UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For
the quarterly period ended | |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the period from ______________ to_______________
Commission
file number:
(Exact name of registrant as specified in its charter)
State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None.
Indicate by check whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act).
Large accelerated filer ☐ | Accelerated filer ☐ |
Smaller
reporting company | |
Emerging
growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: shares of Common Stock, $0.001 par value, at August 16, 2021. As at that same date, the Company also has 1,466,718 Exchangeable Shares outstanding that convert directly into common shares, which when combined with its Common Stock produce an amount equivalent to 42,154,296 outstanding voting securities.
BIOTRICITY INC.
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EXPLANATORY NOTE
This Amendment No. 1 (the “Amendment”) to the Quarterly Report on Form 10-Q of Botricity Inc. (the “Company”) for the quarter ended June 30, 2021, originally filed with the Securities and exchange Commission on August 17, 2021 (the “Original Form 10-Q”) is being filed to complete the filing by tagging the Original Form 10-Q for XBRL which not originally included as a result of technical difficulties.
This Amendment contains new certifications by the Company’s principal executive officer and principal financial officer which are being filed as exhibits to the Amendment.
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PART 1
FINANCIAL INFORMATION
Item 1 – Condensed Consolidated Financial Statements
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BIOTRICITY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS AT JUNE 30, 2021 (unaudited) and MARCH 31, 2021 (audited)
(Expressed in US Dollars)
As at Jun 30, 2021 | As at Mar 31, 2021 | |||||||
$ | $ | |||||||
CURRENT ASSETS | ||||||||
Cash | ||||||||
Accounts receivable, net | ||||||||
Inventory | ||||||||
Deposits and other receivables | ||||||||
Total current assets | ||||||||
Long-term accounts receivable | ||||||||
Operating right of use lease asset | ||||||||
TOTAL ASSETS | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable and accrued liabilities [Note 4] | ||||||||
Convertible promissory notes and short term loans [Note 5] | ||||||||
Derivative liabilities [Note 7] | ||||||||
Operating lease liability | ||||||||
Total current liabilities | ||||||||
Federally guaranteed loans [Note 6] | ||||||||
Derivative liabilities [Note 7] | ||||||||
TOTAL LIABILITIES | ||||||||
STOCKHOLDERS’ DEFICIENCY | ||||||||
Preferred stock, $ | par value, authorized as at June 30, 2021 and March 31, 2021, respectively, share issued and outstanding as at June 30, 2021 and March 31, 2021, respectively [Note 8]||||||||
Preferred stock, $ | par value, authorized as at June 30, 2021 and March 31, 2021, respectively, preferred shares issued and outstanding as at June 30, 2021 and as at March 31, 2021, respectively [Note 8]||||||||
Common stock, $ | par value, authorized as at June 30, 2021 and March 31, 2021, respectively. Issued and outstanding common shares: and as at June 30, 2021 and March 31, 2021, respectively, and exchangeable shares of and outstanding as at June 30, 2021 and March 31, 2021, respectively [Note 8]||||||||
Shares to be issued ( | and shares of common stock as at June 30, 2021 and March 31, 2021, respectively) [Note 8]||||||||
Additional paid-in-capital | ||||||||
Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
Accumulated deficit | ( | ) | ( | ) | ||||
Total stockholders’ deficiency | ( | ) | ( | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY |
See accompanying notes to unaudited condensed consolidated interim financial statements
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BIOTRICITY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND 2020
(Expressed in US Dollars)
3 Months Ended Jun 30, 2021 | 3 Months Ended Jun 30, 2020 | |||||||
$ | $ | |||||||
REVENUE | ||||||||
Cost of Revenue | ||||||||
NET REVENUE | ||||||||
EXPENSES | ||||||||
General and administrative expenses [Notes 7, 8 and 9] | ||||||||
Research and development expenses | ||||||||
TOTAL OPERATING EXPENSES | ||||||||
Other income / (expense) | ( | ) | ||||||
Accretion and amortization expenses [Note 5] | ||||||||
Change in fair value of derivative liabilities [Note 7] | ( | ) | ||||||
NET LOSS BEFORE INCOME TAXES | ( | ) | ( | ) | ||||
Income taxes | ||||||||
NET LOSS BEFORE DIVIDENDS | ( | ) | ( | ) | ||||
Less: Preferred Stock Dividends | ||||||||
NET LOSS ATTRIBUTABLE TO COMMON STOCKLHOLDERS | ( | ) | ( | ) | ||||
Translation adjustment | ( | ) | ||||||
COMPREHENSIVE LOSS | ( | ) | ( | ) | ||||
LOSS PER SHARE, BASIC AND DILUTED | ( | ) | ( | ) | ||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING |
See accompanying notes to unaudited condensed consolidated interim financial statements
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BIOTRICITY INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY
FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND 2020 (UNAUDITED)
Preferred stock | Common stock and exchangeable common shares | Shares to be Issued | Additional paid in capital | Accumulated other comprehensive (loss) income | Accumulated deficit | Total | |||||||||||||||||||||||||||||||||||
Shares | $ | Shares | $ | Shares | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
Balance, March 31, 2021 | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
Conversion of convertible notes into common shares | — | ||||||||||||||||||||||||||||||||||||||||
Exercise of warrants for cash | — | ||||||||||||||||||||||||||||||||||||||||
Issuance of warrants for services | — | — | — | ||||||||||||||||||||||||||||||||||||||
Stock based compensation - ESOP | — | — | — | ||||||||||||||||||||||||||||||||||||||
Translation adjustment | — | — | — | ||||||||||||||||||||||||||||||||||||||
Net loss for the period | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
Preferred stock dividends | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
Balance, June 30, 2021 (unaudited) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
Balance, March 31, 2020 | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
Issuance of preferred stock | — | ||||||||||||||||||||||||||||||||||||||||
Derivative liabilities adjustment | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
Issuance of shares for services | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
Issuance of warrants for services | — | — | — | ||||||||||||||||||||||||||||||||||||||
Stock based compensation - ESOP | — | — | — | ||||||||||||||||||||||||||||||||||||||
Translation adjustment | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
Net loss for the period | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
Preferred stock dividends | — | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
Balance, June 30, 2020 (unaudited) | ( | ) | ( | ) | ( | ) |
See accompanying notes to unaudited condensed consolidated interim financial statements
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BIOTRICITY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND 2020
(Expressed in US Dollars)
Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | |||||||
$ | $ | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net loss before dividends | ( | ) | ( | ) | ||||
Adjustments to reconcile net loss to net cash used in operations | ||||||||
Stock based compensation | ||||||||
Issuance of shares for services | ||||||||
Issuance of warrants for services | ||||||||
Accretion and amortization expenses | ||||||||
Change in fair value of derivative liabilities | ( | ) | ||||||
Loss on conversion of convertible notes to common shares | ||||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable, net | ( | ) | ( | ) | ||||
Inventory | ( | ) | ||||||
Deposits and other receivables | ( | ) | ||||||
Accounts payable and accrued liabilities | ( | ) | ||||||
Net cash used in operating activities | ( | ) | ( | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Issuance of preferred shares, net | ||||||||
Exercise of warrants for cash | ||||||||
Federally guaranteed loans | ||||||||
Proceeds from (repayment to) ST loan and promissory notes, net | ( | ) | ||||||
Preferred Stock Dividend | ( | ) | ||||||
Net cash provided by financing activities | ||||||||
Effect of foreign currency translation | ( | ) | ||||||
Net decrease in cash during the period | ( | ) | ( | ) | ||||
Cash, beginning of period | ||||||||
Cash, end of period |
See accompanying notes to unaudited condensed consolidated interim financial statements
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BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2021 (Unaudited)
(Expressed in US dollars)
1. NATURE OF OPERATIONS
Biotricity Inc. (formerly MetaSolutions, Inc.) (the “Company”) was incorporated under the laws of the State of Nevada on August 29, 2012. iMedical Innovations Inc. (“iMedical”) was incorporated on July 3, 2014 under the laws of the Province of Ontario, Canada and became a wholly-owned subsidiary of Biotricity through reverse take-over.
Both the Company and iMedical are engaged in research and development activities within the remote monitoring segment of preventative care. They are focused on a realizable healthcare business model that has an existing market and commercialization pathway. As such, its efforts to date have been devoted in building technology that enables access to this market through the development of a tangible product.
2. BASIS OF PRESENTATION, MEASUREMENT AND CONSOLIDATION
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) for interim financial information and the Securities and Exchange Commission (“SEC”) instructions to Form 10-Q and Article 8 of SEC Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with Biotricity’s audited consolidated financial statements for the years ended March 31, 2021 and 2020 and their accompanying notes.
The accompanying unaudited condensed consolidated financial statements are expressed in United States dollars (“USD”). In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of financial position and results of operations for the interim periods presented have been reflected herein. Operating results for the interim periods presented herein are not necessarily indicative of the results that may be expected for the year ending March 31, 2022. The Company’s fiscal year-end is March 31.
The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Significant intercompany accounts and transactions have been eliminated.
Certain prior year amounts have been reclassified to conform to the current year’s presentation.
Liquidity and Basis of Presentation
The
Company is in the early stages of commercializing its first product. It is concurrently in development mode, operating a research
and development program in order to develop an ecosystem of medical technologies, and, where required or deemed advisable, obtain
regulatory approvals for, and commercialize other proposed products. The Company has incurred recurring losses from operations, and
as at June 30, 2021, has an accumulated deficit of $
9 |
The Company’s operating plan is predicated on a variety of assumptions including, but not limited to, the level of product demand, cost estimates, its ability to continue to raise additional financing and the state of the general economic environment in which the Company operates. There can be no assurance that these assumptions will prove to be accurate in all material respects, or that the Company will be able to successfully execute its operating plan. In the absence of additional appropriate financing, the Company may have to modify its operating plan or slow down the pace of development and commercialization of its proposed products. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in case of equity financing.
Due to the disruption of the COVID-19 crisis, the Company’s business activities might be subject to certain level of adverse impact. To the date of the issuance of these financial statements, the Company is still assessing the impact on its business, results of operations, financial position and cash flows, which will be accounted for when the reliable estimates will become available.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of the consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the 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. Areas involving significant estimates and assumptions include: deferred income tax assets and related valuation allowance, accruals and valuation of derivatives, convertible promissory notes, stock options, and assumptions used in the going concern assessment. Actual results could differ from those estimates. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the period in which they become known.
The Company has adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 260-10 which provides for calculation of “basic” and “diluted” earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income or loss available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. Diluted earnings per share exclude all potentially dilutive shares if their effect is anti-dilutive. There were potentially dilutive shares outstanding as at June 30, 2021 and 2020.
Fair Value of Financial Instruments
ASC 820 defines fair value, establishes a framework for measuring fair value and expands required disclosure about fair value measurements of assets and liabilities. ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
● Level 1 – Valuation based on quoted market prices in active markets for identical assets or liabilities.
● Level 2 – Valuation based on quoted market prices for similar assets and liabilities in active markets.
● Level 3 – Valuation based on unobservable inputs that are supported by little or no market activity, therefore requiring management’s best estimate of what market participants would use as fair value.
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments or interest rates that are comparable to market rates. These financial instruments include cash, accounts receivable, deposits and other receivables, convertible promissory notes, and accounts payable and accrued liabilities. The Company’s cash and derivative liabilities, which are carried at fair values, are classified as a Level 1 and Level 3, respectively. The Company’s bank accounts are maintained with financial institutions of reputable credit, therefore, bear minimal credit risk.
10 |
Leases
The Company is the lessee in a lease contract when the Company obtains the right to use the asset. Operating leases are included in the line items right-of-use asset, lease obligation, current, and lease obligation, long-term in the consolidated balance sheet.
Right-of-use (“ROU”) asset represents the Company’s right to use an underlying asset for the lease term and lease obligations represent the Company’s obligations to make lease payments arising from the lease, both of which are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Leases with a lease term of 12 months or less at inception are not recorded on the consolidated balance sheet and are expensed on a straight-line basis over the lease term in our consolidated statement of income. The Company determines the lease term by agreement with lessor. As our lease do not provide an implicit interest rate, the Company uses the Company’s incremental borrowing rate based on the information available at commencement date in determining the present value of future payments.
Government loan
Loans that were received from the federal government, which contain certain operating conditions and with terms of over twelve months, are recorded by the Company as long-term liabilities.
Convertible Promissory Notes Payable and Derivative Instruments
The Company has adopted the provisions of ASU 2017-11 to account for the down round features of warrants issued with private placements effective as of April 1, 2017. In doing so, warrants with a down round feature previously treated as derivative liabilities in the consolidated balance sheet and measured at fair value are henceforth treated as equity, with no adjustment for changes in fair value at each reporting period. Previously, the Company accounted for conversion options embedded in convertible notes in accordance with ASC 815. ASC 815 generally requires companies to bifurcate conversion options embedded in convertible notes from their host instruments and to account for them as free-standing derivative financial instruments. ASC 815 provides for an exception to this rule when convertible notes, as host instruments, are deemed to be conventional, as defined by ASC 815-40. The Company accounts for convertible notes deemed conventional and conversion options embedded in non-conventional convertible notes which qualify as equity under ASC 815, in accordance with the provisions of ASC 470-20, which provides guidance on accounting for convertible securities with beneficial conversion features. Accordingly, the Company records, as a discount to convertible notes, the intrinsic value of such conversion options based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt.
Recently Issued Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments.” This pronouncement, along with subsequent ASUs issued to clarify provisions of ASU 2016-13, changes the impairment model for most financial assets and will require the use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. In developing the estimate for lifetime expected credit loss, entities must incorporate historical experience, current conditions, and reasonable and supportable forecasts. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. On November 19, 2019, the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), finalized various effective date delays for private companies, not-for-profit organizations, and certain smaller reporting companies applying the credit losses (CECL), the revised effective date is January 2023.
11 |
In July 2019, the FASB issued ASU 2019-07, Codification Updates to SEC Sections. This ASU amends various SEC paragraphs pursuant to the issuance of SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization. One of the changes in the ASU requires a presentation of changes in stockholders’ equity in the form of a reconciliation, either as a separate financial statement or in the notes to the financial statements, for the current and comparative year-to-date interim periods. The Company presented changes in stockholders’ equity as separate financial statements for the current and comparative year-to-date interim periods beginning on April 1, 2019. The additional elements of the ASU did not have a material impact on the Company’s consolidated financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company is currently evaluating the impacts of the provisions of ASU 2019-12 on its financial condition, results of operations, and cash flows.
In March 2020, the FASB issued ASU No. 2030-20 Codification Improvements to Financial Instruments, An Amendment of the FASB Accounting Standards Codification: a) in ASU No. 2016-01, b) in Subtopic 820-10, c) for depository and lending institutions clarification in disclosure requirements, d) in Subtopic 470-50, e) in Subtopic 820-10, f) Interaction of Topic 842 and Topic 326, g) Interaction of the guidance in Topic 326 and Subtopic 860-20.The amendments in this Update represent changes to clarify or improve the Codification. The amendments make the Codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. For public business entities updates under the following paragraphs: a), b), d) and e) are effective upon issuance of this final update. The effective date for c) is for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company does not expect that the new guidance will significantly impact its consolidated financial statements.
The Company continues to evaluate the impact of the new accounting pronouncement, including enhanced disclosure requirements, on our business processes, controls and systems.
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4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
As at June 30, 2021 $ | As at March 31, 2021 $ | |||||||
Accounts payable | ||||||||
Accrued liabilities | ||||||||
Accounts
payable as at June 30, 2021, and March 31, 2021 include $
5. CONVERTIBLE PROMISSORY NOTES AND SHORT TERM LOANS
a) | The
Company has issued various promissory notes and obtained several short term
loans. The promissory notes and short-term loans are generally for a |
During
the year ended March 31, 2021, the Company raised additional $
During
the three months ended June 30, 2021, the Company raised additional $
As
at June 30, 2021, the Company had a balance in promissory note of $
As
at June 30, 2021, the Company had a balance in short term loan of $
General
and administrative expenses included interest expense on the above notes of $
(b) | During
the year ended March 31, 2021, the Company issued $ |
For first series of Series A Notes, commencing six months following the Issuance Date, and at any time thereafter (provided the Holder has not received notice of the Company’s intent to prepay the note), at the sole election of the Holder, any amount of the outstanding principal and accrued interest of this note (the “Outstanding Balance”) may be converted into that number of shares of Common Stock equal to: (i) the Outstanding Balance divided by (ii) 75% of the volume weighted average price of the Common Stock for the 5 trading days prior to the Conversion Date (the conversion price).
For
the first series of Series A Notes,
13 |
For second series of Series A Notes, the notes could be converted into shares of common stock, at the option of the holder, commencing six months from issuance, at a conversion price equal to the lower of $per share or 75% of the volume weighted average price of the common stock for the five trading days prior to the conversion date
Net
proceeds to the Company from Series A Notes issuance up to March 31, 2021 amounted to $
On
final closing, which occurred on January 8, 2021, the warrants’
exercise price was struck at $
Prior
to January 8, 2021 (final closing date), the Company determined that the conversion and redemption features, investor warrants and placement
agent warrants contained in those Notes represented a single compound derivative liability that meets the requirements for liability
classification under ASC 815. The Company accounted for these obligations by determining the fair value of the related derivative liabilities
associated with the embedded conversion and redemption features, as well as investor warrants and placement agent warrants. The initial
fair value of the derivative liabilities generated as a result of issuing the Series A Notes was $
Subsequently,
the exercise price of all warrants was concluded and locked to $
For
the Series A Notes, The Company recognized debt issuance costs in the amount of $
At
June 30, 2021, the Company recorded $
During
the three months ended June 30, 2021, $
14 |
In
addition, during the year ended March 31, 2021, the Company also issued $
The
Series B Notes will automatically convert into common stock upon
a merger, consolidation, exchange of shares, recapitalization, reorganization, as a result of which the Company’s common stock
shall be changed into another class or classes of stock of the Company or another entity, or in the case of the sale of all or substantially
all of the assets of the Company other than a complete liquidation of the Company. Within the first 180 days after the issuance date,
the Company may, at its discretion redeem the notes for 115% of their face value plus accrued interest. The Company is obligated to issue
warrants that accompany the convertible notes and provide 50% warrant coverage. The warrants have a
Net
proceeds to the Company from convertible note issuances to March 31, 2021 amounted to $
The
Company recognized debt issuance costs in the amount of $
At
June 30, 2021, the Company recorded $
15 |
Total | ||||
$ | ||||
Year ended March 31, 2021 | ||||
Face value of convertible notes issued | ||||
Debt discount | ( | ) | ||
Debt issuance cost | ( | ) | ||
Day 1 value of convertible notes issued | ||||
Accretion of debt discount | ||||
Amortization of debt issuance cost | ||||
Total accretion and amortization expenses | ||||
Conversion to common shares (Note 8) | ( | ) | ||
Balance at March 31, 2021 | ||||
Three months ended June 30, 2021 | ||||
Accretion of debt discount | ||||
Amortization of debt issuance cost | ||||
Total accretion and amortization expenses | ||||
Conversion to common shares (Note 8) | ( | ) | ||
Balance at June 30, 2021 |
General
and administrative expenses include interest expense on the above debt instruments of $
6. FEDERALLY GUARANTEED LOANS
Economic Injury Disaster Loan (“EIDL”)
In
April 2020, the Company received $
In
May 2021, the Company received an additional $
Payment Protection Program (“PPP”) Loan
In
May 2020, Biotricity received loan proceeds of $
16 |
7. DERIVATIVE LIABILITIES
On
December 19, 2019 and January 9, 2020, the Company issued
On
May 22, 2020, another Series A preferred shares were issued as a result
of a combined transaction that included the conversion of $
The Company analyzed the compound features of variable conversion and redemption embedded in this instrument, for potential derivative accounting treatment on the basis of ASC 820 (Fair Value in Financial Instruments), ASC 815 (Accounting for Derivative Instruments and Hedging Activities), Emerging Issues Task Force (“EITF”) Issue No. 00–19 and EITF 07–05, and determined that the embedded derivatives should be bundled and valued as a single, compound embedded derivative, bifurcated from the underlying equity instrument, treated as a derivative liability, and measured at fair value.
Total | ||||
$ | ||||
Derivative liabilities as at March 31, 2020 | ||||
Derivative fair value at issuance during fiscal 2021 | ||||
Change in fair value of derivatives | ( | ) | ||
Derivative liabilities as at March 31, 2021 | ||||
Change in fair value of derivatives during the period | ( | ) | ||
Derivative liabilities as at June 30, 2021 | $ |
The lattice methodology was used to value the derivative components, using the following assumptions:
Assumptions | ||||
Dividend yield | % | |||
Risk-free rate for term | % | |||
Volatility | % | |||
Remaining terms (Years) | ||||
Stock price ($ per share) | $ and $ |
In addition, the Company recorded derivative liabilities related to the conversion and redemption features of the convertible notes, as well as warrants that were issued in connection with the convertible notes, during the year ended March 31, 2021 (Note 5(b)). As the warrant exercise price became final and locked, the derivative liabilities related to those warrants were marked to market and transferred to equity (Note 5(b)). Any noteholder and placement agent warrants that were issued after the finalization of exercise price was accounted for as equity.
Total | ||||
$ | ||||
For the year ended March 31, 2021 | ||||
Derivative fair value at issuance | ||||
Series A notes (Note 5(b)) | ||||
Series B notes (Note 5(b)) | ||||
Fair value change upon end of warrants derivative treatment (Note 5(b)) | ( | ) | ||
Carrying amount of warrants transferred equity upon end of warrants derivative treatment (Note 5(b)) | ( | ) | ||
Conversion to common shares (Note 5(b)) | ( | ) | ||
Change in fair value of derivative liabilities | ||||
Balance at March 31, 2021 | ||||
For the three months ended June 30, 2021 | ||||
Conversion to common shares (Note 5(b)) | ( | ) | ||
Change in fair value of derivative liabilities | ||||
Balance at June 30, 2021 |
The monte carlo methodology was used to value the convertible note and warrant derivative components, using the following assumptions:
Conversion and redemption features | ||
Risk-free rate for term (%) | ||
Volatility (%) | ||
Remaining terms (Years) | ||
Stock price ($ per share) | – |
17 |
8. STOCKHOLDERS’ DEFICIENCY
a) Authorized stock
As at June 30, 2021, the Company is authorized to issue (March 31, 2021 – ) shares of common stock ($par value) and (March 31, 2021 – ) shares of preferred stock ($ par value), of which (March 31, 2021 – ) are designated shares of Series A preferred stock ($par value)
At June 30, 2021, common shares and shares directly exchangeable into equivalent common shares that were issued and outstanding totaled (March 31, 2021 – ); these were comprised of (March 31, 2021 – ) shares of common stock and (March 31, 2021 – ) exchangeable shares. 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. The Company has also issued a Series A preferred stock, $par value; shares have been designated as authorized (as at June 30 and March 31, 2021); preferred shares were issued and outstanding as at June 30 and March 31, 2021.
b) Exchange Agreement
On February 2, 2016, the Company was formed through reverse-take-over:
● | The Company issued approximately (for the purposes of the Income Tax Act (Canada). Accordingly, the Company issued 13,376,947 shares; | |
● | Shareholders
of iMedical who in general terms, are Canadian residents (for the purposes of the Income Tax Act (Canada)) received approximately
| |
● | Each
outstanding option to purchase common shares in iMedical (whether vested or unvested) was exchanged, without any further action or
consideration on the part of the holder of such option, for approximately | |
● | Each
outstanding warrant to purchase common shares in iMedical was adjusted, in accordance with the terms thereof, such that it entitles
the holder to receive approximately |
18 |
● | Each
outstanding advisor warrant to purchase common shares in iMedical was adjusted, in accordance with the terms thereof, such that it
entitles the holder to receive approximately | |
● |
Issuance of common stock, exchangeable shares and cancellation of shares in connection with the reverse takeover transaction as explained above represents recapitalization of capital retroactively adjusting the accounting acquirer’s legal capital to reflect the legal capital of the accounting acquiree.
c) Share issuances
Share issuances during the year ended March 31, 2021
During
the year ended March 31, 2021, the Company recorded preferred stock dividends for the Series A preferred stock in amount of $
During
the year ended March 31, 2021, the Company issued
During the year ended March 31, 2021, the Company issued common shares for services provided and for warrants exercised.
During the year ended March 31, 2021, the Company also issued an aggregate of shares of its common stock to investors as part of the one-for-one exchange of previously issued exchangeable shares into the Company’s Common Stock, which is a non-cash transaction.
Share issuances during the three months ended June 30, 2021
During
the three months ended June 30, 2021, the Company issued common shares in connection with conversion
of convertible notes (Note 5(b)) with another that would be issued subsequent to
June 30, 2021. The total amounts of debts settled is in amount of $ that composed of face value of convertible
promissory notes in amount of $
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During the three months ended June 30, 2021, the Company also issued an aggregate of shares of its common stock to investors as part of the one-for-one exchange of previously issued exchangeable shares into the Company’s Common Stock, which is a non-cash transaction.
d) Shares to be issued
During
the three months ended June 30, 2021, the Company issued of previously to be issued shares, in connection
with convertible note conversions. As of June 30, 2021, the Company has recognized its contractual obligations for shares to be issued, in connection with conversions
of convertible notes that took place in the quarter (Note 5(b)), with fair value of shares to be issued of $,
determined based on the market price upon conversion. In
addition, the Company recognized its contractual obligations for
e) Warrant issuances and exercises
Warrant exercises and issuances during the year ended March 31, 2021
During
the year ended March 31, 2021,
During
the year ended March 31, 2021, the Company issued
During
the three months ended June 30, 2021, the Company issued warrants as compensation for advisor and consultant
services, including warrants issued to an executive of the Company.
The warrants expenses were fair valued at $
20 |
During the three months ended June 30, 2021, one
warrant holder provided cash of $
Warrant issuances, exercises and expirations or cancellations during the three months ended June 30, 2021 and preceding periods resulted in warrants outstanding at the end of those respective periods as follows:
Broker Warrants | Consultant Warrants | Warrants Issued on Conversion of Convertible Notes | Private Placement Warrants | Total | ||||||||||||||||
As at March 31, 2020 | ||||||||||||||||||||
Less: Expired/cancelled | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
Less: Exercised | ( | ) | ( | ) | ||||||||||||||||
Add: Issued | ||||||||||||||||||||
As at March 31, 2021 | ||||||||||||||||||||
Less: Expired/cancelled | ( | ) | ( | ) | ||||||||||||||||
Less: Exercised | - | - | ( | ) | - | ( | ) | |||||||||||||
Add: Issued | ||||||||||||||||||||
As at June 30, 2021 | ||||||||||||||||||||
Exercise Price | $ to $ | $ -$ | $ to $ | |||||||||||||||||
Expiration Date |
f) Stock-based compensation
On February 2, 2016, the Board of Directors of the Company approved the Company’s 2016 Equity Incentive Plan (the “Plan”). The purpose of the Plan is to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Company and by motivating such persons to contribute to the growth and profitability of the Company. The Plan seeks to achieve this purpose by providing for awards in the form of options, stock appreciation rights, restricted stock purchase rights, restricted stock bonuses, restricted stock units, performance shares, performance units and other stock-based awards.
The Plan shall continue in effect until its termination by the board of directors or committee formed by the board; provided, however, that all awards shall be granted, if at all, on or before the day immediately preceding the tenth (10th) anniversary of the effective date.
Based on the 2016 Option Plan, the Company is authorized to issue employee options with a -year term. On March 31, 2020, the Company’s Board of Directors approved the amendment of certain prior options grants, issued to current employees, previously issued with a -year term, such that the respective options issued under these agreements would have their term extended to years. The Company revalued these options using a lattice model with an expected life of years, risk free rates of % to %, stock price of $ and expected volatility of %, in order to recognize the additional expense associated with the longer term and recognized a one-time charge of $ in share-based compensation, with a corresponding adjustment to adjusted paid in capital.
During the year ended March 31, 2021, the Company granted stock options with a weighted average remaining contractual life of years. The Company recorded stock-based compensation of $ in connection with ESOP 2016 Plan under general and administrative expenses with corresponding credit to additional paid in capital.
21 |
During
the three months ended June 30, 2021, the Company granted of options with a weighted average remaining
contractual life of years. The Company recorded stock-based
compensation of $ in connection with ESOP 2016 Plan (June
30, 2020 - $
Number of options | Weighted average exercise price ($) | |||||||
Granted | ||||||||
Exercised | ||||||||
Outstanding as of March 31, 2018 | ||||||||
Granted | ||||||||
Exercised | ||||||||
Outstanding as of March 31, 2019 | ||||||||
Granted | ||||||||
Expired | ( | ) | ||||||
Outstanding as of March 31, 2020 | ||||||||
Granted | ||||||||
Exercised | ||||||||
Outstanding as of March 31, 2021 | ||||||||
Granted | ||||||||
Exercised | ||||||||
Outstanding as of June 30, 2021 |
2022 | 2021 | 2020 | 2019 | |||||||||||||
Exercise price ($) | – | - | - | - | ||||||||||||
Risk free interest rate (%) | – | – | - | - | ||||||||||||
Expected term (Years) | – | – | - | - | ||||||||||||
Expected volatility (%) | – | – | - | - | ||||||||||||
Expected dividend yield (%) | ||||||||||||||||
Fair value of option ($) | – | - | ||||||||||||||
Expected forfeiture (attrition) rate (%) |
22 |
9. LEASE
The Company has one operating lease primarily for office and administration.
The Company adopted ASC 842 – Leases using the modified retrospective cumulative catch-up approach beginning on April 1, 2019. Under this approach, the Company did not restate its comparative amounts and recognized a right-of-use asset equal to the present value of the future lease payments. The Company elected to apply the practical expedient to only transition contracts which were previously identified as leases and elected to not recognize right-of-use assets and lease obligations for leases of low value assets.
When
measuring the lease obligations, the Company discounted lease payments using its incremental borrowing rate. The
weighted-average-rate applied is
$ | ||||
Operating lease right-of-use asset - initial recognition | ||||
Amortization | ( | ) | ||
Balance at June 30, 2021 | ||||
Operating lease obligation - initial recognition | ||||
Repayment and interest accretion | ( | ) | ||
Balance at June 30, 2021 | ||||
Current portion of operating lease obligation | ||||
Noncurrent portion of operating lease obligation |
The
operating lease expense was $
During June 2021, the Company
entered into a short-term lease for the leased premise at monthly base rent of $
10. CONTINGENCIES
There are no unrecognized claims against the company that were assessed as significant, which were outstanding as at June 30, 2021 and, consequently, no additional provision for such has been recognized in the consolidated financial statements during the three and nine months then ended.
11. SUBSEQUENT EVENTS
The Company’s management has evaluated subsequent events up to August 16, 2021, the date the condensed consolidated financial statements were issued, pursuant to the requirements of ASC 855 and has determined the following material subsequent events:
On July 2, 2021, the Company issued
During the period from July 1 to August 16, the
Company received conversion notices to convert $
23 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Cautionary Note Regarding Forward-Looking Statements
Except for historical information contained herein, this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. These forward-looking statements are based on various factors and were derived utilizing numerous important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements. Important assumptions and other factors that could cause actual results to differ materially from those in the forward-looking statements, include but are not limited to: (a) any fluctuations in sales and operating results; (b) risks associated with international operations; (c) regulatory, competitive and contractual risks; (d) development risks; (e) the ability to achieve strategic initiatives, including but not limited to the ability to achieve sales growth across the business segments through a combination of enhanced sales force, new products, and customer service; (f) competition in the Company’s existing and potential future product lines of business; (g) the Company’s ability to obtain financing on acceptable terms if and when needed; (h) uncertainty as to the Company’s future profitability; (i) uncertainty as to the future profitability of acquired businesses or product lines; and (j) uncertainty as to any future expansion of the Company. Other factors and assumptions not identified above were also involved in the derivation of these forward-looking statements and the failure of such assumptions to be realized as well as other factors may also cause actual results to differ materially from those projected. The Company assumes no obligation to update these forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements, except as may be required under applicable law. Past results are no guaranty of future performance. Any such forward-looking statements speak only as of the dates they are made. When used in this Report, the words “believes,” “anticipates,” “expects,” “estimates,” “plans,” “intends,” “will” and similar expressions are intended to identify forward-looking statements.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the financial statements and footnotes thereto included in this Quarterly Report on Form 10-Q (the “Financial Statements”).
Company Overview
Biotricity Inc. (“Company”, “Biotricity”, “we”, “us” or “our”)
Biotricity Inc. (the “Company”, “Biotricity”, “we”, “us”, “our”) is a medical technology company focused on biometric data monitoring solutions. Our aim is to deliver innovative, remote monitoring solutions to the medical, healthcare, and consumer markets, with a focus on diagnostic and post-diagnostic solutions for lifestyle and chronic illnesses. We approach the diagnostic side of remote patient monitoring by applying innovation within existing business models where reimbursement is established. We believe this approach reduces the risk associated with traditional medical device development and accelerates the path to revenue. In post-diagnostic markets, we intend to apply medical grade biometrics to enable consumers to self-manage, thereby driving patient compliance and reducing healthcare costs. We intend to first focus on a segment of the diagnostic mobile cardiac telemetry market, otherwise known as MCT, while providing our chosen markets with the capability to also perform other cardiac studies.
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We developed our FDA-approved Bioflux® MCT technology, comprised of a monitoring device and software components, which we made available to the market under limited release on April 6, 2018, in order to assess, establish and develop sales processes and market dynamics. The fiscal year ended March 31, 2021 marked the Company’s first year of expanded commercialization efforts, focused on sales growth and expansion. We have expanded our sales efforts to 20 states, with intention to expand further and compete in the broader US market using an insourcing business model. Our technology has a large potential total addressable market, which can include hospitals, clinics and physicians’ offices, as well as other Independent Diagnostic Testing Facilities (“IDTFs)”. We believe our solution’s insourcing model, which empowers physicians with state-of-the-art technology and charges technology service fees for its use, has the benefit of a reduced operating overhead for the Company, and enables a more efficient market penetration and distribution strategy. This, when combined with the value the Company’s solution in the diagnosis of cardiac arrhythmias, enhancement of patient outcomes, improved patient compliance, and the corresponding reduction of healthcare costs, is driving growth and increasing revenues.
We are a technology company focused on earning utilization-based recurring technology fee revenue. The Company’s ability to grow this type of revenue is predicated on the size and quality of its sales force and their ability to penetrate the market and place devices with clinically focused, repeat users of its cardiac study technology. The Company plans to grow its sales force in order to address new markets and achieve sales penetration in the markets currently served. The Company has also developed or is developing several other ancillary technologies, which will require application for further FDA clearances, which the Company anticipates applying for within the next to twelve months. Among these are:
● | advanced ECG analysis software that can analyze and synthesize patient ECG monitoring data with the purpose of distilling it down to the important information that requires clinical intervention, while reducing the amount of human intervention necessary in the process; | |
● | the Biotres patch solution, which will be a novel product in the field of Holter monitoring; | |
● | the Bioflux® 2.0, which is the next generation of our award winning Bioflux® |
During the three months ended June 30, 2021, the Company announced that it received a 510(k) clearance from the FDA for its Bioflux Software II System, engineered to improve workflows and reduce estimated analysis time from 5 minutes to 30 seconds. ECG monitoring requires significant human oversight to review and interpret incoming patient data to discern actionable events for clinical intervention, highlighting the necessity of driving operational efficiency. This improvement in analysis time reduces operational costs and allows the company to continue to focus on excellent customer service and industry-leading response times to physicians and their at-risk patients. Additionally, these advances mean we can focus our resources on high-level operations and sales to help drive greater revenue.
The COVID-19 pandemic has highlighted the importance of telemedicine and remote patient monitoring technologies. During the three months ended June 30, 2021, the Company has continued to develop a telemedicine platform, with capabilities of real-time streaming of medical devices. Telemedicine offers patients the ability to communicate directly with their health care providers without the need of leaving their home. The introduction of a telemedicine solution is intended to align with the Company’s Bioflux product and facilitate remote visits and remote prescriptions for cardiac diagnostics, but it will also serve as a means of establishing referral and other synergies across the network of doctors and patients that use the technologies we are building within the Biotricity ecosystem. The intention is to continue to provide improved care to patients that may otherwise elect not to go to medical facilities and continue to provide economic benefits and costs savings to healthcare service providers and payers that reimburse.
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Critical Accounting Policies
The unaudited condensed consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and are expressed in United States Dollars. Significant accounting policies are summarized below:
Use of Estimates
The preparation of the unaudited condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the 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. Areas involving significant estimates and assumptions include: deferred income tax assets and related valuation allowance, accruals and valuation of derivatives, convertible promissory notes, stock options and warrants, as well as assumptions used by management in its assessment of liquidity. Actual results could differ from those estimates. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the period in which they become known.
Earnings (Loss) Per Share
We have adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 260-10 which provides for calculation of “basic” and “diluted” earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income or loss available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. Diluted earnings per share exclude all potentially dilutive shares if their effect is anti-dilutive. There were no potentially dilutive shares outstanding as at June 30, 2021.
Fair Value of Financial Instruments
ASC 820 defines fair value, establishes a framework for measuring fair value and expands required disclosure about fair value measurements of assets and liabilities. ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
● | Level 1 – Valuation based on quoted market prices in active markets for identical assets or liabilities. |
● | Level 2 – Valuation based on quoted market prices for similar assets and liabilities in active markets. |
● | Level 3 – Valuation based on unobservable inputs that are supported by little or no market activity, therefore requiring management’s best estimate of what market participants would use as fair value. |
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments or interest rates that are comparable to market rates. These financial instruments include cash, accounts receivable, deposits and other receivables, convertible promissory notes and short-term loans, accounts payable and accrued liabilities, and derivative liabilities. The Company’s cash and derivative liabilities, which are carried at fair values, are classified as a Level 1 and Level 3, respectively. The Company’s bank accounts are maintained with financial institutions of reputable credit, therefore, bear minimal credit risk.
26 |
Leases
On April 1, 2019, the Company adopted Accounting Standards Codification Topic 842, “Leases” (“ASC 842”) to replace existing lease accounting guidance. This pronouncement is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet for most leases. Expenses associated with leases will continue to be recognized in a manner similar to previous accounting guidance. The Company adopted ASC 842 utilizing the transition practical expedient added by the Financial Accounting Standards Board (“FASB”), which eliminates the requirement that entities apply the new lease standard to the comparative periods presented in the year of adoption.
The Company is the lessee in a lease contract when the Company obtains the right to use the asset. Operating leases are included in the line items right-of-use asset, lease obligation, current, and lease obligation, long-term in the consolidated balance sheet. Right-of-use (“ROU”) asset represents the Company’s right to use an underlying asset for the lease term and lease obligations represent the Company’s obligations to make lease payments arising from the lease, both of which are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Leases with a lease term of 12 months or less at inception are not recorded on the consolidated balance sheet and are expensed on a straight-line basis over the lease term in our consolidated statement of income. The Company determines the lease term by agreement with lessor. As our lease does not provide an implicit interest rate, the Company uses the Company’s incremental borrowing rate based on the information available at commencement date in determining the present value of future payments.
Government loan
For loans received from federal government that contains certain operating conditions and with terms over twelve month time, the Company records those loans as long term liabilities.
Recently Issued Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments.” This pronouncement, along with subsequent ASUs issued to clarify provisions of ASU 2016-13, changes the impairment model for most financial assets and will require the use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. In developing the estimate for lifetime expected credit loss, entities must incorporate historical experience, current conditions, and reasonable and supportable forecasts. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. On November 19, 2019, the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), finalized various effective date delays for private companies, not-for-profit organizations, and certain smaller reporting companies applying the credit losses (CECL), the revised effective date is January 2023.
In July 2019, the FASB issued ASU 2019-07, Codification Updates to SEC Sections. This ASU amends various SEC paragraphs pursuant to the issuance of SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization. One of the changes in the ASU requires a presentation of changes in stockholders’ equity in the form of a reconciliation, either as a separate financial statement or in the notes to the financial statements, for the current and comparative year-to-date interim periods. The Company presented changes in stockholders’ equity as separate financial statements for the current and comparative year-to-date interim periods beginning on April 1, 2019. The additional elements of the ASU did not have a material impact on the Company’s consolidated financial statements.
27 |
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company is currently evaluating the impacts of the provisions of ASU 2019-12 on its financial condition, results of operations, and cash flows.
In March 2020, the FASB issued ASU No. 2030-20 Codification Improvements to Financial Instruments, An Amendment of the FASB Accounting Standards Codification: a)in ASU No. 2016-01, b) in Subtopic 820-10, c) for depository and lending institutions clarification in disclosure requirements, d) in Subtopic 470-50, e) in Subtopic 820-10, f) Interaction of Topic 842 and Topic 326, g) Interaction of the guidance in Topic 326 and Subtopic 860-20.The amendments in this Update represent changes to clarify or improve the Codification. The amendments make the Codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. For public business entities updates under the following paragraphs: a), b), d) and e) are effective upon issuance of this final update. The effective date for c) is for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company does not expect that the new guidance will significantly impact its consolidated financial statements.
Results of Operations
The fiscal year ended March 31, 2021 marked the trailing 24-month period of full market release of the Bioflux MCT device for commercialization, originally launched in limited market release in April 2018, after receiving its second and final required FDA clearance. To commence commercialization, we ordered device inventory from our FDA-approved manufacturer and hired a small, captive sales force, with deep experience in cardiac technology sales; we expanded on our limited market release, which identified potential anchor clients who could be early adopters of our technology. By increasing our sales force and geographic footprint, we have launched sales in 23 U.S. states by March 31, 2021.
During the three months ended June 30, 2021, the Company earned combined device sales and technology fee income totaling $1.8 million. This represents a 290% increase from the corresponding quarter of fiscal 2021, an increase of approximately $1.3 million over the revenue earned in that quarter. This also marks an increase of 49%, sequentially over the immediately preceding quarter ended March 31, 2021, when the Company earned $1.2 million. These increases in sales indicate continuous improvement in the growth trajectory of the Company’s revenues.
During the three months ended June 30, 2021, Biotricity incurred a net loss of $5.9 million and a comprehensive loss of approximately $5.9 million, compared to $3.4 million and $3.5 million in the comparative periods of fiscal 2021. This resulted in a net loss per common share of $0.151 cents per share for the three months ended June 30, 2021 (2020: $0.092). The Company has devoted, and expects to continue to devote, significant resources in the areas of sales and marketing and research and development costs. We also expect to incur additional operating losses, as we build the infrastructure required to support higher sales volume.
During the three months ended June 30, 2021, the Company experienced a gross margin of 70%. Management expects that the cost of devices sold, as well as cellular and other costs associated with technology fees, will become lower as a percentage of revenues as business sales volumes expand.
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Three Months Ended June 30, 2021
Operating Revenues and Expenses
Operating Expenses
Total operating expenses for the three months ended June 30, 2021 were $4.2 million compared to $3.6 million, respectively, for the corresponding periods of the prior year, as further described below.
General and administrative expenses
Our general and administrative expenses for the three months ended June 30, 2021 was $3.7 million, compared to $3.2 million, respectively, for the corresponding prior year periods. The increase in general and administrative expenses was a result of investment made by the Company in building its professional sales force, offset by more efficient office and administrative spending activities.
Research and development expenses
During the three months ended June 30, 2021 we incurred research and development expenses of $588,996, compared to $423,883 in the prior year. The increase in research and development activity is directly related the development of new technologies for our ecosystem and our pursuit of FDA clearance of new products (including the Biotres), as well as the development of continuous product enhancements to our existing products.
Accretion and amortization expense related to convertible notes
During the three months ended June 30, 2021 and 2020, we incurred accretion and amortization expense related to debt financing of $2.3 million and Nil, respectively.
Change in fair value of derivative liabilities
During the three months ended June 30, 2021 and 2020, the Company recognized a loss of $298,983, and gain of $204,142, respectively, related to the change in fair value of derivative liabilities related to preferred shares and convertible notes.
Translation Adjustment
Translation adjustment for the three months ended June 30, 2021 and 2020 was a gain of $6,560 and a loss of $105,001, respectively. This translation adjustment represents gains and losses that result from the translation of currency in the financial statements from our functional currency of Canadian dollars to the reporting currency in U.S. dollars over the course of the reporting period.
Liquidity and Capital Resources
The Company is in commercialization mode, while continuing to pursue the development of its next generation MCT product as well as new products that are being developed.
We generally require cash to:
● | purchase devices that will be placed in the field for pilot projects and to produce revenue, | |
● | launch sales initiatives, | |
● | fund our operations and working capital requirements, | |
● | develop and execute our product development and market introduction plans, |
29 |
● | fund research and development efforts, and | |
● | pay any expense obligations as they come due. |
The Company is in the early stages of commercializing its first product. It is concurrently in development mode, operating a research and development program in order to develop an ecosystem of medical technologies, and, where required or deemed advisable, obtain regulatory approvals for, and commercialize other proposed products. The Company has incurred recurring losses from operations, and as at June 30, 2021, has an accumulated deficit of $68,715,051 and a working capital deficiency of $9,545,069. The Company launched its first commercial sales program as part of a limited market release, during the year ended March 31, 2019, using an experienced professional in-house sales team. A full market release ensued during the year ended March 31, 2020. Management anticipates the Company will continue on its revenue growth trajectory and improve its liquidity through continued business development and after additional equity or debt capitalization of the Company. The Company has developed and continues to pursue sources of funding that management believes if successful would be sufficient to support the Company’s operating plan, and alleviate any substantial doubt as to its ability to meet its obligations, at least for a period of one year from the date of these consolidated financial statements. During the fiscal year ended March 31, 2021, the Company closed on a number of private placements offering of convertible notes, which have raised cash proceeds of $11,375,690. During the fiscal quarter ended June 30, 2021, the Company procured an additional $499,900 through a government EIDL loan, and $250,000 through short term loans.
As we proceed with the commercialization of the Bioflux product development, we expect to continue to devote significant resources on capital expenditures, as well as research and development costs and operations, marketing and sales expenditures.
We expect to require additional funds to further develop our business plan, including the continuous commercialization and expansion of the Bioflux and other technologies that will form part of its eco-systems. Based on our current operating plans, we will require approximately $15 million (more in order to accelerate commercialization further and faster) to grow our sales team and order devices that will be placed in the field to produce revenue. A portion of these funds will also go towards the further development of Bioflux and other technologies into their next generations, including marketing, sales, regulatory and clinical costs. 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.
Based on the above facts and assumptions, we believe our existing cash and cash equivalents, along with anticipated near-term equity financings, will be sufficient to meet our needs for the next twelve months from the filing date of this report. However, we will need to seek additional debt or equity capital to respond to business opportunities and challenges, including our ongoing operating expenses, protecting our intellectual property, developing or acquiring new lines of business and enhancing our operating infrastructure. The terms of our future 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. There can be no assurance we will be able to raise this additional capital on acceptable terms, or at all. If we are unable to obtain additional funding on a timely basis, we may be required to modify our operating plan and otherwise curtail or slow the pace of development and commercialization of our proposed product lines.
Net Cash Used in Operating Activities
During the three months ended June 31, 2021, we used cash in operating activities of $2.7 million compared to $2.4 million for the corresponding period of the prior year. These activities involved expenditures for sales, infrastructure and business development, as well as marketing and operating activities, and continued research and product development.
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Net Cash from Financing Activities
Net cash provided by financing activities was $0.6 million for the three months ended June 30, 2021 compared to $1.6 million for the three months ended June 30, 2020.
Net Cash Used in Investing Activities
The Company did not use any net cash in investing activities in the three month periods ended June 30, 2021 and 2020.
Off-Balance Sheet Arrangements
We have 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for a smaller reporting company.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 13a-15(e). The Company’s disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching the Company’s desired disclosure control objectives. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Therefore, even a system which is determined to be effective cannot provide absolute assurance that all control issues have been detected or prevented. Our systems of internal controls are designed to provide reasonable assurance with respect to financial statement preparation and presentation.
At the end of the period being reported upon, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to ensure that the material information required to be included in our Securities and Exchange Commission reports is accumulated and communicated to our management, including our principal executive and financial officer, as well as recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms relating to the Company.
Changes in Internal Controls
There were no changes in the Company’s internal controls over financial reporting that occurred during the three-month period ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors
Not required for smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the period from July 1 to August 16, the Company received conversion notices to convert $5,268,000 in convertibles notes, together with $428,000 in accrued interest, into common shares. Pursuant to receipt of these conversion notices, the Company has processed the issuance of 2,273,400 common shares. During this same period, has issued 59,883 common shares to investors in the respective convertible notes who have exercised warrants issued in prior periods. Also during this same period, the Company issued 36,060 common shares to brokers who exercised placement agent warrants received as compensation. In connection with the foregoing, the Company relied upon the exemption from registration provided by Section 4(a)(2) under the Securities Act of 1933, as amended, for transactions not involving a public offering.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits
31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
101.1 XBRL Instance.*
101.SCH XBRL Taxonomy Extension Schema.*
101.CAL XBRL Taxonomy Extension Calculation.*
101.DEF XBRL Taxonomy Extension Definition.*
101.LAB XBRL Taxonomy Extension Labels.*
101.PREXBRL Taxonomy Extension Presentation.*
* Filed herewith.
** Furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, this 17th day of August 2021.
BIOTRICITY INC.
By: | /s/ Waqaas Al-Siddiq | |
Name: | Waqaas Al-Siddiq | |
Title: | Chief Executive Officer | |
(principal executive officer) | ||
By: | /s/ John Ayanoglou | |
Name: | John Ayanoglou | |
Title: | Chief Financial Officer | |
(principal financial and accounting officer) |
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