder approval
and may prevent you and other stockholders from influencing significant corporate decisions, which could result in conflicts of
interest that could cause the Company’s stock price to decline.
Our executive officers collectively beneficially
own Exchangeable Shares, which may be exchanged for common stock equal to approximately 29% of our outstanding shares of Common
Stock and Exchangeable Shares as a single class. As a result, such individuals will have the ability, acting together, to substantially
influence the election of our directors and the outcome of corporate actions requiring shareholder approval, such as: (i) a merger
or a sale of our Company, (ii) a sale of all or substantially all of our assets, and (iii) amendments to our articles of incorporation
and bylaws. This concentration of voting power and control could have a significant effect in delaying, deferring or preventing
an action that might otherwise be beneficial to our other shareholders and be disadvantageous to our shareholders with interests
different from those individuals. These individuals also have significant control over our business, policies and affairs as officers
and/or directors of our Company. These stockholders may also exert influence in delaying or preventing a change in control of
the Company, even if such change in control would benefit the other stockholders of the Company. In addition, the significant
concentration of stock ownership may adversely affect the market value of the Company’s common stock due to investors’
perception that conflicts of interest may exist or arise. Therefore, you should not invest in reliance on your ability to have
any control over the Company.
We do not currently have a majority of
independent directors on our Board, which limits our ability to establish effective independent corporate governance procedures.
Our board of directors has significant control
over us and we have not established committees comprised of independent directors. We have five directors, three of whom hold executive
officer positions and are not independent. Accordingly, they have significant control over all corporate issues. We do not have
an audit, compensation, governance or nominating committee comprised of independent directors. Our directors as a whole perform
these functions. Thus, there is a potential conflict in that our directors also engaged in management and participate in decisions
concerning management compensation and audit issues, among other issues, may affect management performance.
14
Although we intend to add additional members
to our Board of Directors as qualified candidates become available, including upon the consummation of the proposed merger with
Interactive Motion, until we have a board of directors that would include a majority of independent members, if ever, there will
be limited independent oversight of our directors’ decisions and activities.
We may have undisclosed liabilities and
any such liabilities could harm our revenues, business, prospects, financial condition and results of operations.
Before the Acquisition Transaction, Bionik Canada
conducted due diligence on the Company it believed was customary and appropriate for a transaction such as the Acquisition Transaction.
However, the due diligence process may not have revealed all material liabilities of the Company then existing or which may be
asserted in the future against us relating to the Company’s activities before the consummation of the Acquisition Transaction.
In addition, the agreement with the Company contains representations with respect to the absence of any liabilities and indemnification
for any breach thereof. However, there can be no assurance that the Company had no liabilities upon the closing of the Acquisition
Transaction or that we will be successful in enforcing the indemnification provisions or that such indemnification provisions will
be adequate to reimburse us. Any such liabilities of the Company that survive the Acquisition Transaction could harm our revenues,
business, prospects, financial condition and results of operations.
We do not expect the Company to pay cash
dividends on its common stock.
We anticipate that the Company will retain its
earnings, if any, for future growth and therefore does not anticipate paying cash dividends on its common stock in the future.
Investors seeking cash dividends should not invest in the Company’s common stock for that purpose.
Anti-takeover provisions in the Company’s
charter and bylaws may prevent or frustrate attempts by stockholders to change the board of directors or current management and
could make a third-party acquisition of the Company difficult.
The Company’s Amended and Restated Certificate
of Incorporation and Amended and Restated Bylaws contain provisions that may discourage, delay or prevent a merger, acquisition
or other change in control that stockholders may consider favorable, including transactions in which stockholders might otherwise
receive a premium for their shares. These provisions could limit the price that investors might be willing to pay in the future
for shares of the Company’s common stock.
We cannot assure you that the Company’s
Common Stock will be listed on any national securities exchange.
We cannot assure you that the Company’s
Common Stock will be listed on any national securities exchange. We cannot assure you that will ever be able to meet the initial
listing standards of any of the NASDAQ markets or any other stock exchange, or that, if quoted, we would be able to maintain a
listing of Common Stock on any of the NASDAQ markets or any other stock exchange. If our Common Stock remains quoted on an over-the-counter
system rather than being listed on a national securities exchange, an investor may find it more difficult to dispose of shares
or obtain accurate quotations as to the market value of the Company’s Common Stock.
15
Because Bionik Canada became a reporting
company by means of the Acquisition Transaction, we may not be able to establish a liquid market for the Company’s Common
Stock or attract the attention of research analysts at major brokerage firms
Because Bionik Canada did not become a reporting
company by the traditional means of conducting an initial public offering of common stock, we may be unable to establish a liquid
market for the Company’s Common Stock. Moreover, we do not expect security analysts of brokerage firms to provide coverage
of the Company in the near future. In addition, investment banks may be less likely to agree to underwrite secondary offerings
on behalf of the Company or our stockholders than they would if we were to become a public reporting company by means of an initial
public offering of Common Stock. If all or any of the foregoing risks occur, it would have a material adverse effect on the Company.
An active and visible public trading market
for the Company’s Common Stock may not develop.
We cannot predict whether an active market for
the Company’s Common Stock will ever develop in the future. In the absence of an active trading market:
·
Investors may have difficulty buying and selling or obtaining market quotations;
·
Market visibility for shares of the Company’s Common Stock may be limited; and
·
A lack of visibility for shares of the Company’s Common Stock may have a depressive effect on the market price for shares
of the Company’s Common Stock.
The Company’s Common Stock is quoted on
the OTCQX marketplace operated by OTC Markets Group, Inc. These markets are relatively unorganized, inter-dealer, over-the-counter
markets that provide significantly less liquidity than NASDAQ or the NYSE. No assurances can be given that our Common Stock, even
if quoted on such markets, will ever actively trade on such markets, much less a senior market like NASDAQ or NYSE. In this event,
there would be a highly illiquid market for the Company’s Common Stock and you may be unable to dispose of your Common Stock
at desirable prices or at all.
The market for our Common Stock is limited.
Our Common Stock is thinly-traded and any recently
reported sales price may not be a true market-based valuation of our Common Stock. There can be no assurance that an active market
for our Common Stock will develop, even with the move from the OTC Pink marketplace to the OTCQX marketplace. In addition, the
stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate
to operating performance. Consequently, holders of shares of our common stock may not be able to liquidate their investment in
the Company’s shares at prices that they may deem appropriate.
The market price for our Common Stock
may be volatile.
The market price for our Common Stock may be
volatile and subject to wide fluctuations in response to factors including the following:
·
actual or anticipated fluctuations in our quarterly or annual operating results;
·
changes in financial or operational estimates or projections;
·
conditions in markets generally;
·
changes in the economic performance or market valuations of companies similar to ours;
·
announcements by us or our competitors of new products, acquisitions, strategic partnerships, joint ventures or capital commitments;
·
our intellectual property position; and
16
·
general economic or political conditions in the United States or elsewhere.
In addition, the securities market has from
time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular
companies. These market fluctuations may also materially and adversely affect the market price of shares of our Common Stock.
The issuance of shares upon exercise of
outstanding warrants could cause immediate and substantial dilution to existing stockholders.
The issuance of shares upon exercise of warrants
could result in substantial dilution to the interests of other stockholders since the selling stockholders may ultimately convert
and sell the full amount issuable on conversion.
A large number of our shares may be sold
in the market, which may depress the market price of our Common Stock.
We have commitments to register an aggregate
of 61,739,894 shares of our outstanding common stock, and common stock underlying outstanding Exchangeable Shares and outstanding
warrants, some of which are being registered pursuant to the registration statement of which this prospectus forms a part. The
issuance and sale of such shares may depress the market price of our Common Stock. Sales of a substantial number of shares of our
Common Stock in the public market could cause the market price of our Common Stock to decline.
As our Common Stock is subject to the
SEC’s penny stock rules, broker-dealers may experience difficulty in completing customer transactions and trading activity
in our securities may be adversely affected.
The SEC has adopted regulations, which generally
define “penny stock” to be an equity security that has a market price of less than $5.00 per share, subject to specific
exemptions. The market price of our Common Stock is now and may in the future continue to be less than $5.00 per share and therefore
would be a “penny stock” according to SEC rules, unless we are listed on a national securities exchange. Under these
rules, broker-dealers who recommend such securities to persons other than institutional accredited investors must:
·
make a special written suitability determination for the purchaser;
·
receive the purchaser’s prior written agreement to the transaction;
·
provide the purchaser with risk disclosure documents which identify certain risks associated with investing in “penny
stocks” and which describe the market for these “penny stocks” as well as a purchaser’s legal remedies;
and
·
obtain a signed and dated acknowledgment from the purchaser demonstrating that the purchaser has actually received the required
risk disclosure document before a transaction in a “penny stock” can be completed.
If our Common Stock becomes subject to these
rules, broker-dealers may find it difficult to effectuate customer transactions and trading activity in our securities may be adversely
affected. As a result, the market price of our securities may be depressed, and you may find it more difficult to sell your securities.
IN ADDITION TO THE ABOVE RISKS, BUSINESSES
ARE OFTEN SUBJECT TO RISKS NOT FORESEEN OR FULLY APPRECIATED BY MANAGEMENT. IN REVIEWING THIS PROSPECTUS, POTENTIAL INVESTORS SHOULD
KEEP IN MIND THAT THERE MAY BE OTHER POSSIBLE RISKS THAT COULD BE IMPORTANT.
17
USE OF PROCEEDS
The shares of our common stock offered by this
prospectus are being registered solely for the account of the selling stockholders. We will not receive any of the proceeds from
the sale of these shares. To the extent that we receive cash payment for the exercise of the warrants to purchase shares of our
common stock from the selling stockholders participating in this offering, we would use such proceeds for our working capital,
development of our technologies or acquisition of new technologies, and/or general corporate purposes. If all of the warrants to
which the warrant shares offered in this prospectus were exercised, we would receive proceeds of $22,971,550 in the aggregate.
DETERMINATION OF OFFERING PRICE
The selling stockholders
will determine at what price they may sell the shares of common stock offered by this prospectus, and such sales may be made at
prevailing market prices, or at privately negotiated prices.
MARKET PRICE OF AND DIVIDENDS ON COMMON STOCK
AND RELATED STOCKHOLDER MATTERS
Market Information
Our common stock is traded on the OTCQX marketplace
under the symbol “BNKL” since August 19, 2015. Prior to that, our common stock was traded on the OTC Pink marketplace
and was traded on such market prior to March 13, 2015 under the symbol “DWTP”. Our common stock did not trade between
approximately July 15, 2013 and February 23, 2015. The following table sets forth the range of high and low bid prices for our
common stock for each of the periods indicated as reported by such marketplaces. These quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not represent actual transactions. On March 21, 2016, the closing price
of our common stock as reported on the OTCQX marketplace was $1.00 per share.
Year Ending December 31, 2015
High
Low
March 31, 2015
$
3.000
$
2.000
June 30, 2015
$
2.400
$
1.050
September 30, 2015
$
1.900
$
1.450
December 31, 2015
$
1.550
$
0.600
March 31, 2014
–
–
June 30, 2014
–
–
September 30, 2014
–
–
December 31, 2014
–
–
We consider our common stock to be thinly traded
and, accordingly, reported sales prices or quotations may not be a true market-based valuation of our common stock.
Holders
As of March 21, 2016, 22,591,292 shares of Common
Stock were issued and outstanding, which were held by approximately 219 holders of record. In addition, as of March 21, 2016, 50,000,000
Exchangeable Shares were issued and outstanding, which were held by approximately 37 holders of record. We also believe there are
more owners of our common stock whose shares are held by nominees or in street name.
Dividends
We have not paid any dividends and we do not
anticipate paying any cash dividends in the foreseeable future and we intend to retain all of our earnings, if any, to finance
our growth and operations and to fund the expansion of our business. Payment of any dividends will be made in the discretion of
our Board of Directors, after our taking into account various factors, including our financial condition, operating results, current
and anticipated cash needs and plans for expansion.
18
Securities Authorized for Issuance under Equity Compensation
Plans
We adopted, and a majority of our stockholders
approved, the 2014 Equity Incentive Plan (the “2014 Plan”). Under such plan, we may grant equity based incentive awards,
including options, restricted stock, and other stock-based awards, to any directors, employees, advisers, and consultants that
provide services to us or any of our subsidiaries on terms and conditions that are from time to time determined by us. An aggregate
of 10,800,000 shares of our common stock are reserved for issuance under the 2014 Plan, and options for the purchase of 6,960,609
shares of our common stock have been granted and are outstanding as of December 31, 2015. The purpose of the 2014 Plan is to provide
financial incentives for selected directors, employees, advisers, and consultants of the Company and/or its subsidiaries, thereby
promoting the long-term growth and financial success of the Company.
The table below sets forth information as of
December 31, 2015 with respect to compensation plans under which our common stock or Exchangeable Shares are authorized for issuance.
Plan category
(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights
(b) Weighted-average exercise price of outstanding options, warrants and rights
(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders
6,960,609
$
0.59
3,839,391
Equity compensation plans not approved by security holders
-
-
-
Total
6,960,609
-
3,839,391
19
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following Management’s Discussion
and Analysis of Financial Condition and Results of Operations (“MD&A”) covers information pertaining
to the Company up to December 31, 2015 and should be read in conjunction with the audited financial statements and related notes
of the Company as of and for the year ended December 31, 2015 and the transitional nine month period ended December 31, 2014. Except
as otherwise noted, the financial information contained in this MD&A and in the financial statements has been prepared in accordance
with accounting principles generally accepted in the United States of America. All amounts are expressed in U.S. dollars unless
otherwise noted.
The preparation of financial statements in
conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities,
disclosure of any contingent liabilities at the financial statement date and reported amounts of revenue and expenses during the
reporting period. On an on-going basis we review our estimates and assumptions. The estimates were based on historical experience
and other assumptions that we believe to be reasonable under the circumstances. Actual results are likely to differ from those
estimates under different assumptions or conditions, but we do not believe such differences will materially affect our financial
position or results of operations.
Forward Looking Statements
Certain information contained in this MD&A
includes “forward-looking statements.” Statements which are not historical reflect our current expectations and projections
about our future results, performance, liquidity, financial condition and results of operations, prospects and opportunities and
are based upon information currently available to us and our management and their interpretation of what is believed to be significant
factors affecting our existing and proposed business, including many assumptions regarding future events. In some cases, you can
identify forward-looking statements by terminology such as “may,” “will” “should,” “expect,”
“intend,” “plan,” anticipate,” “believe,” “estimate,” “predict,”
“potential,” “continue,” or similar terms, variations of such terms or the negative of such terms. These
statements are only predictions and involve known and unknown risks, uncertainties and other factors. Although forward-looking
statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment, actual results
could differ materially from those anticipated in such statements. Actual results, performance, liquidity, financial condition
and results of operations, prospects and opportunities could differ materially and perhaps substantially from those expressed in,
or implied by, these forward-looking statements as a result of various risks, uncertainties and other factors, including those
risks described in detail in the section of this prospectus entitled “Risk Factors” as well as elsewhere in this prospectus.
In light of these risks and uncertainties, and
especially given the nature of our existing and proposed business, there can be no assurance that the forward-looking statements
contained in this section and elsewhere in this prospectus will in fact occur. Potential investors should not place undue reliance
on any forward-looking statements. Except as expressly required by the federal securities laws, there is no undertaking to publicly
update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or
any other reason.
Plan of Operation and Recent Corporate Developments
Bionik Laboratories Corp. was incorporated on
January 8, 2010 in the State of Colorado. At the time of our incorporation the name of our company was Strategic Dental Management
Corp. On July 16, 2013, the Company changed its name from Strategic Dental Management Corp. to Drywave Technologies, Inc. and changed
its state of incorporation from Colorado to Delaware. Effective February 13, 2015, we filed with the Secretary of State of Delaware
a Certificate of Amendment to our Articles of Incorporation whereby, among other things, we changed our name to Bionik Laboratories
Corp. and reduced the authorized number of shares of Common Stock from 200,000,000 to 150,000,000. Additionally, on September 24,
2014, our stockholders approved a 1-for-0.831105 reverse stock split of the issued and outstanding shares of our Common Stock,
and adopted an equity incentive plan. The reverse stock split was implemented on February 13, 2015.
20
Bionik Canada was incorporated on March 24,
2011 under the Canada Business Corporations Act. On February 26, 2015, we entered into an Investment Agreement with Acquireco,
our wholly owned subsidiary, and Bionik Canada, whereby we acquired 100 Class 1 common shares of Bionik Canada representing 100%
of the outstanding Class 1 common shares of Bionik Canada. After giving effect to this transaction, we commenced operations through
Bionik Canada.
Immediately prior to the closing of the Acquisition
Transaction and the First Closing, we transferred all of the business, properties, assets, operations and goodwill of the Company
(other than cash and cash equivalents), and liabilities as of March 6, 2013, to our then-existing wholly owned subsidiary, Strategic
Dental Alliance, Inc., and then transferred all of the capital stock of Strategic Dental Alliance to Brian E. Ray, a former officer
and existing director (through March 20, 2015) and Jon Lundgreen, a former officer and director, pursuant to a Spin-Off Agreement.
Also as of immediately prior to the closing of the Acquisition Transaction and the First Closing, we entered into an Assignment
and Assumption Agreement with Tungsten 74 LLC, pursuant to which Tungsten 74 LLC assumed all of our remaining liabilities through
the closing of the Acquisition Transaction. Accordingly, as of the closing of the Acquisition Transaction and the First Closing,
we had no assets or liabilities.
On March 1, 2016, we entered into an Agreement
and Plan of Merger with Interactive Motion Technologies, Inc., a Massachusetts corporation, and Bionik Mergerco Inc., a Massachusetts
corporation, our wholly owned subsidiary, providing for the merger of Bionik Mergerco with and into Interactive Motion, with Interactive
Motion surviving the Merger as our wholly-owned subsidiary. Interactive Motion is a Massachusetts-based private company that provides
robotic tools for neurorehabilitation professionals.
We are a medical device company engaged in the
business of designing, developing and commercializing physical rehabilitation technologies, prosthetics, and assisted robotic products.
We strive to create products that improve an individual’s health, comfort, accessibility and quality of life through products
that use advanced algorithms and sensing technologies to anticipate a user’s every move.
Significant Accounting Policies and Estimates
The discussion and analysis of the financial
condition and results of operations are based upon the financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States. The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets
and liabilities, disclosure of any contingent liabilities at the financial statement date and reported amounts of revenue and expenses
during the reporting period. On an on-going basis we review our estimates and assumptions. The estimates were based on historical
experience and other assumptions that we believe to be reasonable under the circumstances. Actual results are likely to differ
from those estimates under different assumptions or conditions, but we do not believe such differences will materially affect our
financial position or results of operations.
Results of Operations
From the inception of Bionik Canada on March
24, 2011 through December 31, 2015, we have generated a deficit of $10,647,888. We expect to incur additional operating losses
during the fiscal year ending December 31, 2016 and beyond, principally as a result of our continuing research and development,
sales and marketing and production costs connected to the ARKE, our planned first product, expected liabilities and operating costs
resulting from our planned merger with Interactive Motion, and general and administrative costs associated with being a public
company. When we approach final stages of the anticipated commercialization of the ARKE, we will have to devote and expect to continue
to devote significant resources to these costs.
Our results of operations are presented for
the year ended December 31, 2015 and the nine-month transition period ended December 31, 2014.
Bionik Canada changed its fiscal year to the
calendar twelve months ending December 31, effective beginning after its previous fiscal year ended March 31, 2014. Bionik Canada’s
subsequent fiscal period was shortened from twelve months to a nine-month transition period ended on December 31, 2014. As a result,
unless otherwise indicated herein, comparisons of results below compare results for the year ended December 31, 2015 to nine-month
transition period from April 1, 2014 through December 31, 2014, and accordingly are not comparing results for comparable periods
of time.
21
For the Year Ended December 31, 2015 Compared to the Nine
Month Period Ended December 31, 2014
Operating Expenses
Total operating expenses for the year ended
December 31, 2015 were $5,924,861 and for the nine month period ended December 31, 2014 were $2,440,673, as further described below.
For the year ended December 31, 2015, we incurred
research and development expenses of $1,489,483 (nine month period ended December 31, 2014 - $1,101,820). The increase in research
and development expenses relates primarily to additional engineering staff being added to meet technology and regulatory requirements,
and further develop ARKE.
We incurred general and administrative expenses
of $2,666,669 for the year ended December 31, 2015 and $1,192,244 for the nine month period ended December 31, 2014. The increase
in general and administrative expenses relate primarily to the hiring of a full time CFO, increased investor relations activity,
consultants hired to assist the company, insurance for a public company and other administration costs connected with going public
and the growth of the Company.
Stock compensation expenses increased to $1,709,230
compared to $112,573 in the nine month period ended December 31, 2014 due to a substantial number of options grants vesting during
2015.
Other Expenses
For the year ended December 31, 2015, we incurred
interest expenses and imputed interest expense of $3,018 and $nil, respectively, and for the nine month period ended December 31,
2014 we incurred $6,212 and $27,677, respectively. The change in interest expenses relates primarily to a change in amounts owed
to third parties and the decrease in imputed interest expenses relates primarily to the decrease in below market loan arrangements.
For the year ended December 31, 2015, we incurred
a foreign exchange loss of $184,125 and in the nine month period ended December 31, 2014 we had a loss of $36,211. Losses and gains
on foreign currency for the year ended December 31, 2015 and 2014 resulted from the translation of foreign currency transactions
to the Company’s functional currency. On April 1, 2015, Bionik Canada and Bionik Acquisitions Inc. changed its functional
currency from the Canadian Dollar to the U.S. Dollar. This reflects the fact that the majority of the Company’s business
is influenced by an economic environment denominated in U.S. currency as well as that the Company anticipates revenues to be earned
in U.S. dollars.
The Company’s outstanding warrants include
price protection provisions that allow for a reduction in the exercise price of the warrants in the event the Company subsequently
issues common stock or options, rights, warrants or securities convertible or exchangeable for shares of common stock at a price
lower than the exercise price of the warrants. Simultaneously with any reduction to the exercise price, the number of shares of
common stock that may be purchased upon exercise of each of these warrants shall be increased based on a pre-defined formula. During
the year ended December 31, 2015, the Company recorded a loss of $898,860 on initial recognition of the warrant derivative liability
and a gain of $1,382,984 on remeasurement to fair value at year end. The net result is a gain of $484,124 for the year ended December
31, 2015 which was recorded within the Company’s consolidated statements of operations and comprehensive loss and represents
a non-cash item. There were no such amounts in the nine month transition period.
Other Income
For the year ended December 31, 2015 other income
was $33,974 and for the transition period ended December 31, 2014, $46,026, related to interest and other income. The Company has
also filed its final claim for refundable SR&ED credits from the Government of Canada and will record this income when it is
received.
22
Comprehensive Loss
Comprehensive loss for the year ended December
31, 2015 was $5,569,107, resulting in a loss per share of $0.08, and for the nine month period ended December 31, 2014 was $2,489,137,
resulting in a loss per share of $0.05. The increase in the comprehensive loss is primarily due to increased operating expenses
in 2015, due to increased research and development as well as costs associated with becoming a public company and larger stock
compensation expense, offset by a non-cash gain of $484,124 resulting from the warrant derivative liability recognition and remeasurement.
Liquidity and Capital Resources
We have not yet realized any revenues from our
planned operations. We have incurred a deficit of $10,647,888 from inception on March 24, 2011 to December 31, 2015.
We have funded operations through the issuance
of capital stock, loans, grants and investment tax credits received from the Government of Canada. We raised in our 2015 private
offering aggregate gross proceeds of $13,126,600 which resulted in net proceeds after costs of $11,341,397. At December 31, 2015,
we had cash and cash equivalents of $6,617,082. We expect that we will have sufficient funds to continue operations for at least
the next 12 months, including upon the planned merger of Interactive Motion.
As we proceed with the ARKE product development
we have devoted and expect to continue to devote significant resources in the areas of capital expenditures and research and development
costs and operations, marketing, clinical trials and sales expenditures. Furthermore, upon the planned merger of Interactive Motion,
we expect to assume all of their cash liabilities which as of February 29, 2016 was approximately $1,800,000, of which approximately
$1,200,000 is expected to be paid after the close of the transaction, $210,000 is expected to be paid in September, 2015 and approximately
$385,000 is expected to be paid upon the earlier of a capital raise of $15 million or more, or in two years.
During our review and due diligence of Interactive
Motion prior to the execution of the Merger Agreement, we loaned an aggregate of $300,000 to Interactive Motion, which loans were
secured by certain assets of Interactive Motion. On March 7, 2016, we loaned an additional $68,750 to Interactive Motion to fund
certain Interactive Motion expenses in contemplation of the closing of the merger. The loan matures upon the earlier to occur of
(a) the termination date of the merger agreement and (b) the effective date of the merger. The Company also advanced IMT $80,000
for closing costs during 2016.
We may require additional funds to further develop
our expanded business plan, including the anticipated commercialization of the ARKE and the expansion of IMT’s products.
Since it is impossible to predict with certainty the timing and amount of funds required to launch the ARKE in any other markets
or any of our other proposed products, we anticipate that we will need to raise additional funds through equity or debt offerings
or otherwise in order to meet our expected future liquidity requirements. Any such financing that we undertake will likely be dilutive
to existing stockholders.
In addition, we expect to also need additional
funds to respond to business opportunities including potential acquisitions of complementary technologies or business, protect
our intellectual property, develop new lines of business and enhance our operating infrastructure. While we may need to seek additional
funding for any such purposes, we may not be able to obtain financing on acceptable terms, or at all. In addition, the terms of
our financings may be dilutive to, or otherwise adversely affect, holders of our common stock. We may also seek additional funds
through arrangements with collaborators or other third parties. We may not be able to negotiate any such arrangements on acceptable
terms, if at all. If we are unable to obtain additional funding on a timely basis, we may be required to curtail or terminate some
or all of our product lines.
Net Cash Used in Operating Activities
During the year ended December 31, 2015, we
used cash in operating activities of $4,590,387 compared to $1,639,478 for the nine month period ended December 31, 2014. The increased
use of cash is mainly attributable to the larger loss for the year ended December 31, 2015. The change in fair value of warrant
derivative liability did not have any impact on cash used in operating activities as it is a non-cash item.
23
Net Cash Used in Investing Activities
During the year ended December 31, 2015, net
cash used in investing activities of was $380,195, compared to $109,316 for the nine month period ended December 31, 2014. Net
cash used in investing activities in 2014 and 2015 was used for the acquisition of equipment and, in 2015 the Company provided
a series of interest-bearing loans to Interactive Motion in the aggregate principal amount of $300,000. The Company’s purchase
of additional computer equipment was due to the increase in engineers and equipment to help with the development of our technology.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was
$11,341,397 for the year ended December 31, 2015 compared to $1,988,678 for the nine month period ended December 31, 2014. The
principal reason for the increase is due to our private offering in 2015, which was much larger than the funds raised in 2014.
Recent Issued Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09,
“Revenue from Contracts with Customers (Topic 606)”. The standard outlines a single comprehensive model for entities
to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance.
The accounting standard is effective for annual reporting periods (including interim reporting periods within those periods) beginning
after December 15, 2017. Early adoption is not permitted. The impact on the financial statements of adopting ASU 2014-09 will be
assessed by management.
In August 2014, the FASB issued a new financial
accounting standard on going concern, ASU No. 2014-15, “Presentation of Financial Statements – Going Concern (Sub-Topic
205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” The standard provides
guidance about management’s responsibility to evaluate whether there is a substantial doubt about the organization’s
ability to continue as a going concern. The amendments in this Update apply to all companies. They become effective in the annual
period ending after December 15, 2016, with early application permitted. The impact on the financial statements of adopting ASU
2014-15 will be assessed by management.
In September 2015, the FASB issued ASU No. 2015-16,
“Simplifying the Accounting for Measurement-Period Adjustments,” which illustrates certain guidance governing adjustments
to the provisional amounts recognized at the acquisition date with a corresponding adjustment to goodwill. Such adjustments are
required when new information is obtained about facts and circumstances that existed as of the acquisition date that, if known,
would have affected the measurement amounts initially recognized or would have resulted in the recognition of additional assets
and liabilities. ASU No. 2015-16 eliminates the requirement to retrospectively account for such adjustments. ASU No. 2015-16 is
effective for the fiscal year commencing on January 1, 2016. The Company does not anticipate that the adoption of ASU No. 2015-16
will have a material effect on the consolidated financial position or the consolidated results of operations and comprehensive
loss.
In November 2015, the FASB issued ASU No. 2015-17,
“Balance Sheet Classification of Deferred Taxes,” which requires that deferred tax liabilities and assets be classified
on our Consolidated Balance Sheets as noncurrent based on an analysis of each taxpaying component within a jurisdiction. ASU No.
2015-17 is effective for the fiscal year commencing on January 1, 2017. The Company does not anticipate that the adoption of ASU
No. 2015-17 will have a material effect on the consolidated financial position or the consolidated results of operations.
Management does not believe that any other recently
issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying condensed
consolidated interim financial statements.
24
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements that
have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues
or expenses, results of operations, liquidity, capital expenditures or capital resources.
25
BUSINESS
Description of Business
We are a medical device company, specializing
in the designing, developing and commercializing of cost-effective physical rehabilitation technologies, prosthetics, and assisted
robotic products. We strive to innovate and build devices that improve an individual’s health, comfort, accessibility and
quality of life through the use of advanced algorithms and sensing technologies that anticipate a user’s every move.
Our first product is the ARKE lower body exoskeleton.
We plan to develop other biomechatronic solutions through internal research and development and we may further augment our product
portfolio through strategic and accretive acquisition opportunities in the future.
We also have two early stage development technologies:
APOLLO, an intelligent prosthetic knee; and Chronos, a cloud-based intelligent patient queuing system. We are continuing development
and exploring markets and pricing for Chronos to determine if the market justifies further investment. We currently do not have
the financial capability or personnel to develop APOLLO and the ARKE at the same time, so our investment in APOLLO is on hold in
order to focus on the ARKE. We intend to continue to revisit developing our technologies and the markets for our technologies as
we grow.
Since our founding, we have partnered with industry
partners in manufacturing and design and have also expanded our development team through partnerships with researchers and academia.
From inception to immediately prior to the First Closing, we have secured cash funding of approximately $5.5 million, which includes
grants as well as Scientific Research and Experimental Development tax refunds provided through the Canadian government that support
our creation of technologies that could lower the costs of medical devices and medical care.
We currently hold an intellectual property portfolio
that includes 5 U.S. and international patents pending, 13 U.S. provisional patents, and other patents under development. The provisional
patents may not be filed as full patents and new provisional patents may be filed as the technology evolves or changes.
Through December 31, 2015, we have not generated
any revenue and have a history of net losses.
Recent Developments
Merger Agreement with Interactive Motion Technologies,
Inc.
On March 1, 2016, we entered into an Agreement
and Plan of Merger (the “Merger Agreement”) with Interactive Motion Technologies, Inc. (“Interactive Motion”
or “IMT”), a Massachusetts corporation, and Bionik Mergerco Inc., a Massachusetts corporation, our wholly owned subsidiary,
providing for the merger of Bionik Mergerco with and into Interactive Motion, with Interactive Motion surviving as our wholly-owned
subsidiary. Interactive Motion is a Massachusetts-based private company that provides robotic tools for neurorehabilitation professionals.
Subject to the indemnification and escrow arrangements
described in the Merger Agreement, at the effective time of the merger, we will issue (or reserve for issuance) an aggregate of
23,650,000 shares of our common stock in exchange for all shares of Interactive Motion common stock and Interactive Motion preferred
stock outstanding immediately prior to the effective time (other than shares (i) held in treasury or (ii) held by persons who properly
exercise appraisal rights under Massachusetts law).
Because the consummation of the merger will
constitute a sale event under the terms of the Articles of Organization, as amended, of Interactive Motion, at the effective time
of the merger, first holders of the Interactive Motion preferred stock will receive payment of their liquidation preference out
of the merger consideration prior to any payment or allocation of merger consideration to holders of Interactive Motion common
stock. Following payment of the liquidation preference to the holders of Interactive Motion preferred stock, the remaining merger
consideration, subject to the indemnification and escrow arrangements described in the Merger Agreement, will be paid to the holders
of Interactive Motion common stock.
26
Additionally, we will assume each of the 3,897,500
options to acquire Interactive Motion common stock granted under its equity incentive plan or otherwise issued by Interactive Motion.
At the effective time of the merger, these options will represent the right to purchase an aggregate of 3,000,000 shares of our
common stock, of which 1,000,000 will have an exercise price of $0.25, 1,000,000 will have an exercise price of $0.95 and 1,000,000
will have an exercise price of $1.05.
Consummation of the merger is subject to customary
conditions, including without limitation, the affirmative vote or consent of the holders of a majority of the issued and outstanding
shares of Interactive Motion preferred stock voting as a separate class, and a majority of the issued and outstanding shares of
Interactive Motion preferred stock and common stock voting together as a single class. If the law permits, we or Interactive Motion
may each waive conditions for their benefit and their stockholders’ benefit and complete the merger even though one or more
of these conditions has not been met.
The Merger Agreement contains certain termination
rights, including that upon termination of the Merger Agreement for any reason except our breach, Interactive Motion must pay us
a fee of $80,000, all other amounts we may have advanced to Interactive Motion subsequent to March 1, 2016 through the termination
date (including the loan as described below), and all amounts loaned to Interactive Motion by us prior to the date of the Merger
Agreement of $300,000 plus interest, shall be immediately due and payable.
As of March 14, 2015, we entered into a Waiver
and Amendment Agreement with Bionik Mergerco Inc., Hermano Igo Krebs, and IMT. The Amendment amends the Merger Agreement and waives
any and all potential or actual breaches and/or defaults by the Company of its representations, warranties and/or covenants in
the Merger Agreement as a result of the restatements referred to below under “-Restatement of Unaudited Financial Statements.”
The foregoing summary of the Merger Agreement
and the Amendment does not purport to be complete and is qualified in its entirety by the Merger Agreement and the Amendment, which
are attached hereto as Exhibit 2.2 and 2.3 and incorporated herein by reference.
Loan Agreement with Interactive Motion
On March 7, 2016, we loaned $68,750 to Interactive
Motion, pursuant to a Loan and Security Agreement, to fund certain Interactive Motion expenses in contemplation of the closing
of the merger. The loan matures upon the earlier to occur of (a) the termination date of the Merger Agreement and (b) the effective
date of the Merger.
Interest on the loan is 6% per annum. The loan
is secured by a lien on the asset of Interactive Motion, subject to our company having a second position on all accounts and inventory
of Interactive Motion. Bionik may call an event of default upon the failure of Interactive Motion to make a payment when due of
any principal or interest on the loan.
This loan is in addition to a May 5, 2015 loan
to Interactive Motion of $150,000 and an August 25, 2015 loan to Interactive Motion of $150,000.
Restatement of Unaudited Financial Statements
On March 11, 2016, we announced that, during
the preparation of our financial statements for the year-end December 31, 2015, we were advised by MNP LLP, our independent registered
public accounting firm, to re-evaluate our accounting relating to the common stock purchase warrants issued in 2015 as part of
the Offering, and to consider restating our previously issued reviewed, unaudited condensed consolidated financial statements included
in our Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2015, June 30, 2015 and September 30, 2015.
27
Management promptly engaged outside advisors
to consult on this matter, including a Big 4 accounting firm, and on March 9, 2016, management, with and upon advice of such advisors
and further discussions with its auditors, determined that the financial statements included in such Quarterly Reports should no
longer be relied upon and would be restated due to non-cash errors identified in the accounting for the warrants.
As a result, we filed restated Quarterly Reports
on Form 10-Q for the quarterly periods ended March 31, 2015, June 30, 2015 and September 30, 2015.
Please see “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” and our audited financial statements later in this prospectus.
The Acquisition Transaction and Offering
On February 26, 2015, we entered into an Investment
Agreement with Bionik Acquisition Inc., a company existing under the laws of Canada and our wholly owned subsidiary (“Acquireco”),
and Bionik Laboratories, Inc. (“Bionik Canada”) (the “Investment Agreement”), whereby we acquired 100 Class
1 common shares of Bionik Canada representing 100% of the outstanding Class 1 common shares of Bionik Canada, taking into account
the Exchangeable Share Transaction (as defined below) (the “Acquisition Transaction”). After giving effect to the Acquisition
Transaction, we commenced operations through Bionik Canada.
Bionik Canada was incorporated on March 24,
2011 under the Canada Business Corporations Act. Bionik Canada’s principal executive office is located at 483 Bay Street,
N105, Toronto, ON Canada M5G 2C9 and its telephone number is (416) 640-7887. Our website address is www.bioniklabs.com.
Immediately prior to the closing of the Acquisition
Transaction and the First Closing (as defined below), we transferred all of the business, properties, assets, operations and goodwill
of the Company (other than cash and cash equivalents), and liabilities as of March 6, 2013, to our then-existing wholly owned subsidiary,
Strategic Dental Alliance, Inc., a Colorado corporation (“Strategic Dental Alliance”), and then transferred all of
the capital stock of Strategic Dental Alliance to Brian E. Ray, a former officer and existing director (through March 20, 2015)
and Jon Lundgreen, a former officer and director, pursuant to a Spin-Off Agreement (the “Spin-Off Agreement”). Also
as of immediately prior to the closing of the Acquisition Transaction and the First Closing, we entered into an Assignment and
Assumption Agreement with Tungsten 74 LLC, pursuant to which Tungsten 74 LLC assumed all of our remaining liabilities through the
closing of the Acquisition Transaction (the “Assignment and Assumption Agreement”). Accordingly, as of the closing
of the Acquisition Transaction and the First Closing, we had no assets or liabilities.
As a condition of the closing of the Acquisition
Transaction, Bionik Canada created a new class of exchangeable shares (the “Exchangeable Shares”), which were issued
to the existing common shareholders of Bionik Canada in exchange for all of their outstanding common shares, all of which were
cancelled (the “Exchangeable Share Transaction”).
Pursuant to the rights and privileges of the
Exchangeable Shares, the holders of such Exchangeable Shares maintain the right to (i) receive dividends equal to, and paid concurrently
with, dividends paid by the Company to the holders of Common Stock; (ii) vote, through the Trustee’s voting of the Special
Voting Preferred Stock (as defined herein) on all matters that the holders of Common Stock are entitled to vote upon; and (iii)
receive shares of Common Stock upon the liquidation or insolvency of the Company upon the redemption of such Exchangeable Shares
by Acquireco. The Exchangeable Shares do not give the holders any economic, voting or other control rights over Bionik Canada.
As part of the Exchangeable Share Transaction,
we entered into the following agreements, each dated February 26, 2015:
•
Voting and Exchange Trust Agreement (the “Trust Agreement”) with Bionik Canada and Computershare Trust Company of Canada (the “Trustee”); and
•
Support Agreement (the “Support Agreement”) with Acquireco and Bionik Canada.
28
Pursuant to the terms of the Trust Agreement,
the parties created a trust for the benefit of its beneficiaries, which are the holders of the Exchangeable Shares, enabling the
Trustee to exercise the voting rights of such holders until such time as they choose to redeem their Exchangeable Shares for shares
of the common stock of the Company, and allowing the Trustee to hold certain exchange rights in respect of the Exchangeable Shares.
As a condition of the Trust Agreement and prior
to the execution thereof, we filed a Certificate of Designation with the Delaware Secretary of State, effective February 20, 2015,
designating a class of our preferred shares as The Special Voting Preferred Stock (the “Special Voting Preferred Stock”)
and issued one share of The Special Voting Preferred Stock to the Trustee.
The Special Voting Preferred Stock entitles
the Trustee to exercise the number of votes equal to the number of Exchangeable Shares outstanding on a one-for-one basis during
the term of the Trust Agreement. The Trust Agreement further sets out the terms and conditions under which holders of the Exchangeable
Shares are entitled to instruct the Trustee as to how to vote during any stockholder meetings of our company.
Pursuant to the terms of the Trust Agreement,
we granted the Trustee the right to require our Company to purchase the Exchangeable Shares from any beneficiary upon the occurrence
of certain events including in the event that we are bankrupt, insolvent or our business is wound up. The Trust Agreement continues
to remain in force until the earliest of the following events: (i) no outstanding Exchangeable Shares are held by any beneficiary
under the Trust Agreement; and (ii) each of Bionik Canada and us elects to terminate the Trust Agreement in writing and the termination
is approved by the beneficiaries.
Pursuant to the terms of the Support Agreement,
we agreed to certain covenants while the Exchangeable Shares were outstanding, including: (i) not to declare or pay any dividends
on our common stock unless simultaneously declaring the equivalent dividend for the holders of the Exchangeable Shares, (ii) advising
Bionik Canada in advance of any dividend declaration by our company, (iii) ensure that the record date for any dividend or other
distribution declared on the shares of the Company is not less than seven days after the declaration date of such dividend or other
distribution; (iv) taking all actions reasonably necessary to enable Bionik Canada to pay and otherwise perform its obligations
with respect to the issued and outstanding Exchangeable Shares, (iv) to ensure that shares of the Company are delivered to holders
of Exchangeable Shares upon exercise of certain redemption rights set out in the agreement and in the rights and restrictions of
the Exchangeable Shares, and (v) reserving for issuance and keeping available from our authorized common stock such number of shares
as may be equal to: (A) the number of Exchangeable Shares issued and outstanding from time to time; and (B) the number of Exchangeable
Shares issuable upon the exercise of all rights to acquire Exchangeable Shares from time to time.
The Support Agreement also outlines certain
restrictions on our ability to issue any dividends, rights, options or warrants to all or substantially all of our stockholders
during the term of the agreement unless the economic equivalent is provided to the holders of Exchangeable Shares. The Support
Agreement is governed by the laws of the Province of Ontario.
Concurrently with the closing of the Acquisition
Transaction and in contemplation of the Acquisition Transaction, we sold 7,735,750 units (the “Units”) for gross proceeds
of $6,188,600 (including $500,000 of outstanding bridge loans converted into Units at the offering price) at a purchase price of
$0.80 per Unit (the “Purchase Price”) in a private placement offering (the “Offering”). Each Unit consists
of one share of common stock, par value $0.001 per share (the “Common Stock”) and a warrant (the “Warrant”)
to purchase one share of Common Stock at an initial exercise price of $1.40 per share (the “Warrant Shares”).
The Offering was being offered with a minimum
offering amount of $6,000,000 (the “Minimum Offering Amount”) and up to a maximum offering amount of $12,800,000 (subject
to an up-to $2,600,000 overallotment option). Once the Minimum Offering amount was reached and held in escrow and other conditions
to closing were satisfied (including the simultaneous closing of the Acquisition Transaction), the Company and the placement agent
were able to conduct a first closing (the “First Closing”). Pursuant to the terms of a Registration Rights Agreement,
we filed a registration statement on Form S-1 (or any other applicable form exclusively for the Offering) (the “Registration
Statement”) registering for resale under the Securities Act all of the shares of Common Stock sold in the Offering and Warrant
Shares underlying the Warrants. As a result of the Offering, after payment of placement agent fees and expenses but before the
payment of other offering expenses such as legal and accounting expenses, we received net proceeds of approximately $5,339,778
at the First Closing, including the $500,000 in bridge loans we previously received that were taken into account as part of the
Minimum Offering Amount. In addition, the placement agent is entitled to 10% warrant coverage for all Units sold in the Offering,
which we intend to issue upon the last closing of the Offering for all Units sold in the Offering. The warrants will be exercisable
at $0.80 per share for a period of 4 years.
29
As of the Acquisition Transaction and the First
Closing, an aggregate of 90,575,126 shares of our Common Stock were deemed cancelled, of which 90,207,241 were held by our former
Chief Executive Officer and current Senior Vice President.
Immediately following the Acquisition Transaction,
the Exchangeable Share Transaction and the First Closing, there were approximately 63,735,813 shares of our common stock and equivalents
issued and outstanding of which approximately 6,000,063 were held by existing stockholders, 7,735,750 were held by the investors
in the Offering and Bionik Canada shareholders held an equivalent of 50,000,000 shares of our common stock through their ownership
of 100% of the Exchangeable Shares.
On March 27, 2015, we sold to accredited investors
in a second closing, 1,212,500 Units for gross proceeds of $970,000 at the Purchase Price. After payment of placement agent fees
and expenses but before the payment of other Offering expenses such as legal and accounting expenses, we received net proceeds
of $828,900.
On March 31, 2015, we sold to accredited investors
in a third closing of the Offering, 891,250 Units for gross proceeds of $713,000 at the Purchase Price. After payment of placement
agent fees and expenses but before the payment of other offering expenses such as legal and accounting expenses, we received net
proceeds of $615,901.
On April 21, 2015, we sold to accredited investors
in a fourth closing of the Offering, 3,115,000 Units for gross proceeds of $2,492,000 at the Purchase Price. After payment of placement
agent fees and expenses but before the payment of other offering expenses such as legal and accounting expenses, we received net
proceeds of $2,153,040.
On May 27, 2015, we sold to accredited investors
in a fifth closing of the Offering, 1,418,750 Units for gross proceeds of $1,135,000 at the Purchase Price. After payment of placement
agent fees and expenses but before the payment of other offering expenses such as legal and accounting expenses, we received net
proceeds of $987,434.
On June 30, 2015, we sold to accredited investors
in a sixth and final closing of the Offering, 2,035,000 Units for gross proceeds of $1,628,000 at the Purchase Price. After payment
of placement agent fees and expenses but before the payment of other offering expenses such as legal and accounting expenses, we
received net proceeds of approximately $1,416,344.
Through the final closing of the Offering on
June 30, 2015, we raised in the Offering aggregate gross proceeds of $13,126,600. As a result, assuming there are no transfers
of our common stock by the holder thereof, our pre-Acquisition Transaction stockholders hold approximately 8.3% of our issued and
outstanding shares of Common Stock, the former stockholders of Bionik Canada hold the right to approximately 69.0% of our issued
and outstanding shares of Common Stock through their ownership of 100% of the Exchangeable Shares, and the investors in the Offering
hold approximately 22.7% of our issued and outstanding shares of Common Stock.
Product Pipeline
ARKE
The ARKE is a robotic lower body exoskeleton
designed for wheelchair bound individuals suffering from spinal cord injuries, stroke and other mobility disabilities which could
allow patients to restore proper walking gait, rehabilitate more efficiently and finally could improve current methods of manual
rehabilitation and its future results. ARKE is expected to complement or replace existing rehabilitation methods by enabling a
patient full motion control and increasing feedback for physicians and care providers during the rehabilitation process. Further,
the ability to walk during rehabilitation has the potential to reduce bone density loss, muscle atrophy, secondary illness and
the frequency of re-hospitalization, while potentially helping to increase blood flow and nutrient delivery throughout the body.
It is also believed that additional potential improvements in patients is expected to include but are not limited to: better bowel
control, better bladder control and medication reduction.
30
We have achieved significant progression
in the ARKE development. We completed clinical testing of the generation 1 product. The clinical feedback from this testing, directed
the development for ARKE’s generation 2. Generation 2 of the ARKE exoskeleton development was completed in the second quarter
of 2015 as planned and currently the manufacturing phase of the entire system is underway. We plan to begin clinical tests of
ARKE in Canada in 2016 at a research institute in Montreal, Quebec and at a hospital group in Toronto, Ontario, as well as plan
to do product feasibility and development work with the University of Ottawa in advance of formal Health Canada clinical trials.
We are currently focused on the Canadian market due to lower clinical costs and faster possible approval from Health Canada, which
is expected to take between six and twelve months to receive. We are also investigating the possibility of clinical tests of ARKE
in Europe later in 2016 in cooperation with the clinical trials in Canada, with the goal of achieving CE Mark certification by
the European authorities in 2017.
There are significant improvements in generation
2 of the ARKE over our previous generations of ARKE, including:
•
Significantly slimmer than the first clinical tested version and much lighter;
•
Incorporates a built-in removable data interface that will give the physiotherapist full control of the product but also will allow the patient to visually see their own progress;
•
Significantly improved control system with adaptive walking and step recovery; and
•
A system that collects data from all sensors on the device.
The next step of the data collection system
is to save patient data from the exoskeleton in the data interface and send the data to the cloud where the data can be processed.
In the future this system will allow optimization of various rehabilitation programs and individualization of expected goals for
each patient.
We believe that the ideal candidate for the
ARKE rehabilitation and ambilion therapy is a level T6 spinal cord injury patient with paralysis below the chest but maintains
some or all upper body strength and mobility, although we believe any incomplete paraplegic (meaning a paraplegic with some healthy
nerves remaining after the spinal cord damage that allows for no more than partial paralysis of hands, arms and upper torso) can
benefit from the rehabilitation that the ARKE is expected to provide.
The ARKE uses sensory technology to determine
at all times a user’s movements, such as bending forward and weight shifts from side to side. This sensory system allows
the exoskeleton to determine precisely the movement required by the user, including when the user wants to walk, stop, sit down
or stop.
We have developed the ARKE to be electronically
adjustable by a clinician or a rehabilitation specialist to attend to a patient’s specific needs and provide for customized
rehabilitation or ambilion plans. Additionally, the ARKE will have the capability to interface with the provided tablet computer
to allow the clinician or a rehabilitation specialist to program, change, edit and select different features within the ARKE system
platform, such as selecting or saving a patient’s profile, adjusting the rehabilitation movement speed or walking gait. The
tablet interface is designed to allow for the staff to be in close proximity to the user, allowing for them to closely monitor
the ARKE at all times during use, making the process safer and more reliable and facilitating post session data analysis.
Stroke rehabilitation and other similar disability
rehabilitation programs deal with patients that do not necessarily have spinal cord damage and that may possess the ability to
generate some sort of lower-body motion. Accordingly, we intend in the future on developing a version of the ARKE for stroke patients
with partial assist, that is expected to allow stroke patients that have restricted or no motion in one or both legs to wear the
product and experience normal weight bearing rehabilitation to walk. We anticipate that the ARKE software platform will also be
programmed to assist with the rehabilitation of other disabilities in the future such as cerebral palsy, multiple sclerosis and
spinal bifida.
31
We also intend on developing additional accessories
for the ARKE that can improve the rehabilitation process along with the clinician’s or rehabilitation specialist’s
interaction with the patient. We feel that improving the staff interaction with the patient is an important step forward for the
industry and incorporating a tablet interface to the ARKE was our first innovative step in this regard. We intend on improving
real time interactions between the staff and the patient that can simulate resistance experienced during the rehabilitation process,
as well as improving product controls.
On February 1, 2016, we announced that we are
working with IBM to develop a unique analytics system and apply sophisticated machine learning algorithms to improve the outcomes
of neurological rehabilitation. Use of IBM’s cognitive computing infrastructure would enable access to the exoskeleton’s
performance, patient data, and results of ARKE rehabilitation from multiple sites, including rehabilitation centers, physicians’
offices, physiotherapists’ offices, patients’ homes, research centers or any other location at any time. Phase one
of the IBM development project for ARKE is expected to be completed in 2016. Phase one will include the full backend required to
capture the information needed for future use. As part of phases two and three of the project, Bionik engineers together with data
scientists at IBM are expected to develop machine-learning algorithms designed to analyze large volumes of sensor data generated
by ARKE. The analytical program is expected to be an important tool in identifying the correlation between different rehabilitation
regimens using the ARKE exoskeleton and understanding the therapeutic results from these physio-protocol programs over certain
measures of time.
Mobility impairment affects an estimated 10
million people in developed countries, of which there is an estimated 5 million potential ARKE users in those markets. We believe
that the ARKE can be used to assist in the rehabilitation of those patients who have mobility in their arms for stability.
Other Prospective Products
We intend to expand our product offerings and
enhance the strength of our Company through, not only internal development, but also strategic and accretive partnerships or acquisitions
from time to time.
Competition and Competitive Advantage
The medical technology equipment industry is
characterized by strong competition and rapid technological change. There are a number of companies developing technologies that
are competitive to our existing and proposed products, many of them, when compared to our Company, having significantly longer
operational history and greater financial and other resources.
The ARKE faces competition from companies that
are focused on technologies for rehabilitation of patients suffering from spinal cord injuries, stroke and related neurological
disabilities. Our competitors that we expect to compete with the ARKE in spinal cord rehabilitation therapies include Rewalk Robotics,
Ekso Bionics, and Rex Bionics, each of which sell over-ground, weight bearing exoskeletons. Additionally, Parker Hannifin has announced
plans to sell over-ground exoskeletons beginning in 2015. For the stroke market, we are developing an assisted version of the ARKE,
which we expect will compete with Cyberdyne’s over-ground exoskeletons and Hocoma, AlterG, Aretech, Ekso Bionics, Parker
Hannifin and Reha Technology, who are each selling treadmill-based walking gait therapies.
We believe that the ARKE’s primary advantage
over the aforementioned products is that it has been designed to facilitate a selling price, which we believe is more affordable
to the market than competing products. When comparing the ARKE to treadmill-based products available to the rehabilitation market,
the ARKE has a smaller footprint, uses standard power sources, does not need any special infrastructure and is expected to be more
affordable. Importantly, the ARKE is able to mobilize pre or non-ambulatory patients as it is a full weight-bearing product. The
ARKE is also expected to be less expensive than competitors in the spinal cord rehabilitation market for over-ground exoskeleton
products. Additional advantages include our patented patient profiling system, and 3D trigger point system.
32
From inception, our developments and proposed
products were focused on the medical market. We believe that we are the company among our competitors with the shortest time to
market strategy. For example, Rewalk Robotics was founded in 2001 and launched its product into the home market in 2014, 13 years
later. We were founded approximately 5 years ago and have products in pre-clinical testing. We expect our innovative approach to
result in a high quality product at a lower cost.
Our challenge will be achieving rapid market
awareness and adoption of our emerging technology in rehabilitation and mobility centers throughout the U.S., Canada and any other
market we may enter. Our proposed acquisition of IMT is expected to significantly help with our clinical trials and ability to
launch ARKE into the market, as IMT has clinical data on its FDA–approved rehabilitative products and IMT has distributorships
and relationships with rehabilitation centers around the world which we intend to leverage.
Robotic exoskeleton technology and its use in
clinical settings is a new and emerging industry and is regulated by medical device regulatory agencies (such as the US Food and
Drug Administration). We believe that we will face challenges of increased regulatory scrutiny, possible changes in regulator’s
requirements, meeting quality control standards of various government regulators, increased competition in the future based on
other new technologies, additional features and customizability, reduced pricing, clinical outcomes and other factors. Our strength
in this market will depend on our ability to achieve market acceptance, develop new technologies, develop new products, implement
production plans, develop marketing strategies, secure regulatory approvals, secure necessary data for reimbursement, protect our
intellectual property and have sufficient funding to meet all these challenges.
The market for the Company’s other prospective
products also has competition and is subject to rapid technological change and regulatory requirements. There can be no assurance
that the Company will be in a strong position to respond quickly to potential acquisitions and other market opportunities, new
or emerging technologies and changes in customer requirements. Failure to maintain and enhance our competitive position could materially
affect the business and our prospects.
Market Strategy
The ARKE is designed to be a rehabilitation
tool for hospitals and clinics and potentially a personal rehabilitation tool so paraplegics and other mobility disabled individuals
could benefit from using ARKE at home. We consider the exoskeleton robotic market to consist of two sub-markets:
•
The rehabilitation market for hospitals and clinics; and
•
The home market for personal use.
We are currently completing the safety testing
and general proof of concept testing. We have also prepared clinical trial protocols, which will test the product on paraplegic
patients and gauge the medical benefits and other parameters. We anticipate receiving clearance from Health Canada and the European
Authorities within approximately 6 months of completing the clinical trials, and later pursue approval with the FDA. We plan to
focus initially on clinical trials in Canada and Europe before the U.S. due to the lower cost of trials in Canada and Europe.
Our initial go-to-market strategy will be the
development of hospital and clinic relationships that will allow us to gain acceptance of the technology among experts and patients.
We are also seeking a number of government grants in collaboration with various hospitals and clinics to allow us to partially
fund trials, research projects and upgrade the ARKE’s technology. We expect to gain traction among the doctors and experts
involved in the distribution and buying groups that are established within those selected partner hospitals. We expect to also
conduct clinical trials in other countries for the purpose of gaining traction in those markets.
During the first market phase, we may sell or
lease at a monthly or other fee structure the ARKE product to hospitals, clinics, distribution companies and/or buying groups that
supply those rehabilitation facilities. We are also considering other revenue models.
33
We intend on developing, licensing or acquiring
other related vertical products to introduce to the market. We intend on using a similar commercialization approach for these products
as planned for the ARKE.
Intellectual Property
We use intellectual property developed or acquired,
including patents, trade secrets and technical innovations to provide our future growth and to build our competitive position.
We have 5 U.S. and international patents pending and 13 U.S. provisional patents. As we continue to expand our intellectual property
portfolio, it is critical for us to continue to invest in filing patent applications to protect our technology, inventions, and
improvements. However, we can give no assurance that competitors will not infringe on our patent rights or otherwise create similar
or non infringing competing products that are technically patentable in their own right.
Our patents pending, all of which are expected
to expire in 2033 or 2034, are as follows:
Algorithms & Control Systems
Filed US & International
Sensory Technology
Filed US & International
Robotics
Filed US & International
Robotics
Filed US & International
Robotics
Filed US & International
Bionik has also filed 13 provisional patents
in the areas of Robotics, Algorithms & Controls Systems, Sensory Technology and Cloud Computing. The provisional patents may
not be filed as full patents and new provisional patents may be filed as the technology evolves or changes.
We have to date and generally plan to continue
to enter into non-disclosure, confidentially and intellectual property assignment agreements with all new employees as a condition
of employment. In addition, we intend to also generally enter into confidentiality and non-disclosure agreements with consultants,
manufacturers’ representatives, distributors, suppliers and others to attempt to limit access to, use and disclosure of our
proprietary information.
Research and Development
Our research and development programs are pursued
by engineers and scientists employed by us in Toronto on a full-time basis or hired as per diem consultants. We also work with
advisors who are industry leaders in manufacturing and design and researchers and academia. These include Dr. Dany Gagnon of the
University of Montreal Interdisciplinary Research Centre, Dr. Edward Lemaire of the University of Ottawa, Dr. Isadore Lieberman
of the Texas Back Institute, Dr. Kaamran Raahemifar of Ryerson University and Gary Henley, a former CEO of medical device and technology
companies. We are also working with subcontractors in developing specific components of our technologies. The primary objective
of our research and development program is to advance the development of our existing and proposed products, to enhance the commercial
value of such products. Furthermore, our proposed acquisition of IMT is expected to significantly strengthen our robotics knowledge
and access to additional products and know-how, as it is expected that Dr. Hermano Igo Krebs will join the Company as Chief Science
Officer and Dr. Neville Hogan will be an adviser to the Company. Both individuals are currently professors with MIT’s Robotics
Engineering Department
For the year ended December 31, 2015 and the
transitional period ended December 31, 2014 we incurred $1,489,483 and $1,101,820 respectively, in research and development costs.
Government Regulation
General
Our medical technology products and operations
are subject to regulation by the U.S. Food and Drug Administration (“FDA”) and various other federal and state agencies,
as well as foreign governmental agencies in Canada, Europe, South America and Asia. These agencies enforce laws and regulations
that govern the development, testing, manufacturing, labeling, advertising, marketing and distribution, and market surveillance
of our medical device products.
34
In addition to the below, the only regulations
we encounter are the regulations that are common to all businesses, such as employment legislation, implied warranty laws, and
environmental, health and safety standards, to the extent applicable. We will also encounter in the future industry-specific government
regulations that would govern our products, if and when developed for commercial use. It may become the case that other regulatory
approvals will be required for the design and manufacture of our products and proposed products.
U.S. Regulation
Under the U.S. Federal Food, Drug, and Cosmetic
Act, medical devices are classified into one of three classes — Class I, Class II or Class III — depending on the degree
of risk associated with each medical device and the extent of control needed to ensure safety and effectiveness. The ARKE is expected
to be a Class II product (products similar to the ARKE are currently designated as Class II for supervised use). Class II devices
require a 510(k) premarket submission to the US FDA. Equivalent agencies in other countries also require similar submissions prior
to the device being marketed.
We also are required to establish a suitable
and effective quality management system, which establishes controlled processes for our product design, manufacturing, and distribution.
We are doing this in compliance with the internationally recognized standard ISO 13485:2013 Quality Management Systems. Following
the introduction of a product, the FDA and foreign agencies engage in periodic reviews of our quality systems, as well as product
performance and advertising and promotional materials. These regulatory controls, as well as any changes in FDA or other foreign
agencies’ policies, can affect the time and cost associated with the development, introduction and continued availability
of new products. Where possible, we anticipate these factors in our product development processes. These agencies possess the authority
to take various administrative and legal actions against us, such as product recalls, product seizures and other civil and criminal
sanctions.
Foreign Regulation
In addition to regulations in the United States,
we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our products
in foreign countries. The ARKE has been designated as the equivalent to a Class I device with Health Canada. Whether or not we
obtain FDA approval for a product, we must obtain approval of a product by the comparable regulatory authorities of foreign countries
before we can commence clinical trials or marketing of the product in those countries. The approval process varies from country
to country, and the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct of
clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.
The policies of the FDA and foreign regulatory
authorities may change and additional government regulations may be enacted which could prevent or delay regulatory approval of
our products and could also increase the cost of regulatory compliance. We cannot predict the likelihood, nature or extent of adverse
governmental regulation that might arise from future legislative or administrative action, either in the United States or abroad.
Employees
As of December 31, 2015 we had 14 full-time
employees, 1 part-time employee and 3 consultants who are based in our principal executive office located in Toronto, Canada. These
employees oversee day-to-day operations of the Company supporting management, engineering, manufacturing, and administration functions
of the Company. As required, we also engage consultants to provide services to the Company, including quality assurance and corporate
services. We have no unionized employees.
We have hired a software engineer and quality
manager in the first quarter and plan to hire approximately 5 additional full-time employees within the next 12 months whose principal
responsibilities will be the support of our research and development, clinical development, production, sales and marketing and
commercialization/ business development activities.
35
We consider relations with our employees to
be satisfactory.
Properties
Our principal executive
office is located in premises of approximately 3,655 square feet at 483 Bay Street, N105, Toronto, Ontario Canada M5G 2C9. The
facilities have been leased on our behalf by Ryerson University and we receive a subsidy on lease payments to the University. We
intend to move to larger premises in the future to allow for infrastructure to accommodate our development work based on our current
operating plan. We do not own any real estate.
Legal Proceedings
From time to time, we may become involved in
various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent
uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business.
We are not currently a party in any legal proceeding
or governmental regulatory proceeding nor are we currently aware of any pending or potential legal proceeding or governmental regulatory
proceeding proposed to be initiated against us that would have a material adverse effect on us or our business.
36
MANAGEMENT
Directors and Executive Officers
As of December 31, 2015,
our executive officers and directors were as follows:
Name
Age
Position
Peter Bloch
56
Chief Executive Officer and
Chairman of the Board of Directors
Michal Prywata
24
Chief Operating Officer and Director
Thiago Caires
27
Chief Technology Officer and Director
Leslie N. Markow
55
Chief Financial Officer
Robert Hariri
56
Director
Marc Mathieu
56
Director
Peter Bloch: Chief Executive Officer and
Chairman of the Board of Directors. Mr. Bloch has served as the Company’s Chief Executive Officer since April 2013
and as Chairman of the Board of Directors since February 2014. From April 2012 to April 2013, Mr. Bloch served as our Chief Financial
Officer. Mr. Bloch is a CPA, CA with a track record of building both public and private technology companies, mainly in the life
sciences industry. Mr. Bloch currently serves as a Director of HB Agri Products Inc., a manufacturer of organic fertilizers from
waste, since February 2014. From January 2008 to February 2009, Mr. Bloch served as the Chief Financial Officer of Just Energy,
a public electricity and gas company. Since December 2011, Mr. Bloch has also served as a Director for Walmer Capital Corp., an
acquisition company. His past 25 years of executive management experience includes serving as Chief Financial Officer and joint
interim CEO of Sanofi Canada Inc., the Canadian affiliate of Sanofi, a global healthcare leader; Chief Financial Officer of Intellivax
Inc., a biotechnology company which was sold to GlaxoSmithKline for $1.75 billion; founder of Tribute Pharmaceuticals, a specialty
pharmaceutical company; and Chief Financial Officer of Gennum Corporation, a public semiconductor company focused on the TV and
medical device market. These companies have ranged in size from start-ups to companies with revenues of over $2 billion. In these
roles, Mr. Bloch has secured significant funding for both private and public companies, gained experience with initial public offerings
and led a number of acquisitions and partnership transactions. We believe Mr. Bloch is qualified to serve as Chairman of the Board
of Directors due to his public service experience, experience in the biotechnology and pharmaceuticals industries and his business
contacts.
Michal Prywata: Chief Operating Officer
and Director. Mr. Prywata is the co-founder of Bionik Canada and has served as our Chief Operating Officer since April
2013 and as a Director since March 2011. Mr. Prywata previously served as our Chief Executive Officer from March 2011 to April
2013. Mr. Prywata studied biomedical engineering at Ryerson University until the end of his second year, with a focus on electronics
and software development for medical products. He has a track record of winning technology showcases and inventing technologies
that address significant unmet needs and untapped markets. He has spent the past 5 years with Bionik Canada, managing technological
advancements, managing day-to-day operations, and developing concepts into products. In addition, Mr. Prywata, together with Mr.
Caires, was responsible for raising and securing initial seed capital – subsequent capital raises were done together with
Mr. Bloch. Mr. Prywata is the co-inventor of all current intellectual property of the Company. Mr. Prywata serves as a member of
the Board of Directors due to his being a founder of the Company and his current executive position with the Company. We also believe
that Mr. Prywata is qualified due to his experience in the medical device industry.
Thiago Caires: Chief Technology Officer
and Director. Mr. Caires is the co-founder of Bionik Canada and has served as its chief technical officer since May 2013.
He was its President from March 2011 to April 2013, at which time he was appointed Chief Technology Officer. He started his engineering
training, studying one year in Mechatronics at PUC University, Rio de Janeiro, Brazil. Mr. Caires moved to Canada to attend Centennial
College where he studied automation and robotics with a focus on robotics and CIM (computer integrated manufacturing) where he
received Automation and Robotic Technician certification. After Centennial College he attended Ryerson University until the end
of his third year for biomedical engineering, where his major focus was on prosthetics. He has a track record of winning technology
showcases and inventing technologies that address significant unmet needs and untapped markets. While at Bionik Canada, Mr. Caires
was responsible for managing technological advancements and creating the clinical trials strategy for the approvals of its first
product. In addition, Mr. Caires, together with Mr. Prywata, was responsible for raising and securing initial seed capital - subsequent
capital raises were done together with Mr. Bloch. Mr. Caires is the co-inventor of all of current intellectual property of the
Company. Mr. Caires serves as a member of the Board of Directors due to his being a founder of the Company and his current executive
position with the Company. We also believe that Mr. Caires is qualified due to his experience in the medical device industry.
37
Leslie N. Markow: Chief Financial Officer.
Ms. Markow has served as the Company’s Chief Financial Officer since September 2014. She is a CPA CA in Canada, a US CPA
(Illinois) and Chartered Director. From 2002 to 2004 and since 2010, Ms. Markow has provided outsourced CFO, controller and financial
services on a part-time basis to numerous public and private companies. In addition, in 2012-2013, Ms. Markow was the Chief Financial
Officer of Stewardship Ontario, a supply chain operator of Blue Box and Orange Drop Programs for industry in the Province of Ontario.
In 2010-2012, Ms. Markow was the Chief Financial Officer of Blue Ocean NutraSciences Inc. (formerly Solutions4CO2 Inc.), a public
CO2 solution industrial company. From 2004 to 2010, Ms. Markow was the Director of Client Service for Resources Global Professionals,
a Nasdaq-listed global consulting firm. From 1991-2002, she held various positions at SunOpta Inc. a TSX-Nasdaq listed company,
which at that time was named Stake Technology Ltd. and was an industrial technology manufacturer, including as Chief Administrative
Officer, Vice-President Regulatory Reporting & Compliance, Chief Financial Officer and Vice-President–Finance and Controller.
Ms. Markow started her career in 1983 with predecessors of PricewaterhouseCoopers, ultimately holding a position as Senior Audit
Manager and in 1991, she moved to SunOpta Inc. Ms. Markow is a member of the Board of Directors and Chairperson of the Audit Committee
of Jemtec Inc., a Canadian public company that sells monitoring hardware and software. She also is a member of Financial Executives
Canada, where she is a past National Board Director, Toronto Board Director, Toronto Chapter President and the winner of the Toronto
Leadership Award, and is a faculty member of The Directors College, which is a joint venture of McMaster University and The Conference
Board of Canada.
Dr. Robert Hariri: Director. Dr.
Robert (Bob) Hariri is a surgeon, biomedical scientist and highly successful serial entrepreneur in two technology sectors: biomedicine
and aerospace. The Chairman, Founder, Chief Scientific Officer, and former Chief Executive Officer of Celgene Cellular Therapeutics,
one of the world’s largest human cellular therapeutics companies, Dr. Hariri has pioneered the use of stem cells to treat
a range of life threatening diseases and has made transformative contributions in the field of tissue engineering. His activities
and experience includes academic neurosurgeon at Cornell, businessman, military surgeon and aviator and aerospace innovator. Dr.
Hariri has over 90 issued and pending patents, has authored over 100 published chapters, articles and abstracts and is most recognized
for his discovery of pluripotent stem cells from the placenta and as a member of the team which discovered the physiological activities
of TNF (tumor necrosis factor). Dr. Hariri was recipient of the Thomas Alva Edison Award in 2007 and 2011, The Fred J. Epstein
Lifetime Achievement Award and has received numerous other honors for his many contributions to biomedicine and aviation. Dr. Hariri
also serves on numerous Boards of Directors including Myos Corporation and Provista Diagnostics. Dr. Hariri is an Adjunct Associate
Professor of Pathology at the Mount Sinai School of Medicine and a member of the Board of Visitors of the Columbia University School
of Engineering & Applied Sciences and the Science & Technology Council of the College of Physicians and Surgeons, and is
a member of the scientific advisory board for the Archon X PRIZE for Genomics, which is awarded by the X PRIZE Foundation. Dr.
Hariri is also a Trustee of the Liberty Science Center and has been appointed Commissioner of Cancer Research by New Jersey Governor
Chris Christie. Dr. Hariri is also a member of the Board of Trustees of the J. Craig Venter Institute. A jet-rated commercial pilot
with thousands of hours of flight time in over 60 different military and civilian aircraft, Dr. Hariri has also produced several
feature films as well as documentaries on global societal issues. We believe Dr. Hariri is qualified to serve as a director due
to his public service experience, experience in the biotechnology and pharmaceuticals industries and his business contacts.
Marc Mathieu: Director. Mr. Mathieu
has been the U.S. Chief Marketing Officer of Samsung North America since June 2015. Prior to that, from April 2011 to June 2015,
he was Senior Vice President of Global Marketing at Unilever, where he was responsible for the development of Unilever’s
global marketing strategy. Mr. Mathieu has also overseen the implementation of pivotal programs such as Project Sunlight, the first
Unilever brand consumer initiative to motivate millions of people to adopt more sustainable lifestyles, and The Unilever Foundry,
a platform that provides a single entry-point for innovative start-ups seeking to partner with Unilever. Since January 2011, Mr.
Mathieu has been the Chairman and Co-founder of We&Co, a social app for People who provide and enjoy great service. From January
2009 through August 2011, Mr. Mathieu founded and was principal of the strategic brand consultancy, BeDo, which worked to build
brands with purpose and fuse marketing and sustainability agendas. From 1996 through 2008, Mr. Mathieu held various positions at
Coca-Cola, culminating in Senior Vice President Global Brand Marketing. He sits on the Advisory Panel of the Guardian Digital and
Media network and writes for Marketing Week magazine. He is a regular conference and keynote speaker on themes such as the Future
of Marketing. Mr. Mathieu has a passion for theatre and sits on the Board of Directors for the Almeida Theatre and Punchdrunk.
We believe Mr. Mathieu is qualified to serve as a member of the Board of Directors due to his marketing experience.
38
There are no family relationships among any
of our current or proposed officers and directors.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors
or executive officers has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, or has
been a party to any judicial or administrative proceeding during the past ten years that resulted in a judgment, decree, or final
order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or
a finding of any violation of federal or state securities laws, except for matters that were dismissed without sanction or settlement.
Each of our executive officers and directors has informed us that he or she, as the case may be, has not been involved in any of
the events specified in clauses (1) through (8) of Regulation S-K, Item 401(f). Except as set forth in our discussion below in
“Certain Relationships and Related Transactions, and Director Independence – Transactions with Related Persons,”
none of our directors, director nominees, or executive officers has been involved in any transactions with us or any of our directors,
executive officers, affiliates, or associates that are required to be disclosed pursuant to the rules and regulations of the Commission.
Term of Office
Directors are appointed to hold office until
the next annual general meeting of stockholders or until removed from office in accordance with our bylaws. Our officers are appointed
by our Board and hold office until removed by our Board.
All officers and directors listed above will
remain in office until the next annual meeting of our stockholders, and until their successors have been duly elected and qualified.
Our bylaws provide that officers are appointed annually by our Board and each executive officer serves at the discretion of our
Board.
Section 16(a) of the Securities Exchange Act
requires the Company’s officers and directors, and persons who beneficially own more than ten (10%) percent of a class of
equity securities registered pursuant to Section 12 of the Exchange Act, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission and the principal exchange upon which such securities are traded or quoted. Reporting
Persons are also required to furnish copies of such reports filed pursuant to Section 16(a) of the Exchange Act with the Company.
Based on our review of the copies of such forms
received by us, and to the best of our knowledge, other than Mr. Mathieu, who did not file a Form 4 disclosing the acquisition
of certain options beneficial owned by him, by the deadline, all executive officers, directors and greater than 10% stockholders
filed the required reports in a timely manner in 2015.
Code of Business Conduct and Ethics Policy
We adopted a Code of Business Conduct and Ethics
that applies to, among other persons, our principal executive officers, principal financial officer, principal accounting officer
or controller, and persons performing similar functions. Our Code of Business Conduct and Ethics is available on our website www.bioniklabs.com.
39
Corporate Governance
The business and affairs of the Company are
managed under the direction of our Board of Directors, which as of March 21, 2016, is comprised of Peter Bloch, Michal Prywata,
Thiago Caires, Robert Hariri and Marc Mathieu.
There have been no changes in any state law
or other procedures by which security holders may recommend nominees to our board of directors.
Our board of directors does not currently have
any committees, such as an audit committee or a compensation committee. However, the board of directors may establish such committees
in the future, and will establish an audit committee and a compensation committee (and any other committees that are required)
if the Company seeks to be listed on a national securities exchange.
Director Independence
We use the definition of “independence”
of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director”
is a person other than an officer or employee of the company or any other individual having a relationship, which, in the opinion
of the Company’s Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of
a director. The NASDAQ listing rules provide that a director cannot be considered independent if:
·
The director is, or at any time during the past three years was, an employee of the company;
·
The director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service);
·
A family member of the director is, or at any time during the past three years was, an executive officer of the company;
·
The director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);
·
The director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or
·
The director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.
Under such definitions, Dr. Hariri and Mr. Mathieu are considered
independent directors.
40
EXECUTIVE COMPENSATION
Compensation of Executive Officers
The following table
sets forth information regarding each element of compensation that was paid or awarded to the named executive officers of Bionik
for the periods indicated.
Name and Principal Position
Year(1)
Salary ($)
Bonus ($)
Stock Awards ($)
Option Awards ($)
Non-Equity Incentive Plan Compensation ($)
All Other Compensation ($)
Total ($)
Peter Bloch(2)
Chief
2015
260,891
-
-
505,185
(3,9)
-
108,352
(4)
874,428
Executive
2014T
100,491
-
-
419,829
(3,5)
-
80,000
600,320
Officer
2014
-
-
-
-
-
169,996
169,996
Michal Prywata
Chief
2015
198,799
-
-
202,074
(3,9)
-
71,817
(6)
472,690
Operating
2014T
145,460
-
-
419,829
(3,5)
-
-
565,289
Officer
2014
157,650
-
-
-
-
157,650
Thiago Caires
Chief
2015
204,644
-
-
-
-
72,310
(7)
276,954
Technology
2014T
145,491
-
-
419,829
(3,5)
-
-
565,320
Officer
2014
157,650
-
-
-
-
157,650
Leslie N. Markow (8)
Chief
2015
131,923
24,000
-
488,789
(3,10)
-
4,997
649,709
Financial
2014T
32,134
-
-
-
-
-
32,134
Officer
2014
-
-
-
-
-
-
-
(1)
“2014T” refers to the Company’s nine month transition period ended December 31, 2014. “2014”
refers to the Company’s fiscal year ended March 31, 2014.
(2)
Mr. Bloch was a consultant to Bionik Canada until August 2014. His consulting income is reflected under All Other Compensation
in the table.
(3)
For assumptions made in such valuation, see Note 9 to the Company’s audited consolidated financial statements included
in this prospectus, commencing on page F-18.
(4)
Represents additional compensation as a result of the successful consummation of the Company’s Acquisition Transaction
and Offering of $100,000 and a contribution to RRSP(Canadian IRA) and other benefits of $8,352.
(5)
On July 1, 2014, the Company issued 990,864 options to Messrs. Bloch, Prywata and Caires at an exercise price of $0.23 with
a term of 7 years, which vest on May 27, 2015. On February 26, 2015, as a result of the Acquisition Transaction, the options were
revalued for each executive to $419,829 for a total of $1,259,487. See “Outstanding Equity Awards” below for additional
information on options granted to the named executive officers during the nine-month transition period ended December 31, 2014.
(6)
Represents additional compensation as a result of the successful consummation of the Company’s Acquisition Transaction
and Offering of $65,000 and RRSP(Canadian IRA) contributions and other benefits of $6,817.
(7)
Represents additional compensation as a result of the successful consummation of the Company’s Acquisition Transaction
and Offering of $65,000 and RRSP(Canadian IRA) contributions and other benefits of $7,310.
(8)
Ms. Markow was hired by Bionik Canada on September 3, 2014 on a part-time basis and became a full time employee on September
16, 2015.
(9)
On December 14, 2015, we issued 1,000,000 options to Mr. Bloch and 400,000 options to Mr. Prywata at an exercise price of $1.00
that vest equally over three years on the anniversary date starting December 14, 2016.
41
(10)
On November 24, 2015, we issued 400,000 options to Ms. Markow at an exercise price of $1.22, that vest equally over three years
on the anniversary date starting November 24, 2016.
Outstanding Equity Awards at Fiscal Year-End
The following table presents the outstanding
equity awards held by each of the named executive officers as of the end of the fiscal year ended December 31, 2015.
Option Awards
Name
Number of Securities Underlying Unexercised Options Exercisable
Number of Securities Underlying Unexercised Options Unexercisable
Option Exercise Price
Option Expiration Date
Peter Bloch
990,864
(1)
-
$
0.23
July 1, 2021
-
1,000,000
(2)
$
1.00
December 14, 2022
Michal Prywata
990,864
(1)
-
$
0.23
July 1, 2021
-
400,000
(2)
$
1.00
December 14, 2022
Thiago Caires
990,864
(1)
-
$
0.23
July 1, 2021
Leslie N. Markow
94,371
(3)
-
$
0.23
February 16, 2022
-
47,186
(3)
$
0.23
February 16, 2022
-
400,000
(4)
$
1.22
November 24, 2022
(1)
On July 1, 2014, Bionik Canada issued 2,972,592 options (adjusted for post-Acquisition Transaction) equally split between Messrs.
Bloch, Prywata and Caires, at an exercise price of $0.23 with a term of 7 years, which vested May 27, 2015. All of such options
were issued subject to and contingent on the successful consummation of the Offering and the Acquisition Transaction, which took
place on February 26, 2015. Accordingly, such options are deemed issued as of February 26, 2015.
(2)
On December 14, 2015, we issued 1,000,000 options to Mr. Bloch and 400,000 options to Mr. Prywata at an exercise price of $1.00
that vest equally over three years on the anniversary date starting December 14, 2016.
(3)
On February 17, 2015, we issued 141,557 options (adjusted for post-Acquisition Transaction) to Ms. Markow at an exercise price
of $0.23, that vest one-third immediately and two thirds over the next two anniversary dates with an expiry date of seven years.
(4)
On November 24, 2015, we issued 400,000 options to Ms. Markow at an exercise price of $1.22, that vest equally over three years
on the anniversary date starting November 24, 2016.
On February 25, 2015, 262,904 post-Acquisition
Transaction common shares were issued to two former lenders connected with a $241,185 loan received and repaid in fiscal 2013.
As part of the consideration for the initial loan, Messrs. Prywata and Caires transferred 314,560 common shares to the lenders.
For contributing the common shares to the lenders, the Company intends to reimburse them post-Acquisition Transaction 320,000 common
shares, however these shares have not yet been issued.
42
Long-Term Incentive Plans and Awards
Since our incorporation on January 8, 2010 through
December 31, 2015, we did not have any long-term incentive plans that provided compensation intended to serve as incentive for
performance. No individual grants or agreements regarding future payouts under non-stock price-based plans have been made to any
executive officer or any director or any employee or consultant since our inception through December 31, 2015.
Director Compensation
Name
Fees earned or paid in cash
Stock Awards
Option Awards
Non-Equity Incentive Plan Compensation
Nonqualified Deferred Compensation Earnings
All Other Compensation
Total
Robert Hariri
$
20,000
-
$
128,360
(1)
-
-
$
-
$
148,360
Marc Mathieu
-
-
$
101,037
(1)
-
-
$
-
$
101,037
(1)
On December 14, 2015, Dr. Hariri and Mr. Mathieu were each granted 200,000 options exercisable at $1.00, which vest equally
over three years on the anniversary date starting December 14, 2016. In addition, Dr. Hariri was granted 62,914 options on February
15, 2015, exercisable at $0.23, of which one third vested immediately and the remainder vests equally on the one year and two year
anniversary of the date of grant.
Our independent directors each receive an annual
cash payment of up to $20,000, as well as reimbursement for expenses incurred by them in connection with attending board meetings.
They also are eligible for stock option grants.
Messrs. Bloch, Prywata and Caires received compensation
for their respective services to the Company as set forth above under “-Compensation of Executive Officers.”
Employment Agreements
Peter Bloch
Bionik Canada entered into an employment agreement
with Peter Bloch on July 7, 2014, to serve as our Chief Executive Officer, on an indefinite basis subject to the termination provisions
described in the agreement. Pursuant to the terms of the agreement, Mr. Bloch received an annual base salary of $275,000 per annum
since February 26, 2015. The salary will be reviewed on an annual basis to determine potential increases based on Mr. Bloch’s
performance and that of the Company. Mr. Bloch would also be entitled to receive a target annual cash bonus of 50% of base salary.
In the event Mr. Bloch’s employment is
terminated as a result of death, Mr. Bloch’s estate would be entitled to receive the annual salary and a portion of the annual
bonus earned up to the date of death. In addition, all vested options and warrants as of the date of death would continue in full
force and effect, subject to the terms and conditions of the plan.
In the event Mr. Bloch’s employment is
terminated as a result of disability, Mr. Bloch would be entitled to receive the annual salary, benefits, a portion of the annual
bonus earned up to the date of disability and expenses incurred up to the date of termination.
In the event Mr. Bloch’s employment is
terminated by us for cause, Mr. Bloch would be entitled to receive his annual salary, benefits and expenses incurred up to the
date of termination.
In the event Mr. Bloch’s employment is
terminated by us without cause, he would be entitled to receive 12 months’ pay (salary and bonus) and full benefits, plus
one month for each year of service. Furthermore, Mr. Bloch will have six months after termination to exercise all vested options
in accordance with the terms of the plan. All unvested options would immediately forfeit upon such notice of termination.
43
The agreement contains customary non-competition
and non-solicitation provisions pursuant to which Mr. Bloch agrees not to compete and solicit with the Company. Mr. Bloch also
agreed to customary terms regarding confidentiality and ownership of intellectual property.
Michal Prywata
Bionik Canada entered into an employment agreement
with Michal Prywata on July 7, 2014, to serve as our Chief Operating Officer, on an indefinite basis subject to the termination
provisions described in the agreement. Pursuant to the terms of the agreement, Mr. Prywata received an annual base salary of $210,000
since February 26, 2015. The salary will be reviewed on an annual basis to determine potential increases based on Mr. Prywata’s
performance and that of the Company.
Mr. Prywata would also be entitled to receive
a target annual cash bonus of 30% of base salary,. Mr. Prywata is further entitled to a cash and option bonus based on a per patent
creation basis, as determined by the Board of Directors.
In the event Mr. Prywata’s employment
is terminated as a result of death, Mr. Prywata’s estate would be entitled to receive the annual salary and a portion of
the annual bonus earned up to the date of death. In addition, all vested options and warrants as of the date of death would continue
in full force and effect, subject to the terms and conditions of the plan.
In the event Mr. Prywata’s employment
is terminated as a result of disability, Mr. Prywata would be entitled to receive the annual salary, benefits, a portion of the
annual bonus earned up to the date of disability and expenses incurred up to the date of termination.
In the event Mr. Prywata’s employment
is terminated by us for cause, Mr. Prywata would be entitled to receive his annual salary, benefits and expenses incurred up to
the date of termination.
In the event Mr. Prywata’s employment
is terminated by us without cause, he would be entitled to receive 12 months’ pay and full benefits, plus one month for each
year of service. Furthermore, Mr. Prywata will have six months after termination to exercise all vested options in accordance with
the terms of the plan. All unvested options would immediately forfeit upon such notice of termination.
The agreement contains customary non-competition
and non-solicitation provisions pursuant to which Mr. Prywata agrees not to compete and solicit with the Company. Mr. Prywata also
agreed to customary terms regarding confidentiality and ownership of intellectual property.
Thiago Caires
Bionik Canada entered into an employment agreement
with Thiago Caires on July 7, 2014, to serve as our Chief Technology Officer, on an indefinite basis subject to the termination
provisions described in the agreement. Pursuant to the terms of the agreement, Mr. Caires received an annual base salary of $210,000
since February 26, 2015. The salary will be reviewed on an annual basis to determine potential increases based on Mr. Caires’s
performance and that of the Company.
Mr. Caires would also be entitled to receive
a target annual cash bonus of 30% of base salary. Mr. Caires is further entitled to a cash and option bonus based on a per patent
creation basis, as determined by the Board of Directors.
In the event Mr. Caires’s employment is
terminated as a result of death, Mr. Caires’s estate would be entitled to receive the annual salary and a portion of the
annual bonus earned up to the date of death. In addition, all vested options and warrants as of the date of death would continue
in full force and effect, subject to the terms and conditions of the plan.
44
In the event Mr. Caires’s employment is
terminated as a result of disability, Mr. Caires would be entitled to receive the annual salary, benefits, a portion of the annual
bonus earned up to the date of disability and expenses incurred up to the date of termination.
In the event Mr. Caires’s employment is
terminated by us for cause, Mr. Caires would be entitled to receive his annual salary, benefits and expenses incurred up to the
date of termination.
In the event Mr. Caires’s employment is
terminated by us without cause, he would be entitled to receive 12 months’ pay and full benefits, plus one month for each
year of service. Furthermore, Mr. Caires will have six months after termination to exercise all vested options in accordance with
the terms of the plan. All unvested options would immediately forfeit upon such notice of termination.
The agreement contains customary non-competition
and non-solicitation provisions pursuant to which Mr. Caires agrees not to compete and solicit with the Company. Mr. Caires also
agreed to customary terms regarding confidentiality and ownership of intellectual property.
Leslie N. Markow
Bionik Canada entered into an employment agreement
with Leslie Markow on September 3, 2014 to serve as our Chief Financial Officer, on a part-time, indefinite basis subject to the
termination provisions described in the agreement. On September 16, 2015, Ms. Markow was promoted to full time. Pursuant to the
terms of the agreement, as amended, Ms. Markow receives an annual base salary of $210,000 payable semi-monthly in arrears. The
salary will be reviewed on an annual basis to determine potential increases based on Ms. Markow’s performance and that of
the Company. Ms. Markow would also be entitled to receive a target annual cash bonus of 30% of base salary, and a grant of options
in an amount to be determined at the price of the Acquisition Transaction, upon the closing of the Acquisition Transaction, to
vest over three years in equal annual installments.
In the event Ms. Markow’s employment is
terminated as a result of death, Ms. Markow’s estate would be entitled to receive the annual salary and a portion of the
annual bonus earned up to the date of death. In addition, all vested options and warrants as of the date of death would continue
in full force and effect, subject to the terms and conditions of the plan.
In the event Ms. Markow’s employment is
terminated as a result of disability, Ms. Markow would be entitled to receive the annual salary, benefits, a portion of the annual
bonus earned up to the date of disability and expenses incurred up to the date of termination.
In the event Ms. Markow’s employment is
terminated by us for cause, Ms. Markow would be entitled to receive her annual salary, benefits and expenses incurred up to the
date of termination.
In the event Ms. Markow’s employment is
terminated by us without cause, she would be entitled to receive no more than 9 months’ pay and full benefits. Furthermore
Ms. Markow will have six months after termination to exercise all vested options in accordance with the terms of the plan. All
unvested options would immediately forfeit upon such notice of termination.
The agreement contains customary non-competition
and non-solicitation provisions pursuant to which Ms. Markow agrees not to compete and solicit with the Company. Ms. Markow also
agreed to customary terms regarding confidentiality and ownership of intellectual property.
Limits on Liability and Indemnification
We provide directors and officers insurance
for our current directors and officers.
45
Our certificate of incorporation eliminate the
personal liability of our directors to the fullest extent permitted by law. The certificate of incorporation further provide that
the Company will indemnify its officers and directors to the fullest extent permitted by law. We believe that this indemnification
covers at least negligence on the part of the indemnified parties. Insofar as indemnification for liabilities under the Securities
Act may be permitted to our directors, officers, and controlling persons under the foregoing provisions or otherwise, we have been
advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is therefore unenforceable.
46
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table shows the beneficial ownership
of our Common Stock as of March 21, 2016 held by (i) each person known to us to be the beneficial owner of more than five percent
(5%) of our Common Stock; (ii) each director; (iii) each executive officer; and (iv) all directors and executive officers as a
group.
Beneficial ownership is determined in accordance
with the rules of the SEC, and generally includes voting power and/or investment power with respect to the securities held. Shares
of Common Stock subject to options and warrants currently exercisable or which may become exercisable within 60 days of March 21,
2016 are deemed outstanding and beneficially owned by the person holding such options or warrants for purposes of computing the
number of shares and percentage beneficially owned by such person, but are not deemed outstanding for purposes of computing the
percentage beneficially owned by any other person. Except as indicated in the footnotes to this table, the persons or entities
named have sole voting and investment power with respect to all shares of our Common Stock shown as beneficially owned by them.
The following table assumes 72,591,292 shares
are outstanding as of March 21, 2016, consisting of 22,591,292 shares of Common Stock and 50,000,000 Common Stock equivalents through
the Exchangeable Shares.
The percentages below assume the exchange by
all of the holders of Exchangeable Shares of Bionik Canada for an equal number of shares of our Common Stock in accordance with
the terms of the Exchangeable Shares. Unless otherwise indicated, the address of each beneficial holder of our Common Stock is
our corporate address.
Name of Beneficial Owner
Shares of Common Stock Beneficially Owned
% of Shares of Common Stock Beneficially Owned
Peter Bloch (1)(2)
7,074,768
9.61
%
Michal Prywata (1)(3)
8,487,215
11.53
%
Thiago Caires (1)(4)
8,487,215
11.53
%
Olivier Archambaud (1)
7,210,768
9.93
%
Leslie N. Markow (5)
94,374
*
Robert Hariri (6)
291,944
*
Marc Mathieu
-
-
All directors, director appointees and executive officers as a group (6 persons)
24,435,516
32.23
%
* Less than 1%
(1)
Such shares will initially be held as Exchangeable Shares for tax purposes. The Exchangeable Shares have the following attributes,
among others:
·
Be, as nearly as practicable, the economic equivalent of the Common Stock as of the consummation of the Acquisition Transaction;
·
Have dividend entitlements and other attributes corresponding to the Common Stock;
·
Be exchangeable, at each holder’s option, for Common Stock; and
·
Upon the direction of our board of directors, be exchanged for Common Stock on the 10-year anniversary of the First Closing,
subject to applicable law, unless exchanged earlier upon the occurrence of certain events.
The holders of the Exchangeable
Shares, through The Special Voting Preferred Stock, will have voting rights and other attributes corresponding to the Common Stock.
(2)
Includes options to acquire 990,864 Exchangeable Shares.
(3)
Includes options to acquire 990,864 Exchangeable Shares. Does not include 160,000 Exchangeable Shares expected to be issued
to Mr. Prywata.
(4)
Includes options to acquire 990,864 Exchangeable Shares. Does not include 160,000 Exchangeable Shares expected to be issued
to Mr. Caires.
(5)
Represents 94,374 options to acquire shares of our common stock.
(6)
Includes options to acquire 41,944 shares of our common stock and warrants to acquire 125,000 shares of our common stock.
47
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Procedures and Policies
We consider “related party transactions”
to be transactions between our Company and (i) a director, officer, director nominee or beneficial owner of greater than five percent
of our stock; (ii) the spouse, parents, children, siblings or in-laws of any person named in (i); or (iii) an entity in which one
of our directors or officers is also a director or officer or has a material financial interest.
Our Board of Directors is vested with the responsibility
of evaluating and approving any potential related party transaction, unless a special committee consisting solely of independent
directors is appointed by the Board of Directors. We do not have any formal policies or procedures for related party transactions.
Transactions with Related Parties
As of February 26, 2015, as part of the Acquisition
Transaction, the Company spun off Strategic Dental Alliance, Inc., a Colorado corporation, a wholly-owned subsidiary of the Company
and, until the Acquisition Transaction, the holder of certain of the Company’s assets and liabilities, to Messrs. Brian Ray
and John Lundgreen, former directors and executive officers of the Company.
As of February 26, 2015, as part of the Acquisition
Transaction and the resignation of Mr. Kibler as our Chief Executive Officer, we cancelled an aggregate of 90,207,241 shares of
the Company’s common stock beneficially owned by AAK Ventures, LLC, a Delaware limited liability company controlled by Mr.
Kibler.
In June, 2014, Olivier Archambaud, a former
director of Bionik Canada, received payments and fees of CDN$233,000 for services rendered to Bionik with respect to a capital
raise transaction, which he subsequently converted into 247,778 common shares of Bionik Canada at $0.81 ($0.90 CAD) per share.
Subsequent to March 31, 2014, one advance amounting to $85,947 was settled by the issuance of 105,555 pre-transaction common shares
to Mr. Archambaud.
As of December 31, 2015, we had aggregate advances
repayable by Messrs. Prywata and Caires of $38,554 (December 31, 2014 -$44,986)which bear interest at a prescribed rate of 1% and
are repayable on demand in Canadian dollars.
At December 31, 2015, there was $2,970 (December
31, 2014 -$4,220) owing to Peter Bloch and $856 (December 31, 2014- $5,930) owing to Thiago Caires, $878 (December 31, 2014 –
nil) owing to Michal Prywata and $346 (December 31, 2014 – nil) owing to Leslie Markow for sums paid by them on behalf of
Bionik Canada for certain of its expenses. Subsequent to December 31, 2015, all of such amounts have been paid.
In connection with a CDN$250,000 loan obtained
by Bionik Canada (which loan has been repaid), Bionik Canada agreed to transfer pre-transaction 83,574 common shares to the lenders.
In addition, Messrs. Caires and Prywata also transferred 100,000 pre-transaction common shares to the loan holder and this will
be reimbursed by the issuance of 320,000 exchangeable shares to Messrs. Caires and Prywata effective as of the date of the Acquisition
Transaction. These shares have not yet been issued.
Other than the above transactions, there have
been no related party transactions, or any other transactions or relationships required to be disclosed pursuant to Item 404 Regulation
S-K. The Company is currently not a subsidiary of any company.
48
SELLING
STOCKHOLDERS
This prospectus relates
to the registration of 32,816,500 shares of our common stock, consisting of:
·
16,408,250 shares of our issued and outstanding common stock; and
·
16,408,250 shares of our common stock that may be issued upon the exercise of outstanding warrants.
Each warrant has anti-dilution
protection including adjustments to the exercise price, as provided under the terms of such warrant, for stock splits, stock dividends
and other similar transactions.
The selling stockholders
identified in this prospectus may offer the shares of our common stock at prevailing market prices at the time of sale, at prices
related to the prevailing market price, at varying prices determined at the time of sale or at negotiated prices. See “Plan
of Distribution” for additional information.
Unless otherwise indicated,
we believe, based on information supplied by the following persons, that the persons named in the table below have sole voting
and investment power with respect to all shares of common stock that they beneficially own. The information presented in the columns
under the heading “Shares Beneficially Owned After Offering” assumes the sale of all of our shares offered by this
prospectus. The registration of the offered shares does not mean that any or all of the selling stockholders will offer or sell
any of these shares.
Unless otherwise indicated
elsewhere in this prospectus, none of the selling stockholders have within the past three years had any position, office or other
material relationship with the Company or any of its predecessors or affiliates.
Number of Shares
Common Stock Offered by the
Shares Beneficially Owned After Offering
Name of Selling Stockholder
Beneficially Owned(1)
Selling Stockholder
Number
Percent
Abrams, Mark
750,000
750,000
–
–
Andreotti, Paul
25,000
25,000
–
–
Antico, Steven R.
250,000
250,000
–
–
Apregan Family Living Trust dto 2/11/98 (2)
187,500
187,500
–
–
Beaumont, Nigel
54,000
54,000
–
–
Bricker, Adam
125,000
125,000
–
–
Brickley, Robert J.
131,250
131,250
–
–
Bridges, Bob
62,500
62,500
–
–
Cloyd, Richard A.
250,000
250,000
–
–
Dell'Aera, Mario
1,250,000
1,250,000
–
–
Dennis Abbott IRA (3)
187,500
187,500
–
–
Dotson, Robert
62,500
62,500
–
–
Dronenburg, Jr., Ernest
100,000
100,000
–
–
Factor, Seth
50,000
50,000
–
–
Fahey, Michael
125,000
125,000
–
–
Fisher, Patricia
25,000
25,000
–
–
Freeman, Hank
125,000
125,000
–
–
Fried, Arno Harris
500,000
500,000
–
–
Giordano, Nicholas P.
250,000
250,000
–
–
Goodson, Michael D.
60,000
60,000
–
–
Gray, Jr. Donald
50,000
50,000
–
–
Hayden, Christopher
50,000
50,000
–
–
Herbranson, Dale E.
35,000
35,000
–
–
Huykman, Richard B.
175,000
175,000
–
–
49
Ide, Gary
125,000
125,000
–
–
Koncsics, Thomas M.
475,000
475,000
–
–
Laband, Alistair
250,000
250,000
–
–
Lew, Steven
62,500
62,500
–
–
Lipson, Adam C.
500,000
500,000
–
–
Lisser, Anna
100,000
100,000
–
–
Lutze, Michael
375,000
375,000
–
–
McGarr, Samuel
250,000
250,000
–
–
McGee, Larry
62,500
62,500
–
–
McLoughlin, Mick
1,170,000
1,170,000
–
–
Painter, Adam
62,500
62,500
–
–
Pazdro, Steven G.
300,000
300,000
–
–
Richards, Donald J.
125,000
125,000
–
–
Robert G. Moroney, Jr. IRA (4)
125,000
125,000
–
–
Root, Sherwin
25,000
25,000
–
–
Scherer, Martin
250,000
250,000
–
–
Scott, Duncan
500,000
500,000
–
–
Shappard, Richard A.
250,000
250,000
–
–
Simon, Michael & Mary
87,500
87,500
–
–
Susan A. Izard IRA (5)
62,500
62,500
–
–
Sweeney, David
20,000
20,000
–
–
Takada, Hideo
375,000
375,000
–
–
Tam, John L.
60,000
60,000
–
–
Thomas, Mark A.
62,500
62,500
–
–
Ufheil, David
125,000
125,000
–
–
Ufheil, David & Susan JT
125,000
125,000
–
–
Umansky, George
40,000
40,000
–
–
Uttley, Adam
120,000
120,000
–
–
Weiss, Brian
125,000
125,000
–
–
Whalen, Dennis T.
250,000
250,000
–
–
Orville A. White, IRA (6)
250,000
250,000
–
–
Bennett, Kirk
6,250
6,250
–
–
FACA Management Trust (7)
125,000
125,000
–
–
Bunker, Jeffrey
375,000
375,000
–
–
Andrew M. Ciora and Michelle A. Ciora Revocable Trust (8)
25,000
25,000
–
–
Cole, Jeffery
250,000
250,000
–
–
FRX Bionik, LLC (9)
200,000
200,000
–
–
Georgek, Gregory
437,500
437,500
–
–
Hall, David B.
200,000
200,000
–
–
Hariri, Robert J.
291,944
(10)
250,000
41,944
*
JW Opportunities Fund, LLC (11)
75,000
75,000
–
–
JW Partners, LP (12)
300,000
300,000
–
–
Kaminetsky, Jed
125,000
125,000
–
–
McKracken, Mark
187,500
187,500
–
–
Paul, Patrick
625,000
625,000
–
–
Perspecta Trust, LLC as Trustee of Lev Grzhonko Non-Grantor Delaware Trust (13)
250,000
250,000
–
–
Pratt, Alfred
125,000
125,000
–
–
Scheck, Clifford
5,000
5,000
–
–
Ann Silvestri GS Irrevocable Trust (14)
625,000
625,000
–
–
Silvestri, John P.
625,000
625,000
–
–
Talwar, Mahesh
250,000
250,000
–
–
Lifestyle Healthcare LLC (15)
1,591,136
(16)
1,250,000
341,136
*
50
Fitzgibbons, Shawn
25,000
25,000
–
–
Mills, Christian
375,000
375,000
–
–
Paul, Patrick
1,250,000
1,250,000
–
–
Helicopter Express, Inc. (17)
400,000
400,000
–
–
OceanAir Environmental LLC
250,000
250,000
–
–
Boulus, Michael
50,000
50,000
–
–
Breen, David J.
250,000
250,000
–
–
Soles, Robert
125,000
125,000
–
–
Umansky, Morris
120,000
120,000
–
–
Weinman, Kristian & Sharon
62,500
62,500
–
–
Cohen, Gerald D.
125,000
125,000
–
–
Fuchs, Martin
77,500
77,500
–
–
Jindal, Gorav
100,000
100,000
–
–
Robert G Moroney IRA (18)
62,500
62,500
–
–
Alsberg, Charles
250,000
250,000
–
–
Carr, Walter Lee
250,000
250,000
–
–
Kasten, Donald
62,500
62,500
–
–
Schaffer, Don
62,500
62,500
–
–
Spence, Chris
250,000
250,000
–
–
Aldrich, Ellen Anita
62,500
62,500
–
–
Bouch, Clive
125,000
125,000
–
–
Braverman, Herbert
25,000
25,000
–
–
Casey, Rupert
250,000
250,000
–
–
Cummins, Jonathan
25,000
25,000
–
–
Cunningham, Scott
50,000
50,000
–
–
Defries, Graham
200,000
200,000
–
–
Donohue, James
250,000
250,000
–
–
Favre, Donald
125,000
125,000
–
–
Gan, Wah Meng
17,500
17,500
–
–
Golden, Richard J.
250,000
250,000
–
–
Greenberg, Mark
250,000
250,000
–
–
Herndon, Mark
125,000
125,000
–
–
Hinkle, Donald
25,000
25,000
–
–
Latimer, Gordon
250,000
250,000
–
–
Little, James
250,000
250,000
–
–
MacKenzie, Kevin
250,000
250,000
–
–
Moroney, Kathleen IRA (19)
62,500
62,500
–
–
Moroney, Richard
62,500
62,500
–
–
Moroney, Ryan IRA (20)
62,500
62,500
–
–
Pankowski, Joseph
25,000
25,000
–
–
Pazdro, Steven
287,500
287,500
–
–
Prasad, Joseph
10,000
10,000
–
–
Quackenbush, Michael
125,000
125,000
–
–
Rey Family Trust (21)
250,000
250,000
–
–
Richards, Donald
250,000
250,000
–
–
Shaer, Steve
250,000
250,000
–
–
Thibault, Daniel
125,000
125,000
–
–
Tierney, John
250,000
250,000
–
–
Wakil, Salman
125,000
125,000
–
–
Abrams, Kristine
250,000
250,000
–
–
Barone, Charles
250,000
250,000
–
–
Chittick, John
62,500
62,500
–
–
Freyne, James
80,000
80,000
–
–
Friedman, Greg & Susan
25,000
25,000
–
–
George Umansky IRA (22)
40,000
40,000
–
–
51
Hart, Maureen & Allen
40,000
40,000
–
–
Pins, Judson
62,500
62,500
–
–
Richard Huyman IRA (23)
75,000
75,000
–
–
Semple, Bob
250,000
250,000
–
–
West, Andrew
125,000
125,000
–
–
Whalen, Dennis & Linda
250,000
250,000
–
–
Kristian Weinman Roth IRA (24)
1,110,000
1,110,000
–
–
Mulukutla, Ramakrisana
50,000
50,000
–
–
Gornick, Thomas G.
125,000
125,000
–
–
Poulad, David
500,000
500,000
–
–
Wheeler, Richard
60,000
60,000
–
–
Laband, Alistair
250,000
250,000
–
–
Pochi, Adam
20,000
20,000
–
–
Rabetz, William
40,000
40,000
–
–
Rush, David
500,000
500,000
–
–
Somers, James F.
125,000
125,000
–
–
Blum, George
50,000
50,000
–
–
Huesken, Richard J.
250,000
250,000
–
–
Pinto, Paul A.
25,000
25,000
–
–
Brown, Jeffrey S.
87,500
87,500
–
–
Dunlavy, Stanley
37,500
37,500
–
–
Farrell Jr., Richard A.
50,000
50,000
–
–
Genrich, Thomas W.
250,000
250,000
–
–
Mostafa El Khashab & Bakinam Ghoneim WROS (25)
25,000
25,000
–
–
Kort, Michael
50,000
50,000
–
–
Jerry and Lisa Krieg JTWROS
125,000
125,000
–
–
Jecmen, Scott J.
625,000
625,000
–
–
Lisa Kemp Carter IRA (26)
250,000
250,000
–
–
Denechaud, Barton
37,500
37,500
–
–
Gegg, James L.
162,500
162,500
–
–
Simon, Michael
37,500
37,500
–
–
TOTAL
33,199,580
32,816,500
*
Less than 1%.
(1)
Except as may otherwise be disclosed in a footnote, these
values represent ownership of an equal number of shares of common stock and shares underlying common stock purchase warrants.
(2)
George Apregan and
Patricia Ann Apregan, as Trustees, may be deemed to have beneficial ownership of the shares of common stock beneficially owned
by this selling stockholder.
(3)
Dennis Abbott has
sole voting and investment control over these shares.
(4)
Robert G. Moroney
Jr. has sole voting and investment control over these shares.
(5)
Susan A. Izard has
sole voting and investment control over these shares.
(6)
Orville A. White
has sole voting and investment control over these shares.
(7)
Frank A. Blankenbeckler III,
as Trustee, may be deemed to have beneficial ownership of the shares of common stock beneficially owned by this selling stockholder.
(8)
Andrew M. Ciora,
as Trustee, may be deemed to have beneficial ownership of the shares of common stock beneficially owned by this selling stockholder.
(9)
Zeshan Muhammedi is the manager of the selling stockholder and has control of all decisions related to the voting and trading
of stock.
(10
Includes 125,000 shares underlying common stock purchase warrants and options to acquire 41,944 shares of our common stock.
(11)
Jason Wild is the managing member JW GP, LLC, the manager
of the selling stockholder, and has effective voting and investment control over the shares offered by the selling stockholder.
(12)
Jason Wild is the managing member JW GP, LLC, the general
partner of the selling stockholder, and has effective voting and investment control over the shares offered by the selling stockholder.
52
(13)
Lev Grzhonko is the investment advisor of the Trust and
has voting and investment control over these shares.
(14)
Ann Favell Silvestri,
as Trustee, may be deemed to have beneficial ownership of the shares of common stock beneficially owned by this selling stockholder.
(15)
Dmitri Saprikyn is a partner of the selling stockholder
and has voting and investment control over the shares offered by the selling stockholder.
(16)
Includes 625,000 shares underlying common stock purchase warrants.
(17)
Scott R. Runyan has sole voting and investment control over these shares.
(18)
Robert G. Moroney has sole voting and investment control over these shares.
(19)
Kathleen Moroney has sole voting and investment control over these shares.
(20)
Ryan Moroney has sole voting and investment control over these shares.
(21)
David A. Rey, as
Trustee, may be deemed to have beneficial ownership of the shares of common stock beneficially owned by this selling stockholder.
(22)
George Umansky has sole voting and investment control over these shares.
(23)
Richard Huyman has sole voting and investment control over these shares.
(24)
Kristian Weinman has sole voting and investment control over these shares.
(25)
Lisa Kemp Carter has the sole voting and investment control over these shares.
53
DESCRIPTION OF SECURITIES
The following description of our capital stock
is a summary only and is qualified by reference to our Amended and Restated Certificate of Incorporation and Amended and Restated
Bylaws, which are included as Exhibits 3.5 and 3.6 of the registration statement of which this prospectus is a part.
General
Our authorized capital stock consists of 150,000,000
shares of common stock, with a par value of $0.001 per share, and 10,000,000 shares of preferred stock, with a par value of $0.001
per share. As of March 21, 2016, there were 22,591,292 shares of Common Stock issued and outstanding, and 50,000,000 Exchangeable
Shares which have rights (including voting rights) substantially identical to the Common Stock. Of the shares of Common Stock issued
and outstanding, approximately 16,609,587 of such shares are restricted shares under the Securities Act. There is currently one
share of The Special Voting Preferred Stock issued and outstanding held by one holder of record, which is the Trustee in accordance
with the terms of the Trust Agreement. None of these restricted shares are eligible for resale absent registration or an exemption
from registration under the Securities Act. As of the date hereof, the exemption from registration provided by Rule 144 under the
Securities Act is not available for these shares pursuant to Rule 144(i).
Common Stock
Each holder of Common Stock will be entitled
to one vote for each share of Common Stock held of record by such holder with respect to all matters to be voted on or consented
to by our stockholders, except as may otherwise be required by applicable Delaware law. The stockholders will not have pre-emptive
rights under our Certificate of Incorporation to acquire additional shares of Common Stock or other securities. The Common Stock
will not be subject to redemption rights and will carry no subscription or conversion rights. In the event of liquidation of the
Company, the stockholders will be entitled to share in corporate assets on a pro rata basis after the Company satisfies all liabilities
and after provision is made for each class of capital stock having preference over the Common Stock (if any). Subject to the laws
of the State of Delaware, if any, of the holders of any outstanding series of preferred stock, the Board of Directors will determine,
in their discretion, to declare dividends advisable and payable to the holders of outstanding shares of Common Stock.
Blank-Check Preferred Stock
The Company is currently authorized to issue
up to 10,000,000 shares of blank check preferred stock, $0.001 par value per share, of which one share has currently been designated
as The Special Voting Preferred Stock (as described below). The Board of Directors has the discretion to issue shares of preferred
stock in series and, by filing a Preferred Stock Designation or similar instrument with the Delaware Secretary of State, to establish
from time to time the number of shares to be included in each such series, and to fix the designation, power, preferences and rights
of the shares of each such Series and the qualifications, limitations and restrictions thereof.
Special Voting Preferred Stock
The Board authorized the designation of a class
of The Special Voting Preferred Stock, with the rights and preferences specified below. For purposes of deferring Canadian tax
liabilities that would be incurred by certain of our shareholders, Bionik Canada and its shareholders entered into a transaction
pursuant to which the Bionik Canada shareholders, who would have otherwise received shares of common stock of the Company pursuant
to the Acquisition Transaction, would receive instead newly issued shares of Bionik Canada that are exchangeable into shares of
Common Stock at the same ratio as if the shareholders exchanged their common shares at the consummation of the Acquisition Transaction
(the “Exchangeable Shares”). The right to vote the Common Stock equivalent of such Exchangeable Shares shall be conducted
by the vote of The Special Voting Preferred Stock issued to the Trustee.
54
In that regard, the Company has designated one
share of preferred stock as The Special Voting Preferred Stock with a par value of $0.001 per share. The rights and preferences
of The Special Voting Preferred Stock consist of the following:
·
The right to vote in all circumstances in which the Common Stock have the right to vote, with the
Common Stock as one class;
·
The Special Voting Preferred Stock entitles the holder (the Trustee) to an aggregate number of
votes equal to the number of shares of Common Stock that are issuable to the holders of the outstanding Exchangeable Shares;
·
The holder of the Special Voting Preferred Stock (and, indirectly, the holders of the Exchangeable
Shares) has the same rights as the holders of Common Stock as to notices, reports, financial statements and attendance at all stockholder
meetings;
·
No entitlement to dividends;
·
The holder of the Special Voting Preferred Stock is entitled to a total sum of $1.00 upon windup,
dissolution or liquidation of the Company; and
·
The Company may cancel The Special Voting Preferred Stock when there are no Exchangeable Shares
outstanding and no option or other commitment of Bionik Canada, which could require Bionik Canada to issue more Exchangeable Shares.
As set forth above, the
holders of the Exchangeable Shares, through The Special Voting Preferred Stock, have voting rights and other attributes corresponding
to the Common Stock. The Exchangeable Shares provide an opportunity for Canadian resident holders of Bionik Canada securities to
obtain a full deferral of taxable capital gains for Canadian federal income tax purposes in specified circumstances. Reference
is made to the full text of the Certificate of Designations, a copy of which is filed as Exhibit 4.1 to the registration statement
of which this prospectus is a part.
Warrants
General Terms. The
Warrants issued in connection with the Offering are exercisable for Common Stock at an initial exercise price equal to $1.40 per
share. The exercise price and the number of securities issued upon exercise of the Warrants are subject to adjustment in certain
cases described below under “Adjustments.”
Exercisability.
The Warrants are exercisable upon issuance and may be exercised at any time prior to the fourth anniversary of the date of the
First Closing. The Warrants may be exercised at any time in whole or in part at the applicable exercise price until expiration
of the Warrants. No fractional shares will be issued upon the exercise of the Warrants.
Adjustments. The
exercise price and the number of warrant shares purchasable upon the exercise of the Warrants are subject to “weighted average”
adjustment for dilutive issuance as well as adjustment upon the occurrence of certain events, including stock dividends, stock
splits, combinations and reclassifications of our capital stock. Additionally, an adjustment would be made in the case of a reclassification
or exchange, consolidation or merger of the Company with or into another corporation (other than a consolidation or merger in which
the Company is the surviving corporation) or sale of all or substantially all of the assets of the Company in order to enable holders
of the Warrants to acquire the kind and number of shares of stock or other securities or property receivable in such event by a
holder of the number of shares Common Stock that might otherwise have been purchased upon the exercise of the Warrants.
Cashless Exercise.
The Warrants do not provide for a “cashless” exercise, provided that the shares underlying the Warrants are registered.
55
Redemption. The
Warrants may be redeemed by the Company if the VWAP (as defined in the Warrants) of the Common Stock is 200% of the exercise price
or more for 20 consecutive trading days, provided there is an effective registration statement covering the Warrant Shares.
Warrant holder Not a
Stockholder. The Warrants do not confer upon the holders thereof any voting, dividend or other rights as stockholders of the
Company.
The Placement Agent Warrants
The Placement Agent and/or
its sub agents conducting the Offering have been granted warrants to purchase 10% of the shares of Common Stock sold in the Offering
at an exercise price of $0.80 per share and have received “piggy-back” and demand registration rights. The Placement
Agent’s warrants were immediately exercisable upon grant and will expire four years after the applicable closing and provide
for a cashless exercise right. The Placement Agent’s Warrants are not callable and have a customary weighted average anti-dilution
provision.
Transfer Agent and Registrar
VStock Transfer, LLC is
the registrar and transfer agent for our shares of common stock. Its address is 150 West 46th Street, 6th Floor, New York, NY 10036;
Telephone: (212) 828-8436.
PLAN OF DISTRIBUTION
Each selling stockholder of the securities offered
hereby and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their securities
covered hereby on the principal trading market or any other stock exchange, market or trading facility on which the securities
are traded or in private transactions. These sales may be at fixed or negotiated prices. A selling stockholder may use any one
or more of the following methods when selling securities:
·
ordinary brokerage transactions and transactions in which the broker dealer solicits purchasers;
·
block trades in which the broker dealer will attempt to sell the securities as agent but may position and resell a portion
of the block as principal to facilitate the transaction;
·
purchases by a broker dealer as principal and resale by the broker dealer for its account;
·
an exchange distribution in accordance with the rules of the applicable exchange;
·
privately negotiated transactions;
·
settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a
part;
·
in transactions through broker dealers that agree with the selling stockholders to sell a specified number of such securities
at a stipulated price per security;
·
through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
·
a combination of any such methods of sale; or
·
any other method permitted pursuant to applicable law.
The selling stockholders may also sell securities
under Rule 144 under the Securities Act of 1933, as amended (or the Securities Act), if available, rather than under this prospectus;
however, Rule 144 may only be available under the conditions set forth in subsection (i) (2) of such rule, as we were an issuer
with no or nominal assets prior to February 26, 2015.
56
Broker dealers engaged by the selling stockholders
may arrange for other brokers dealers to participate in sales. Broker dealers may receive commissions or discounts from the selling
stockholders (or, if any broker dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated,
but, except as set forth in a supplement to this prospectus, in the case of an agency transaction not in excess of a customary
brokerage commission in compliance with FINRA Rule 2440; and in the case of a principal transaction a markup or markdown in compliance
with FINRA IM-2440.
In connection with the sale of the securities
or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions,
which may in turn engage in short sales of the securities in the course of hedging the positions they assume. The selling stockholders
may also sell securities short and deliver these securities to close out their short positions, or loan or pledge the securities
to broker-dealers that in turn may sell these securities. The selling stockholders may also enter into option or other transactions
with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such
broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer or other
financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
The selling stockholders and any broker-dealers
or agents that are involved in selling the securities may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any
profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities
Act. Each selling stockholder has informed the Company that it does not have any written or oral agreement or understanding, directly
or indirectly, with any person to distribute the securities. In no event shall any broker-dealer receive fees, commissions and
markups which, in the aggregate, would exceed eight percent (8%).
We are required to pay certain fees and expenses
incurred by us incident to the registration of the securities. We have agreed to indemnify the selling stockholders against certain
losses, claims, damages and liabilities, including liabilities under the Securities Act.
Because selling stockholders may be deemed to
be “underwriters” within the meaning of the Securities Act, they will be subject to the prospectus delivery requirements
of the Securities Act including Rule 172 thereunder. In addition, any securities covered by this prospectus which qualify for sale
pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this prospectus. The selling stockholders
have advised us that there is no underwriter or coordinating broker acting in connection with the proposed sale of the resale securities
by the Selling Stockholders.
We have agreed to keep this prospectus effective
until the earlier of (i) the date on which the securities may be resold by the selling stockholders without registration and without
regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for us to be in compliance with
the current public information under Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the securities
have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The resale
securities will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws.
In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registered or qualified
for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied
with.
Under applicable rules and regulations under
the Securities Exchange Act of 1934, as amended (or the Exchange Act), any person engaged in the distribution of the resale securities
may not simultaneously engage in market making activities with respect to the common stock for the applicable restricted period,
as defined in Regulation M promulgated under the Exchange Act, prior to the commencement of the distribution. In addition, the
selling stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including
Regulation M, which may limit the timing of purchases and sales of securities of the common stock by the selling stockholders or
any other person. We will make copies of this prospectus available to the selling stockholders and have informed them of the need
to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172
under the Securities Act).
57
LEGAL MATTERS
The validity of the shares of common stock covered
by this prospectus will be passed upon by Ruskin Moscou Faltischek, P.C., Uniondale, New York.
EXPERTS
The consolidated financial statements of the
Company at December 31, 2015 and 2014 and for the year and nine month transition period, respectively, then ended appearing in
this prospectus have been audited by MNP LLP, an independent registered public accounting firm, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as an expert in accounting
and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC under the Securities
Act a registration statement on Form S-1 relating to the common stock to be sold in this offering. The registration statement,
including the attached exhibits and schedules, contains additional relevant information about us and our capital stock. This prospectus
does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. For further
information about us and our common stock, you should refer to the registration statement, including the exhibits and schedules
thereto. Statements contained in this prospectus as to the contents of any contract or other document referred to are not necessarily
complete and in each instance, if such contract or document is filed as an exhibit, reference is made to the copy of such contract
or other document filed as an exhibit to the registration statement, each statement being qualified in all respects by such reference.
You may inspect a copy of the registration statement and the exhibits and schedules thereto without charge at the Public Reference
Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may obtain copies of all or any part of the registration statement
from such office at prescribed rates. You may also obtain information on the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet website, which is located at http://www.sec.gov, that contains
reports, proxy and information statements and other information regarding issuers that file electronically with the SEC, including
the annual, quarterly and other information we file with the SEC pursuant to the informational requirements of the Securities Exchange
Act of 1934. You may access the registration statement, of which this prospectus is a part, and our other reports and other filings,
at the SEC’s Internet website.
58
Through and including , 2016 (the 90th day
after the date of this prospectus), all dealers effecting transactions in the registered securities offered hereby, whether or
not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation
of dealers to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
Report of Independent Registered Public
Accounting Firm
To the Board of Directors and Shareholders
of Bionik Laboratories Corp
We have audited the accompanying balance
sheets of Bionik Laboratories Corp as of December 31, 2015 and 2014, and the related consolidated statements of operations and
comprehensive loss, changes in shareholders' equity (deficiency) and cash flows for the year ended December 31, 2015 and nine month
period ended December 31, 2014. Bionik Laboratories Corp’s management is responsible for these consolidated financial statements.
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. Bionik Laboratories
Corp is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Bionik Laboratories Corp’s
internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of Bionik Laboratories Corp as of
December 31, 2015 and 2014, and the results of its operations and its cash flows for the year ended December 31, 2015 and nine
month period ended December 31, 2014 in conformity with accounting principles generally accepted in the United States of America.
Chartered Professional Accountants
Licensed Public Accountants
Mississauga, Ontario
March 17, 2016
ACCOUNTING
› CONSULTING › TAX
900-50 BURNHAMTHORPE
ROAD W, MISSISSAUGA, ON, L5B 3C2
P:
416.626.6000 F: 416.626.8650 MNP.ca
F-2
Bionik Laboratories Corp.
Consolidated Balance Sheets
(Amounts expressed in US Dollars)
As at
As at
December 31, 2015
December 31, 2014
$
$
Assets
Current
Cash and cash equivalents
6,617,082
209,933
Prepaid expenses and other receivables (Note 3)
188,217
81,130
Due from related parties (Note 7)
38,554
44,986
Loans receivable (Note 4)
307,459
-
Total Current Assets
7,151,312
336,049
Equipment (Note 5)
87,103
77,922
Total Assets
7,238,415
413,971
Liabilities and Shareholders’ Equity (Deficiency)
Current
Accounts payable (Note 7)
134,718
308,947
Accrued liabilities
57,840
155,463
Warrant derivative liability (Note 10)
6,067,869
-
Total Liabilities
6,260,427
464,410
Shareholders’ Equity (Deficiency)
Special Voting Preferred Stock, par value $0.001; Authorized - 1; Issued and outstanding - 1 (December 31, 2014 – Nil)
-
-
Common Shares, par value $0.001; Authorized - 150,000,000 (December 31, 2014 – 200,000,000); Exchangeable Shares; Authorized – Unlimited, Issued and outstanding – 22,428,313 and 50,000,000 Exchangeable Shares (December 31, 2014 – nil and 49,737,096 Exchangeable Shares) (Note 8)
72,428
49,737
Additional paid-in capital
11,412,399
4,936,456
Shares to be issued (Note 8(xiii))
98,900
-
Deficit
(10,647,888
)
(5,053,982
)
Accumulated other comprehensive income
42,149
17,350
Total Shareholders’ Equity (Deficiency)
977,988
(50,439
)
Total Liabilities and Shareholders’ Equity (Deficiency)
7,238,415
413,971
Commitments and Contingencies (Note 12)
Subsequent events (Note 14)
The accompanying notes are an integral part of these consolidated
financial statements
F-3
Bionik Laboratories Corp.
Consolidated Statements of Operations and Comprehensive Loss
(Amounts expressed in U.S. Dollars)
Year Ended
Nine month period ended
December 31 2015
December 31 2014
$
$
Operating expenses
Research and development
1,489,483
1,101,820
General and administrative
2,666,669
1,192,244
Share-based compensation expense (Notes 8(v), 8(xiii) and 9)
1,709,230
112,573
Depreciation (Note 5)
59,479
34,036
Total operating expenses
5,924,861
2,440,673
Other expenses (income)
Imputed interest expense (Note 6)
-
27,677
Interest expense
3,018
6,212
Other income
(33,974
)
(46,026
)
Foreign exchange loss
184,125
36,211
Change in fair value of warrant derivative liability (Note 10)
(484,124
)
-
Total other (income) expenses
(330,955
)
24,074
Net loss for the period
(5,593,906
)
(2,464,747
)
Foreign exchange translation adjustment
24,799
(24,390
)
Net loss and comprehensive loss for the period
(5,569,107
)
(2,489,137
)
Loss per share – basic and diluted
$
(0.08
)
$
(0.05
)
Weighted average number of shares outstanding – basic and diluted
67,210,266
48,225,034
The accompanying notes are an integral part of these consolidated
financial statements
F-4
Bionik Laboratories Corp.
Consolidated Statements of Changes in Shareholders’ Equity
(Deficiency)
(Amounts expressed in US Dollars)
Special
voting preferred shares
Common
shares
Additional
Paid In
Shares
to be
Accumulated
Other Comprehensive
Shares
Amount
Shares
Amount
Capital
Issued
Deficit
Income
Total
$
$
$
$
$
$
$
Balance, March
31, 2014
-
-
36,621,885
36,622
1,736,247
-
(2,589,235
)
41,740
(774,626
)
Issuance of common shares for cash (Note 8(i))
-
-
10,792,335
10,792
2,605,270
-
-
-
2,616,062
Share issue costs (Note 8(i))
-
-
-
-
(11,609
)
-
-
-
(11,609
)
Shares issues on conversion of loans (Notes 8(ii)
and (iii))
-
-
1,012,142
1,012
238,734
-
-
-
239,746
Beneficial conversion feature (Note 6)
-
-
-
-
27,677
-
-
-
27,677
Shares issued on exercise of stock options (Note 8(iv))
-
-
1,310,734
1,311
227,564
-
-
-
228,875
Share compensation expense (Note 9)
-
-
-
-
112,573
-
-
-
112,573
Net loss for the period
-
-
-
-
-
-
(2,464,747
)
-
(2,464,747
)
Foreign currency translation
-
-
-
-
-
-
-
(24,390
)
(24,390
)
Balance, December 31, 2014
-
-
49,737,096
49,737
4,936,456
-
(5,053,982
)
17,350
(50,439
)
Effect of the Reverse Acquisition
1
-
6,000,063
6,000
(6,000
)
-
-
-
-
Shares issued on private placement (Notes 8(v) and (xii))
-
-
16,408,250
16,408
4,772,996
-
-
-
4,789,404
Shares to be issued for services (Note
8(xiii))
-
-
-
-
-
98,900
-
-
98,900
Share compensation expense (Note 9)
-
-
282,904
283
1,708,947
-
-
-
1,709,230
Net loss for the year
-
-
-
-
-
-
(5,593,906
)
-
(5,593,906
)
Foreign currency translation
-
-
-
-
-
-
-
24,799
24,799
Balance, December 31, 2015
1
-
72,428,313
72,428
11,412,399
98,900
(10,647,888
)
42,149
977,988
The accompanying notes are an integral part of these consolidated
financial statements
F-5
Bionik Laboratories Corp.
Consolidated Statements of Cash Flows
(Amounts expressed in U.S. Dollars)
Year ended December 31, 2015
Nine month period ended December 31, 2014
$
$
Operating activities
Net loss for the year/period
(5,593,906
)
(2,464,747
)
Adjustment for items not affecting cash
Depreciation of equipment
59,479
34,036
Imputed interest
-
27,677
Interest income
(7,459
)
-
Share-based compensation expense
1,709,230
112,573
Shares to be issued for services
98,900
-
Change in fair value of warrant derivative liability
(484,124
)
-
(4,217,880
)
(2,290,461
)
Changes in non-cash working capital items
Prepaid expenses and other receivables
(107,087
)
420,709
Due from related parties
6,432
-
Accounts payable
(174,229
)
195,427
Accrued liabilities
(97,623
)
34,847
Net cash used in operating activities
(4,590,387
)
(1,639,478
)
Investing activities
Acquisition of equipment
(80,195
)
(109,316
)
Provision of a loan receivable
(300,000
)
-
Net cash used in investing activities
(380,195
)
(109,316
)
Financing activities
Proceeds from issuance of shares, net of issue costs
11,341,397
2,604,453
Repayment of proceeds from loans payable
-
(733,293
)
Proceeds from the exercise of options
-
228,875
Repayment of loans from related parties
-
(111,357
)
Net cash provided by financing activities
11,341,397
1,988,678
Effects of foreign currency exchange rate changes on cash and cash equivalents
36,334
(33,433
)
Net increase in cash and cash equivalents for the year/period
6,407,149
206,451
Cash and cash equivalents, beginning of year/period
209,933
3,482
Cash and cash equivalents, end of year/period
6,617,082
209,933
Supplemental information:
Issuance of shares on conversion of loans
$
500,000
$
239,746
The accompanying notes are an integral part of these consolidated
financial statements
F-6
BIONIK LABORATORIES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 2015 and
the nine month period ended December 31, 2014
(Amounts expressed in U.S. Dollars)
1.
NATURE OF OPERATIONS
The Company and its Operations
Bionik Laboratories Corp. (formerly Drywave
Technologies Inc., the “Company” or “Bionik”) was incorporated on January 8, 2010 in the State of Colorado
as Strategic Dental Management Corp. On July 16, 2013, the Company changed its name to Drywave Technologies Inc. (“Drywave”)
and its state of incorporation from Colorado to Delaware. Effective February 13, 2015, the Company changed its name to Bionik Laboratories
Corp. and reduced the authorized number of shares of common stock from 200,000,000 to 150,000,000. Concurrently, the Company implemented
a 1-for-0.831105 reverse stock split of the common stock, which had previously been approved on September 24, 2014. The consolidated
financial statements consolidate the Company, subject to the Exchangable Shares referred to below, and its wholly-owned subsidiaries
Bionik Laboratories Inc. (“Bionik Canada”) and Bionik Acquisition Inc.
The Company is a bioengineering research and
development company targeting diseases and injuries that impact human mobility. The Company is working towards its first product,
which will be the “ARKE”, a robotic pair of exoskeleton legs to be used for rehabilitation purposes.
These consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”),
which contemplates continuation of the Company as a going concern, which assumes the realization of assets and satisfaction of
liabilities and commitments in the normal course of business.
On February 26, 2015, the Company finalized
a Share Exchange Agreement whereby Bionik Canada issued 50,000,000 Exchangeable Shares, representing a 3.14 exchange ratio, for
100% of the common shares of Bionik Canada (the “Merger”). The Exchangeable Shares are exchangeable at the option of
the holder, each into one share of the common stock of the Company. In addition, the Company issued one Special Voting Preferred
Share (Note 8).
As a result of the shareholders of Bionik Canada
having a controlling interest in the Company subsequent to the Merger, for accounting purposes the Merger does not constitute a
business combination. The transaction has been accounted for as a recapitalization of the Company with Bionik Canada being the
accounting acquirer even though the legal acquirer is Bionik, accordingly, the historic financial statements of Bionik Canada are
presented as the comparative balances for the period prior to the Merger.
References to the Company refer to the Company
and its subsidiaries, Bionik Acquisition Inc. and Bionik Laboratories Inc. References to Drywave relate to the Company prior to
the Merger.
The Company has not yet realized any revenues
from its planned operations. As at December 31, 2015, the Company had working capital surplus of $890,885 (December 31, 2014 –
deficit of $128,361) and shareholders’ equity of $977,988 (December 31, 2014 – deficiency of $50,439) and incurred
a net loss and comprehensive loss of $5,569,107 for the year ended December 31, 2015 (nine months ended December 31, 2014 - $2,489,137). Further,
the Company expects that the ARKE will be categorized as a Class I device under Health Canada, and Class IIa in Europe to obtain
the CE Mark and be a Class II medical device under the U.S. Food and Drug Administration (“FDA”) and accordingly will
be subject to FDA regulations, guidelines and the FDA’s Quality System Regulation (“QSR”) in order to market
and sell their product in the U.S. The costs of obtaining the necessary FDA approval and maintaining compliance with the FDA could
be significant.
The Company’s principal offices are located at 483 Bay Street,
N105, Toronto, Ontario, M5G 2C9.
F-7
BIONIK LABORATORIES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 2015 and
the nine month period ended December 31, 2014
(Amounts expressed in U.S. Dollars)
2.
SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in
conformity with US GAAP 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 revenues
and expenses during the reporting period. Actual results could differ from those estimates, and changes in these estimates
are recorded when known. Significant estimates made by management include: the valuation of the warrant derivative liability and
the valuation allowance for deferred tax assets.
The selection of the appropriate valuation model to apply to the warrant derivative liability and the related inputs and assumptions
that are required to determine that valuation require significant judgment and require management to make estimates and assumptions
that affect the reported amount of the related liability and reported amounts of the change in fair value. As the derivative
warrant liability is required to be measured at fair value at each reporting date it is reasonably possible that these estimates
and assumptions could change in the near term.
Foreign Currency Translation
On April 1, 2015, Bionik Canada and Bionik
Acquisition Inc. changed its functional currency from the Canadian Dollar to the U.S. Dollar. This reflects the fact that the majority
of the Company’s business is influenced by an economic environment denominated in U.S. currency as well the Company anticipates
revenues to be earned in U.S. dollars. The change in accounting treatment was applied prospectively. The functional currency is
separately determined for the Company and each of its subsidiaries, and is used to measure the financial position and operating
results. The functional currency of the Company and its wholly-owned subsidiaries is the U.S. dollar. Transactions denominated
in a currency other than the functional currency are recorded on initial recognition at the exchange rate at the date of the transaction.
After initial recognition, monetary assets and liabilities denominated in foreign currency are translated at the end of each reporting
period into the functional currency at the exchange rate at that date. Exchange differences are recognized in profit or loss. Non-monetary
assets and liabilities measured at cost are translated at the exchange rate at the date of the transaction.
Property and Equipment
Property and equipment are recorded at cost.
Depreciation is computed using the declining balance method, over the estimated useful lives of these assets. The costs of improvements
that extend the life of equipment are capitalized. All ordinary repair and maintenance costs are expensed as incurred. Property
and equipment are depreciated as follows:
Computer & Electronics
50% per annum
Furniture and Fixtures
20% per annum
Tools and Parts
20% per annum
Revenue Recognition
The Company has yet to recognize any revenue.
The Company intends to record revenue when it is realized, or realizable and earned. The Company will consider revenue to be realized,
or realizable and earned, when the following revenue recognition requirements are met: persuasive evidence of an arrangement exists;
the products or services have been accepted by the customer via delivery or acceptance; the sales price is fixed or determinable;
and collectability is reasonably assured.
F-8
BIONIK LABORATORIES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 2015 and
the nine month period ended December 31, 2014
(Amounts expressed in U.S. Dollars)
2.
SIGNIFICANT ACCOUNTING POLICIES – Continued
Government Grant and Input Tax Credit Recoveries
The Company receives certain grant and input
tax credit recoveries from the Canadian government in compensation for eligible expenditures. These are presented as other income
in the statement of operations and comprehensive loss as they generally relate to a number of the Company’s operating expenses,
such as salaries and benefits, research and development and professional and consulting fees. The recoveries are recognized in
the corresponding period when such expenses are incurred and collection of the grant funds is assured.
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with
original terms to maturity of 90 days or less at the date of purchase. For all periods presented cash and cash equivalents consisted
entirely of cash.
Research and Development
The Company is engaged in research and development
work. Research and development costs are charged as operating expense of the Company as incurred.
Warrant Derivative Liability
The Company’s derivative
warrant instruments are measured at fair value using a simulation model which takes into account, as of the valuation
date, factors including the current exercise price, the expected life of the warrant, the current price of the underlying
stock, its expected volatility, holding cost and the risk-free interest rate for the term of the warrant (Note 10). The warrant
derivative liability is revalued at each reporting period and changes in fair value are recognized in the consolidated
statements of operations and comprehensive loss under the caption “Change in fair value of warrant
liability”.
Segment Reporting
ASC 280-10, “Disclosures about Segments
of an Enterprise and Related Information”, establishes standards for the way that public business enterprises report information
about operating segments in the Company’s consolidated financial statements. Operating segments are components of an enterprise
about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding
how to allocate resources and in assessing performance. The Company does not have any reportable segments. All of its operations
and assets are domiciled in Canada.
F-9
BIONIK LABORATORIES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 2015 and
the nine month period ended December 31, 2014
(Amounts expressed in U.S. Dollars)
2.
SIGNIFICANT ACCOUNTING POLICIES – Continued
Income Taxes
Income taxes are computed in accordance with
the provisions of ASC Topic 740, which requires, among other things, a liability approach to calculating deferred income taxes.
The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized
in its consolidated financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined
based on the difference between the financial statement carrying amounts and tax bases of assets and liabilities using enacted
tax rates in effect in the years in which the differences are expected to reverse. The Company is required to make certain estimates
and judgments about the application of tax law, the expected resolution of uncertain tax positions and other matters. In the event
that uncertain tax positions are resolved for amounts different than the Company’s estimates, or the related statutes of
limitations expire without the assessment of additional income taxes, the Company will be required to adjust the amounts of related
assets and liabilities in the period in which such events occur. Such adjustment may have a material impact on Bionik’s income
tax provision and results of operations.
Fair Value of Financial Instruments
ASC Topic 820 defines fair value, establishes
a framework for measuring fair value, and expands disclosures about fair value measurements. Included in the ASC Topic 820 framework
is a three level valuation inputs hierarchy with Level 1 being inputs and transactions that can be effectively fully observed by
market participants spanning to Level 3 where estimates are unobservable by market participants outside of the Company and must
be estimated using assumptions developed by the Company. The Company discloses the lowest level input significant to each category
of asset or liability valued within the scope of ASC Topic 820 and the valuation method as exchange, income or use. The Company
uses inputs which are as observable as possible and the methods most applicable to the specific situation of each company or valued
item.
The carrying amounts reported in the balance
sheets for cash and cash equivalents, other receivables, accounts payable, accrued liabilities, and due from related parties approximate fair value because of the short period of time between the origination of such instruments
and their expected realization and their current market rates of interest. Per ASC Topic 820 framework these are considered Level
2 inputs where inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets
for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active,
or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets
or liabilities.
As at December 31, 2015, the Company’s
warrant derivative liability is measured at fair value at each reporting period using a simulation model based on
Level 3 inputs.
The Company’s policy is to recognize transfers into and out of Level 3 as of the date of the event or change in the
circumstances that caused the transfer. There were no such transfers during the year.
F-10
BIONIK LABORATORIES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 2015 and
the nine month period ended December 31, 2014
(Amounts expressed in U.S. Dollars)
2.
SIGNIFICANT ACCOUNTING POLICIES – Continued
Basic and Diluted Loss Per Share
Basic and diluted loss per share has been determined
by dividing the net loss available to shareholders for the applicable period by the basic and diluted weighted average number of
shares outstanding, respectively. The diluted weighted average number of shares outstanding is calculated as if all dilutive options
had been exercised or vested at the later of the beginning of the reporting period or date of grant, using the treasury stock method.
Loss per common share is computed by dividing
the net loss by the weighted average number of shares of common shares outstanding during the period. Common share equivalents,
options and warrants are excluded from the computation of diluted loss per share when their effect is anti-dilutive, as they are
in 2015 and 2014.
Impairment of Long-Lived Assets
The Company follows the ASC Topic 360, which
requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the assets’
carrying amounts may not be recoverable. In performing the review for recoverability, if future undiscounted cash flows (excluding
interest charges) from the use and ultimate disposition of the assets are less than their carrying values, an impairment loss represented
by the difference between its fair value and carrying value, is recognized. When properties are classified as held for sale they
are recorded at the lower of the carrying amount or the expected sales price less costs to sell.
Reclassifications
Certain amounts have been reclassified within
the consolidated statement of operations and comprehensive loss for the nine month period ended December 31, 2014, in order to
conform with current presentation. There was no impact to the previously reported net loss.
Recently Issued Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09,
“Revenue from Contracts with Customers (Topic 606)”. The standard outlines a single comprehensive model for entities
to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance.
The accounting standard is effective for annual reporting periods (including interim reporting periods within those periods) beginning
after December 15, 2016. Early adoption is not permitted. The impact on our consolidated financial statements of adopting ASU 2014-09
will be assessed by management.
In August 2014, the FASB issued a new financial
accounting standard on going concern, ASU No. 2014-15, “Presentation of Financial Statements – Going Concern (Sub-Topic
205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” The standard provides
guidance about management’s responsibility to evaluate whether there is a substantial doubt about the organization’s
ability to continue as a going concern. The amendments in this Update apply to all companies. They become effective in the annual
period ending after December 15, 2016, with early application permitted. The impact on the consolidated financial statements of
adopting ASU 2014-15 will be assessed by management.
F-11
BIONIK LABORATORIES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 2015 and
the nine month period ended December 31, 2014
(Amounts expressed in U.S. Dollars)
2.
SIGNIFICANT ACCOUNTING POLICIES – Continued
Recently Issued Accounting Pronouncements
- Continued
In September 2015, the FASB issued ASU No.
2015-16, “Simplifying the Accounting for Measurement-Period Adjustments,” which illustrates certain guidance governing
adjustments to the provisional amounts recognized at the acquisition date with a corresponding adjustment to goodwill. Such adjustments
are required when new information is obtained about facts and circumstances that existed as of the acquisition date that, if known,
would have affected the measurement amounts initially recognized or would have resulted in the recognition of additional assets
and liabilities. ASU No. 2015-16 eliminates the requirement to retrospectively account for such adjustments. ASU No. 2015-16 is
effective for the fiscal year commencing on January 1, 2016. The Company does not anticipate that the adoption of ASU No. 2015-16
will have a material effect on the consolidated financial position or the consolidated results of operations and comprehensive
loss.
In November 2015, the FASB issued ASU No. 2015-17,
“Balance Sheet Classification of Deferred Taxes,” which requires that deferred tax liabilities and assets be classified
on our Consolidated Balance Sheets as noncurrent based on an analysis of each taxpaying component within a jurisdiction. ASU No.
2015-17 is effective for the fiscal year commencing on January 1, 2017. The Company does not anticipate that the adoption of ASU
No. 2015-17 will have a material effect on the consolidated financial position or the consolidated results of operations.
Management does not believe that any other
recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying
consolidated financial statements.
3.
PREPAID EXPENSES AND OTHER RECEIVABLES
December 31, 2015
December 31, 2014
$
$
Prepaid expenses and other receivables
120,661
18,172
Prepaid insurance
12,966
40,630
Sales taxes receivable (i)
54,590
22,328
188,217
81,130
i)
Sales tax receivable represents net harmonized sales taxes (HST) input tax credits receivable from
the Government of Canada.
F-12
BIONIK LABORATORIES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 2015 and
the nine month period ended December 31, 2014
(Amounts expressed in U.S. Dollars)
4.
LOANS RECEIVABLE
During the year, the Company provided two loans
to a third party (the “Borrower”) in the aggregate amount of $300,000 under normal commercial terms, while the Company
and Borrower explore a possible strategic relationship or other commercial transaction (a “Possible Transaction”).
The loans both carry an interest rate of 6% and are secured by all assets of the third party subject to a $200,000 subordination
to a third party financial services company. Of the $300,000, $150,000 is repayable upon the earliest of May 5, 2016, the consummation
of certain Possible Transactions and any consolidation, merger, combination, reorganization or other similar transaction entered
into by the Borrower and interest is payable semi-yearly. The remaining $150,000, along with accrued interest, is repayable upon
the earliest of the nine-month anniversary of the termination date of any letter of intent with respect to a Possible Transaction
and the consummation of certain Possible Transactions or any other similar transaction similar to a Possible Transaction without
the participation of the Company. As at December 31, 2015, accrued interest amounted to $7,459, which was included in the loan
balance.
5.
EQUIPMENT
Equipment consisted of the following as at December 31, 2015 and
December 31, 2014:
December 31, 2015
December 31, 2014
Cost
Accumulated Depreciation
Net
Cost
Accumulated Depreciation
Net
$
$
$
$
$
$
Computers and electronics
148,214
84,072
64,142
77,650
27,438
50,212
Furniture and fixtures
23,496
9,478
14,018
24,909
7,325
17,584
Tools and parts
11,422
2,479
8,943
11,913
1,787
10,126
183,132
96,029
87,103
114,472
36,550
77,922
Equipment is recorded at cost less accumulated depreciation. Depreciation
expense during the year ended December 31, 2015 was $59,479 (December 31, 2014 - $34,036).
F-13
BIONIK LABORATORIES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 2015 and
the nine month period ended December 31, 2014
(Amounts expressed in U.S. Dollars)
6.
CONVERTIBLE SECURED PROMISSORY NOTE
On December 8, 2011, the Company received $61,500
CAD from a lender that at the time was non-interest bearing and had no specified terms of repayment. On February 28, 2012, the
lender and the Company agreed to the terms of a Convertible Secured Promissory Note, which securitized the previous note plus an
additional $60,000 CAD for a total principal amount of $121,500 CAD. The note was interest bearing at prime plus 1%, secured by
a general security agreement and was to mature on the earlier of a qualifying financing event or February 28, 2014. The lender
had an option to convert the principal plus accrued interest at a discount of 20% to the share price in the event of a qualifying
financing event prior to February 28, 2014.
The note matured on February 28, 2014, at this
point the conversion option expired and the note became due on demand; however, no repayment was demanded. Upon the occurrence
of the April financing (Note 8(i)) the Company agreed to honor the original conversion option and a beneficial conversion feature
of $27,677 was recognized. As the note was due on demand the Company immediately recognized imputed interest of $27,677 in the
consolidated statement of operations and comprehensive loss.
On May 9, 2014, the lender converted the note
plus accrued interest into common shares based on the 20% discount to the $0.22 ($0.24 CAD) per share equity financing that was
accomplished in April 2014 and the Company issued these pre-transaction shares in June 2014 (see Note 8(iii)).
7.
RELATED PARTY TRANSACTIONS AND BALANCES
Due from related parties
(a)
As of December 31, 2015, the Company had advances receivable from the Chief Operating Officer (“COO”)
and Chief Technology Officer (“CTO”) for $38,554 (December 31, 2014 – $44,986). These advances are unsecured,
bear interest at a rate of 1% based on the Canada Revenue Agency’s prescribed rate for such advances and are payable on demand
in Canadian dollars. During the nine month period ended December 31, 2014, the Company advanced funds to settle a tax assessment;
the Company paid additional salary amounts that had not been made during the period; and, the Company reimbursed $37,837 ($44,000
CAD) related to various out-of-pocket costs they incurred on behalf of the Company. During 2015, the Company accrued interest receivable
in the amount of $756 ($1,046 CAD), the remaining fluctuation in the balance from the prior year is due to changes in foreign exchange.
Issuance of shares to settle due
to related party
(b)
During the nine months ended December 31, 2014, one advance amounting to $85,947 ($95,000 CAD)
was settled by issuance of 331,443 common shares to a former director.
Accounts payable and accrued liabilities
(c)
As at December 31, 2015, $2,970 (December 31, 2014 - $4,220) was owing to the CEO, $856 (December
31, 2014 - $5,930) owing to the CTO, $878 was owing to the COO (December 31, 2014 - $nil) and $346 (December 31, 2014 – $nil)
owing to the CFO, related to business expenses, all of which are included in accounts payable or accrued liabilities.
F-14
BIONIK LABORATORIES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 2015 and
the nine month period ended December 31, 2014
(Amounts expressed in U.S. Dollars)
8.
SHARE CAPITAL
December 31, 2015
December 31, 2014
Number of shares
$
Number of shares
$
Exchangeable Shares:
Balance, beginning of year/period
49,737,096
49,737
36,621,885
36,622
Shares issued for services
(v)
262,904
263
-
-
Shares issued under private placement
-
-
(i)
10,792,335
10,792
Shares issued on conversion and settlement of debt
-
-
(ii)(iii)
1,012,142
1,012
Shares issued on the exercise of options
-
-
(iv)
1,310,734
1,311
Balance, end of the year/period
50,000,000
50,000
49,737,096
49,737
Common Shares
Balance, beginning of the year
-
-
-
-
Shares issued as Merger consideration
(vii)
6,000,063
6,000
-
-
Shares issued under private placement
(vi)-(xii)
16,408,250
16,408
-
-
Shares issued for services
(xiii)
20,000
20
Balance, end of the year
22,428,313
22,428
-
-
TOTAL COMMON SHARES
72,428,313
72,428
-
-
(i)
In April, 2014, the Company completed a private placement issuing 10,792,335 common shares at a
price of $0.24 per share for gross proceeds of $2,616,062. A former director of the Company assisted in securing a significant
portion of this financing. The Company incurred $11,609 in share issue costs related to the transaction.
(ii)
In May 2014, the Company issued 436,908 common shares in exchange for the settlement of $115,223
of unsecured debt.
(iii)
In June, 2014, the Company issued 575,234 common shares on conversion of the convertible secured
promissory note (Note 6). The note plus accrued interest totaled $124,523 and was converted at a 20% discount to the April 2014
private placement.
(iv)
In June 2014, the Company issued 1,310,734 common shares for the exercise of stock options. The
Company received cash of $228,875.
F-15
BIONIK LABORATORIES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 2015 and
the nine month period ended December 31, 2014
(Amounts expressed in U.S. Dollars)
8.
SHARE CAPITAL – Continued
(v)
On February 25, 2015, 262,904 common shares were issued to two former lenders connected with a
$241,185 loan received and repaid during fiscal 2013. The common shares were valued at $210,323 based on the value of the concurrent
private placement (Note 8(vi)), and recorded in stock-based compensation on the consolidated statement of operations and comprehensive
loss. As part of the consideration for the initial loan the CTO and COO had transferred 314,560 common shares to the lenders. For
contributing the common shares to the lenders, the Company intends to reimburse the CTO and COO 320,000 common shares. As at December
31, 2015, these shares have not yet been issued.
(vi)
Concurrently with the closing of the Merger on February 26, 2015, the Company issued 7,735,750
units (the “Units”) for gross proceeds of $6,188,600 (the “First Closing”) (including $500,000 of outstanding
bridge loans converted into Units at the offering price) at a purchase price of $0.80 per Unit (the “Purchase Price”)
in a private placement offering (the “Offering”). Each Unit consists of one common share of the Company, and a warrant
to purchase one common share of the Company at an exercise price of $1.40 per share exercisable for 4 years. The Company incurred
share issue costs before legal and other costs related to the transaction of $848,822 and issued 773,575 broker warrants exercisable
at $0.80 for a period of 4 years. The warrants were measured at fair value and recorded as a warrant derivative liability on the
consolidated balance sheet (Note 10). After deducting the value of the warrants and the share issue costs, $4,789,404 was attributed
to the value of the common shares.
(vii)
Immediately following the Merger and the First Closing, 6,000,063 common shares were held by existing
Drywave stockholders, 7,735,750 were held by the investors in the Offering and Bionik Canada shareholders held an equivalent of
50,000,000 shares of the common shares through their ownership of 100% of the Exchangeable Shares which are held in 1 Special Preferred
Share. The Special Preferred Share votes on behalf of the 50,000,000 Exchangeable Shares alongside the common shares of the Company
as a single class.
(viii)
On March 27, 2015, the Company issued 1,212,500 Units for gross proceeds of $970,000 to accredited
investors in a second closing (the “Second Closing”). Each Unit consisted of one common share of the Company, and a
warrant to purchase one common share of the Company at an exercise price of $1.40 per share exercisable for 4 years. The Company
incurred share issue costs before legal and other costs related to the Second Closing of $141,100 and issued 121,250 broker warrants
exercisable at $0.80 for a period of 4 years. The warrants were measured at fair value and recorded as a warrant liability on the
consolidated balance sheet (Note 10). The fair value of the warrants exceeded the net proceeds received upon closing and as a result
$207,425 was recorded as a loss on initial recognition of the warrants and included in the change in fair value of warrant derivative
liability on the consolidated statements of operations and comprehensive loss.
(ix)
On March 31 2015, the Company issued 891,250 Units for gross proceeds of $713,000 to accredited
investors in a third closing (the “Third Closing”). Each Unit consisted of one common share of the Company, and a warrant
to purchase one common share of the Company at an exercise price of $1.40 per share exercisable for 4 years. The Company incurred
share issue costs before legal and other costs related to the Third Closing of $97,099 and issued 89,125 broker warrants exercisable
at $0.80 for a period of 4 years. The warrants were measured at fair value and recorded as a warrant liability on the consolidated
balance sheet (Note 10). The fair value of the warrants exceeded the net proceeds received upon closing and as a result $143,389
was recorded as a loss on initial recognition of the warrants and included in the change in fair value of warrant derivative liability
on the consolidated statements of operations and comprehensive loss.
F-16
BIONIK LABORATORIES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 2015 and
the nine month period ended December 31, 2014
(Amounts expressed in U.S. Dollars)
8.
SHARE CAPITAL – Continued
(x)
On April 21, 2015, the Company issued 3,115,000 Units for gross proceeds of $2,492,000 to accredited
investors in a fourth closing (the “Fourth Closing”). Each Unit consisted of one common share of the Company, and a
warrant to purchase one common share of the Company at an exercise price of $1.40 per share exercisable for 4 years. The Company
incurred share issue costs before legal and other related to the Fourth Closing of $338,960 and issued 311,500 broker warrants
exercisable at $0.80 for a period of 4 years. The warrants were measured at fair value and recorded as a warrant liability on the
consolidated balance sheet (Note 10). The fair value of the warrants exceeded the net proceeds received upon closing and as a result
$435,682 was recorded as a loss on initial recognition of the warrants and included in the change in fair value of warrant derivative
liability on the consolidated statements of operations and comprehensive loss.
(xi)
On May 27, 2015, the Company issued 1,418,750 Units for gross proceeds of $1,135,000 to accredited
investors in a fifth closing (the “Fifth Closing”). Each Unit consisted of one common share of the Company, and a warrant
to purchase one common share of the Company at an exercise price of $1.40 per share exercisable for 4 years. The Company incurred
share issue costs before legal and other costs related to the Fifth Closing of $147,566 and issued 141,875 broker warrants exercisable
at $0.80 for a period of 4 years. The warrants were measured at fair value and recorded as a warrant liability on the consolidated
balance sheet (Note 10). The fair value of the warrants exceeded the net proceeds received upon closing and as a result $37,739
was recorded as a loss on initial recognition of the warrants and included in the change in fair value of warrant derivative liability
on the consolidated statements of operations and comprehensive loss.
(xii)
On June 30, 2015, the Company issued 2,035,000 Units for gross proceeds of $1,628,000 to accredited
investors in a sixth and final closing (the “Sixth Closing”). Each Unit consisted of one common share of the Company,
and a warrant to purchase one common share of the Company at an exercise price of $1.40 per share exercisable for 4 years. The
Company incurred share issue costs before legal and other costs related to the Sixth Closing of $211,656 and issued 203,500 broker
warrants exercisable at $0.80 for a period of 4 years. The warrants were measured at fair value and recorded as a warrant liability
on the consolidated balance sheet (Note 10). The fair value of the warrants exceeded the net proceeds received upon closing and
as a result $74,625 was recorded as a loss on initial recognition of the warrants and included in the change in fair value of
warrant derivative liability on the consolidated statements of operations and comprehensive loss.
(xiii)
During the year, the Company entered into service agreements
that resulted in a commitment to issue up to an December 31, 2016 and pay up to $130,000 over the next 12 months. During the year
20,000 common shares were issued pursuant to these commitments valued at $31,000 is included in share-based compensation. Subsequent
to year -end, pursuant to this commitment 53,233 shares related to services provided in 2015 were issued (Note 13). As at December
31, 2015, these shares, valued at $43,900, have been recorded as shares to be issued with the corresponding expense included in
general and administrative expense.
F-17
BIONIK LABORATORIES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 2015 and
the nine month period ended December 31, 2014
(Amounts expressed in U.S. Dollars)
8.
SHARE CAPITAL – Continued
Special Voting Preferred Share
In connection with the Merger (Note 1), on
February 26, 2015, the Company entered into a voting and exchange trust agreement (the “Trust Agreement”). Pursuant
to the Trust Agreement, the Company issued one Special Voting Preferred Share to the Trustee, and the parties created a trust for
the Trustee to hold the Special Voting Preferred Share for the benefit of the holders of the Exchangeable Shares (the “Beneficiaries”).
Pursuant to the Trust Agreement, the Beneficiaries will have voting rights in the Company equivalent to what they would have had,
had they received shares of common stock in the same amount as the Exchangeable Shares held by the Beneficiaries.
In connection with the Merger and the Trust
Agreement, effective February 20, 2015, the Company filed a certificate of designation of the Special Voting Preferred Share (the
“Special Voting Certificate of Designation”) with the Delaware Secretary of State. Pursuant to the Special Voting Certificate
of Designation, one share of the Company’s blank check preferred stock was designated as Special Voting Preferred Share.
The Special Voting Preferred Share entitles the Trustee to exercise the number of votes equal to the number of Exchangeable Shares
outstanding on a one-for-one basis during the term of the Trust Agreement.
The Special Voting Preferred Share is not entitled
to receive any dividends or to receive any assets of the Company upon liquidation, and is not convertible into common shares of
the Company.
The voting rights of the Special Voting Preferred
Share will terminate pursuant to and in accordance with the Trust Agreement. The Special Voting Preferred Share will be automatically
cancelled at such time as no Exchangeable Shares are held by a Beneficiary.
9.
STOCK OPTIONS
The purpose of the Company’s stock option
plan, is to attract, retain and motivate persons of training, experience and leadership to the Company, including their directors,
officers and employees, and to advance the interests of the Company by providing such persons with the opportunity, through share
options, to acquire an increased proprietary interest in the Company.
Options may be granted in respect of authorized
and unissued shares, provided that the aggregate number of shares reserved for issuance upon the exercise of all Options granted
under the Plan, shall not exceed 10,800,000 or such greater number of shares as may be determined by the Board and approved, if
required, by the shareholders of the Company and by any applicable stock exchange or other regulatory authority. Optioned shares
in respect of which options are not exercised shall be available for subsequent options.
On April 11, 2014 and June 20, 2014 the Company
issued 657,430 and 264,230 options to employees and a consultant at an exercise price of $0.165 and $0.23, respectively, with a
term of seven years. The options vest one-third on grant date and two thirds equally over the subsequent two years on the anniversary
date. During the year ended December 31, 2014, 125,824 of the 657,430 options were cancelled. On February 26, 2015, as a result
of the Merger, the options were re-valued. The fair value, as re-measured, of the 531,606 options issued in April 2014 and the
264,230 options issued in June 2014 was $230,930 and $118,957 respectively. During the year ended December 31, 2015, 188,736 options
were cancelled and $83,034 and $18,619 (December 31, 2014 - $82,038 and $30,535) has been recorded as share-based compensation
related to the vesting of these stock options.
F-18
BIONIK LABORATORIES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 2015 and
the nine month period ended December 31, 2014
(Amounts expressed in U.S. Dollars)
9.
STOCK OPTIONS – Continued
On July 1, 2014, the Company issued 2,972,592
options to management of the Company, at an exercise price of $0.23 with a term of 7 years, which vested May 27, 2015. On February
26, 2015, as a result of the Merger, the options were re-valued at a fair value of $1,259,487, which has been recorded as share-based
compensation in the year ended December 31, 2015.
On February 17, 2015, the Company issued 314,560
options to a director, employees and a consultant with an exercise price of $0.23, that vest one third immediately and two thirds
over the next two anniversary dates with an expiry date of seven years. The grant date fair value of the options was $136,613.
During the year ended December 31, 2015, 78,643 options were cancelled and $63,774 has been recorded as share-based compensation
related to the vesting of these stock options.
On November 24, 2015, the Company issued 650,000
options granted to employees that vest over three years at the anniversary date. During the year ended December 31, 2015, $23,442
has been recorded as share-based compensation related to the vesting of these options. The grant date fair value of the options
was $694,384.
On December 14, 2015, the Company issued 2,495,000
options granted to employees, directors and consultants that vest over three years at the anniversary date. During the year ended
December 31, 2015, $19,552 has been recorded as share-based compensation expenses related to the vesting of these options. The
grant date fair value of the options was $1,260,437.
These options granted and revalued during the
year ended December 31, 2015 were valued using the Black-Scholes option pricing model with the following key assumptions:
Grant date
Expected life in years
Risk free rate
Dividend rate
Forfeiture rate
Expected volatility
Grant date fair value
February 17, 2015
5.00
1.59
%
0
%
0
%
114
%
$
136,613
July 1, 2014
4.35
1.59
%
0
%
0
%
114
%
$
1,259,487
June 20, 2014
6.32
1.59
%
0
%
0
%
114
%
$
118,957
April 11, 2014
4.14
1.59
%
0
%
0
%
114
%
$
230,930
November 24, 2015
7
1.59
%
0
%
0
%
114
%
$
694,384
December 14, 2015
7
1.59
%
0
%
0
%
114
%
$
1,260,437
A summary of the Company’s outstanding options is as follows
Number of Options
Weighted-Average Exercise Price ($)
Outstanding, December 31, 2013
1,310,665
0.19
Exercised
(1,310,665
)
0.19
Issued
3,894,252
0.22
Cancelled
(125,824
)
0.17
Outstanding, December 31, 2014
3,768,428
0.22
Cancelled as a result of Merger
(3,768,428
)
0.22
Re-issued as part of Merger
3,768,428
0.22
Issued
3,459,560
0.97
Cancelled
(267,379
)
0.22
Outstanding, December 31, 2015
6,960,609
0.59
F-19
BIONIK LABORATORIES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 2015 and
the nine month period ended December 31, 2014
(Amounts expressed in U.S. Dollars)
9.
STOCK OPTIONS – Continued
The following is a summary of stock options outstanding and exercisable
as of December 31, 2015:
Exercise Price ($)
Number of Options
Expiry Date
Number of
Exercisable Options
0.165
500,150
April 1, 2021
354,404
0.23
106,950
June 20, 2021
71,300
0.23
2,972,592
July 1, 2021
2,972,592
0.23
235,917
February 17, 2022
78,643
1.22
650,000
November 24, 2022
-
1.00
2,495,000
December 14, 2022
-
6,960,609
3,476,939
The weighted-average remaining contractual term of the outstanding
options is 6.16 (2014 – 6.47) and for the options that are exercisable 5.49 (2014 – 6.33).
10.
WARRANTS
The following is a continuity schedule of the Company’s common share
purchase warrants:
Number of Warrants
Weighted-Average Exercise Price ($)
Outstanding and exercisable, December 31, 2014 and 2013
-
-
Issued
18,049,075
1.35
Outstanding and exercisable, December 31, 2015
18,049,075
1.35
F-20
BIONIK LABORATORIES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 2015 and
the nine month period ended December 31, 2014
(Amounts expressed in U.S. Dollars)
10.
WARRANTS – Continued
Common share purchase warrants
The following is a summary of common share purchase warrants outstanding
as of December 31, 2015:
Exercise Price ($)
Number of Warrants
Expiry Date
1.40
Note 8(vi)
7,735,750
February 26, 2019
0.80
Note 8(vi)
773,575
February 26, 2019
1.40
Note 8(viii)
1,212,500
March 27, 2019
0.80
Note 8(viii)
121,250
March 27, 2019
1.40
Note 8(ix)
891,250
March 31, 2019
0.80
Note 8(ix)
89,125
March 31, 2019
1.40
Note 8(x)
3,115,000
April 21, 2019
0.80
Note 8(x)
311,500
April 21, 2019
1.40
Note 8(xi)
1,418,750
May 27, 2019
0.80
Note 8(xi)
141,875
May 27, 2019
1.40
Note 8(xii)
2,035,000
June 30, 2019
0.80
Note 8(xii)
203,500
June 30, 2019
18,049,075
Exchangeable share purchase warrants
In 2014 the Company repaid loans of $180,940
plus accrued interest of $12,138 owing to investors introduced by Pope and Co. As part of this transaction the Company was committed
to issue these lenders warrants exercisable into 349,522 Exchangeable Shares at an exercise price of $0.23 per share for a period
ending March 21, 2017. During the year ended December 31, 2015, the Company issued these warrants.
F-21
BIONIK LABORATORIES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 2015 and
the nine month period ended December 31, 2014
(Amounts expressed in U.S. Dollars)
10.
WARRANTS – Continued
Warrant derivative liability
The Company’s outstanding common share
purchase warrants include price protection provisions that allow for a reduction in the exercise price of the warrants in the
event the Company subsequently issues common stock or options, rights, warrants or securities convertible or exchangeable for
shares of common stock at a price lower than the exercise price of the warrants. Simultaneously with any reduction to the exercise
price, the number of shares of common stock that may be purchased upon exercise of each of these warrants shall be increased based
on a pre-defined formula.
In addition, prior to the effectiveness of
certain resale registration statements or if any such registration statements are no longer effective, the holder of the Company’s
warrants, at their option, may exercise all or any part of the warrants in a “cashless” or “net-issue”
exercise.
The Company has the option to redeem the
warrants for $0.001 per warrant if the daily volume weighted-average price of the common shares is 200% or more of the exercise
price for twenty consecutive trading days provided there is an effective registration statement covering the common shares available
throughout the thirty day period after the redemption date. The warrant holders then have thirty days to exercise the warrants
or receive the redemption amount.
The Company’s derivative instruments
have been measured at fair value at inception and at December 31, 2015 using a simulation model. The Company recognizes
all of its warrants with price protection on its consolidated balance sheet as a derivative liability.
The following summarizes the changes in the
value of the warrant derivative liability from inception until December 31, 2015:
Number of Warrants
Value ($)
Warrants issued in February 26, 2015 financing
Note 8(vi)
8,509,325
550,374
Warrants issued in March 27, 2015 financing
Note 8(viii)
1,333,750
1,036,325
Warrants issued in March 31, 2015 financing
Note 8(ix)
980,375
759,290
Warrants issued in April 21, 2015 financing
Note 8(x)
3,426,500
2,588,722
Warrants issued in May 27, 2015 financing
Note 8(xi)
1,560,625
1,025,173
Warrants issued in June 30, 2015 financing
Note 8(xii)
2,238,500
1,490,969
Total at inception
7,450,853
Change in fair value of warrant derivative liability
(1,382,984
)
Balance at December 31, 2015
6,067,869
During the year ended December 31, 2015
the Company recorded a loss of $898,860 on initial recognition of the warrant derivative liability and a gain of $1,382,984
on re-measurement to fair value at year-end. The net impact is a gain of $484,124 for the year ended December 31, 2015 was
recorded as a change in fair value of warrant derivative liability within the Company’s consolidated statements
of operations and comprehensive loss.
F-22
BIONIK LABORATORIES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 2015 and
the nine month period ended December 31, 2014
(Amounts expressed in U.S. Dollars)
10.
WARRANTS – Continued
The key inputs and assumptions used in the
simulation model at inception and at December 31, 2015 are as follows:
Grant date
Number of Warrants
Expected life in years
Exercise Price ($)
Risk free rate
Dividend rate
Expected volatility
Grant date fair value ($)
At Inception:
February 26, 2015
7,735,750
4
1.4
0.44
%
0
%
51.83
%
464,784
February 26, 2015
773,575
4
0.8
0.44
%
0
%
51.83
%
85,590
March 27, 2015
1,212,500
3.92
1.4
0.43
%
0
%
52.37
%
950,913
March 27, 2015
121,250
3.92
0.8
0.43
%
0
%
52.37
%
85,412
March 31, 2015
891,250
3.91
1.4
0.41
%
0
%
52.45
%
696,582
March 31, 2015
89,125
3.91
0.8
0.41
%
0
%
52.45
%
62,708
April 21, 2015
3,115,000
3.85
1.4
0.68
%
0
%
51.54
%
2,371,956
April 21, 2015
311,500
3.85
0.8
0.68
%
0
%
51.54
%
216,766
May 27, 2015
1,418,750
3.76
1.4
0.46
%
0
%
51.74
%
933,065
May 27, 2015
141,875
3.76
0.8
0.46
%
0
%
51.74
%
92,108
June 30, 2015
2,035,000
3.66
1.4
0.37
%
0
%
52.94
%
1,356,512
June 30, 2015
203,500
3.66
0.8
0.37
%
0
%
52.94
%
134,457
At Year End:
December 31, 2015
16,408,250
3.16
1.4
0.65
%
0
%
53.58
%
5,315,536
December 31, 2015
1,640,825
3.16
0.8
0.65
%
0
%
53.58
%
752,333
In addition to the forgoing, the Company also utilized a holding cost to approximate the impact of a holder of the warrant
to maintain a hedging strategy in which they maintained a short position. On analysis of comparable companies and other information
the Company has determined that the use of 2.25% in the simulation model is a reasonable assumption.
The warrant derivative liability is classified
within Level 3 of the fair value hierarchy because on initial recognition and again at December 31, 2015, it was valued using
these significant inputs and assumptions that are unobservable in the market. Changes in the values assumed and used in the simulation model can materially affect the estimate of fair value.
Generally, an increase in the market price
of the Company’s common shares, an increase in the volatility of the Company’s common shares and an increase in the
expected life would result in a directionally similar change in the estimated fair value of the warrant derivative liability. An
increase in the risk free rate would result in a decrease in the fair value of the warrant derivative liability.
The expected life is based on the remaining
contractual term of the warrants. The risk free rate was based on U.S. treasury-note yields with terms commensurate with the remaining
term of the warrants. Expected volatility over the expected term of the warrants is estimated based on consideration of historical
volatility and other information.
In addition to the assumptions above,
the Company also took into consideration the probability of the Company’s participation in another round of financing,
the type of such financing and the range of the stock price for the financing at that time. At each increment of the
simulation, the daily volume weighted-average price was calculated. If this amount was 200% greater than the exercise price of the warrants at the time, and this threshold was maintained for 20 consecutive
days, the simulation assumed the trigger of the Company’s option to redeem and the exercise of the warrants by the holder
within thirty days. In the circumstance where the redemption was not triggered the warrant was valued at its discounted intrinsic
value at maturity.
11.
INCOME TAXES
December 31, 2015
9 month period ended December 31, 2014
$
$
Components of net loss before income taxes consists of the following:
U.S.
(2,372,510
)
-
Canada
(3,221,396
)
(2,464,747
)
(5,593,906
)
(2,464,747
)
Reconciliation of the statutory tax rate of 35% (2014 – 26.5%)
and income tax benefits at those rates to the effective income tax rates and income tax benefits reported in the statement of operations
and comprehensive loss is as follows:
2015
2014
$
$
Net loss for the period before recovery of income taxes
(5,593,906
)
(2,464,747
)
Statutory rate
35
%
26.5
%
Expected income tax recovery
(1,957,867
)
(653,158
)
Tax rate changes and other basis adjustments
364,651
(29,109
)
Stock-based compensation
587,381
-
Non-deductible expenses
57,625
193,305
Change in valuation allowance
948,210
488,962
Recovery of income taxes
-
-
F-23
BIONIK LABORATORIES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 2015 and
the nine month period ended December 31, 2014
(Amounts expressed in U.S. Dollars)
11.
INCOME TAXES – Continued
Deferred tax reflects the tax effects of temporary
differences that gave rise to significant portions of deferred tax assets and liabilities and consisted of the following:
2015
2014
$
$
Property and equipment
47,495
36,940
Share issue costs
3,877
162,350
SR&ED pool
340,585
7,137
Other
39,947
18,621
Non-capital losses - Canada
1,149,389
812,522
Net operating losses - U.S.
404,487
-
Valuation allowance
(1,985,780
)
(1,037,570
)
-
-
The Company has non-capital losses in its Canadian
subsidiary of approximately $4,337,319 which will expire between 2031 and 2035. The Company has net operating losses in the U.S.
parent Company of $1,155,674 which will expire in 2035.
Income taxes are provided based on the liability
method, which results in deferred tax assets and liabilities arising from temporary differences. Temporary differences are differences
between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements that will result
in taxable or deductible amounts in future years. The liability method requires the effect of tax rate changes on current and accumulated
deferred taxes to be reflected in the period in which the rate change was enacted. The liability method also requires that deferred
tax assets be reduced by a valuation allowance unless it is more likely than not that the assets will be realized.
The Company recognizes the financial statement
benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position
following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the consolidated financial
statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant
tax authority. The Company recognizes interest accrued on uncertain tax positions as well as interest received from favorable tax
settlements within interest expense. The Company recognizes penalties accrued on unrecognized tax benefits within general and administrative
expenses. As of December 31, 2015 and 2014, the Company had no uncertain tax positions.
F-24
BIONIK LABORATORIES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 2015 and
the nine month period ended December 31, 2014
(Amounts expressed in U.S. Dollars)
11.
INCOME TAXES – Continued
In many cases the Company’s uncertain
tax positions are related to tax years that remain subject to examination by tax authorities. The following describes the open
tax years, by major tax jurisdiction, as of December 31, 2015.
United States - Federal
2013 - present
United States - State
2013 - present
Canada - Federal
2012 - present
Canada - Provincial
2012 - present
12.
COMMITMENTS AND CONTINGENCIES
Contingencies
From time to time, the Company may be involved
in a variety of claims, suits, investigations and proceedings arising in the ordinary course of our business, collections claims,
breach of contract claims, labor and employment claims, tax and other matters. Although claims, suits, investigations and proceedings
are inherently uncertain and their results cannot be predicted with certainty, the Company believes that the resolution of current
pending matters will not have a material adverse effect on its business, financial position, results of operations or cash flow.
Regardless of the outcome, litigation can have an adverse impact on the Company because of legal costs, diversion of management
resources and other factors.
13.
RISK MANAGEMENT
The Company’s cash balances are maintained
in two banks in Canada and a Canadian Bank subsidiary in the US. Deposits held in banks in Canada are insured up to $100,000 CAD
per depositor for each bank by The Canada Deposit Insurance Corporation, a federal crown corporation. Actual balances at times
may exceed these limits.
Interest Rate Risk
Interest rate risk is the risk that the value
of a financial instrument might be adversely affected by a change in the interest rates. The Company has minimal exposure to fluctuations
in the market interest rate. In seeking to minimize the risks from interest rate fluctuations, the Company manages exposure through
its normal operating and financing activities.
Liquidity Risk
Liquidity risk is the risk that the Company
will incur difficulties meeting its financial obligations, as they are due. The Company’s approach to managing liquidity
is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due. Accounts payable and
accrued liabilities are due within the current operating period.
The Company has funded its operations through
the issuance of capital stock, convertible debt and loans in addition to grants and investment tax credits received from the Government
of Canada.
F-25
BIONIK LABORATORIES CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended December 31, 2015 and
the nine month period ended December 31, 2014
(Amounts expressed in U.S. Dollars)
14.
SUBSEQUENT EVENTS
1. On March 1, 2016, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Interactive
Motion Technologies, Inc., a Massachusetts corporation (“IMT”), and Bionik Mergerco Inc., a Massachusetts corporation
and a wholly owned subsidiary of the Company (“Merger Subsidiary”), providing for the merger (“Merger”)
of Merger Subsidiary with and into IMT, with IMT surviving the Merger as a wholly-owned subsidiary of Bionik.
Subject to the
indemnification and escrow arrangements described in the Merger Agreement, at the effective time of the Merger, Bionik will
issue (or reserve for issuance) an aggregate of 23,650,000 shares of Company Common Stock in exchange for all shares of IMT
Common Stock and IMT Preferred Stock outstanding immediately prior to the effective time (other than shares (i) held in treasury
or (ii) held by persons who properly exercise appraisal rights under Massachusetts law).
Bionik will assume each of the 3,897,500
options to acquire IMT Common Stock granted under IMT’s equity incentive plan or otherwise issued by IMT. At the effective
time of the Merger, these options will represent the right to purchase an aggregate of 3,000,000 shares of Company Common
Stock, of which 1,000,000 will have an exercise price of $0.25, 1,000,000 will have an exercise price of $0.95 and 1,000,000
will have an exercise price of $1.05.
Consummation of the Merger is subject to customary conditions, including without limitation,
the affirmative vote or consent of the holders of a majority of the issued and outstanding shares of IMT Preferred Stock voting
as a separate class, and a majority of the issued and outstanding shares of IMT Preferred Stock and of IMT Common Stock voting
together as a single class. If the law permits, Bionik or IMT may each waive conditions for their benefit and their stockholders’
benefit and complete the Merger even though one or more of these conditions has not been met.
On March 14, 2015, the parties
entered into an Amendment and Waiver Agreement, amending the Merger Agreement and waiving any and all potential or actual
breaches and/or defaults by the Company of its representations, warranties and/or covenants in the Merger Agreement as a result
of the Company’s restatement of its Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2015, June
30, 2015 and September 30, 2015.
During review and due diligence
of IMT prior to the execution of the Merger Agreement, the Company loaned an aggregate of $300,000 to Interactive
Motion, which loans were secured by certain of its assets of IMT. On March 7, 2016, the Company loaned an
additional $68,750 to IMT to fund certain of its expenses in contemplation of the closing of the
Merger. The loan matures upon the earlier to occur of (a) the termination date of the Merger Agreement and (b) the effective
date of the Merger. Interest and security are consistent with the terms of the previous loans as disclosed in Note 4.
The Company also advanced IMT $80,000 for
closing costs during 2016.
The Company has not completed the identification
of the assets acquired and liabilities assumed or the related valuation work necessary to arrive at any estimate of fair value
or preliminary purchase price allocation. The initial accounting for the acquisition is incomplete and the information necessary
to present accurate pro forma financial information is not yet available. The Company will present this information in future filings.
2. Subsequent to year-end, 53,233 common
shares related to services provided in 2015 were issued. As at December 31, 2015, these shares, valued at $43,900, have been recorded
as shares to be issued with the corresponding expense included in general and administrative expense. (Note 8xiii).
3. Subsequent to year-end, 64,248 common
shares were issued related to investor relations and consulting services provided in 2016.
4. Subsequent to year-end, 45,508 common
shares were issued as a result of a cashless exercise of 148,787 warrants with an exercise price of $0.80.
F-26
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and
Distribution
The following table sets
forth the costs and expenses expected to be incurred by Bionik Laboratories Corp. (the “Registrant”) in connection
with this offering described in this registration statement. All amounts shown are estimates, except the SEC registration fee.
SEC registration fee
$
7,245.23
Accounting fees and expenses
$
7,500.00
Legal fees and expenses
$
20,000.00
Miscellaneous
$
5,254.77
Total
$
40,000.00
Item 14. Indemnification of Directors and
Officers
The Registrant is incorporated
under the laws of the State of Delaware. Section 145 of the Delaware General Corporation Law (“DGCL”) states:
(a) A corporation shall
have the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action arising by
or in the right of the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if
the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person’s
conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea
of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and
in a manner which the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had reasonable cause to believe that the person’s conduct was unlawful.
(b) A corporation shall
have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is
or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture, trust, or other enterprise against expenses (including
attorneys’ fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action
or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests
of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court
in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view
of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expense which the Court
of Chancery or such other court shall deem proper.
II-1
Our Amended and Restated
Certificate of Incorporation and Amended and Restated Bylaws provide that we shall indemnify our directors, officers, employees
and agents to the full extent permitted by the DGCL, including in circumstances in which indemnification is otherwise discretionary
under such law.
These indemnification provisions
may be sufficiently broad to permit indemnification of our officers, directors and other corporate agents for liabilities (including
reimbursement of expenses incurred) arising under the Securities Act of 1933.
Insofar as indemnification
for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, we have been informed that in the opinion of the SEC such indemnification
is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.
We have the power to purchase
and maintain insurance on behalf of any person who is or was one of our directors or officers, or is or was serving at our request
as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other business against any
liability asserted against the person or incurred by the person in any of these capacities, or arising out of the person’s
fulfilling one of these capacities, and related expenses, whether or not we would have the power to indemnify the person against
the claim under the provisions of the DGCL. We currently maintain and intend to maintain for the foreseeable future director and
officer liability insurance on behalf of our directors and officers.
Item 15. Recent Sales of Unregistered Securities.
The following is a summary
of sales of our securities that were not registered under the Securities Act of 1933, as amended (the “Securities Act”)
during the last three years.
Bionik Canada
In March 2013, Bionik Canada
issued through a private placement, 516,666 common shares at a price of $0.60 (0.60 CAD) per share for aggregate gross proceeds
of $308,183.
In June 2013, Bionik Canada
issued through a private placement, 166,667 common shares at a price of $0.58 ($0.60 CAD) per share for aggregate gross proceeds
of $96,320.
In April, 2014, Bionik
Canada completed a private placement issuing 3,182,978 common shares at a price of $0.82 ($0.90 CAD) per share for gross proceeds
of $2,616,062 ($2,864,680 CAD). A former director of Bionik Canada assisted in securing a significant portion of this financing.
As a result Bionik Canada issued 247,778 common shares as a finder’s fee to this director.
In May 2014, Bionik Canada
issued 105,555 common shares to a director of Bionik Canada in exchange for the settlement of $87,638 ($95,000 CAD) of unsecured
debt.
In May 2014, Bionik Canada
issued 33,333 common shares to a third party in exchange for the settlement of $27,585 ($30,000 CAD) of unsecured debt.
In June, 2014, Bionik Canada
issued 182,860 common shares on conversion of an outstanding convertible secured promissory note. The note plus accrued interest
totaled $124,523 ($131,659 CAD) and was converted at a 20% discount to the $0.68 ($0.90 CAD) April 2014 private placement.
In June 2014, Bionik Canada
issued 416,667 common shares for the exercise of stock options. Bionik Canada received cash of $228,875 ($250,000 CAD). The value
of the options, $106,185, was transferred from contributed surplus to share capital on exercise.
II-2
None of the above issuances
were offered or sold in the U.S.
Bionik Laboratories Corp.
On February 26, 2015, the
Registrant sold 7,735,750 units (the “Units”) for gross proceeds of $6,188,600 (including $500,000 of outstanding bridge
loans converted into Units at the offering price) at a purchase price of $0.80 per Unit (the “Purchase Price”) in a
private placement offering (the “Offering”). Each Unit consists of one share of common stock, par value $0.001 per
share (the “Common Stock”) and a warrant (the “Warrant”) to purchase one share of Common Stock at an initial
exercise price of $1.40 per share (the “Warrant Shares”).
On March 27, 2015, the
Registrant sold to accredited investors in a second closing, 1,212,500 Units for gross proceeds of $970,000 at the Purchase Price.
After payment of placement agent fees and expenses but before the payment of other Offering expenses such as legal and accounting
expenses, the Registrant received net proceeds of $828,900.
On March 31, 2015, the
Registrant sold to accredited investors in a third closing of the Offering, 891,250 Units for gross proceeds of $713,000 at the
Purchase Price. After payment of placement agent fees and expenses but before the payment of other offering expenses such as legal
and accounting expenses, the Registrant received net proceeds of $620,310.
On April 21, 2015, the
Registrant sold to accredited investors in a fourth closing of the Offering, 3,115,000 Units for gross proceeds of $2,492,000 at
the Purchase Price. After payment of placement agent fees and expenses but before the payment of other offering expenses such as
legal and accounting expenses, the Registrant received net proceeds of $2,153,040.
On May 27, 2015, the Registrant
sold to accredited investors in a fifth closing of the Offering, 1,418,750 Units for gross proceeds of $1,135,000 at the Purchase
Price. After payment of placement agent fees and expenses but before the payment of other offering expenses such as legal and accounting
expenses, the Registrant received net proceeds of $987,400.
On June 30, 2015, the Registrant
sold to accredited investors in a sixth and final closing of the Offering, 2,035,000 Units for gross proceeds of $1,628,000 at
the Purchase Price. After payment of placement agent fees and expenses but before the payment of other offering expenses such as
legal and accounting expenses, the Registrant received net proceeds of approximately $1,416,300.
The issuance and sale of
such securities were issued in a private transaction in reliance upon exemptions from registration pursuant to Section 4(a)(2)
of the Securities Act and/or Regulation D, Rule 506 promulgated thereunder, to purchasers who are “accredited investors”
as defined by Regulation D.
Between October 20, 2015
and January 20, 2016, the Registrant issued an aggregate of 133,223 shares of Common Stock to consultants of the Company for services
rendered or to be rendered. The securities were issued in private transactions in reliance upon exemptions from registration pursuant
to Section 4(a)(2) of the Securities Act.
In connection with
the Offering, the Registrant issued warrants to Highline Research Advisors LLC, an affiliate of Merriman Securities, as placement
agent, or its sub-agents or affiliates of its sub-agents, to purchase an aggregate of 773,575 shares of the Registrant’s
common stock, at an exercise price per share of $0.80 through February 26, 2019.
In 2015, the
Registrant issued to a lender, warrants to purchase 349,522 Exchangeable Shares at an exercise price of $0.23 per share
through March 21, 2017.
The issuance and sale of
such securities were issued in a private transaction in reliance upon exemptions from registration pursuant to Section 4(a)(2)
of the Securities Act and/or Regulation D, Rule 506 promulgated thereunder, to purchasers who are “accredited investors”
as defined by Regulation D.
II-3
Item 16. Exhibits and Financial Statement
Schedules.
(a) The following exhibits are filed as a part
of, or incorporated by reference into, this Registration Statement.
The following exhibits,
which are numbered in accordance with Item 601 of Regulation S-K, are filed herewith or, as noted, incorporated by reference herein
Exhibit Number
Description of Exhibits
2.1
Plan of Conversion, dated June 25, 2013 (incorporated by reference to the Company’s 10-K filing on April 15, 2014)
2.2
Agreement and Plan of Merger, dated as of March 1, 2016, by and among Bionik Laboratories Corp., Bionik Mergerco Inc. and Interactive Motion Technologies Inc. (incorporated by reference to the Company’s Current Report on Form 8-K filed on March 7, 2016)
2.3
Waiver and Amendment Agreement, dated as of March 14, 2016, by and among Bionik Laboratories Corp., Hermano Igo Krebs, Bionik Mergerco Inc. and Interactive Motion Technologies, Inc. (incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, filed on March 18, 2016)
3.1
Articles of Conversion, dated June 25, 2013 (incorporated by reference to the Company’s 10-K filing on April 15, 2014)
3.2
Certificate of Conversion, dated June 25, 2013 (incorporated by reference to the Company’s 10-K filing on April 15, 2014)
3.3
Certificate of Incorporation, dated June 25, 2013 (incorporated by reference to the Company’s 10-K filing on April 15, 2014)
3.4
Delaware By-laws, dated June 25, 2013 (incorporated by reference to the Company’s 10-K filing on April 15, 2014)
3.5
Amended and Restated Certificate of Incorporation dated February 10, 2015 (incorporated by reference to the Company’s 8-K filing on March 4, 2015)
3.6
Amended and Restated By-Laws (incorporated by reference to the Company’s 8-K filing on March 4, 2015)
4.1
Certificate of Designation of Preferences, Rights and Limitations of Special Voting Preferred Stock of Bionik Laboratories Corp. (incorporated by reference to the Company’s 8-K filing on March 4, 2015)
4.2
Schedule A to Articles of Amendment of Bionik Laboratories Inc., relating to the Exchangeable Shares of Bionik Laboratories Inc. (incorporated by reference to the Company’s 8-K filing on March 4, 2015)
4.3
Form of Warrant (incorporated by reference to the Company’s 8-K filing on March 4, 2015)
4.4
Form of Warrant to Pope and Company Limited (incorporated by reference to the Company’s Quarterly Report on Form 10-Q/A for the Fiscal Quarter Ended September 30, 2015)
5.1*
Opinion of Ruskin Moscou Faltischek, P.C.
10.1
Investment Agreement, dated February 26, 2015, among Bionik Laboratories Inc., Bionik Acquisition Inc. and Bionik Laboratories Corp. (incorporated by reference to the Company’s 8-K filing on March 4, 2015)
10.2
Voting and Exchange Trust Agreement, made as of February 26, 2015, among Bionik Laboratories Corp., Bionik Laboratories, Inc. and Computershare Trust Company of Canada dated February 26, 2015 (incorporated by reference to the Company’s 8-K filing on March 4, 2015)
10.3
Support Agreement, made as of February 26, 2015, among Bionik Laboratories Inc., Bionik Acquisition Inc. and Bionik Laboratories Corp. (incorporated by reference to the Company’s 8-K filing on March 4, 2015)
10.4
Registration Rights Agreement, made as of February 26, 2015, by and between Bionik Laboratories Inc. and each of the several shareholders signatory thereto (incorporated by reference to the Company’s 8-K filing on March 4, 2015)
10.5
Novation Agreement, dated as of February 26, 2015, between Bionik Laboratories Corp. and Bionik Laboratories Inc. (incorporated by reference to the Company’s 8-K filing on March 4, 2015)
10.6
Spin-Off Agreement, dated as of February 26, 2015, by and among Bionik Laboratories Corp., and Brian E. Ray and Jon Lundgreen (incorporated by reference to the Company’s 8-K filing on March 4, 2015)
II-4
10.7
Assignment and Assumption Agreement, dated as of February 26, 2015, by and between Bionik Laboratories Corp. and Tungsten 74 LLC (incorporated by reference to the Company’s 8-K filing on March 4, 2015)
10.8
Form of Subscription Agreement (incorporated by reference to the Company’s 8-K filing on March 4, 2015)
10.9
Peter Bloch Employment Agreement (incorporated by reference to the Company’s 8-K filing on March 4, 2015)
10.10
Michal Prywata Employment Agreement (incorporated by reference to the Company’s 8-K filing on March 4, 2015)
10.11
Thiago Caires Employment Agreement (incorporated by reference to the Company’s 8-K filing on March 4, 2015)
10.12
Leslie Markow’s Employment Agreement (incorporated by reference to the Company’s 8-K filing on March 4, 2015)
10.13
Bionik Laboratories Corp. f/k/a Drywave Technologies, Inc. 2014 Equity Incentive Plan (incorporated by reference to the Company’s Definitive Information Statement on Schedule 14C filing on October 6, 2014)
10.14
Bridge Loan and Security Agreement between the Registrant and Interactive Motion Technologies Inc., dated as of May 5, 2015 (incorporated by reference to the Company’s Quarterly Report on Form 10-Q/A for the Fiscal Quarter Ended September 30, 2015)
10.15
Bridge Loan and Security Agreement between the Registrant and Interactive Motion Technologies Inc., dated as of August 22, 2015 (incorporated by reference to the Company’s Quarterly Report on Form 10-Q/A for the Fiscal Quarter Ended September 30, 2015)
10.16
Loan and Security Agreement, dated March 7, 2016, between Bionik Laboratories Corp. and Interactive Motion Technologies, Inc. (incorporated by reference to the Company’s Current Report on Form 8-K filed on March 7, 2016)
14.1
Code of Business Conduct and Ethics (incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014)
21.1
List of Subsidiaries (incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014)
23.1
Consent of MNP, LLP
23.2*
Consent of Ruskin Moscou Faltischek, P.C. (contained in the Opinion of Ruskin Moscou Faltischek, P.C. under Exhibit 5.1)
* Previously filed with this registration Statement
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(a)(1) To file, during any period in which it offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by
Section 10(a) (3) of the Securities Act;
(ii) To reflect in the prospectus any facts
or events which, individually or together, represent a fundamental change in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes
in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation
of Registration Fee” table in the effective Registration Statement; and
II-5
(iii) To include any material information
with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such
information in the Registration Statement.
(2) For determining liability under the Securities Act, to treat
each post-effective amendment as a new registration statement relating to the securities then being offered, and the offering of
such securities at that time shall be deemed to be the initial bona fide offering of such securities.
(3) To file a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.
(4) That, for the purpose of determining liability under the Securities
Act to any purchaser:
If the undersigned Registrant is subject to Rule 430C, each prospectus
filed pursuant to Rule 424(b) as part of this Registration Statement, other than registration statements relying on Rule 430B or
other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the Registration Statement
as of the date it is first used after effectiveness; provided , however , that no statement made in a registration statement or
prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into
the registration statement or prospectus that is part of the Registration Statement will, as to a purchaser with a time of contract
of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that
was part of the Registration Statement or made in any such document immediately prior to such date of first use.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of Registrant pursuant to Item 14 of this Part II to the registration
statement, or otherwise, Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Registrant of expenses incurred or paid by a director, officer or controlling
person of Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
II-6
SIGNATURES
Pursuant to the requirements
of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Toronto, Province of Ontario, on March 22, 2016.
Bionik Laboratories Corp.
By:
/s/ Peter Bloch
Peter Bloch
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities
Act of 1933, this Registration Statement on Form S-1 has been signed by the following persons in the capacities and on the dates
indicated.
Signature
Title
Date
/s/ Peter
Bloch
Chief Executive Officer Director and
March 22, 2016
Peter Bloch
(Principal Executive Officer)
/s/ Leslie
N. Markow
Chief Financial Officer
March 23, 2016
Leslie Markow
(Principal Financial and Accounting Officer)
/s/ Michal
Prywata
Chief Operating Officer
March 23, 2016
Michal Prywata
and Director
/s/ Thiago Caires
Chief Technology Officer
March 22, 2016
Thiago Caires
and Director
/s/ Robert
Hariri
Director
March 22, 2016
Robert Hariri
/s/ Marc
Mathieu
Director
March 22, 2016
Marc Mathieu
EX-23.1
2
v434931_ex23-1.htm
EXHIBIT 23.1
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
We consent to the use in the Post-Effective
Amendment No. 1 to the Registration Statement on Form S-1 of our report dated March 17, 2016 relating to the consolidated financial
statements of Bionik Laboratories Corp. as of December 31, 2015 and 2014, and the related consolidated statements of operations
and comprehensive loss, changes in shareholders' equity (deficiency) and cash flows for the year ended December 31, 2015 and nine
month period ended December 31, 2014. We additionally consent to the reference to our firm under the heading “Experts”
in the Post-Effective Amendment No. 1 to the Registration Statement on Form S-1.
Signed:
Mississauga, Ontario
March 23, 2016
ACCOUNTING
› CONSULTING › TAX
900-50 BURNHAMTHORPE
ROAD W, MISSISSAUGA, ON, L5B 3C2
Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.
The end date of the period reflected on the cover page if a periodic report. For all other reports and registration statements containing historical data, it is the date up through which that historical data is presented. If there is no historical data in the report, use the filing date. The format of the date is CCYY-MM-DD.
The type of document being provided (such as 10-K, 10-Q, 485BPOS, etc). The document type is limited to the same value as the supporting SEC submission type, or the word "Other".
Indicate whether the registrant is one of the following: (1) Large Accelerated Filer, (2) Accelerated Filer, (3) Non-accelerated Filer, (4) Smaller Reporting Company (Non-accelerated) or (5) Smaller Reporting Accelerated Filer. Definitions of these categories are stated in Rule 12b-2 of the Exchange Act. This information should be based on the registrant's current or most recent filing containing the related disclosure.
Carrying value as of the balance sheet date of liabilities incurred (and for which invoices have typically been received) and payable to vendors for goods and services received that are used in an entity's business. Used to reflect the current portion of the liabilities (due within one year or within the normal operating cycle if longer).
Carrying value as of the balance sheet date of obligations incurred and payable, pertaining to costs that are statutory in nature, are incurred on contractual obligations, or accumulate over time and for which invoices have not yet been received or will not be rendered. Examples include taxes, interest, rent and utilities. Used to reflect the current portion of the liabilities (due within one year or within the normal operating cycle if longer).
Accumulated change in equity from transactions and other events and circumstances from non-owner sources, net of tax effect, at period end. Excludes Net Income (Loss), and accumulated changes in equity from transactions resulting from investments by owners and distributions to owners. Includes foreign currency translation items, certain pension adjustments, unrealized gains and losses on certain investments in debt and equity securities, other than temporary impairment (OTTI) losses related to factors other than credit losses on available-for-sale and held-to-maturity debt securities that an entity does not intend to sell and it is not more likely than not that the entity will be required to sell before recovery of the amortized cost basis, as well as changes in the fair value of derivatives related to the effective portion of a designated cash flow hedge.
Excess of issue price over par or stated value of the entity's capital stock and amounts received from other transactions involving the entity's stock or stockholders. Includes adjustments to additional paid in capital. Some examples of such adjustments include recording the issuance of debt with a beneficial conversion feature and certain tax consequences of equity instruments awarded to employees. Use this element for the aggregate amount of additional paid-in capital associated with common and preferred stock. For additional paid-in capital associated with only common stock, use the element additional paid in capital, common stock. For additional paid-in capital associated with only preferred stock, use the element additional paid in capital, preferred stock.
Sum of the carrying amounts as of the balance sheet date of all assets that are recognized. Assets are probable future economic benefits obtained or controlled by an entity as a result of past transactions or events.
Sum of the carrying amounts as of the balance sheet date of all assets that are expected to be realized in cash, sold, or consumed within one year (or the normal operating cycle, if longer). Assets are probable future economic benefits obtained or controlled by an entity as a result of past transactions or events.
Amount of currency on hand as well as demand deposits with banks or financial institutions. Includes other kinds of accounts that have the general characteristics of demand deposits. Also includes short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Excludes cash and cash equivalents within disposal group and discontinued operation.
Aggregate par or stated value of issued nonredeemable common stock (or common stock redeemable solely at the option of the issuer). This item includes treasury stock repurchased by the entity. Note: elements for number of nonredeemable common shares, par value and other disclosure concepts are in another section within stockholders' equity.
Fair value, after the effects of master netting arrangements, of a financial liability or contract with one or more underlyings, notional amount or payment provision or both, and the contract can be net settled by means outside the contract or delivery of an asset. Includes liabilities not subject to a master netting arrangement and not elected to be offset.
For an unclassified balance sheet, amounts due from related parties including affiliates, employees, joint ventures, officers and stockholders, immediate families thereof, and pension funds.
Sum of the carrying amounts as of the balance sheet date of all liabilities that are recognized. Liabilities are probable future sacrifices of economic benefits arising from present obligations of an entity to transfer assets or provide services to other entities in the future.
Amount after allowance and deduction of deferred interest and fees, unamortized costs and premiums and discounts from face amounts, of loans and leases held in portfolio, including but not limited to, commercial and consumer loans. Includes loans held for sale. Excludes loans and leases covered under loss sharing agreements.
Aggregate par or stated value of issued nonredeemable preferred stock (or preferred stock redeemable solely at the option of the issuer). This item includes treasury stock repurchased by the entity. Note: elements for number of nonredeemable preferred shares, par value and other disclosure concepts are in another section within stockholders' equity.
Amount of asset related to consideration paid in advance for costs that provide economic benefits in future periods, and amount of other assets that are expected to be realized or consumed within one year or the normal operating cycle, if longer.
Amount after accumulated depreciation, depletion and amortization of physical assets used in the normal conduct of business to produce goods and services and not intended for resale. Examples include, but are not limited to, land, buildings, machinery and equipment, office equipment, and furniture and fixtures.
Total of all stockholders' equity (deficit) items, net of receivables from officers, directors, owners, and affiliates of the entity which are attributable to the parent. The amount of the economic entity's stockholders' equity attributable to the parent excludes the amount of stockholders' equity which is allocable to that ownership interest in subsidiary equity which is not attributable to the parent (noncontrolling interest, minority interest). This excludes temporary equity and is sometimes called permanent equity.
Total number of shares of other common stock instruments held by shareholders, such as exchangeable shares. May be all or portion of the number of common shares authorized.
Total number of common shares of an entity that have been sold or granted to shareholders (includes common shares that were issued, repurchased and remain in the treasury). These shares represent capital invested by the firm's shareholders and owners, and may be all or only a portion of the number of shares authorized. Shares issued include shares outstanding and shares held in the treasury.
The maximum number of nonredeemable preferred shares (or preferred stock redeemable solely at the option of the issuer) permitted to be issued by an entity's charter and bylaws.
Total number of nonredeemable preferred shares (or preferred stock redeemable solely at the option of the issuer) issued to shareholders (includes related preferred shares that were issued, repurchased, and remain in the treasury). May be all or portion of the number of preferred shares authorized. Excludes preferred shares that are classified as debt.
Aggregate share number for all nonredeemable preferred stock (or preferred stock redeemable solely at the option of the issuer) held by stockholders. Does not include preferred shares that have been repurchased.
Amount after tax of increase (decrease) in equity from transactions and other events and circumstances from net income and other comprehensive income, attributable to parent entity. Excludes changes in equity resulting from investments by owners and distributions to owners.
The current period expense charged against earnings on long-lived, physical assets not used in production, and which are not intended for resale, to allocate or recognize the cost of such assets over their useful lives; or to record the reduction in book value of an intangible asset over the benefit period of such asset; or to reflect consumption during the period of an asset that is not used in production.
The amount of net income or loss for the period per each share in instances when basic and diluted earnings per share are the same amount and reported as a single line item on the face of the financial statements. Basic earnings per share is the amount of net income or loss for the period per each share of common stock or unit outstanding during the reporting period. Diluted earnings per share includes the amount of net income or loss for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.
The aggregate total of expenses of managing and administering the affairs of an entity, including affiliates of the reporting entity, which are not directly or indirectly associated with the manufacture, sale or creation of a product or product line.
Generally recurring costs associated with normal operations except for the portion of these expenses which can be clearly related to production and included in cost of sales or services. Includes selling, general and administrative expense.
Amount after tax and reclassification adjustments of gain (loss) on foreign currency translation adjustments, foreign currency transactions designated and effective as economic hedges of a net investment in a foreign entity and intra-entity foreign currency transactions that are of a long-term-investment nature, attributable to parent entity.
The net amount of other income and expense amounts, the components of which are not separately disclosed on the income statement, resulting from ancillary business-related activities (that is, excluding major activities considered part of the normal operations of the business) also known as other nonoperating income (expense) recognized for the period. Such amounts may include: (a) dividends, (b) interest on securities, (c) net gains or losses on securities, (d) unusual costs, (e) gains or losses on foreign exchange transactions, and (f) miscellaneous other income and expense items.
The total amount of other operating income, the components of which are not separately disclosed on the income statement, from items that are associated with the entity's normal revenue producing operation.
The aggregate costs incurred (1) in a planned search or critical investigation aimed at discovery of new knowledge with the hope that such knowledge will be useful in developing a new product or service, a new process or technique, or in bringing about a significant improvement to an existing product or process; or (2) to translate research findings or other knowledge into a plan or design for a new product or process or for a significant improvement to an existing product or process whether intended for sale or the entity's use, during the reporting period charged to research and development projects, including the costs of developing computer software up to the point in time of achieving technological feasibility, and costs allocated in accounting for a business combination to in-process projects deemed to have no alternative future use.
The aggregate amount of noncash, equity-based employee remuneration. This may include the value of stock or unit options, amortization of restricted stock or units, and adjustment for officers' compensation. As noncash, this element is an add back when calculating net cash generated by operating activities using the indirect method.
Amount of increase (decrease) in additional paid in capital (APIC) resulting from recognition of deferred taxes for convertible debt with a beneficial conversion feature.
Amount of decrease in additional paid in capital (APIC) resulting from direct costs associated with issuing stock. Includes, but is not limited to, legal and accounting fees and direct costs associated with stock issues under a shelf registration.
Amount after tax and reclassification adjustments of gain (loss) on foreign currency translation adjustments, foreign currency transactions designated and effective as economic hedges of a net investment in a foreign entity and intra-entity foreign currency transactions that are of a long-term-investment nature, attributable to parent entity.
Number of shares issued in lieu of cash for services contributed to the entity. Number of shares includes, but is not limited to, shares issued for services contributed by vendors and founders.
Gross number of shares (or other type of equity) issued during the period as a result of any equity-based compensation plan other than an employee stock ownership plan (ESOP). Shares issued could result from the issuance of restricted stock, the exercise of stock options, stock issued under employee stock purchase plans, and/or other employee benefit plans.
Gross value of stock (or other type of equity) issued during the period as a result of any equity-based compensation plan other than an employee stock ownership plan (ESOP). Stock issued could result from the issuance of restricted stock, the exercise of stock options, stock issued under employee stock purchase plans, and/or other employee benefit plans.
Total of all stockholders' equity (deficit) items, net of receivables from officers, directors, owners, and affiliates of the entity which are attributable to the parent. The amount of the economic entity's stockholders' equity attributable to the parent excludes the amount of stockholders' equity which is allocable to that ownership interest in subsidiary equity which is not attributable to the parent (noncontrolling interest, minority interest). This excludes temporary equity and is sometimes called permanent equity.
The aggregate amount of adjustments to net income or loss necessary to remove the effects of all items whose cash effects are investing or financing cash flows. The aggregate amount also includes all noncash expenses and income items which reduce or increase net income and are thus added back or deducted when calculating cash provided by or used in operating activities.
Amount of currency on hand as well as demand deposits with banks or financial institutions. Includes other kinds of accounts that have the general characteristics of demand deposits. Also includes short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Excludes cash and cash equivalents within disposal group and discontinued operation.
Amount of increase (decrease) in cash and cash equivalents. Cash and cash equivalents are the amount of currency on hand as well as demand deposits with banks or financial institutions. Includes other kinds of accounts that have the general characteristics of demand deposits. Also includes short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Includes effect from exchange rate changes.
The value of the stock converted in a noncash (or part noncash) transaction. Noncash is defined as transactions during a period that do not result in cash receipts or cash payments in the period. "Part noncash" refers to that portion of the transaction not resulting in cash receipts or cash payments in the period.
The amount of expense recognized in the current period that reflects the allocation of the cost of tangible assets over the assets' useful lives. Includes production and non-production related depreciation.
The increase (decrease) during the reporting period in the aggregate amount of liabilities incurred (and for which invoices have typically been received) and payable to vendors for goods and services received that are used in an entity's business.
The increase (decrease) during the reporting period in receivables to be collected from other entities that could exert significant influence over the reporting entity.
Amount of cash inflow (outflow) of financing activities, excluding discontinued operations. Financing activity cash flows include obtaining resources from owners and providing them with a return on, and a return of, their investment; borrowing money and repaying amounts borrowed, or settling the obligation; and obtaining and paying for other resources obtained from creditors on long-term credit.
Amount of cash inflow (outflow) of investing activities, excluding discontinued operations. Investing activity cash flows include making and collecting loans and acquiring and disposing of debt or equity instruments and property, plant, and equipment and other productive assets.
Amount of cash inflow (outflow) from operating activities, excluding discontinued operations. Operating activity cash flows include transactions, adjustments, and changes in value not defined as investing or financing activities.
The net amount paid or received by the reporting entity associated with purchase (sale or collection) of loans receivable arising from the financing of goods and services.
The cash inflow associated with the amount received from holders exercising their stock options. This item inherently excludes any excess tax benefit, which the entity may have realized and reported separately.
The cash outflow for the payment of a long-term borrowing made from a related party where one party can exercise control or significant influence over another party; including affiliates, owners or officers and their immediate families, pension trusts, and so forth. Alternate caption: Payments for Advances from Affiliates.
The aggregate amount of noncash, equity-based employee remuneration. This may include the value of stock or unit options, amortization of restricted stock or units, and adjustment for officers' compensation. As noncash, this element is an add back when calculating net cash generated by operating activities using the indirect method.
Bionik Laboratories Corp. (formerly Drywave Technologies Inc., the “Company” or “Bionik”) was incorporated on January 8, 2010 in the State of Colorado as Strategic Dental Management Corp. On July 16, 2013, the Company changed its name to Drywave Technologies Inc. (“Drywave”) and its state of incorporation from Colorado to Delaware. Effective February 13, 2015, the Company changed its name to Bionik Laboratories Corp. and reduced the authorized number of shares of common stock from 200,000,000 to 150,000,000. Concurrently, the Company implemented a 1-for-0.831105 reverse stock split of the common stock, which had previously been approved on September 24, 2014. The consolidated financial statements consolidate the Company, subject to the Exchangable Shares referred to below, and its wholly-owned subsidiaries Bionik Laboratories Inc. (“Bionik Canada”) and Bionik Acquisition Inc.
The Company is a bioengineering research and development company targeting diseases and injuries that impact human mobility. The Company is working towards its first product, which will be the “ARKE”, a robotic pair of exoskeleton legs to be used for rehabilitation purposes.
These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), which contemplates continuation of the Company as a going concern, which assumes the realization of assets and satisfaction of liabilities and commitments in the normal course of business.
On February 26, 2015, the Company finalized a Share Exchange Agreement whereby Bionik Canada issued 50,000,000 Exchangeable Shares, representing a 3.14 exchange ratio, for 100% of the common shares of Bionik Canada (the “Merger”). The Exchangeable Shares are exchangeable at the option of the holder, each into one share of the common stock of the Company. In addition, the Company issued one Special Voting Preferred Share (Note 8).
As a result of the shareholders of Bionik Canada having a controlling interest in the Company subsequent to the Merger, for accounting purposes the Merger does not constitute a business combination. The transaction has been accounted for as a recapitalization of the Company with Bionik Canada being the accounting acquirer even though the legal acquirer is Bionik, accordingly, the historic financial statements of Bionik Canada are presented as the comparative balances for the period prior to the Merger.
References to the Company refer to the Company and its subsidiaries, Bionik Acquisition Inc. and Bionik Laboratories Inc. References to Drywave relate to the Company prior to the Merger.
The Company has not yet realized any revenues from its planned operations. As at December 31, 2015, the Company had working capital surplus of $890,885 (December 31, 2014 deficit of $128,361) and shareholders’ equity of $977,988 (December 31, 2014 deficiency of $50,439) and incurred a net loss and comprehensive loss of $5,569,107 for the year ended December 31, 2015 (nine months ended December 31, 2014 - $2,489,137). Further, the Company expects that the ARKE will be categorized as a Class I device under Health Canada, and Class IIa in Europe to obtain the CE Mark and be a Class II medical device under the U.S. Food and Drug Administration (“FDA”) and accordingly will be subject to FDA regulations, guidelines and the FDA’s Quality System Regulation (“QSR”) in order to market and sell their product in the U.S. The costs of obtaining the necessary FDA approval and maintaining compliance with the FDA could be significant.
The Company’s principal offices are located at 483 Bay Street, N105, Toronto, Ontario, M5G 2C9.
The entire disclosure for the nature of an entity's business, major products or services, principal markets including location, and the relative importance of its operations in each business and the basis for the determination, including but not limited to, assets, revenues, or earnings. For an entity that has not commenced principal operations, disclosures about the risks and uncertainties related to the activities in which the entity is currently engaged and an understanding of what those activities are being directed toward.
The preparation of financial statements in conformity with US GAAP 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 revenues and expenses during the reporting period. Actual results could differ from those estimates, and changes in these estimates are recorded when known. Significant estimates made by management include: the valuation of the warrant derivative liability and the valuation allowance for deferred tax assets.
The selection of the appropriate valuation model to apply to the warrant derivative liability and the related inputs and assumptions that are required to determine that valuation require significant judgment and require management to make estimates and assumptions that affect the reported amount of the related liability and reported amounts of the change in fair value. As the derivative warrant liability is required to be measured at fair value at each reporting date it is reasonably possible that these estimates and assumptions could change in the near term.
Foreign Currency Translation
On April 1, 2015, Bionik Canada and Bionik Acquisition Inc. changed its functional currency from the Canadian Dollar to the U.S. Dollar. This reflects the fact that the majority of the Company’s business is influenced by an economic environment denominated in U.S. currency as well the Company anticipates revenues to be earned in U.S. dollars. The change in accounting treatment was applied prospectively. The functional currency is separately determined for the Company and each of its subsidiaries, and is used to measure the financial position and operating results. The functional currency of the Company and its wholly-owned subsidiaries is the U.S. dollar. Transactions denominated in a currency other than the functional currency are recorded on initial recognition at the exchange rate at the date of the transaction. After initial recognition, monetary assets and liabilities denominated in foreign currency are translated at the end of each reporting period into the functional currency at the exchange rate at that date. Exchange differences are recognized in profit or loss. Non-monetary assets and liabilities measured at cost are translated at the exchange rate at the date of the transaction.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is computed using the declining balance method, over the estimated useful lives of these assets. The costs of improvements that extend the life of equipment are capitalized. All ordinary repair and maintenance costs are expensed as incurred. Property and equipment are depreciated as follows:
Computer & Electronics
50% per annum
Furniture and Fixtures
20% per annum
Tools and Parts
20% per annum
Revenue Recognition
The Company has yet to recognize any revenue. The Company intends to record revenue when it is realized, or realizable and earned. The Company will consider revenue to be realized, or realizable and earned, when the following revenue recognition requirements are met: persuasive evidence of an arrangement exists; the products or services have been accepted by the customer via delivery or acceptance; the sales price is fixed or determinable; and collectability is reasonably assured.
Government Grant and Input Tax Credit Recoveries
The Company receives certain grant and input tax credit recoveries from the Canadian government in compensation for eligible expenditures. These are presented as other income in the statement of operations and comprehensive loss as they generally relate to a number of the Company’s operating expenses, such as salaries and benefits, research and development and professional and consulting fees. The recoveries are recognized in the corresponding period when such expenses are incurred and collection of the grant funds is assured.
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with original terms to maturity of 90 days or less at the date of purchase. For all periods presented cash and cash equivalents consisted entirely of cash.
Research and Development
The Company is engaged in research and development work. Research and development costs are charged as operating expense of the Company as incurred.
Warrant Derivative Liability
The Company’s derivative warrant instruments are measured at fair value using a simulation model which takes into account, as of the valuation date, factors including the current exercise price, the expected life of the warrant, the current price of the underlying stock, its expected volatility, holding cost and the risk-free interest rate for the term of the warrant (Note 10). The warrant derivative liability is revalued at each reporting period and changes in fair value are recognized in the consolidated statements of operations and comprehensive loss under the caption “Change in fair value of warrant liability”.
Segment Reporting
ASC 280-10, “Disclosures about Segments of an Enterprise and Related Information”, establishes standards for the way that public business enterprises report information about operating segments in the Company’s consolidated financial statements. Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company does not have any reportable segments. All of its operations and assets are domiciled in Canada.
Income Taxes
Income taxes are computed in accordance with the provisions of ASC Topic 740, which requires, among other things, a liability approach to calculating deferred income taxes. The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in its consolidated financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. The Company is required to make certain estimates and judgments about the application of tax law, the expected resolution of uncertain tax positions and other matters. In the event that uncertain tax positions are resolved for amounts different than the Company’s estimates, or the related statutes of limitations expire without the assessment of additional income taxes, the Company will be required to adjust the amounts of related assets and liabilities in the period in which such events occur. Such adjustment may have a material impact on Bionik’s income tax provision and results of operations.
Fair Value of Financial Instruments
ASC Topic 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. Included in the ASC Topic 820 framework is a three level valuation inputs hierarchy with Level 1 being inputs and transactions that can be effectively fully observed by market participants spanning to Level 3 where estimates are unobservable by market participants outside of the Company and must be estimated using assumptions developed by the Company. The Company discloses the lowest level input significant to each category of asset or liability valued within the scope of ASC Topic 820 and the valuation method as exchange, income or use. The Company uses inputs which are as observable as possible and the methods most applicable to the specific situation of each company or valued item.
The carrying amounts reported in the balance sheets for cash and cash equivalents, other receivables, accounts payable, accrued liabilities, and due from related parties approximate fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rates of interest. Per ASC Topic 820 framework these are considered Level 2 inputs where inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
As at December 31, 2015, the Company’s warrant derivative liability is measured at fair value at each reporting period using a simulation model based on Level 3 inputs.
The Company’s policy is to recognize transfers into and out of Level 3 as of the date of the event or change in the circumstances that caused the transfer. There were no such transfers during the year.
Basic and Diluted Loss Per Share
Basic and diluted loss per share has been determined by dividing the net loss available to shareholders for the applicable period by the basic and diluted weighted average number of shares outstanding, respectively. The diluted weighted average number of shares outstanding is calculated as if all dilutive options had been exercised or vested at the later of the beginning of the reporting period or date of grant, using the treasury stock method.
Loss per common share is computed by dividing the net loss by the weighted average number of shares of common shares outstanding during the period. Common share equivalents, options and warrants are excluded from the computation of diluted loss per share when their effect is anti-dilutive, as they are in 2015 and 2014.
Impairment of Long-Lived Assets
The Company follows the ASC Topic 360, which requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the assets’ carrying amounts may not be recoverable. In performing the review for recoverability, if future undiscounted cash flows (excluding interest charges) from the use and ultimate disposition of the assets are less than their carrying values, an impairment loss represented by the difference between its fair value and carrying value, is recognized. When properties are classified as held for sale they are recorded at the lower of the carrying amount or the expected sales price less costs to sell.
Reclassifications
Certain amounts have been reclassified within the consolidated statement of operations and comprehensive loss for the nine month period ended December 31, 2014, in order to conform with current presentation. There was no impact to the previously reported net loss.
Recently Issued Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The accounting standard is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2016. Early adoption is not permitted. The impact on our consolidated financial statements of adopting ASU 2014-09 will be assessed by management.
In August 2014, the FASB issued a new financial accounting standard on going concern, ASU No. 2014-15, “Presentation of Financial Statements Going Concern (Sub-Topic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” The standard provides guidance about management’s responsibility to evaluate whether there is a substantial doubt about the organization’s ability to continue as a going concern. The amendments in this Update apply to all companies. They become effective in the annual period ending after December 15, 2016, with early application permitted. The impact on the consolidated financial statements of adopting ASU 2014-15 will be assessed by management.
In September 2015, the FASB issued ASU No. 2015-16, “Simplifying the Accounting for Measurement-Period Adjustments,” which illustrates certain guidance governing adjustments to the provisional amounts recognized at the acquisition date with a corresponding adjustment to goodwill. Such adjustments are required when new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement amounts initially recognized or would have resulted in the recognition of additional assets and liabilities. ASU No. 2015-16 eliminates the requirement to retrospectively account for such adjustments. ASU No. 2015-16 is effective for the fiscal year commencing on January 1, 2016. The Company does not anticipate that the adoption of ASU No. 2015-16 will have a material effect on the consolidated financial position or the consolidated results of operations and comprehensive loss.
In November 2015, the FASB issued ASU No. 2015-17, “Balance Sheet Classification of Deferred Taxes,” which requires that deferred tax liabilities and assets be classified on our Consolidated Balance Sheets as noncurrent based on an analysis of each taxpaying component within a jurisdiction. ASU No. 2015-17 is effective for the fiscal year commencing on January 1, 2017. The Company does not anticipate that the adoption of ASU No. 2015-17 will have a material effect on the consolidated financial position or the consolidated results of operations.
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.
During the year, the Company provided two loans to a third party (the “Borrower”) in the aggregate amount of $300,000 under normal commercial terms, while the Company and Borrower explore a possible strategic relationship or other commercial transaction (a “Possible Transaction”). The loans both carry an interest rate of 6% and are secured by all assets of the third party subject to a $200,000 subordination to a third party financial services company. Of the $300,000, $150,000 is repayable upon the earliest of May 5, 2016, the consummation of certain Possible Transactions and any consolidation, merger, combination, reorganization or other similar transaction entered into by the Borrower and interest is payable semi-yearly. The remaining $150,000, along with accrued interest, is repayable upon the earliest of the nine-month anniversary of the termination date of any letter of intent with respect to a Possible Transaction and the consummation of certain Possible Transactions or any other similar transaction similar to a Possible Transaction without the participation of the Company. As at December 31, 2015, accrued interest amounted to $7,459, which was included in the loan balance.
The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.
Equipment consisted of the following as at December 31, 2015 and December 31, 2014:
December 31, 2015
December 31, 2014
Accumulated
Accumulated
Cost
Depreciation
Net
Cost
Depreciation
Net
$
$
$
$
$
$
Computers and electronics
148,214
84,072
64,142
77,650
27,438
50,212
Furniture and fixtures
23,496
9,478
14,018
24,909
7,325
17,584
Tools and parts
11,422
2,479
8,943
11,913
1,787
10,126
183,132
96,029
87,103
114,472
36,550
77,922
Equipment is recorded at cost less accumulated depreciation. Depreciation expense during the year ended December 31, 2015 was $59,479 (December 31, 2014 - $34,036).
The entire disclosure for long-lived, physical assets used in the normal conduct of business and not intended for resale. Includes, but is not limited to, accounting policies and methodology, roll forwards, depreciation, depletion and amortization expense, including composite depreciation, accumulated depreciation, depletion and amortization expense, useful lives and method used, income statement disclosures, assets held for sale and public utility disclosures.
On December 8, 2011, the Company received $61,500 CAD from a lender that at the time was non-interest bearing and had no specified terms of repayment. On February 28, 2012, the lender and the Company agreed to the terms of a Convertible Secured Promissory Note, which securitized the previous note plus an additional $60,000 CAD for a total principal amount of $121,500 CAD. The note was interest bearing at prime plus 1%, secured by a general security agreement and was to mature on the earlier of a qualifying financing event or February 28, 2014. The lender had an option to convert the principal plus accrued interest at a discount of 20% to the share price in the event of a qualifying financing event prior to February 28, 2014.
The note matured on February 28, 2014, at this point the conversion option expired and the note became due on demand; however, no repayment was demanded. Upon the occurrence of the April financing (Note 8(i)) the Company agreed to honor the original conversion option and a beneficial conversion feature of $27,677 was recognized. As the note was due on demand the Company immediately recognized imputed interest of $27,677 in the consolidated statement of operations and comprehensive loss.
On May 9, 2014, the lender converted the note plus accrued interest into common shares based on the 20% discount to the $0.22 ($0.24 CAD) per share equity financing that was accomplished in April 2014 and the Company issued these pre-transaction shares in June 2014 (see Note 8(iii)).
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
As of December 31, 2015, the Company had advances receivable from the Chief Operating Officer (“COO”) and Chief Technology Officer (“CTO”) for $38,554 (December 31, 2014 $44,986). These advances are unsecured, bear interest at a rate of 1% based on the Canada Revenue Agency’s prescribed rate for such advances and are payable on demand in Canadian dollars. During the nine month period ended December 31, 2014, the Company advanced funds to settle a tax assessment; the Company paid additional salary amounts that had not been made during the period; and, the Company reimbursed $37,837 ($44,000 CAD) related to various out-of-pocket costs they incurred on behalf of the Company. During 2015, the Company accrued interest receivable in the amount of $756 ($1,046 CAD), the remaining fluctuation in the balance from the prior year is due to changes in foreign exchange.
Issuance of shares to settle due to related party
(b)
During the nine months ended December 31, 2014, one advance amounting to $85,947 ($95,000 CAD) was settled by issuance of 331,443 common shares to a former director.
Accounts payable and accrued liabilities
(c)
As at December 31, 2015, $2,970 (December 31, 2014 - $4,220) was owing to the CEO, $856 (December 31, 2014 - $5,930) owing to the CTO, $878 was owing to the COO (December 31, 2014 - $nil) and $346 (December 31, 2014 $nil) owing to the CFO, related to business expenses, all of which are included in accounts payable or accrued liabilities.
The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.
Shares issued on conversion and settlement of debt
-
-
(ii)(iii)
1,012,142
1,012
Shares issued on the exercise of options
-
-
(iv)
1,310,734
1,311
Balance, end of the year/period
50,000,000
50,000
49,737,096
49,737
Common Shares
Balance, beginning of the year
-
-
-
-
Shares issued as Merger consideration
(vii)
6,000,063
6,000
-
-
Shares issued under private placement
(vi)-(xii)
16,408,250
16,408
-
-
Shares issued for services
(xiii)
20,000
20
Balance, end of the year
22,428,313
22,428
-
-
TOTAL COMMON SHARES
72,428,313
72,428
-
-
(i)
In April, 2014, the Company completed a private placement issuing 10,792,335 common shares at a price of $0.24 per share for gross proceeds of $2,616,062. A former director of the Company assisted in securing a significant portion of this financing. The Company incurred $11,609 in share issue costs related to the transaction.
(ii)
In May 2014, the Company issued 436,908 common shares in exchange for the settlement of $115,223 of unsecured debt.
(iii)
In June, 2014, the Company issued 575,234 common shares on conversion of the convertible secured promissory note (Note 6). The note plus accrued interest totaled $124,523 and was converted at a 20% discount to the April 2014 private placement.
(iv)
In June 2014, the Company issued 1,310,734 common shares for the exercise of stock options. The Company received cash of $228,875.
(v)
On February 25, 2015, 262,904 common shares were issued to two former lenders connected with a $241,185 loan received and repaid during fiscal 2013. The common shares were valued at $210,323 based on the value of the concurrent private placement (Note 8(vi)), and recorded in stock-based compensation on the consolidated statement of operations and comprehensive loss. As part of the consideration for the initial loan the CTO and COO had transferred 314,560 common shares to the lenders. For contributing the common shares to the lenders, the Company intends to reimburse the CTO and COO 320,000 common shares. As at December 31, 2015, these shares have not yet been issued.
(vi)
Concurrently with the closing of the Merger on February 26, 2015, the Company issued 7,735,750 units (the “Units”) for gross proceeds of $6,188,600 (the “First Closing”) (including $500,000 of outstanding bridge loans converted into Units at the offering price) at a purchase price of $0.80 per Unit (the “Purchase Price”) in a private placement offering (the “Offering”). Each Unit consists of one common share of the Company, and a warrant to purchase one common share of the Company at an exercise price of $1.40 per share exercisable for 4 years. The Company incurred share issue costs before legal and other costs related to the transaction of $848,822 and issued 773,575 broker warrants exercisable at $0.80 for a period of 4 years. The warrants were measured at fair value and recorded as a warrant derivative liability on the consolidated balance sheet (Note 10). After deducting the value of the warrants and the share issue costs, $4,789,404 was attributed to the value of the common shares.
(vii)
Immediately following the Merger and the First Closing, 6,000,063 common shares were held by existing Drywave stockholders, 7,735,750 were held by the investors in the Offering and Bionik Canada shareholders held an equivalent of 50,000,000 shares of the common shares through their ownership of 100% of the Exchangeable Shares which are held in 1 Special Preferred Share. The Special Preferred Share votes on behalf of the 50,000,000 Exchangeable Shares alongside the common shares of the Company as a single class.
(viii)
On March 27, 2015, the Company issued 1,212,500 Units for gross proceeds of $970,000 to accredited investors in a second closing (the “Second Closing”). Each Unit consisted of one common share of the Company, and a warrant to purchase one common share of the Company at an exercise price of $1.40 per share exercisable for 4 years. The Company incurred share issue costs before legal and other costs related to the Second Closing of $141,100 and issued 121,250 broker warrants exercisable at $0.80 for a period of 4 years. The warrants were measured at fair value and recorded as a warrant liability on the consolidated balance sheet (Note 10). The fair value of the warrants exceeded the net proceeds received upon closing and as a result $207,425 was recorded as a loss on initial recognition of the warrants and included in the change in fair value of warrant derivative liability on the consolidated statements of operations and comprehensive loss.
(ix)
On March 31 2015, the Company issued 891,250 Units for gross proceeds of $713,000 to accredited investors in a third closing (the “Third Closing”). Each Unit consisted of one common share of the Company, and a warrant to purchase one common share of the Company at an exercise price of $1.40 per share exercisable for 4 years. The Company incurred share issue costs before legal and other costs related to the Third Closing of $97,099 and issued 89,125 broker warrants exercisable at $0.80 for a period of 4 years. The warrants were measured at fair value and recorded as a warrant liability on the consolidated balance sheet (Note 10). The fair value of the warrants exceeded the net proceeds received upon closing and as a result $143,389 was recorded as a loss on initial recognition of the warrants and included in the change in fair value of warrant derivative liability on the consolidated statements of operations and comprehensive loss.
(x)
On April 21, 2015, the Company issued 3,115,000 Units for gross proceeds of $2,492,000 to accredited investors in a fourth closing (the “Fourth Closing”). Each Unit consisted of one common share of the Company, and a warrant to purchase one common share of the Company at an exercise price of $1.40 per share exercisable for 4 years. The Company incurred share issue costs before legal and other related to the Fourth Closing of $338,960 and issued 311,500 broker warrants exercisable at $0.80 for a period of 4 years. The warrants were measured at fair value and recorded as a warrant liability on the consolidated balance sheet (Note 10). The fair value of the warrants exceeded the net proceeds received upon closing and as a result $435,682 was recorded as a loss on initial recognition of the warrants and included in the change in fair value of warrant derivative liability on the consolidated statements of operations and comprehensive loss.
(xi)
On May 27, 2015, the Company issued 1,418,750 Units for gross proceeds of $1,135,000 to accredited investors in a fifth closing (the “Fifth Closing”). Each Unit consisted of one common share of the Company, and a warrant to purchase one common share of the Company at an exercise price of $1.40 per share exercisable for 4 years. The Company incurred share issue costs before legal and other costs related to the Fifth Closing of $147,566 and issued 141,875 broker warrants exercisable at $0.80 for a period of 4 years. The warrants were measured at fair value and recorded as a warrant liability on the consolidated balance sheet (Note 10). The fair value of the warrants exceeded the net proceeds received upon closing and as a result $37,739 was recorded as a loss on initial recognition of the warrants and included in the change in fair value of warrant derivative liability on the consolidated statements of operations and comprehensive loss.
(xii)
On June 30, 2015, the Company issued 2,035,000 Units for gross proceeds of $1,628,000 to accredited investors in a sixth and final closing (the “Sixth Closing”). Each Unit consisted of one common share of the Company, and a warrant to purchase one common share of the Company at an exercise price of $1.40 per share exercisable for 4 years. The Company incurred share issue costs before legal and other costs related to the Sixth Closing of $211,656 and issued 203,500 broker warrants exercisable at $0.80 for a period of 4 years. The warrants were measured at fair value and recorded as a warrant liability on the consolidated balance sheet (Note 10). The fair value of the warrants exceeded the net proceeds received upon closing and as a result $74,625 was recorded as a loss on initial recognition of the warrants and included in the change in fair value of warrant derivative liability on the consolidated statements of operations and comprehensive loss.
(xiii)
During the year, the Company entered into service agreements that resulted in a commitment to issue up to an December 31, 2016 and pay up to $130,000 over the next 12 months. During the year 20,000 common shares were issued pursuant to these commitments valued at $31,000 is included in share-based compensation. Subsequent to year -end, pursuant to this commitment 53,233 shares related to services provided in 2015 were issued (Note 13). As at December 31, 2015, these shares, valued at $43,900, have been recorded as shares to be issued with the corresponding expense included in general and administrative expense.
Special Voting Preferred Share
In connection with the Merger (Note 1), on February 26, 2015, the Company entered into a voting and exchange trust agreement (the “Trust Agreement”). Pursuant to the Trust Agreement, the Company issued one Special Voting Preferred Share to the Trustee, and the parties created a trust for the Trustee to hold the Special Voting Preferred Share for the benefit of the holders of the Exchangeable Shares (the “Beneficiaries”). Pursuant to the Trust Agreement, the Beneficiaries will have voting rights in the Company equivalent to what they would have had, had they received shares of common stock in the same amount as the Exchangeable Shares held by the Beneficiaries.
In connection with the Merger and the Trust Agreement, effective February 20, 2015, the Company filed a certificate of designation of the Special Voting Preferred Share (the “Special Voting Certificate of Designation”) with the Delaware Secretary of State. Pursuant to the Special Voting Certificate of Designation, one share of the Company’s blank check preferred stock was designated as Special Voting Preferred Share. The Special Voting Preferred Share entitles the Trustee to exercise the number of votes equal to the number of Exchangeable Shares outstanding on a one-for-one basis during the term of the Trust Agreement.
The Special Voting Preferred Share is not entitled to receive any dividends or to receive any assets of the Company upon liquidation, and is not convertible into common shares of the Company.
The voting rights of the Special Voting Preferred Share will terminate pursuant to and in accordance with the Trust Agreement. The Special Voting Preferred Share will be automatically cancelled at such time as no Exchangeable Shares are held by a Beneficiary.
The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.
The purpose of the Company’s stock option plan, is to attract, retain and motivate persons of training, experience and leadership to the Company, including their directors, officers and employees, and to advance the interests of the Company by providing such persons with the opportunity, through share options, to acquire an increased proprietary interest in the Company.
Options may be granted in respect of authorized and unissued shares, provided that the aggregate number of shares reserved for issuance upon the exercise of all Options granted under the Plan, shall not exceed 10,800,000 or such greater number of shares as may be determined by the Board and approved, if required, by the shareholders of the Company and by any applicable stock exchange or other regulatory authority. Optioned shares in respect of which options are not exercised shall be available for subsequent options.
On April 11, 2014 and June 20, 2014 the Company issued 657,430 and 264,230 options to employees and a consultant at an exercise price of $0.165 and $0.23, respectively, with a term of seven years. The options vest one-third on grant date and two thirds equally over the subsequent two years on the anniversary date. During the year ended December 31, 2014, 125,824 of the 657,430 options were cancelled. On February 26, 2015, as a result of the Merger, the options were re-valued. The fair value, as re-measured, of the 531,606 options issued in April 2014 and the 264,230 options issued in June 2014 was $230,930 and $118,957 respectively. During the year ended December 31, 2015, 188,736 options were cancelled and $83,034 and $18,619 (December 31, 2014 - $82,038 and $30,535) has been recorded as share-based compensation related to the vesting of these stock options.
On July 1, 2014, the Company issued 2,972,592 options to management of the Company, at an exercise price of $0.23 with a term of 7 years, which vested May 27, 2015. On February 26, 2015, as a result of the Merger, the options were re-valued at a fair value of $1,259,487, which has been recorded as share-based compensation in the year ended December 31, 2015.
On February 17, 2015, the Company issued 314,560 options to a director, employees and a consultant with an exercise price of $0.23, that vest one third immediately and two thirds over the next two anniversary dates with an expiry date of seven years. The grant date fair value of the options was $136,613. During the year ended December 31, 2015, 78,643 options were cancelled and $63,774 has been recorded as share-based compensation related to the vesting of these stock options.
On November 24, 2015, the Company issued 650,000 options granted to employees that vest over three years at the anniversary date. During the year ended December 31, 2015, $23,442 has been recorded as share-based compensation related to the vesting of these options. The grant date fair value of the options was $694,384.
On December 14, 2015, the Company issued 2,495,000 options granted to employees, directors and consultants that vest over three years at the anniversary date. During the year ended December 31, 2015, $19,552 has been recorded as share-based compensation expenses related to the vesting of these options. The grant date fair value of the options was $1,260,437.
These options granted and revalued during the year ended December 31, 2015 were valued using the Black-Scholes option pricing model with the following key assumptions:
Expected life
Risk
Dividend
Forfeiture
Expected
Grant date
Grant date
in years
free rate
rate
rate
volatility
fair value
February 17, 2015
5.00
1.59
%
0
%
0
%
114
%
$
136,613
July 1, 2014
4.35
1.59
%
0
%
0
%
114
%
$
1,259,487
June 20, 2014
6.32
1.59
%
0
%
0
%
114
%
$
118,957
April 11, 2014
4.14
1.59
%
0
%
0
%
114
%
$
230,930
November 24, 2015
7
1.59
%
0
%
0
%
114
%
$
694,384
December 14, 2015
7
1.59
%
0
%
0
%
114
%
$
1,260,437
A summary of the Company’s outstanding options is as follows
Weighted-Average
Number of Options
Exercise Price ($)
Outstanding, December 31, 2013
1,310,665
0.19
Exercised
(1,310,665)
0.19
Issued
3,894,252
0.22
Cancelled
(125,824)
0.17
Outstanding, December 31, 2014
3,768,428
0.22
Cancelled as a result of Merger
(3,768,428)
0.22
Re-issued as part of Merger
3,768,428
0.22
Issued
3,459,560
0.97
Cancelled
(267,379)
0.22
Outstanding, December 31, 2015
6,960,609
0.59
The following is a summary of stock options outstanding and exercisable as of December 31, 2015:
Number of
Exercise Price ($)
Number of Options
Expiry Date
Exercisable Options
0.165
500,150
April 1, 2021
354,404
0.23
106,950
June 20, 2021
71,300
0.23
2,972,592
July 1, 2021
2,972,592
0.23
235,917
February 17, 2022
78,643
1.22
650,000
November 24, 2022
-
1.00
2,495,000
December 14, 2022
-
6,960,609
3,476,939
The weighted-average remaining contractual term of the outstanding options is 6.16 (2014 6.47) and for the options that are exercisable 5.49 (2014 6.33).
The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.
The following is a continuity schedule of the Company’s common share purchase warrants:
Number of Warrants
Weighted-Average Exercise Price ($)
Outstanding and exercisable, December 31, 2014 and 2013
-
-
Issued
18,049,075
1.35
Outstanding and exercisable, December 31, 2015
18,049,075
1.35
Common share purchase warrants
The following is a summary of common share purchase warrants outstanding as of December 31, 2015:
Exercise
Number of
Price ($)
Warrants
Expiry Date
1.40
Note 8(vi)
7,735,750
February 26, 2019
0.80
Note 8(vi)
773,575
February 26, 2019
1.40
Note 8(viii)
1,212,500
March 27, 2019
0.80
Note 8(viii)
121,250
March 27, 2019
1.40
Note 8(ix)
891,250
March 31, 2019
0.80
Note 8(ix)
89,125
March 31, 2019
1.40
Note 8(x)
3,115,000
April 21, 2019
0.80
Note 8(x)
311,500
April 21, 2019
1.40
Note 8(xi)
1,418,750
May 27, 2019
0.80
Note 8(xi)
141,875
May 27, 2019
1.40
Note 8(xii)
2,035,000
June 30, 2019
0.80
Note 8(xii)
203,500
June 30, 2019
18,049,075
Exchangeable share purchase warrants
In 2014 the Company repaid loans of $180,940 plus accrued interest of $12,138 owing to investors introduced by Pope and Co. As part of this transaction the Company was committed to issue these lenders warrants exercisable into 349,522 Exchangeable Shares at an exercise price of $0.23 per share for a period ending March 21, 2017. During the year ended December 31, 2015, the Company issued these warrants.
Warrant derivative liability
The Company’s outstanding common share purchase warrants include price protection provisions that allow for a reduction in the exercise price of the warrants in the event the Company subsequently issues common stock or options, rights, warrants or securities convertible or exchangeable for shares of common stock at a price lower than the exercise price of the warrants. Simultaneously with any reduction to the exercise price, the number of shares of common stock that may be purchased upon exercise of each of these warrants shall be increased based on a pre-defined formula.
In addition, prior to the effectiveness of certain resale registration statements or if any such registration statements are no longer effective, the holder of the Company’s warrants, at their option, may exercise all or any part of the warrants in a “cashless” or “net-issue” exercise.
The Company has the option to redeem the warrants for $0.001 per warrant if the daily volume weighted-average price of the common shares is 200% or more of the exercise price for twenty consecutive trading days provided there is an effective registration statement covering the common shares available throughout the thirty day period after the redemption date. The warrant holders then have thirty days to exercise the warrants or receive the redemption amount.
The Company’s derivative instruments have been measured at fair value at inception and at December 31, 2015 using a simulation model. The Company recognizes all of its warrants with price protection on its consolidated balance sheet as a derivative liability.
The following summarizes the changes in the value of the warrant derivative liability from inception until December 31, 2015:
Number of
Warrants
Value ($)
Warrants issued in February 26, 2015 financing
Note 8(vi)
8,509,325
550,374
Warrants issued in March 27, 2015 financing
Note 8(viii)
1,333,750
1,036,325
Warrants issued in March 31, 2015 financing
Note 8(ix)
980,375
759,290
Warrants issued in April 21, 2015 financing
Note 8(x)
3,426,500
2,588,722
Warrants issued in May 27, 2015 financing
Note 8(xi)
1,560,625
1,025,173
Warrants issued in June 30, 2015 financing
Note 8(xii)
2,238,500
1,490,969
Total at inception
7,450,853
Change in fair value of warrant derivative liability
(1,382,984)
Balance at December 31, 2015
6,067,869
During the year ended December 31, 2015 the Company recorded a loss of $898,860 on initial recognition of the warrant derivative liability and a gain of $1,382,984 on re-measurement to fair value at year-end. The net impact is a gain of $484,124 for the year ended December 31, 2015 was recorded as a change in fair value of warrant derivative liability within the Company’s consolidated statements of operations and comprehensive loss.
The key inputs and assumptions used in the simulation model at inception and at December 31, 2015 are as follows:
Number of
Expected
Exercise
Risk free
Dividend
Expected
Grant date fair
Grant date
Warrants
life in years
Price ($)
rate
rate
volatility
value ($)
At Inception:
February 26, 2015
7,735,750
4
1.4
0.44
%
0
%
51.83
%
464,784
February 26, 2015
773,575
4
0.8
0.44
%
0
%
51.83
%
85,590
March 27, 2015
1,212,500
3.92
1.4
0.43
%
0
%
52.37
%
950,913
March 27, 2015
121,250
3.92
0.8
0.43
%
0
%
52.37
%
85,412
March 31, 2015
891,250
3.91
1.4
0.41
%
0
%
52.45
%
696,582
March 31, 2015
89,125
3.91
0.8
0.41
%
0
%
52.45
%
62,708
April 21, 2015
3,115,000
3.85
1.4
0.68
%
0
%
51.54
%
2,371,956
April 21, 2015
311,500
3.85
0.8
0.68
%
0
%
51.54
%
216,766
May 27, 2015
1,418,750
3.76
1.4
0.46
%
0
%
51.74
%
933,065
May 27, 2015
141,875
3.76
0.8
0.46
%
0
%
51.74
%
92,108
June 30, 2015
2,035,000
3.66
1.4
0.37
%
0
%
52.94
%
1,356,512
June 30, 2015
203,500
3.66
0.8
0.37
%
0
%
52.94
%
134,457
At Year End:
December 31, 2015
16,408,250
3.16
1.4
0.65
%
0
%
53.58
%
5,315,536
December 31, 2015
1,640,825
3.16
0.8
0.65
%
0
%
53.58
%
752,333
In addition to the forgoing, the Company also utilized a holding cost to approximate the impact of a holder of the warrant to maintain a hedging strategy in which they maintained a short position. On analysis of comparable companies and other information the Company has determined that the use of 2.25% in the simulation model is a reasonable assumption.
The warrant derivative liability is classified within Level 3 of the fair value hierarchy because on initial recognition and again at December 31, 2015, it was valued using these significant inputs and assumptions that are unobservable in the market. Changes in the values assumed and used in the simulation model can materially affect the estimate of fair value.
Generally, an increase in the market price of the Company’s common shares, an increase in the volatility of the Company’s common shares and an increase in the expected life would result in a directionally similar change in the estimated fair value of the warrant derivative liability. An increase in the risk free rate would result in a decrease in the fair value of the warrant derivative liability.
The expected life is based on the remaining contractual term of the warrants. The risk free rate was based on U.S. treasury-note yields with terms commensurate with the remaining term of the warrants. Expected volatility over the expected term of the warrants is estimated based on consideration of historical volatility and other information.
In addition to the assumptions above, the Company also took into consideration the probability of the Company’s participation in another round of financing, the type of such financing and the range of the stock price for the financing at that time. At each increment of the simulation, the daily volume weighted-average price was calculated. If this amount was 200% greater than the exercise price of the warrants at the time, and this threshold was maintained for 20 consecutive days, the simulation assumed the trigger of the Company’s option to redeem and the exercise of the warrants by the holder within thirty days. In the circumstance where the redemption was not triggered the warrant was valued at its discounted intrinsic value at maturity.
Components of net loss before income taxes consists of the following:
U.S.
(2,372,510)
-
Canada
(3,221,396)
(2,464,747)
(5,593,906)
(2,464,747)
Reconciliation of the statutory tax rate of 35% (2014 26.5%) and income tax benefits at those rates to the effective income tax rates and income tax benefits reported in the statement of operations and comprehensive loss is as follows:
2015
2014
$
$
Net loss for the period before recovery of income taxes
(5,593,906)
(2,464,747)
Statutory rate
35
%
26.5
%
Expected income tax recovery
(1,957,867)
(653,158)
Tax rate changes and other basis adjustments
364,651
(29,109)
Stock-based compensation
587,381
-
Non-deductible expenses
57,625
193,305
Change in valuation allowance
948,210
488,962
Recovery of income taxes
-
-
Deferred tax reflects the tax effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities and consisted of the following:
2015
2014
$
$
Property and equipment
47,495
36,940
Share issue costs
3,877
162,350
SR&ED pool
340,585
7,137
Other
39,947
18,621
Non-capital losses - Canada
1,149,389
812,522
Net operating losses - U.S.
404,487
-
Valuation allowance
(1,985,780)
(1,037,570)
-
-
The Company has non-capital losses in its Canadian subsidiary of approximately $4,337,319 which will expire between 2031 and 2035. The Company has net operating losses in the U.S. parent Company of $1,155,674 which will expire in 2035.
Income taxes are provided based on the liability method, which results in deferred tax assets and liabilities arising from temporary differences. Temporary differences are differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements that will result in taxable or deductible amounts in future years. The liability method requires the effect of tax rate changes on current and accumulated deferred taxes to be reflected in the period in which the rate change was enacted. The liability method also requires that deferred tax assets be reduced by a valuation allowance unless it is more likely than not that the assets will be realized.
The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company recognizes interest accrued on uncertain tax positions as well as interest received from favorable tax settlements within interest expense. The Company recognizes penalties accrued on unrecognized tax benefits within general and administrative expenses. As of December 31, 2015 and 2014, the Company had no uncertain tax positions.
In many cases the Company’s uncertain tax positions are related to tax years that remain subject to examination by tax authorities. The following describes the open tax years, by major tax jurisdiction, as of December 31, 2015.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
From time to time, the Company may be involved in a variety of claims, suits, investigations and proceedings arising in the ordinary course of our business, collections claims, breach of contract claims, labor and employment claims, tax and other matters. Although claims, suits, investigations and proceedings are inherently uncertain and their results cannot be predicted with certainty, the Company believes that the resolution of current pending matters will not have a material adverse effect on its business, financial position, results of operations or cash flow. Regardless of the outcome, litigation can have an adverse impact on the Company because of legal costs, diversion of management resources and other factors.
The Company’s cash balances are maintained in two banks in Canada and a Canadian Bank subsidiary in the US. Deposits held in banks in Canada are insured up to $100,000 CAD per depositor for each bank by The Canada Deposit Insurance Corporation, a federal crown corporation. Actual balances at times may exceed these limits.
Interest Rate Risk
Interest rate risk is the risk that the value of a financial instrument might be adversely affected by a change in the interest rates. The Company has minimal exposure to fluctuations in the market interest rate. In seeking to minimize the risks from interest rate fluctuations, the Company manages exposure through its normal operating and financing activities.
Liquidity Risk
Liquidity risk is the risk that the Company will incur difficulties meeting its financial obligations, as they are due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due. Accounts payable and accrued liabilities are due within the current operating period.
The Company has funded its operations through the issuance of capital stock, convertible debt and loans in addition to grants and investment tax credits received from the Government of Canada.
The entire disclosure for any concentrations existing at the date of the financial statements that make an entity vulnerable to a reasonably possible, near-term, severe impact. This disclosure informs financial statement users about the general nature of the risk associated with the concentration, and may indicate the percentage of concentration risk as of the balance sheet date.
1. On March 1, 2016, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Interactive Motion Technologies, Inc., a Massachusetts corporation (“IMT”), and Bionik Mergerco Inc., a Massachusetts corporation and a wholly owned subsidiary of the Company (“Merger Subsidiary”), providing for the merger (“Merger”) of Merger Subsidiary with and into IMT, with IMT surviving the Merger as a wholly-owned subsidiary of Bionik.
Subject to the indemnification and escrow arrangements described in the Merger Agreement, at the effective time of the Merger, Bionik will issue (or reserve for issuance) an aggregate of 23,650,000 shares of Company Common Stock in exchange for all shares of IMT Common Stock and IMT Preferred Stock outstanding immediately prior to the effective time (other than shares (i) held in treasury or (ii) held by persons who properly exercise appraisal rights under Massachusetts law).
Bionik will assume each of the 3,897,500 options to acquire IMT Common Stock granted under IMT’s equity incentive plan or otherwise issued by IMT. At the effective time of the Merger, these options will represent the right to purchase an aggregate of 3,000,000 shares of Company Common Stock, of which 1,000,000 will have an exercise price of $0.25, 1,000,000 will have an exercise price of $0.95 and 1,000,000 will have an exercise price of $1.05.
Consummation of the Merger is subject to customary conditions, including without limitation, the affirmative vote or consent of the holders of a majority of the issued and outstanding shares of IMT Preferred Stock voting as a separate class, and a majority of the issued and outstanding shares of IMT Preferred Stock and of IMT Common Stock voting together as a single class. If the law permits, Bionik or IMT may each waive conditions for their benefit and their stockholders’ benefit and complete the Merger even though one or more of these conditions has not been met.
On March 14, 2015, the parties entered into an Amendment and Waiver Agreement, amending the Merger Agreement and waiving any and all potential or actual breaches and/or defaults by the Company of its representations, warranties and/or covenants in the Merger Agreement as a result of the Company’s restatement of its Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2015, June 30, 2015 and September 30, 2015.
During review and due diligence of IMT prior to the execution of the Merger Agreement, the Company loaned an aggregate of $300,000 to Interactive Motion, which loans were secured by certain of its assets of IMT. On March 7, 2016, the Company loaned an additional $68,750 to IMT to fund certain of its expenses in contemplation of the closing of the Merger. The loan matures upon the earlier to occur of (a) the termination date of the Merger Agreement and (b) the effective date of the Merger. Interest and security are consistent with the terms of the previous loans as disclosed in Note 4.
The Company also advanced IMT $80,000 for closing costs during 2016.
The Company has not completed the identification of the assets acquired and liabilities assumed or the related valuation work necessary to arrive at any estimate of fair value or preliminary purchase price allocation. The initial accounting for the acquisition is incomplete and the information necessary to present accurate pro forma financial information is not yet available. The Company will present this information in future filings.
2. Subsequent to year-end, 53,233 common shares related to services provided in 2015 were issued. As at December 31, 2015, these shares, valued at $43,900, have been recorded as shares to be issued with the corresponding expense included in general and administrative expense. (Note 8xiii).
3. Subsequent to year-end, 64,248 common shares were issued related to investor relations and consulting services provided in 2016.
4. Subsequent to year-end, 45,508 common shares were issued as a result of a cashless exercise of 148,787 warrants with an exercise price of $0.80.
The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business.
The preparation of financial statements in conformity with US GAAP 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 revenues and expenses during the reporting period. Actual results could differ from those estimates, and changes in these estimates are recorded when known. Significant estimates made by management include: the valuation of the warrant derivative liability and the valuation allowance for deferred tax assets.
The selection of the appropriate valuation model to apply to the warrant derivative liability and the related inputs and assumptions that are required to determine that valuation require significant judgment and require management to make estimates and assumptions that affect the reported amount of the related liability and reported amounts of the change in fair value. As the derivative warrant liability is required to be measured at fair value at each reporting date it is reasonably possible that these estimates and assumptions could change in the near term.
On April 1, 2015, Bionik Canada and Bionik Acquisition Inc. changed its functional currency from the Canadian Dollar to the U.S. Dollar. This reflects the fact that the majority of the Company’s business is influenced by an economic environment denominated in U.S. currency as well the Company anticipates revenues to be earned in U.S. dollars. The change in accounting treatment was applied prospectively. The functional currency is separately determined for the Company and each of its subsidiaries, and is used to measure the financial position and operating results. The functional currency of the Company and its wholly-owned subsidiaries is the U.S. dollar. Transactions denominated in a currency other than the functional currency are recorded on initial recognition at the exchange rate at the date of the transaction. After initial recognition, monetary assets and liabilities denominated in foreign currency are translated at the end of each reporting period into the functional currency at the exchange rate at that date. Exchange differences are recognized in profit or loss. Non-monetary assets and liabilities measured at cost are translated at the exchange rate at the date of the transaction.
Property and equipment are recorded at cost. Depreciation is computed using the declining balance method, over the estimated useful lives of these assets. The costs of improvements that extend the life of equipment are capitalized. All ordinary repair and maintenance costs are expensed as incurred. Property and equipment are depreciated as follows:
The Company has yet to recognize any revenue. The Company intends to record revenue when it is realized, or realizable and earned. The Company will consider revenue to be realized, or realizable and earned, when the following revenue recognition requirements are met: persuasive evidence of an arrangement exists; the products or services have been accepted by the customer via delivery or acceptance; the sales price is fixed or determinable; and collectability is reasonably assured.
The Company receives certain grant and input tax credit recoveries from the Canadian government in compensation for eligible expenditures. These are presented as other income in the statement of operations and comprehensive loss as they generally relate to a number of the Company’s operating expenses, such as salaries and benefits, research and development and professional and consulting fees. The recoveries are recognized in the corresponding period when such expenses are incurred and collection of the grant funds is assured.
Cash and cash equivalents include highly liquid investments with original terms to maturity of 90 days or less at the date of purchase. For all periods presented cash and cash equivalents consisted entirely of cash.
The Company’s derivative warrant instruments are measured at fair value using a simulation model which takes into account, as of the valuation date, factors including the current exercise price, the expected life of the warrant, the current price of the underlying stock, its expected volatility, holding cost and the risk-free interest rate for the term of the warrant (Note 10). The warrant derivative liability is revalued at each reporting period and changes in fair value are recognized in the consolidated statements of operations and comprehensive loss under the caption “Change in fair value of warrant liability”.
ASC 280-10, “Disclosures about Segments of an Enterprise and Related Information”, establishes standards for the way that public business enterprises report information about operating segments in the Company’s consolidated financial statements. Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company does not have any reportable segments. All of its operations and assets are domiciled in Canada.
Income taxes are computed in accordance with the provisions of ASC Topic 740, which requires, among other things, a liability approach to calculating deferred income taxes. The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in its consolidated financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. The Company is required to make certain estimates and judgments about the application of tax law, the expected resolution of uncertain tax positions and other matters. In the event that uncertain tax positions are resolved for amounts different than the Company’s estimates, or the related statutes of limitations expire without the assessment of additional income taxes, the Company will be required to adjust the amounts of related assets and liabilities in the period in which such events occur. Such adjustment may have a material impact on Bionik’s income tax provision and results of operations.
ASC Topic 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. Included in the ASC Topic 820 framework is a three level valuation inputs hierarchy with Level 1 being inputs and transactions that can be effectively fully observed by market participants spanning to Level 3 where estimates are unobservable by market participants outside of the Company and must be estimated using assumptions developed by the Company. The Company discloses the lowest level input significant to each category of asset or liability valued within the scope of ASC Topic 820 and the valuation method as exchange, income or use. The Company uses inputs which are as observable as possible and the methods most applicable to the specific situation of each company or valued item.
The carrying amounts reported in the balance sheets for cash and cash equivalents, other receivables, accounts payable, accrued liabilities, and due from related parties approximate fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rates of interest. Per ASC Topic 820 framework these are considered Level 2 inputs where inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
As at December 31, 2015, the Company’s warrant derivative liability is measured at fair value at each reporting period using a simulation model based on Level 3 inputs.
The Company’s policy is to recognize transfers into and out of Level 3 as of the date of the event or change in the circumstances that caused the transfer. There were no such transfers during the year.
Basic and diluted loss per share has been determined by dividing the net loss available to shareholders for the applicable period by the basic and diluted weighted average number of shares outstanding, respectively. The diluted weighted average number of shares outstanding is calculated as if all dilutive options had been exercised or vested at the later of the beginning of the reporting period or date of grant, using the treasury stock method.
Loss per common share is computed by dividing the net loss by the weighted average number of shares of common shares outstanding during the period. Common share equivalents, options and warrants are excluded from the computation of diluted loss per share when their effect is anti-dilutive, as they are in 2015 and 2014.
The Company follows the ASC Topic 360, which requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the assets’ carrying amounts may not be recoverable. In performing the review for recoverability, if future undiscounted cash flows (excluding interest charges) from the use and ultimate disposition of the assets are less than their carrying values, an impairment loss represented by the difference between its fair value and carrying value, is recognized. When properties are classified as held for sale they are recorded at the lower of the carrying amount or the expected sales price less costs to sell.
Certain amounts have been reclassified within the consolidated statement of operations and comprehensive loss for the nine month period ended December 31, 2014, in order to conform with current presentation. There was no impact to the previously reported net loss.
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The accounting standard is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2016. Early adoption is not permitted. The impact on our consolidated financial statements of adopting ASU 2014-09 will be assessed by management.
In August 2014, the FASB issued a new financial accounting standard on going concern, ASU No. 2014-15, “Presentation of Financial Statements Going Concern (Sub-Topic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” The standard provides guidance about management’s responsibility to evaluate whether there is a substantial doubt about the organization’s ability to continue as a going concern. The amendments in this Update apply to all companies. They become effective in the annual period ending after December 15, 2016, with early application permitted. The impact on the consolidated financial statements of adopting ASU 2014-15 will be assessed by management.
In September 2015, the FASB issued ASU No. 2015-16, “Simplifying the Accounting for Measurement-Period Adjustments,” which illustrates certain guidance governing adjustments to the provisional amounts recognized at the acquisition date with a corresponding adjustment to goodwill. Such adjustments are required when new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement amounts initially recognized or would have resulted in the recognition of additional assets and liabilities. ASU No. 2015-16 eliminates the requirement to retrospectively account for such adjustments. ASU No. 2015-16 is effective for the fiscal year commencing on January 1, 2016. The Company does not anticipate that the adoption of ASU No. 2015-16 will have a material effect on the consolidated financial position or the consolidated results of operations and comprehensive loss.
In November 2015, the FASB issued ASU No. 2015-17, “Balance Sheet Classification of Deferred Taxes,” which requires that deferred tax liabilities and assets be classified on our Consolidated Balance Sheets as noncurrent based on an analysis of each taxpaying component within a jurisdiction. ASU No. 2015-17 is effective for the fiscal year commencing on January 1, 2017. The Company does not anticipate that the adoption of ASU No. 2015-17 will have a material effect on the consolidated financial position or the consolidated results of operations.
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying consolidated financial statements.
Disclosure of accounting policy for cash and cash equivalents, including the policy for determining which items are treated as cash equivalents. Other information that may be disclosed includes (1) the nature of any restrictions on the entity's use of its cash and cash equivalents, (2) whether the entity's cash and cash equivalents are insured or expose the entity to credit risk, (3) the classification of any negative balance accounts (overdrafts), and (4) the carrying basis of cash equivalents (for example, at cost) and whether the carrying amount of cash equivalents approximates fair value.
Disclosure of accounting policy for computing basic and diluted earnings or loss per share for each class of common stock and participating security. Addresses all significant policy factors, including any antidilutive items that have been excluded from the computation and takes into account stock dividends, splits and reverse splits that occur after the balance sheet date of the latest reporting period but before the issuance of the financial statements.
Disclosure of accounting policy for (1) transactions denominated in a currency other than the reporting enterprise's functional currency, (2) translating foreign currency financial statements that are incorporated into the financial statements of the reporting enterprise by consolidation, combination, or the equity method of accounting, and (3) remeasurement of the financial statements of a foreign reporting enterprise in a hyperinflationary economy.
Disclosure of accounting policy for recognizing and measuring the impairment of long-lived assets. An entity also may disclose its accounting policy for long-lived assets to be sold. This policy excludes goodwill and intangible assets.
Disclosure of accounting policy for income taxes, which may include its accounting policies for recognizing and measuring deferred tax assets and liabilities and related valuation allowances, recognizing investment tax credits, operating loss carryforwards, tax credit carryforwards, and other carryforwards, methodologies for determining its effective income tax rate and the characterization of interest and penalties in the financial statements.
Disclosure of accounting policy pertaining to new accounting pronouncements that may impact the entity's financial reporting. Includes, but is not limited to, quantification of the expected or actual impact.
Disclosure of accounting policy for long-lived, physical assets used in the normal conduct of business and not intended for resale. Includes, but is not limited to, basis of assets, depreciation and depletion methods used, including composite deprecation, estimated useful lives, capitalization policy, accounting treatment for costs incurred for repairs and maintenance, capitalized interest and the method it is calculated, disposals and impairments.
Disclosure of accounting policy for costs it has incurred (1) in a planned search or critical investigation aimed at discovery of new knowledge with the hope that such knowledge will be useful in developing a new product or service, a new process or technique, or in bringing about a significant improvement to an existing product or process; or (2) to translate research findings or other knowledge into a plan or design for a new product or process or for a significant improvement to an existing product or process.
Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Glossary Research and Development -URI http://asc.fasb.org/extlink&oid=6523717
Disclosure of accounting policy for revenue recognition. If the entity has different policies for different types of revenue transactions, the policy for each material type of transaction is generally disclosed. If a sales transaction has multiple element arrangements (for example, delivery of multiple products, services or the rights to use assets) the disclosure may indicate the accounting policy for each unit of accounting as well as how units of accounting are determined and valued. The disclosure may encompass important judgment as to appropriateness of principles related to recognition of revenue. The disclosure also may indicate the entity's treatment of any unearned or deferred revenue that arises from the transaction.
Disclosure of accounting policy for the use of estimates in the preparation of financial statements in conformity with generally accepted accounting principles.
Tabular disclosure of the amounts paid in advance for capitalized costs that will be expensed with the passage of time or the occurrence of a triggering event, and will be charged against earnings within one year or the normal operating cycle, if longer; the aggregate carrying amount of current assets, not separately presented elsewhere in the balance sheet; and other deferred costs.
Tabular disclosure of physical assets used in the normal conduct of business and not intended for resale. Includes, but is not limited to, balances by class of assets, depreciation and depletion expense and method used, including composite depreciation, and accumulated deprecation.
Shares issued on conversion and settlement of debt
-
-
(ii)(iii)
1,012,142
1,012
Shares issued on the exercise of options
-
-
(iv)
1,310,734
1,311
Balance, end of the year/period
50,000,000
50,000
49,737,096
49,737
Common Shares
Balance, beginning of the year
-
-
-
-
Shares issued as Merger consideration
(vii)
6,000,063
6,000
-
-
Shares issued under private placement
(vi)-(xii)
16,408,250
16,408
-
-
Shares issued for services
(xiii)
20,000
20
Balance, end of the year
22,428,313
22,428
-
-
TOTAL COMMON SHARES
72,428,313
72,428
-
-
(i)
In April, 2014, the Company completed a private placement issuing 10,792,335 common shares at a price of $0.24 per share for gross proceeds of $2,616,062. A former director of the Company assisted in securing a significant portion of this financing. The Company incurred $11,609 in share issue costs related to the transaction.
(ii)
In May 2014, the Company issued 436,908 common shares in exchange for the settlement of $115,223 of unsecured debt.
(iii)
In June, 2014, the Company issued 575,234 common shares on conversion of the convertible secured promissory note (Note 6). The note plus accrued interest totaled $124,523 and was converted at a 20% discount to the April 2014 private placement.
(iv)
In June 2014, the Company issued 1,310,734 common shares for the exercise of stock options. The Company received cash of $228,875.
(v)
On February 25, 2015, 262,904 common shares were issued to two former lenders connected with a $241,185 loan received and repaid during fiscal 2013. The common shares were valued at $210,323 based on the value of the concurrent private placement (Note 8(vi)), and recorded in stock-based compensation on the consolidated statement of operations and comprehensive loss. As part of the consideration for the initial loan the CTO and COO had transferred 314,560 common shares to the lenders. For contributing the common shares to the lenders, the Company intends to reimburse the CTO and COO 320,000 common shares. As at December 31, 2015, these shares have not yet been issued.
(vi)
Concurrently with the closing of the Merger on February 26, 2015, the Company issued 7,735,750 units (the “Units”) for gross proceeds of $6,188,600 (the “First Closing”) (including $500,000 of outstanding bridge loans converted into Units at the offering price) at a purchase price of $0.80 per Unit (the “Purchase Price”) in a private placement offering (the “Offering”). Each Unit consists of one common share of the Company, and a warrant to purchase one common share of the Company at an exercise price of $1.40 per share exercisable for 4 years. The Company incurred share issue costs before legal and other costs related to the transaction of $848,822 and issued 773,575 broker warrants exercisable at $0.80 for a period of 4 years. The warrants were measured at fair value and recorded as a warrant derivative liability on the consolidated balance sheet (Note 10). After deducting the value of the warrants and the share issue costs, $4,789,404 was attributed to the value of the common shares.
(vii)
Immediately following the Merger and the First Closing, 6,000,063 common shares were held by existing Drywave stockholders, 7,735,750 were held by the investors in the Offering and Bionik Canada shareholders held an equivalent of 50,000,000 shares of the common shares through their ownership of 100% of the Exchangeable Shares which are held in 1 Special Preferred Share. The Special Preferred Share votes on behalf of the 50,000,000 Exchangeable Shares alongside the common shares of the Company as a single class.
(viii)
On March 27, 2015, the Company issued 1,212,500 Units for gross proceeds of $970,000 to accredited investors in a second closing (the “Second Closing”). Each Unit consisted of one common share of the Company, and a warrant to purchase one common share of the Company at an exercise price of $1.40 per share exercisable for 4 years. The Company incurred share issue costs before legal and other costs related to the Second Closing of $141,100 and issued 121,250 broker warrants exercisable at $0.80 for a period of 4 years. The warrants were measured at fair value and recorded as a warrant liability on the consolidated balance sheet (Note 10). The fair value of the warrants exceeded the net proceeds received upon closing and as a result $207,425 was recorded as a loss on initial recognition of the warrants and included in the change in fair value of warrant derivative liability on the consolidated statements of operations and comprehensive loss.
(ix)
On March 31 2015, the Company issued 891,250 Units for gross proceeds of $713,000 to accredited investors in a third closing (the “Third Closing”). Each Unit consisted of one common share of the Company, and a warrant to purchase one common share of the Company at an exercise price of $1.40 per share exercisable for 4 years. The Company incurred share issue costs before legal and other costs related to the Third Closing of $97,099 and issued 89,125 broker warrants exercisable at $0.80 for a period of 4 years. The warrants were measured at fair value and recorded as a warrant liability on the consolidated balance sheet (Note 10). The fair value of the warrants exceeded the net proceeds received upon closing and as a result $143,389 was recorded as a loss on initial recognition of the warrants and included in the change in fair value of warrant derivative liability on the consolidated statements of operations and comprehensive loss.
(x)
On April 21, 2015, the Company issued 3,115,000 Units for gross proceeds of $2,492,000 to accredited investors in a fourth closing (the “Fourth Closing”). Each Unit consisted of one common share of the Company, and a warrant to purchase one common share of the Company at an exercise price of $1.40 per share exercisable for 4 years. The Company incurred share issue costs before legal and other related to the Fourth Closing of $338,960 and issued 311,500 broker warrants exercisable at $0.80 for a period of 4 years. The warrants were measured at fair value and recorded as a warrant liability on the consolidated balance sheet (Note 10). The fair value of the warrants exceeded the net proceeds received upon closing and as a result $435,682 was recorded as a loss on initial recognition of the warrants and included in the change in fair value of warrant derivative liability on the consolidated statements of operations and comprehensive loss.
(xi)
On May 27, 2015, the Company issued 1,418,750 Units for gross proceeds of $1,135,000 to accredited investors in a fifth closing (the “Fifth Closing”). Each Unit consisted of one common share of the Company, and a warrant to purchase one common share of the Company at an exercise price of $1.40 per share exercisable for 4 years. The Company incurred share issue costs before legal and other costs related to the Fifth Closing of $147,566 and issued 141,875 broker warrants exercisable at $0.80 for a period of 4 years. The warrants were measured at fair value and recorded as a warrant liability on the consolidated balance sheet (Note 10). The fair value of the warrants exceeded the net proceeds received upon closing and as a result $37,739 was recorded as a loss on initial recognition of the warrants and included in the change in fair value of warrant derivative liability on the consolidated statements of operations and comprehensive loss.
(xii)
On June 30, 2015, the Company issued 2,035,000 Units for gross proceeds of $1,628,000 to accredited investors in a sixth and final closing (the “Sixth Closing”). Each Unit consisted of one common share of the Company, and a warrant to purchase one common share of the Company at an exercise price of $1.40 per share exercisable for 4 years. The Company incurred share issue costs before legal and other costs related to the Sixth Closing of $211,656 and issued 203,500 broker warrants exercisable at $0.80 for a period of 4 years. The warrants were measured at fair value and recorded as a warrant liability on the consolidated balance sheet (Note 10). The fair value of the warrants exceeded the net proceeds received upon closing and as a result $74,625 was recorded as a loss on initial recognition of the warrants and included in the change in fair value of warrant derivative liability on the consolidated statements of operations and comprehensive loss.
(xiii)
During the year, the Company entered into service agreements that resulted in a commitment to issue up to an December 31, 2016 and pay up to $130,000 over the next 12 months. During the year 20,000 common shares were issued pursuant to these commitments valued at $31,000 is included in share-based compensation. Subsequent to year -end, pursuant to this commitment 53,233 shares related to services provided in 2015 were issued (Note 13). As at December 31, 2015, these shares, valued at $43,900, have been recorded as shares to be issued with the corresponding expense included in general and administrative expense.
Tabular disclosure of changes in the separate accounts comprising stockholders' equity (in addition to retained earnings) and of the changes in the number of shares of equity securities during at least the most recent annual fiscal period and any subsequent interim period presented is required to make the financial statements sufficiently informative if both financial position and results of operations are presented.
These options granted and revalued during the year ended December 31, 2015 were valued using the Black-Scholes option pricing model with the following key assumptions:
Tabular disclosure of the number and weighted-average exercise prices (or conversion ratios) for share options (or share units) that were outstanding at the beginning and end of the year, vested and expected to vest, exercisable or convertible at the end of the year, and the number of share options or share units that were granted, exercised or converted, forfeited, and expired during the year.
Tabular disclosure of the significant assumptions used during the year to estimate the fair value of stock options, including, but not limited to: (a) expected term of share options and similar instruments, (b) expected volatility of the entity's shares, (c) expected dividends, (d) risk-free rate(s), and (e) discount for post-vesting restrictions.
Tabular disclosure of warranty derivative liability the aggregate changes in the liability for accruals related to warrant liability during the reporting period.
Tabular disclosure of warrants or rights issued. Warrants and rights outstanding are derivative securities that give the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Warrants are often included in a new debt issue to entice investors by a higher return potential. The main difference between warrants and call options is that warrants are issued and guaranteed by the company, whereas options are exchange instruments and are not issued by the company. Also, the lifetime of a warrant is often measured in years, while the lifetime of a typical option is measured in months. Disclose the title of issue of securities called for by warrants and rights outstanding, the aggregate amount of securities called for by warrants and rights outstanding, the date from which the warrants or rights are exercisable, and the price at which the warrant or right is exercisable.
Deferred tax reflects the tax effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities and consisted of the following:
Tabular disclosure of the components of income tax expense attributable to continuing operations for each year presented including, but not limited to: current tax expense (benefit), deferred tax expense (benefit), investment tax credits, government grants, the benefits of operating loss carryforwards, tax expense that results from allocating certain tax benefits either directly to contributed capital or to reduce goodwill or other noncurrent intangible assets of an acquired entity, adjustments of a deferred tax liability or asset for enacted changes in tax laws or rates or a change in the tax status of the entity, and adjustments of the beginning-of-the-year balances of a valuation allowance because of a change in circumstances that causes a change in judgment about the realizability of the related deferred tax asset in future years.
Tabular disclosure of the components of net deferred tax asset or liability recognized in an entity's statement of financial position, including the following: the total of all deferred tax liabilities, the total of all deferred tax assets, the total valuation allowance recognized for deferred tax assets.
Tabular disclosure of income tax examinations that an enterprise is currently subject to or that have been completed in the current period typically including a description of the examination, the jurisdiction conducting the examination, the tax year(s) under examination, the likelihood of an unfavorable settlement, the range of possible losses, the liability recorded, the increase or decrease in the liability from the prior period, and any penalties and interest that have been recorded.
Amount after tax of increase (decrease) in equity from transactions and other events and circumstances from net income and other comprehensive income, attributable to parent entity. Excludes changes in equity resulting from investments by owners and distributions to owners.
Total of all stockholders' equity (deficit) items, net of receivables from officers, directors, owners, and affiliates of the entity which are attributable to the parent. The amount of the economic entity's stockholders' equity attributable to the parent excludes the amount of stockholders' equity which is allocable to that ownership interest in subsidiary equity which is not attributable to the parent (noncontrolling interest, minority interest). This excludes temporary equity and is sometimes called permanent equity.
Description of the reverse stock split arrangement. Also provide the retroactive effect given by the reverse split that occurs after the balance sheet date but before the release of financial statements.
Amount of asset related to consideration paid in advance for insurance that provides economic benefits within a future period of one year or the normal operating cycle, if longer.
Amount of asset related to consideration paid in advance for income and other taxes that provide economic benefits within a future period of one year or the normal operating cycle, if longer.
Of the $300,000, $150,000 is repayable upon the earliest of May 5, 2016, the consummation of certain Possible Transactions and any consolidation, merger, combination, reorganization or other similar transaction entered into by the Borrower and interest is payable semi-yearly. The remaining $150,000, along with accrued interest, is repayable upon the earliest of the nine-month anniversary of the termination date of any letter of intent with respect to a Possible Transaction and the consummation of certain Possible Transactions or any other similar transaction similar to a Possible Transaction without the participation of the Company.
Carrying amount as of the balance sheet date of current interest earned but not received. Also called accrued interest or accrued interest receivable. For classified balance sheets, represents the current amount receivable, that is amounts expected to be collected within one year or the normal operating cycle, if longer.
Describes the major category and subcategories of loans held, any unusual risk concentration relating thereto, and the related loans receivable carrying amounts as of the balance sheet date. Such descriptions may include information pertaining to: (i) type of borrower, (ii) purpose of the loan, (iii) loan maturity, (iv) credit and other risk associated with the loan, and (v) other terms of importance (secured or unsecured, variable or fixed interest).
Including the current and noncurrent portions, carrying value as of the balance sheet date of subordinated debt (with initial maturities beyond one year or beyond the operating cycle if longer). Subordinated debt places a lender in a lien position behind debt having a higher priority of repayment in liquidation of the entity's assets.
Amount of accumulated depreciation, depletion and amortization for physical assets used in the normal conduct of business to produce goods and services.
Amount before accumulated depreciation, depletion and amortization of physical assets used in the normal conduct of business and not intended for resale. Examples include, but are not limited to, land, buildings, machinery and equipment, office equipment, and furniture and fixtures.
Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.
Amount after accumulated depreciation, depletion and amortization of physical assets used in the normal conduct of business to produce goods and services and not intended for resale. Examples include, but are not limited to, land, buildings, machinery and equipment, office equipment, and furniture and fixtures.
The amount of expense recognized in the current period that reflects the allocation of the cost of tangible assets over the assets' useful lives. Includes production and non-production related depreciation.
Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.
Amount of a favorable spread to a debt holder between the amount of debt being converted and the value of the securities received upon conversion. This is an embedded conversion feature of convertible debt issued that is in-the-money at the commitment date.
Identification of the lender and information about a contractual promise to repay a short-term or long-term obligation, which includes borrowings under lines of credit, notes payable, commercial paper, bonds payable, debentures, and other contractual obligations for payment. This may include rationale for entering into the arrangement, significant terms of the arrangement, which may include amount, repayment terms, priority, collateral required, debt covenants, borrowing capacity, call features, participation rights, conversion provisions, sinking-fund requirements, voting rights, basis for conversion if convertible and remarketing provisions. The description may be provided for individual debt instruments, rational groupings of debt instruments, or by debt in total.
Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.
Interest rate used to find the present value of an amount to be paid or received in the future as an input to measure fair value. For example, but not limited to, weighted average cost of capital (WACC), cost of capital, cost of equity and cost of debt.
For an unclassified balance sheet, amounts due from related parties including affiliates, employees, joint ventures, officers and stockholders, immediate families thereof, and pension funds.
Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.
Number of shares issued in lieu of cash for services contributed to the entity. Number of shares includes, but is not limited to, shares issued for services contributed by vendors and founders.
In April, 2014, the Company completed a private placement issuing 10,792,335 common shares at a price of $0.24 per share for gross proceeds of $2,616,062. A former director of the Company assisted in securing a significant portion of this financing. The Company incurred $11,609 in share issue costs related to the transaction.
[2]
On February 25, 2015, 262,904 common shares were issued to two former lenders connected with a $241,185 loan received and repaid during fiscal 2013. The common shares were valued at $210,323 based on the value of the concurrent private placement (Note 8(vi)), and recorded in stock-based compensation on the consolidated statement of operations and comprehensive loss. As part of the consideration for the initial loan the CTO and COO had transferred 314,560 common shares to the lenders. For contributing the common shares to the lenders, the Company intends to reimburse the CTO and COO 320,000 common shares. As at December 31, 2015, these shares have not yet been issued.
[3]
In June, 2014, the Company issued 575,234 common shares on conversion of the convertible secured promissory note (Note 6). The note plus accrued interest totaled $124,523 and was converted at a 20% discount to the April 2014 private placement.
[4]
In May 2014, the Company issued 436,908 common shares in exchange for the settlement of $115,223 of unsecured debt.
[5]
In June 2014, the Company issued 1,310,734 common shares for the exercise of stock options. The Company received cash of $228,875.
[6]
Immediately following the Merger and the First Closing, 6,000,063 common shares were held by existing Drywave stockholders, 7,735,750 were held by the investors in the Offering and Bionik Canada shareholders held an equivalent of 50,000,000 shares of the common shares through their ownership of 100% of the Exchangeable Shares which are held in 1 Special Preferred Share. The Special Preferred Share votes on behalf of the 50,000,000 Exchangeable Shares alongside the common shares of the Company as a single class.
[7]
Concurrently with the closing of the Merger on February 26, 2015, the Company issued 7,735,750 units (the “Units”) for gross proceeds of $6,188,600 (the “First Closing”) (including $500,000 of outstanding bridge loans converted into Units at the offering price) at a purchase price of $0.80 per Unit (the “Purchase Price”) in a private placement offering (the “Offering”). Each Unit consists of one common share of the Company, and a warrant to purchase one common share of the Company at an exercise price of $1.40 per share exercisable for 4 years. The Company incurred share issue costs before legal and other costs related to the transaction of $848,822 and issued 773,575 broker warrants exercisable at $0.80 for a period of 4 years. The warrants were measured at fair value and recorded as a warrant derivative liability on the consolidated balance sheet (Note 10). After deducting the value of the warrants and the share issue costs, $4,789,404 was attributed to the value of the common shares.
[8]
On April 21, 2015, the Company issued 3,115,000 Units for gross proceeds of $2,492,000 to accredited investors in a fourth closing (the “Fourth Closing”). Each Unit consisted of one common share of the Company, and a warrant to purchase one common share of the Company at an exercise price of $1.40 per share exercisable for 4 years. The Company incurred share issue costs before legal and other related to the Fourth Closing of $338,960 and issued 311,500 broker warrants exercisable at $0.80 for a period of 4 years. The warrants were measured at fair value and recorded as a warrant liability on the consolidated balance sheet (Note 10). The fair value of the warrants exceeded the net proceeds received upon closing and as a result $435,682 was recorded as a loss on initial recognition of the warrants and included in the change in fair value of warrant derivative liability on the consolidated statements of operations and comprehensive loss.
[9]
On June 30, 2015, the Company issued 2,035,000 Units for gross proceeds of $1,628,000 to accredited investors in a sixth and final closing (the “Sixth Closing”). Each Unit consisted of one common share of the Company, and a warrant to purchase one common share of the Company at an exercise price of $1.40 per share exercisable for 4 years. The Company incurred share issue costs before legal and other costs related to the Sixth Closing of $211,656 and issued 203,500 broker warrants exercisable at $0.80 for a period of 4 years. The warrants were measured at fair value and recorded as a warrant liability on the consolidated balance sheet (Note 10). The fair value of the warrants exceeded the net proceeds received upon closing and as a result $74,625 was recorded as a loss on initial recognition of the warrants and included in the change in fair value of warrant derivative liability on the consolidated statements of operations and comprehensive loss.
[10]
On March 27, 2015, the Company issued 1,212,500 Units for gross proceeds of $970,000 to accredited investors in a second closing (the “Second Closing”). Each Unit consisted of one common share of the Company, and a warrant to purchase one common share of the Company at an exercise price of $1.40 per share exercisable for 4 years. The Company incurred share issue costs before legal and other costs related to the Second Closing of $141,100 and issued 121,250 broker warrants exercisable at $0.80 for a period of 4 years. The warrants were measured at fair value and recorded as a warrant liability on the consolidated balance sheet (Note 10). The fair value of the warrants exceeded the net proceeds received upon closing and as a result $207,425 was recorded as a loss on initial recognition of the warrants and included in the change in fair value of warrant derivative liability on the consolidated statements of operations and comprehensive loss.
[11]
On March 31 2015, the Company issued 891,250 Units for gross proceeds of $713,000 to accredited investors in a third closing (the “Third Closing”). Each Unit consisted of one common share of the Company, and a warrant to purchase one common share of the Company at an exercise price of $1.40 per share exercisable for 4 years. The Company incurred share issue costs before legal and other costs related to the Third Closing of $97,099 and issued 89,125 broker warrants exercisable at $0.80 for a period of 4 years. The warrants were measured at fair value and recorded as a warrant liability on the consolidated balance sheet (Note 10). The fair value of the warrants exceeded the net proceeds received upon closing and as a result $143,389 was recorded as a loss on initial recognition of the warrants and included in the change in fair value of warrant derivative liability on the consolidated statements of operations and comprehensive loss.
[12]
On May 27, 2015, the Company issued 1,418,750 Units for gross proceeds of $1,135,000 to accredited investors in a fifth closing (the “Fifth Closing”). Each Unit consisted of one common share of the Company, and a warrant to purchase one common share of the Company at an exercise price of $1.40 per share exercisable for 4 years. The Company incurred share issue costs before legal and other costs related to the Fifth Closing of $147,566 and issued 141,875 broker warrants exercisable at $0.80 for a period of 4 years. The warrants were measured at fair value and recorded as a warrant liability on the consolidated balance sheet (Note 10). The fair value of the warrants exceeded the net proceeds received upon closing and as a result $37,739 was recorded as a loss on initial recognition of the warrants and included in the change in fair value of warrant derivative liability on the consolidated statements of operations and comprehensive loss.
[13]
During the year, the Company entered into service agreements that resulted in a commitment to issue up to an December 31, 2016 and pay up to $130,000 over the next 12 months. During the year 20,000 common shares were issued pursuant to these commitments valued at $31,000 is included in share-based compensation. Subsequent to year -end, pursuant to this commitment 53,233 shares related to services provided in 2015 were issued (Note 13). As at December 31, 2015, these shares, valued at $43,900, have been recorded as shares to be issued with the corresponding expense included in general and administrative expense.
Gross number of shares (or other type of equity) issued during the period as a result of any equity-based compensation plan other than an employee stock ownership plan (ESOP). Shares issued could result from the issuance of restricted stock, the exercise of stock options, stock issued under employee stock purchase plans, and/or other employee benefit plans.
Gross value of stock (or other type of equity) issued during the period as a result of any equity-based compensation plan other than an employee stock ownership plan (ESOP). Stock issued could result from the issuance of restricted stock, the exercise of stock options, stock issued under employee stock purchase plans, and/or other employee benefit plans.
Total of all stockholders' equity (deficit) items, net of receivables from officers, directors, owners, and affiliates of the entity which are attributable to the parent. The amount of the economic entity's stockholders' equity attributable to the parent excludes the amount of stockholders' equity which is allocable to that ownership interest in subsidiary equity which is not attributable to the parent (noncontrolling interest, minority interest). This excludes temporary equity and is sometimes called permanent equity.
Each Unit consists of one common share of the Company, and a warrant to purchase one common share of the Company at an exercise price of $1.40 per share exercisable for 4 years.
Each Unit consisted of one common share of the Company, and a warrant to purchase one common share of the Company at an exercise price of $1.40 per share exercisable for 4 years.
Each Unit consisted of one common share of the Company, and a warrant to purchase one common share of the Company at an exercise price of $1.40 per share exercisable for 4 years.
Each Unit consisted of one common share of the Company, and a warrant to purchase one common share of the Company at an exercise price of $1.40 per share exercisable for 4 years.
Each Unit consisted of one common share of the Company, and a warrant to purchase one common share of the Company at an exercise price of $1.40 per share exercisable for 4 years.
Each Unit consisted of one common share of the Company, and a warrant to purchase one common share of the Company at an exercise price of $1.40 per share exercisable for 4 years.
Short-Term financing which is expected to be paid back relatively quickly, such as by a subsequent longer-term loan. Also called swing loan or bridge financing.
The value of the financial instrument(s) that the original debt is being converted into in a noncash (or part noncash) transaction. "Part noncash" refers to that portion of the transaction not resulting in cash receipts or cash payments in the period.
Dividend or interest rate associated with the financial instrument issued in exchange for the original debt being converted in a noncash or part noncash transaction. Noncash are transactions that affect recognized assets or liabilities but that do not result in cash receipts or cash payments. Part noncash refers to that portion of the transaction not resulting in cash receipts or cash payments.
The number of shares issued in exchange for the original debt being converted in a noncash (or part noncash) transaction. "Part noncash" refers to that portion of the transaction not resulting in cash receipts or payments in the period.
Number of shares issued in lieu of cash for services contributed to the entity. Number of shares includes, but is not limited to, shares issued for services contributed by vendors and founders.
Value of stock issued in lieu of cash for services contributed to the entity. Value of the stock issued includes, but is not limited to, services contributed by vendors and founders.
The estimated dividend rate (a percentage of the share price) to be paid (expected dividends) to holders of the underlying shares over the option's term.
The estimated measure of the percentage by which a share price is expected to fluctuate during a period. Volatility also may be defined as a probability-weighted measure of the dispersion of returns about the mean. The volatility of a share price is the standard deviation of the continuously compounded rates of return on the share over a specified period. That is the same as the standard deviation of the differences in the natural logarithms of the stock prices plus dividends, if any, over the period.
Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.
Expected term of share-based compensation awards, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents the reported fact of one year, five months, and thirteen days.
Fair value of options vested. Excludes equity instruments other than options, for example, but not limited to, share units, stock appreciation rights, restricted stock.
The number of shares under options that were cancelled during the reporting period as a result of occurrence of a terminating event specified in contractual agreements pertaining to the stock option plan.
Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.
The number of shares under options that were cancelled during the reporting period as a result of occurrence of a terminating event specified in contractual agreements pertaining to the stock option plan.
Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.
The number of shares into which fully or partially vested stock options outstanding as of the balance sheet date can be currently converted under the option plan.
Represents the expense recognized during the period arising from equity-based compensation arrangements (for example, shares of stock, unit, stock options or other equity instruments) with employees, directors and certain consultants qualifying for treatment as employees.
Period which an employee's right to exercise an award is no longer contingent on satisfaction of either a service condition, market condition or a performance condition, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents the reported fact of one year, five months, and thirteen days.
Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.
The difference between the maximum number of shares (or other type of equity) authorized for issuance under the plan (including the effects of amendments and adjustments), and the sum of: 1) the number of shares (or other type of equity) already issued upon exercise of options or other equity-based awards under the plan; and 2) shares (or other type of equity) reserved for issuance on granting of outstanding awards, net of cancellations and forfeitures, if applicable.
The number of shares under options that were cancelled during the reporting period as a result of occurrence of a terminating event specified in contractual agreements pertaining to the stock option plan.
Weighted average remaining contractual term for vested portions of options outstanding and currently exercisable or convertible, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents the reported fact of one year, five months, and thirteen days.
Weighted average remaining contractual term for option awards outstanding, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents the reported fact of one year, five months, and thirteen days.
Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.
Fair value, before effects of master netting arrangements, of a financial liability or contract with one or more underlyings, notional amount or payment provision or both, and the contract can be net settled by means outside the contract or delivery of an asset. Includes liabilities elected not to be offset. Excludes liabilities not subject to a master netting arrangement.
Fair value, after the effects of master netting arrangements, of a financial liability or contract with one or more underlyings, notional amount or payment provision or both, and the contract can be net settled by means outside the contract or delivery of an asset. Includes liabilities not subject to a master netting arrangement and not elected to be offset.
The estimated dividend rate (a percentage of the share price) to be paid (expected dividends) to holders of the underlying shares over the option's term.
The estimated measure of the percentage by which a share price is expected to fluctuate during a period. Volatility also may be defined as a probability-weighted measure of the dispersion of returns about the mean. The volatility of a share price is the standard deviation of the continuously compounded rates of return on the share over a specified period. That is the same as the standard deviation of the differences in the natural logarithms of the stock prices plus dividends, if any, over the period.
Expected term of share-based compensation awards, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents the reported fact of one year, five months, and thirteen days.
Value of outstanding derivative securities that permit the holder the right to purchase securities (usually equity) from the issuer at a specified price.
The Company has the option to redeem the warrants for $0.001 per warrant if the daily volume weighted-average price of the common shares is 200% or more of the exercise price for twenty consecutive trading days provided there is an effective registration statement covering the common shares available throughout the thirty day period after the redemption date. The warrant holders then have thirty days to exercise the warrants or receive the redemption amount.
Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.
The number of warrants issued in exchange for the original debt being converted in a noncash (or part noncash) transaction. "Part noncash" refers to that portion of the transaction not resulting in cash receipts or cash payments in the period.
The increase (decrease) during the period in the carrying value of derivative instruments reported as liabilities that are due to be disposed of within one year (or the normal operating cycle, if longer).
The portion of earnings or loss from continuing operations before income taxes that is attributable to foreign operations, which is defined as Income or Loss generated from operations located outside the entity's country of domicile.
Sum of operating profit and nonoperating income or expense before Income or Loss from equity method investments, income taxes, extraordinary items, and noncontrolling interest.
Amount of the difference between reported income tax expense (benefit) and expected income tax expense (benefit) computed by applying the domestic federal statutory income tax rates to pretax income (loss) from continuing operations attributable to increase (decrease) in the valuation allowance for deferred tax assets.
The amount of income tax expense or benefit for the period computed by applying the domestic federal statutory tax rates to pretax income from continuing operations.
Amount of the difference between reported income tax expense (benefit) and expected income tax expense (benefit) computed by applying the domestic federal statutory income tax rates to pretax income (loss) from continuing operations attributable to nondeductible expenses.
Amount of the difference between reported income tax expense (benefit) and expected income tax expense (benefit) computed by applying the domestic federal statutory income tax rates to pretax income (loss) from continuing operations attributable to nondeductible equity-based compensation costs.
Amount of the difference between reported income tax expense (benefit) and expected income tax expense (benefit) computed by applying the domestic federal statutory income tax rates to pretax income (loss) from continuing operations attributable to other adjustments.
Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.
Total number of common shares of an entity that have been sold or granted to shareholders (includes common shares that were issued, repurchased and remain in the treasury). These shares represent capital invested by the firm's shareholders and owners, and may be all or only a portion of the number of shares authorized. Shares issued include shares outstanding and shares held in the treasury.
Amount before allowance of loans and leases held in portfolio, including but not limited to, commercial and consumer loans. Includes deferred interest and fees, undisbursed portion of loan balance, unamortized costs and premiums and discounts from face amounts. Excludes loans and leases covered under loss sharing agreements.
Number of shares issued in lieu of cash for services contributed to the entity. Number of shares includes, but is not limited to, shares issued for services contributed by vendors and founders.
Value of stock issued in lieu of cash for services contributed to the entity. Value of the stock issued includes, but is not limited to, services contributed by vendors and founders.
Detail information of subsequent event by type. User is expected to use existing line items from elsewhere in the taxonomy as the primary line items for this disclosure, which is further associated with dimension and member elements pertaining to a subsequent event.