SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period ended December 31, |
-OR-
¨ | Transition Report Pursuant to Section 13 or 15(d) of the Securities And Exchange Act of 1934 for the transition period |
Commission File Number:000-54717
BIONIK LABORATORIES CORP.
(Exact name of Registrant in its charter)
Delaware | 27-1340346 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification | |
483 Bay Street, N105 | ||
Toronto, Ontario | M5G 2C9 | |
(Address of Principal Executive Offices) | (Zip Code) |
Registrant’s Telephone Number, Including Area Code:(416) 640-7887 x 508
Indicate by check mark whether the issuerregistrant (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. Yesx No¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yesx No¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a small reporting company, as defined byor 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):Act.
Large accelerated filer | ¨ | Non-accelerated filer | |
Accelerated filer | ¨ | Smaller reporting company | x |
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 accounting 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¨ Nox
Indicate the number of shares outstanding of each of the registrant’sissuer’s classes of common stock, as of the latest practicable date. As of February 13, 2018, 55,885,2798, 2019, 2,341,460 shares of Common Stock, par value $0.001 per share.
BIONIK LABORATORIES CORP.
FORM 10-Q
INDEX
i
ii |
PART I – FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
December 31, 2017 and 2016
Index
Condensed Consolidated Interim Balance Sheets
(Amounts expressed in US Dollars)
As at | As at | |||||||||||||||
December 31, | March 31, | |||||||||||||||
2018 | 2018 | |||||||||||||||
(Unaudited) | (Audited) | |||||||||||||||
As at (Unaudited) $ | As at 2017 (Note 2) $ | $ | $ | |||||||||||||
Assets | ||||||||||||||||
Current | ||||||||||||||||
Cash and cash equivalents | 998,661 | 543,650 | 375,133 | 507,311 | ||||||||||||
Accounts receivable, net of allowance for doubtful accounts of $16,349 (March 31, 2017 - $10,000) | 306,572 | 383,903 | ||||||||||||||
Accounts receivable, net of allowance for doubtful accounts of $25,695 (March 31, 2018 - $19,694) | 1,521,109 | 212,730 | ||||||||||||||
Prepaid expenses and other receivables (Note 5) | 145,044 | 228,047 | 1,831,956 | 433,655 | ||||||||||||
Inventories (Note 6) | 302,414 | 228,249 | 335,606 | 237,443 | ||||||||||||
Due from related parties (Note 9(a)) | 19,374 | 18,731 | 17,989 | 18,897 | ||||||||||||
Total Current Assets | 1,772,065 | 1,402,580 | 4,081,793 | 1,410,036 | ||||||||||||
Equipment (Note 7) | 174,997 | 227,421 | 135,842 | 159,961 | ||||||||||||
Technology and other assets (Note 4) | 4,783,704 | 5,030,624 | 4,497,037 | 4,706,719 | ||||||||||||
Goodwill (Note 4) | 22,308,275 | 22,308,275 | ||||||||||||||
Goodwill | 22,308,275 | 22,308,275 | ||||||||||||||
Total Assets | 29,039,041 | 28,968,900 | 31,022,947 | 28,584,991 | ||||||||||||
Liabilities and Shareholders’ Deficiency | ||||||||||||||||
Liabilities and Shareholders' Equity | ||||||||||||||||
Current | ||||||||||||||||
Accounts Payable (Notes 9(b)) | 794,875 | 784,771 | ||||||||||||||
Accrued liabilities (Notes 3, 8 and 9(b)) | 1,868,225 | 1,228,657 | ||||||||||||||
Accounts payable (Notes 9(b) and 13) | 1,394,452 | 724,673 | ||||||||||||||
Accrued liabilities (Note 9(b)) | 1,099,570 | 1,529,505 | ||||||||||||||
Customer advances | 800 | 121,562 | - | 800 | ||||||||||||
Demand Notes Payable (Note 8(a)) | 50,000 | 330,600 | ||||||||||||||
Promissory Notes payable (Note 8(b)) | - | 236,548 | ||||||||||||||
Convertible Loans Payable (Note 8(d), (e) and (f)) | 7,079,852 | 2,017,488 | ||||||||||||||
Short term loan (Note 8(c)) | 400,000 | - | ||||||||||||||
Demand loans (Note 8) | - | 51,479 | ||||||||||||||
Convertible loans (Note 8(b)) | 3,538,859 | - | ||||||||||||||
Deferred revenue | 113,801 | 98,624 | 285,140 | 122,667 | ||||||||||||
Shares to be issued, stock options and warrants (Notes 10, 11 and 12) | - | 5,692,853 | ||||||||||||||
Total Current Liabilities | 10,307,553 | 4,818,250 | 6,318,021 | 8,121,977 | ||||||||||||
Shareholders’ Equity | ||||||||||||||||
Preferred Stock, par value $0.001; Authorized 10,000,000 Special Voting Preferred Stock, par value $0.001; Authorized; Issued and outstanding - 1 (March 31, 2017 – 1) | - | - | ||||||||||||||
Common Shares, par value $0.001; Authorized - 250,000,000 (March 31, 2017 – 150,000,000); Issued and outstanding 55,885,279 and 45,909,336 Exchangeable Shares (March 31, 2017 – 48,885,107 and 47,909,336 Exchangeable Shares) (Note 10) | 101,794 | 96,794 | ||||||||||||||
Shareholders' Equity | ||||||||||||||||
Preferred Stock, par value $0.001; Authorized - 10,000,000; Special Voting Preferred Stock, par value $0.001 - Authorized, issued and outstanding - 1 (March 31, 2018 – 1) | - | - | ||||||||||||||
Common Shares, par value $0.001; Authorized - 500,000,000 (March 31, 2018 – 250,000,000); Issued and outstanding - 2,337,964 and 273,574 Exchangeable Shares (March 31, 2018 – 1,368,856 and 295,146 Exchangeable Shares) | 2,611 | 1,664 | ||||||||||||||
Additional paid in capital | 48,081,670 | 45,088,171 | 67,570,756 | 56,195,541 | ||||||||||||
Shares to be issued (Note 10) | 60,000 | - | ||||||||||||||
Deficit | (29,554,125 | ) | (21,076,464 | ) | (42,910,590 | ) | (35,776,340 | ) | ||||||||
Accumulated other comprehensive income | 42,149 | 42,149 | 42,149 | 42,149 | ||||||||||||
Total Shareholders’ Equity | 18,731,488 | 24,150,650 | ||||||||||||||
Total Liabilities and Shareholders’ Equity | 29,039,041 | 28,968,900 | ||||||||||||||
Total Shareholders' Equity | 24,704,926 | 20,463,014 | ||||||||||||||
Total Liabilities and Shareholders' Equity | 31,022,947 | 28,584,991 |
Going Concern (Note 1)
Commitments and Contingencies (Note 13)
Subsequent Events (Note 15)
The Financial Statements have been adjusted to retroactively reflect the 150-to-1 reverse stock split effected on October 29, 2018, as discussed in Note 2(a).
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
Condensed Consolidated Interim Statements of Operations and Comprehensive Loss for the three and nine monthsmonth periods ended December 31, 20172018 and 20162017 (unaudited)
(Amounts expressed in U.S. Dollars)
Three months ended Dec. 31, 2017 | Nine months ended Dec. 31, 2017 | Three months ended Dec. 31, 2016 | Nine months ended Dec. 31, 2016 | |||||||||||||||||||||||||||||
$ | $ | $ | $ | Three months ended December 31, 2018 | Nine months ended December 31, 2018 | Three months ended December 31, 2017 | Nine months ended December 31, 2017 | |||||||||||||||||||||||||
(Note 2) | (Note 2) | $ | $ | $ | $ | |||||||||||||||||||||||||||
Sales | 260,960 | 570,327 | 372,426 | 553,900 | 930,257 | 1,978,675 | 260,960 | 570,327 | ||||||||||||||||||||||||
Cost of Sales | 88,357 | 177,482 | 334,786 | 405,680 | 450,304 | 1,087,540 | 88,357 | 177,482 | ||||||||||||||||||||||||
Gross Margin | 172,603 | 392,845 | 37,640 | 148,220 | 479,953 | 891,135 | 172,603 | 392,845 | ||||||||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||||||||||
Sales and marketing | 432,260 | 1,313,077 | 377,046 | 646,509 | 515,439 | 1,485,423 | 432,260 | 1,313,077 | ||||||||||||||||||||||||
Research and development | 546,350 | 1,947,659 | 571,671 | 1,803,234 | 779,283 | 2,135,075 | 546,350 | 1,947,659 | ||||||||||||||||||||||||
General and administrative | 783,784 | 2,916,917 | 409,669 | 2,291,136 | 1,022,024 | 2,932,980 | 783,784 | 2,916,917 | ||||||||||||||||||||||||
Share compensation expense (Note 11) | 271,001 | 1,284,257 | 227,540 | 651,630 | ||||||||||||||||||||||||||||
Convertible debt accretion (Note 8) | 216,302 | 290,375 | - | - | ||||||||||||||||||||||||||||
Share-based compensation expense (Note 11) | 191,634 | 1,226,374 | 271,001 | 1,284,257 | ||||||||||||||||||||||||||||
Amortization (Note 4) | 76,985 | 246,920 | - | - | 69,314 | 209,682 | 76,985 | 246,920 | ||||||||||||||||||||||||
Depreciation (Note 7) | 21,234 | 69,606 | 24,028 | 57,781 | 15,969 | 50,190 | 21,234 | 69,606 | ||||||||||||||||||||||||
Total operating expenses | 2,347,916 | 8,068,811 | 1,609,954 | 5,450,290 | 2,593,663 | 8,039,724 | 2,131,614 | 7,778,436 | ||||||||||||||||||||||||
Other expenses (income) | ||||||||||||||||||||||||||||||||
Foreign Exchange | (11,485 | ) | 102,671 | - | - | |||||||||||||||||||||||||||
Interest expense (Note 8) | 416,990 | 657,350 | 13,808 | 23,839 | ||||||||||||||||||||||||||||
Other income | (59 | ) | 649 | (4,363 | ) | (410,877 | ) | |||||||||||||||||||||||||
Other (income) expenses | ||||||||||||||||||||||||||||||||
Foreign exchange | (47,709 | ) | (116,715 | ) | (11,485 | ) | 102,671 | |||||||||||||||||||||||||
Accretion expense (Note 8) | 316,642 | 2,421,060 | 216,302 | 290,375 | ||||||||||||||||||||||||||||
Fair value adjustment (Note 8) | - | (337,923 | ) | - | - | |||||||||||||||||||||||||||
Gain on mark to market revaluation (Note 10) | - | (2,048,697 | ) | - | - | |||||||||||||||||||||||||||
Other expense | 1,520 | 61,652 | 416,931 | 657,999 | ||||||||||||||||||||||||||||
Total other expenses (income) | 405,446 | 760,670 | 9,445 | (387,038 | ) | 270,453 | (20,623 | ) | 621,748 | 1,051,045 | ||||||||||||||||||||||
Net loss and comprehensive loss for the period | (2,580,759 | ) | (8,436,636 | ) | (1,581,759 | ) | (4,915,032 | ) | (2,384,163 | ) | (7,127,966 | ) | (2,580,759 | ) | (8,436,636 | ) | ||||||||||||||||
Loss per share – basic | (0.03 | ) | $ | (0.08 | ) | (0.02 | ) | (0.05 | ) | |||||||||||||||||||||||
Loss per share – diluted | (0.03 | ) | $ | (0.08 | ) | $ | (0.02 | ) | $ | (0.05 | ) | |||||||||||||||||||||
Loss per share - basic and diluted | (0.91 | ) | (3.14 | ) | (3.80 | ) | (12.74 | ) | ||||||||||||||||||||||||
Weighted average number of shares outstanding – basic | 101,794,615 | 99,335,514 | 96,362,541 | 90,286,864 | 2,611,538 | 2,267,906 | 678,631 | 662,237 | ||||||||||||||||||||||||
Weighted average number of shares outstanding – diluted | 101,794,615 | 99,335,514 | 96,362,541 | 90,286,864 | 2,611,538 | 2,267,906 | 678,631 | 662,237 |
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements
Condensed Consolidated InterimFinancial Statements of Changeshave been adjusted to retroactively reflect the 150-to-1 reverse stock split effected on October 29, 2018, as discussed in Shareholders’ Equity (Deficiency) for the nine month period ended December 31, 2017 and the year ended March 31, 2017 (unaudited)
(Amounts expressed in US Dollars)
Special Voting Preferred Stock | Common Stock (1) | Additional Paid | Shares to be | Comprehensive | ||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | in Capital | Issued | Deficit | Income | Total | ||||||||||||||||||||||||||||
$ |
(Note 2) | $ (Note 2) | $ (Note 2) | $ | $ (Note 2) | $ | $ (Note 2) | |||||||||||||||||||||||||||||
Balance, March 31, 2016 | 1 | - | 72,591,292 | 72,591 | 18,292,173 | - | (13,007,062 | ) | 42,149 | 5,399,851 | ||||||||||||||||||||||||||
Shares issued to acquire IMT | - | - | 23,650,000 | 23,650 | 23,153,350 | - | - | - | 23,177,000 | |||||||||||||||||||||||||||
Share compensation acquired | - | - | - | - | 2,582,890 | - | - | - | 2,582,890 | |||||||||||||||||||||||||||
Options exercised | - | - | 110,096 | 110 | 18,056 | - | - | - | 18,166 | |||||||||||||||||||||||||||
Cashless exercise of warrants | - | - | 51,249 | 51 | (51 | ) | - | - | - | - | ||||||||||||||||||||||||||
Warrants exercised | - | - | 174,759 | 175 | 40,020 | - | - | - | 40,195 | |||||||||||||||||||||||||||
Share compensation expense | - | - | 217,047 | 217 | 1,001,733 | - | - | - | 1,001,950 | |||||||||||||||||||||||||||
Net loss for the year | - | - | - | - | - | - | (8,069,402 | ) | - | (8,069,402 | ) | |||||||||||||||||||||||||
Balance, March 31, 2017 | 1 | - | 96,794,443 | 96,794 | 45,088,171 | - | (21,076,464 | ) | 42,149 | 24,150,650 | ||||||||||||||||||||||||||
Warrants exercised | - | - | 5,000,172 | 5,000 | 1,120,038 | - | - | - | 1,125,038 | |||||||||||||||||||||||||||
Share compensation expense | - | - | - | - | 1,284,257 | - | - | - | 1,284,257 | |||||||||||||||||||||||||||
Fair value of warrants on convertible loans | - | - | - | - | 548,179 | - | - | - | 548,179 | |||||||||||||||||||||||||||
Warrant down round feature (Note 12) | - | - | - | - | 41,025 | - | (41,025 | ) | - | - | ||||||||||||||||||||||||||
Shares to be issued | - | - | - | - | - | 60,000 | - | - | 60,000 | |||||||||||||||||||||||||||
Net loss for the period | - | - | - | - | - | - | (8,436,636 | ) | - | (8,436,636 | ) | |||||||||||||||||||||||||
Balance, December 31, 2017 | 1 | - | 101,794,615 | 101,794 | 48,081,670 | 60,000 | (29,544,125 | ) | 42,149 | 18,731,488 |
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements
(1) Includes exchangeable shares
Condensed Consolidated Interim Statements of Cash Flows for the nine months periods ended December 31, 2017 and 2016 (unaudited)
(Amounts expressed in U.S. Dollars)
Nine months | Nine months | |||||||
ended | ended | |||||||
December 31, | December 31, | |||||||
2017 | 2016 | |||||||
$ | $ | |||||||
(Note 2) | ||||||||
Operating activities | ||||||||
Net loss for the period | (8,436,636 | ) | (4,915,032 | ) | ||||
Adjustment for items not affecting cash | ||||||||
Depreciation | 69,606 | 57,781 | ||||||
Amortization | 246,920 | - | ||||||
Interest expense | 640,168 | 23,839 | ||||||
Share based compensation expense | 1,284,257 | 592,130 | ||||||
Convertible debt accretion | 290,375 | - | ||||||
Shares issued for services | 60,000 | 59,500 | ||||||
Allowance for doubtful accounts | (16,349 | ) | - | |||||
(5,861,659 | ) | (4,181,782 | ) | |||||
Changes in non-cash working capital items | ||||||||
Accounts receivable | 93,680 | (247,359 | ) | |||||
Prepaid expenses and other receivables | 83,003 | 95,562 | ||||||
Due from related parties | (643 | ) | 532 | |||||
Inventories | (74,165 | ) | (120,894 | ) | ||||
Accounts payable | 10,104 | (720,573 | ) | |||||
Accrued liabilities | 639,568 | (492,047 | ) | |||||
Customer advances | (120,762 | ) | 28,000 | |||||
Deferred revenue | 15,177 | 97,615 | ||||||
Net cash used in operating activities | (5,215,697 | ) | (5,540,946 | ) | ||||
Investing activities | ||||||||
Acquisition of equipment | (17,182 | ) | (9,827 | ) | ||||
Net cash used in investing activities | (17,182 | ) | (9,827 | ) | ||||
Financing activities | ||||||||
Proceeds from convertible loans | 4,699,975 | 483,333 | ||||||
Proceeds on exercise of warrants | 1,125,038 | - | ||||||
Repayment of Promissory note principal | (200,000 | ) | - | |||||
Repayment of Promissory note interest | (49,505 | ) | - | |||||
Repayment of Demand notes principal | (208,359 | ) | - | |||||
Repayment of Demand notes interest | (79,259 | ) | - | |||||
Proceeds from short term loan | 400,000 | - | ||||||
Cash acquired on acquisition | - | 266,635 | ||||||
Net cash provided by financing activities | 5,687,890 | 749,968 | ||||||
Net decrease in cash and cash equivalents for the period | 455,011 | (4,800,805 | ) | |||||
Cash and cash equivalents, beginning of period | 543,650 | 5,381,757 | ||||||
Cash and cash equivalents, end of period | 998,661 | 580,952 | ||||||
Supplemental Information: | ||||||||
Assets acquired and liabilities assumed as at April 21, 2016: | ||||||||
Current assets, including cash of $266,635 | 478,843 | |||||||
Equipment | 59,749 | |||||||
Intangible assets | 5,580,704 | |||||||
Goodwill | 22,308,275 | |||||||
Accounts payable | (241,299 | ) | ||||||
Accrued liabilities | (361,029 | ) | ||||||
Customer deposits | (86,487 | ) | ||||||
Demand notes payable | (324,894 | ) | ||||||
Promissory Notes payable | (217,808 | ) | ||||||
Bionik advance | (1,436,164 | ) | ||||||
Non-cash consideration | 25,759,890 |
Interest paid or settled (Note 8(a) and (b))Note 2(a).
The accompanying notes are an integral part of these unauditedcondensed consolidated interim financial statements
2 |
Condensed Consolidated Interim Statements of Changes in Shareholders' Equity for the nine month periods ended December 31, 2018 and 2017 (unaudited)
Accumulated | ||||||||||||||||||||||||||||||||||||
Special Voting | Additional | Other | ||||||||||||||||||||||||||||||||||
Preferred Stock | Total Shares | Paid in | Shares | Comprehensive | ||||||||||||||||||||||||||||||||
Shares | Amount | Capital $ | to be | Deficit $ | Income | Total | ||||||||||||||||||||||||||||||
Shares | Amount $ | (Note 2) | (Note 2) $ | (Note 2) | Issued | (Note 2) | $ | (Note 2) | ||||||||||||||||||||||||||||
Balance, March 31, 2017 | 1 | - | 645,297 | 645 | 45,184,320 | - | (21,076,464 | ) | 42,149 | 24,150,650 | ||||||||||||||||||||||||||
Warrant exercised | - | - | 33,335 | 34 | 1,125,004 | - | - | - | 1,125,038 | |||||||||||||||||||||||||||
Share compensation expense | - | - | - | - | 1,284,257 | - | - | - | 1,284,257 | |||||||||||||||||||||||||||
Fair value of warrants on convertible loans | - | - | - | - | 548,179 | - | - | - | 548,179 | |||||||||||||||||||||||||||
Warrant down round feature | - | - | - | - | 41,025 | - | (41,025 | ) | - | - | ||||||||||||||||||||||||||
Shares to be issued | - | - | - | - | - | 60,000 | - | - | 60,000 | |||||||||||||||||||||||||||
Net loss for the period | - | - | - | - | - | - | (8,436,636 | ) | - | (8,436,636 | ) | |||||||||||||||||||||||||
Balance, December 31, 2017 | 1 | - | 678,632 | 679 | 48,182,785 | 60,000 | (29,554,125 | ) | 42,149 | 18,731,488 | ||||||||||||||||||||||||||
Share compensation expense | - | - | - | - | 256,323 | - | - | - | 256,323 | |||||||||||||||||||||||||||
Shares to be issued for services | - | - | - | - | (60,000 | ) | - | - | (60,000 | ) | ||||||||||||||||||||||||||
Warrant down round feature | - | - | - | - | 33,061 | - | (33,061 | ) | - | - | ||||||||||||||||||||||||||
Conversion of convertible notes | - | - | 985,370 | 985 | 9,179,800 | - | - | - | 9,180,785 | |||||||||||||||||||||||||||
Stock option and warrant reclassification (Notes 11 & 12) | - | - | - | - | (2,845,557 | ) | - | - | - | (2,845,557 | ) | |||||||||||||||||||||||||
Beneficial Conversion Feature on convertible debt | - | - | - | - | 1,389,129 | - | - | - | 1,389,129 | |||||||||||||||||||||||||||
Net loss for the period | - | - | - | - | - | - | (6,189,154 | ) | - | (6,189,154 | ) | |||||||||||||||||||||||||
Balance, March 31, 2018 | 1 | - | 1,664,002 | 1,664 | 56,195,541 | - | (35,776,340 | ) | 42,149 | 20,463,014 | ||||||||||||||||||||||||||
Share compensation expense | - | - | - | - | 1,226,374 | - | - | - | 1,226,374 | |||||||||||||||||||||||||||
Conversion of convertible notes (Note 8) | - | - | 263,639 | 264 | 2,470,358 | - | - | - | 2,470,622 | |||||||||||||||||||||||||||
Conversion of convertible notes (Note 8) | 683,395 | 683 | 4,732,170 | 4,732,853 | ||||||||||||||||||||||||||||||||
Stock option and warrant reclassification (Notes 11 & 12) | - | - | �� | - | - | 1,173,534 | - | - | - | 1,173,534 | ||||||||||||||||||||||||||
Anti-dilution Feature allocation on conversion (Note 8) | - | - | - | - | 1,766,495 | - | - | - | 1,766,495 | |||||||||||||||||||||||||||
Warrant down round feature | - | - | - | - | 6,284 | - | (6,284 | ) | - | - | ||||||||||||||||||||||||||
- | - | - | - | - | (7,127,966 | ) | - | (7,127,966 | ) | |||||||||||||||||||||||||||
Net loss for the period Adjustment due to 1:150 share consolidation round-up | - | - | 502 | - | - | - | - | - | - | |||||||||||||||||||||||||||
Balance, December 31, 2018 | 1 | - | 2,611,538 | 2,611 | 67,570,756 | - | (42,910,590 | ) | 42,149 | 24,704,926 |
The Financial Statements have been adjusted to retroactively reflect the 150-to-1 reverse stock split effected on October 29, 2018, as discussed in Note 2(a).
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
Condensed Consolidated Interim Statements of Cash Flows
For the nine month periods ended December 31, 2018 and 2017 (unaudited)
(Amounts expressed in U.S. Dollars)
Nine months ended | Nine months ended | |||||||
December 31, 2018 | December 31, 2017 | |||||||
$ | $ | |||||||
Operating activities | ||||||||
Net loss for the period | (7,127,966 | ) | (8,436,636 | ) | ||||
Adjustment for items not affecting cash | ||||||||
Depreciation | 50,190 | 69,606 | ||||||
Amortization | 209,682 | 246,920 | ||||||
Interest expense | 129,933 | 640,168 | ||||||
Share based compensation expense | 1,226,374 | 1,284,257 | ||||||
Shares issued for services | - | 60,000 | ||||||
Accretion expense | 2,421,060 | 290,375 | ||||||
Fair value adjustment | (337,923 | ) | - | |||||
Gain on mark to market revaluation | (2,048,697 | ) | - | |||||
Allowance for doubtful accounts | 6,001 | (16,349 | ) | |||||
(5,471,346 | ) | (5,861,659 | ) | |||||
Changes in non-cash working capital items | ||||||||
Accounts receivable | (1,314,380 | ) | 93,680 | |||||
Prepaid expenses and other receivables | (1,398,301 | ) | 83,003 | |||||
Due from related parties | 908 | (643 | ) | |||||
Inventories | (98,163 | ) | (74,165 | ) | ||||
Accounts payable | 669,779 | 10,104 | ||||||
Accrued liabilities | (429,935 | ) | 639,568 | |||||
Customer advances | (800 | ) | (120,762 | ) | ||||
Deferred revenue | 162,473 | 15,177 | ||||||
Net cash (used in) operating activities | (7,879,765 | ) | (5,215,697 | ) | ||||
Investing activities | ||||||||
Acquisition of equipment | (26,071 | ) | (17,182 | ) | ||||
Net cash (used in) investing activities | (26,071 | ) | (17,182 | ) | ||||
Financing activities | ||||||||
Proceeds from convertible loans | 7,826,633 | 4,699,975 | ||||||
Proceeds on exercise of warrants | - | 1,125,038 | ||||||
Repayment of promissory notes principal | - | (200,000 | ) | |||||
Repayment of promissory notes interest | - | (49,505 | ) | |||||
Repayment of demand notes principal | (50,000 | ) | (208,359 | ) | ||||
Repayment of demand notes interest | (2,975 | ) | (79,259 | ) | ||||
Proceeds from short term loan | - | 400,000 | ||||||
Net cash provided by financing activities | 7,773,658 | 5,687,890 | ||||||
Net decrease in cash and cash equivalents for the period | (132,178 | ) | 455,011 | |||||
Cash and cash equivalents, beginning of period | 507,311 | 543,650 | ||||||
Cash and cash equivalents, end of period | 375,133 | 998,661 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
4 |
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and nine month periods ended December 31, 20172018 and 2016 (unaudited)2017
(Amounts expressed in U.S. Dollars) (unaudited)
1. | NATURE OF OPERATIONS |
The Company and its Operations
Bionik Laboratories Corp. (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.
On February 26, 2015, the Company entered into a Share Exchange Agreement and related transactions whereby it acquired Bionik Laboratories Inc., a Canadian Corporation (“Bionik Canada”)., and Bionik Canada issued 50,000,000333,334 Exchangeable Shares, representing a 3.14 exchange ratio, for 100% of the then outstanding 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 share of its Special Voting Preferred Voting Share (the “Special Preferred Share”)Stock (Note 10).
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 wholly owned subsidiaries, Bionik Acquisition Inc. and Bionik Canada. References to Drywave relate to the Company prior to the Merger.
On April 21, 2016, the Company acquired all of the outstanding shares and, accordingly, all assets and liabilities of Interactive Motion Technologies, Inc. (“IMT”), a Boston, Massachusetts-based global pioneer and leader in providing effective robotic products for neurorehabilitation, pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) dated March 1, 2016, with IMT, Hermano Igo Krebs, and Bionik Mergerco Inc., a Massachusetts corporation and the Company’s wholly owned subsidiary (“Bionik Mergeco”)(Bionik Mergeco). The merger agreement provided for the merger of Bionik Mergerco with and into IMT, with IMT surviving the merger as the Company’s wholly owned subsidiary.subsidiary which was renamed Bionik, Inc. In return for acquiring IMT, IMT shareholders received an aggregate of 23,650,000157,667 shares of the Company’s common stock.
Bionik Laboratories Corp. is a robotics company focused on providing rehabilitation and mobility solutionsReferences to individuals with neurological and mobility challenges from hospitalthe Company refer to home. The Company has a portfolio of products focused on upper and lower extremity rehabilitation for stroke and other mobility impaired individuals, including three products in the market and four products in varying stages of development. The InMotion Systems - the InMotion ARM, In Motion Wrist, InMotion Hand – are designed to provide intelligent, adaptive therapy in a manner that has been clinically verified to maximize neuro-recovery. Bionik also has a lower-body exoskeleton - the ARKE - designed to allow paraplegics as well as other wheelchair users the ability to rehabilitate through walking. The Company is developing with a partner a lower body product based on some of the ARKE technology, which should allow certain individuals to walk better, who have limited mobility. This product is expected to be launched in the consumer home market.
The unaudited condensed consolidated interim financial statements consolidate the Company and its wholly owned subsidiaries, Bionik Canada,Inc., Bionik Acquisition Inc. and Bionik Inc. (the former IMT) since its acquisitionCanada.
On November 6, 2017, the Company approved the authorization of a common share capital increase to 250,000,000 from 150,000,000 and on April 21, 2016.June 12, 2018, the Company approved the authorization of a common share capital increase to 500,000,000 from 250,000,000.
The Company is a global pioneering robotics company focused on providing rehabilitation solutions to individuals with neurological disorders, specializing in designing, developing and commercializing cost-effective physical rehabilitation technologies, prosthetics, and assisted robotic products. The Company strives to innovate and build devices that can rehabilitate and 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.
These unaudited condensed consolidated interim 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.
The Company’s principal offices are located at 483 Bay Street, N105, Toronto, Ontario, Canada M5G 2C9 and its U.S. address is 80 Coolidge Hill Road, Watertown, MA. USA 02472.
Going Concern
As at December 31, 2017,2018, the Company had a working capital deficit of $8,535,488($2,236,228) (March 31, 2017 - $3,415,670)2018 – ($6,711,941)) and an accumulated deficit of $29,554,125($42,910,590) (March 31, 2017 - $21,076,464)2018 – ($35,776,340)), and the Company incurred a net loss and comprehensive loss of ($8,436,636)2,384,163) for the nine monthsthree month period ended December 31, 20172018 (December 31, 20162017 – $(4,915,032)($2,580,759)) and ($7,127,966) for the nine month period ended December 31, 2018 (December 31, 2017 – ($8,436,636)).
There is no certainty that the Company will be successful in generating sufficient cash flow from operations or achieving and maintaining profitable operations in the future to enable it to meet its obligations as they come due, however the Company believes it has the support of its major shareholders, who have previously provided convertible loans to meet the Company’s cash flow needs and consequentlyto continue as a going concern. The Company will require additional financing this yearhopes to fund its operations and it is currently working on securing this funding throughraise sufficient cash in the issuance of convertible promissory notes, corporate collaborations, public or private equity offerings or debt financings.next three months to meet the Company’s anticipated cash requirements for the 12 months thereafter. Sales of additional equity or equity linkedequity-linked securities by the Company would result in the dilution of the interests of existing stockholders. There can be no assurance that financing will be available when required. In the event that the necessary additional financing is not obtained, the Company would reduce its discretionary overhead costs substantialsubstantially or otherwise curtail operations.
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and nine month periods ended December 31, 20172018 and 2016 (unaudited)2017
(Amounts expressed in U.S. Dollars) (unaudited)
1. | NATURE OF OPERATIONS |
The Company expects the forgoing, or a combination thereof, to meet the Company’s anticipated cash requirements for the next 12 months; however, if these conditions are not achieved, this will raise substantialsignificant doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated interim financial statements do not include any adjustments to reflect the possible future effects onof recoverability and reclassification of assets or the amounts and classificationclassifications of liabilities that may result from the outcome of this uncertainty.
The condensed consolidated interim financial statements do not include any adjustments related to the recoverability and classification of the recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. All adjustments, consisting only of normal recurring items, considered necessary for fair presentation have been included in these condensed consolidated interim financial statements.
2. | CHANGE IN ACCOUNTING POLICY |
a) | Basis of presentation |
On or about August 7, 2018, holders of the common stock and exchangeable shares of the Company approved, through a majority shareholder vote, an amendment to the Company’s Amended and Restated Certificate of Incorporation authorizing the Board of Directors to effect a reverse stock split of the Company’s common stock and exchangeable shares at a ratio up to one-for-one hundred and fifty (1:150).
On October 29, 2018, the Company completed a reverse stock split and thereafter Bionik’s common stock began trading on the OTCQB market on a one-for-one hundred and fifty (1:150) split-adjusted basis. As a result of the reverse stock split, every 150 shares of the Company’s then-existing common stock was converted into one share of the Company’s common stock. No fractional shares were issued in connection with the reverse stock split. All fractional shares created by the reverse split were rounded up to the next whole share. The reverse stock split automatically and proportionately adjusted, based on the one-for-one hundred fifty split ratio, all issued and outstanding shares of the Company’s common stock, as well as exchangeable shares and common stock underlying stock options, warrants and other derivative securities outstanding at the time of the effectiveness of the reverse stock split. The exercise price on outstanding equity based grants was proportionately increased, while the number of shares available under the Company’s equity-based plans was also proportionately reduced. The reverse stock split has no impact on the par value per share of Bionik’s common stock, which remains at $0.001. All current and prior period amounts related to share, share prices and earnings per share, warrant and options presented in the Company’s consolidated financial statements contained in this Quarterly report on Form 10-Q and the accompanying notes have been restated to give retrospective presentation for the reverse split.
b) | Change in accounting policy |
The FASB issued ASU No. 2017-11,Earnings Per Share (Topic 260) Distinguishing Liabilities From Equity (Topic 480) Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments With Down Round Features II Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests With a Scope Exception, allows a financial instrument with a down-round feature to no longer automatically be classified as a liability solely based on the existence of the down-round provision. The update also means the instrument would not have to be accounted for as a derivative and be subject to an updated fair value measurement each reporting period.
On consideration of the above factors, the Company elected to early adopt ASU 2017-11 on July 1, 2017, the2017. The ASU is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other organizations, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.
The early adoption allows the Company to reduce the cost and complexity of updating the fair value measurement each reporting period and eliminate the unnecessary volatility in reported earnings created by the revaluation when the Company’s shares’ value changes.
The Company presented the change in accounting policy through the retrospective application of the new accounting principle to all prior periods, as described in ASU No. 250-10-45-5, Accounting Changes and Error Corrections.
The following financial statement line items for the periods indicated were affected by the change in accounting principle.
Income statement
Three months period ended December | Nine months period ended December | |||||||||||||||||||||||
2016 | 2016 | |||||||||||||||||||||||
As | As | |||||||||||||||||||||||
originally | Effect of | originally | Effect of | |||||||||||||||||||||
reported | As adjusted | change | reported | As adjusted | change | |||||||||||||||||||
Sales | $ | 372,426 | $ | 372,426 | $ | - | $ | 553,900 | $ | 553,900 | $ | - | ||||||||||||
Cost of Sales | 334,786 | 334,786 | - | 405,680 | 405,680 | - | ||||||||||||||||||
Total operating expenses | 1,609,954 | 1,609,954 | - | 5,450,290 | 5,450,290 | - | ||||||||||||||||||
Total other expenses | (761,896 | ) | 9,445 | (771,341 | ) | (2,897,426 | ) | (387,038 | ) | 2,510,388 | ||||||||||||||
Net income (loss) and comprehensive loss for the period | (810,418 | ) | (1,581,759 | ) | (771,341 | ) | (2,404,644 | ) | (4,915,032 | ) | (2,510,388 | ) | ||||||||||||
Net income (loss) per share | (0.01 | ) | (0.02 | ) | (0.01 | ) | (0.03 | ) | (0.05 | ) | (0.02 | ) |
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and nine month periods ended December 31, 20172018 and 2016 (unaudited)2017
(Amounts expressed in U.S. Dollars)
Balance sheet
As at March 31, 2017 | ||||||||||||
As | ||||||||||||
originally | Effect of | |||||||||||
reported | As adjusted | change | ||||||||||
Current assets | $ | 1,402,580 | $ | 1,402,580 | $ | - | ||||||
Capital assets | 227,421 | 227,421 | - | |||||||||
Intangible assets | 27,338,899 | 27,338,899 | - | |||||||||
Total assets | 28,968,900 | 28,968,900 | - | |||||||||
Warrant derivative liability | 959,600 | - | (959,600 | ) | ||||||||
Other current liabilities | 4,818,205 | 4,818,250 | 45 | |||||||||
Total liabilities | 5,777,805 | 4,818,250 | (959,555 | ) | ||||||||
Common stock | 96,794 | 96,794 | - | |||||||||
Additional paid in capital | 38,640,706 | 45,088,171 | 6,447,465 | |||||||||
Retained earnings | (15,588,554 | ) | (21,076,464 | ) | (5,487,910 | ) | ||||||
Accumulated other comprehensive income | 42,149 | 42,149 | - | |||||||||
Total shareholders' equity | 23,191,095 | 24,150,650 | 959,555 | |||||||||
Total liabilities and shareholders' equity | 28,968,900 | 29,968,900 | - |
The change in retained earnings consists of a change in net loss for the year ended March 31 2017, changing from $3,936,574 to $8,069,402, a net change of $4,132,828. The remainder of the change included in the $5,487,910 noted above relates to periods prior to March 31, 2016.
Statement of cash flows
As at December 31, 2016 | ||||||||||||
As originally | Effect of | |||||||||||
reported | As adjusted | change | ||||||||||
Net loss for the period | $ | (2,404,644 | ) | $ | (4,915,032 | ) | $ | (2,510,388 | ) | |||
Adjustment for items not affecting cash | ||||||||||||
Depreciation | 57,781 | 57,781 | ||||||||||
Interest expense | 23,839 | 23,839 | ||||||||||
Share-based compensation expense | 592,130 | 592,130 | ||||||||||
Shares issued for service | 59,500 | 59,500 | ||||||||||
Change in fair value of warrant derivative liability | (2,510,388 | ) | - | 2,510,388 | ||||||||
Change in non-cash working capital items | (1,359,164 | ) | (1,359,164 | ) | ||||||||
Net cash used in operating activities | (5,540,946 | ) | (5,540,946 | ) | - | |||||||
Net cash used in investing activities | (9,827 | ) | (9,827 | ) | - | |||||||
Net cash provided by financing activities | 749,968 | 749,968 | - | |||||||||
Net decrease in cash and cash equivalents for the period | (4,800,805 | ) | (4,800,805 | ) | - | |||||||
Cash and cash equivalents, beginning of period | 5,381,757 | 5,381,757 | - | |||||||||
Cash and cash equivalents, end of period | 580,952 | 580,952 | - |
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and nine month periods ended December 31, 2017 and 2016 (unaudited)
(Amounts expressed in U.S. Dollars)
3. | SIGNIFICANT ACCOUNTING POLICIES |
Unaudited Condensed Consolidated Interim Financial Statements
These unaudited condensed consolidated interim financial statements have been prepared on the same basis as the annual audited financial statements of the Company and should be read in conjunction with those annual audited financial statements filed on Form 10-K for the year ended March 31, 2017.2018. In the opinion of management, these unaudited condensed consolidated interim financial statements reflect adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.
This is the third set of the Company’s unaudited condensed consolidated interim financial statements where ASU-2014-09 “Revenue from Contracts with Customers (Topic 606)” has been applied. The changes in accounting policies in the Company’s unaudited condensed consolidated interim financial statements from the quarter ended December 31, 2018 from the March 31, 2018 audited financial statements are described below.
Newly Adopted and Recently Issued Accounting Pronouncements
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.
In May 2014, the FASBFinancial Accounting Standards Board (“FASB”) issued ASUAccounting Standards Update (“ASU”) No. 2014-09, “RevenueRevenue from Contracts with Customers (Topic 606)”. The updated standard outlineswill replace most existing revenue recognition guidance in U.S. GAAP. The new standard introduces a single comprehensive model for entitiesfive-step process to usebe followed in determining the amount and timing of revenue recognition. It also provides guidance on accounting for revenue arising fromcosts incurred to obtain or fulfill contracts with customers, and supersedes most current revenue recognition guidance.establishes disclosure requirements, which are more extensive than those required under existing U.S. GAAP. The accounting standardFASB has issued numerous amendments to ASU 2014-09 from August 2015 through January 2018, which provide supplemental and clarifying guidance, as well as amend the effective date of the new standard. ASU 2014-09, as amended, is effective for annual reporting periods (includingthe Company in the interim reporting periods within those periods) beginning after December 15, 2017. For a public entity, early adoption isperiod ended June 30, 2018. The standard permits the use of either the retrospective or modified retrospective (cumulative effect) transition method. The Company adopted the new standard using the modified retrospective transition method. The Company has adopted ASU-2014-01 for the fiscal year ending March 31, 2019 and it did not permitted. The impacthave material effect on the condensed consolidated interimfinancial position and the consolidated results of operations.
As a result of the adoption of ASU-2014-09, the Company’s accounting policies have been updated. See “Revenue Recognition” below for these changes in accounting policies, as well as new disclosure requirements. The changes in accounting policies will also be reflected in the Company’s audited consolidated financial statements of adopting ASU 2014-09 will be assessed by management.for the year ending March 31, 2019.
In November 2015, the FASB issued ASU No. 2015-17, “Balance Sheet Classification of Deferred Taxes,” which requiresrequire 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. 2015-172015- 17 is effective for the fiscal year commencing after December 15, 2017. The Company doeshas adopted ASU-2015-17 for the fiscal year ending March 31, 2019 and it did not anticipate that the adoption of ASU No. 2015-17 will have a material effect on the condensed consolidated interim financial position orand the consolidated results of operations.
In January 2016, the FASB issued ASU No. 2016-01 “FinancialFinancial Instruments –- Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”.Liabilities. The updates makesmake several modifications to Subtopic 825-10, including the elimination of the available-for-sale classification of equity investments, and it requires equity investments with readily determinable fair values to be measured at fair value with changes in fair value recognized in operations. The update is effective for fiscal years beginning after December 15, 2017. The Company is still assessinghas adopted ASU-2016-01 for the impact that the adoption of ASU 2016-01 willfiscal year ending March 31, 2019 and it did not have material effect on the condensed consolidated interim financial position and the consolidated results of operations.
In February 2016, the FASB issued ASU 2016-02, “Leases”.“Leases.” This update requires organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The new guidance will also require additional disclosure about the amount, timing and uncertainty of cash flows arising from leases. The provisions of this update are effective for annual and interim periods beginning after December 15, 2018. The Company is still assessing the impact that the adoption of ASU 2016-02 will have on the condensed consolidated interim financial position and the consolidated results of operations.
In March 2016, the FASB issued ASU 2016-09, “Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting”. Several aspects of the accounting for share-based payment award transaction are simplified, including (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The amendments are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company has adopted this policy during the period and there was no impact on the condensed consolidated interim financial statements.
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments”. This ASU provides eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for the fiscal year commencing after December 15, 2017. The Company is still assessinghas adopted ASU-2016-15 for the impact that the adoption of ASU 2016-15 willfiscal year ending March 31, 2019 and it did not have material effect on the condensed consolidated interim statementfinancial position and the consolidated results of cash flows.operations.
In January 2017, the FASBFAS issued ASU 2017-01, “Business Combinations: Clarifying the definition of a Business” which amends the current definition of a business. Under ASU 2017-01, to be considered a business, an acquisition would have to include an input and a substantive process that together significantly contributes to the ability to create outputs. ASU 2017-01 further states that when substantially all of the fair value of gross assets acquittedacquired is concentrated in a single asset (or a group of similar assets), the assets acquired would not represent a business. The new guidance also narrows the definition of the term “outputs” to be consistent with how it is described in Topic 606, Revenue from Contracts with Customers.
7 |
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and nine month periods ended December 31, 2018 and 2017
(Amounts expressed in U.S. Dollars) (unaudited)
3. | SIGNIFICANT ACCOUNTING POLICIES (continued) |
The changes to the definition of a business will likely result in more acquisitions being accounted for as asset acquisitions. ASU 2017-01 is effective for acquisitions commencing on or after June 30, 2019, with early adoption permitted. Adoption of this guidance will be applied prospectively on or after the effective date.
In January 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and Other” ASU 2017-04 simplifies the accounting for goodwill impairment by eliminating Step 2 of the current goodwill impairment test, which required a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which the reporting unit’s carrying value exceeds its fair value, limited to the carrying value of the goodwill. ASU 2017-04 is effective for financial statements issued for fiscal years, and interim periods beginning after December 15, 2019.
In SeptemberMay 2017, the FASB issued ASU 2017-13, “Revenue Recognition2017-09, “Compensation-Stock Compensation (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840),718): Scope of Modification Accounting (ASU 2107-9).” The FASB issued the update to provide clarity and Leases (Topic 842)”. ASU 2017-13 amendsreduce the early adoption date option for certain companies relatedcost and complexity when applying guidance in Topic 718. The amendments in this update provide guidance about which changes to the adoptionterms or conditions of a share-based payment award require an entity to apply modifications accounting in Topic 718. ASU 2014-09 and ASU 2016-02.2017-09 is effective for the Company in the interim period ended June 30, 2018. The Company adopted ASU-2017-09 during the quarter ended June 30, 2018 and it did not have material effect on the consolidated financial position and the consolidated results of operations.
Inventory
Inventory is not early adopting this standard; however, we are currently assessingstated at the lower of cost or net realizable value. Cost is recorded at standard cost, on the first-in, first-out basis. Work-in- progress and finished goods consist of materials, labor and allocated overhead.
Revenue Recognition
The Company has adopted ASU-2014-09 with an initial application date of April 1, 2018. The updated accounting policies and the impact that the eventual adoption of this standard will have on the Company.unaudited condensed consolidated interim financial statements and additional disclosures are detailed as follows:
The Company determines revenue recognition through the following steps: a) identification of the contract with a customer; b) identification of the performance obligation in the contract; c) determination of the transaction price; d) allocation of the transaction price for the performance obligations in the contract; and e) recognition of revenue when the Company satisfies a performance obligation. Revenue is recognized when control of a product is transferred to a customer. Revenue is measured based on the consideration specified in a contract with a customer, net of returns and discounts. Accruals for sales returns are calculated based on the best estimate of the amount of product that will ultimately be returned by customers, reflecting historical experience and the magnitude of non-conforming inventory claims made by the customers that have either been approved or are pending review.
BIONIK LABORATORIES CORP.Contract liabilities are recorded when cash payments are received or due in advance of the Company’s performance.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
ForIn the comparative period, revenue was measured at the fair value of the consideration received or receivable, net of returns and discounts and was recognized when the risks and rewards of ownership has transferred to the customer. No revenue was recognized if there was significant uncertainties regarding recovery of the consideration due, the costs incurred or to be incurred could not be measured reliably, or there was continuing management involvement with the goods.
Impact on the unaudited condensed consolidated interim financial statements
ASU-2014-09 had no impact on the Company’s unaudited condensed consolidated interim statement of loss and comprehensive loss for the three and nine month periods ended December 31, 2017 and 2016 (unaudited)
(Amounts expressed in U.S. Dollars)
Revenue Recognition
The Company recognizes revenue from product sales when persuasive evidence of an agreement with customer exists, products are shipped or title passes pursuant to the terms of the agreement, the amount due from the customer is fixed or determinable, collectability is reasonably assured, and there are no significant future performance obligation. Deposits are carried as liabilities until the requirements for revenue recognition are met.2018.
Warranty Reserve and Deferred Warranty Revenue
The Company provides a one-year warranty as part of its normal sales offering. When products are sold, the Company provides warranty reserves, which, based on the historical experience of the Company are sufficient to cover warranty claims. Accrued warranty reserves are included in accrued liabilities on the balance sheet and amounted to $100,338 and $64,957 at December 31, 20172018 and March 31, 2017.2018, respectively. The Company also sells extended warranties of orfor additional periods beyond the standard warranty. Extended warranty revenue is deferred and recognized as revenue over the extended warranty period. The Company recognized $Nil$20,303 and $35,618 of expense related to the change in warranty reserves and warranty costs incurred and recorded as an expense in cost of goods sold during the three and nine month period ended December 31, 20172018 (December 31, 2016 - $15,3552017 – $Nil and $30,732, respectively)$Nil).
8 |
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and nine month periods ended December 31, 2018 and 2017
(Amounts expressed in U.S. Dollars) (unaudited)
3. | SIGNIFICANT ACCOUNTING POLICIES (continued) |
Foreign Currency Translation
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.
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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. The estimates are based on management’s best knowledge of current events and actions of the Company it may undertake in the future. Significant areas requiring the use of estimates relate to the valuation of inventory, revenue recognition, the useful life of equipment and intangible assets, impairment of goodwill and intangible assets. Actual results could differ from these estimates.
Fair Value of Financial Instruments
ASC Topic 820 defines fair value, establishes a framework for measuring fair value, and expandexpands 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, accounts receivable, other receivables, accounts payable, and accrued liabilities, due from related parties demand notes payable, promissory notes payable, convertible notes payable, and short-termdemand loans 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.
The Company has recognized shares to be issued, stock options and warrants, for which it did not as of March 31, 2018 have sufficient authorized share capital to issue, as a liability that is measured at fair value based on Level 1 inputs, for the component related to shares to be issued, and Level 3 inputs for the measurement of the stock options and warrants using a valuation model, as disclosed in Notes 11 & 12. This was reversed in the quarter ended June 30, 2018, when the Company’s authorized capital was increased from 250,000,000 to 500,000,000 and gain on mark to market valuation of $2,048,697 was recognized.
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 period.quarter ended December 31, 2018.
4. | TECHNOLOGY AND OTHER ASSETS |
The schedule below reflects the intangible assets acquired in the IMT acquisition on April 21, 2016 and the asset amortization period and expense for the nine month period ended December 31, 2018 and the year ended March 31, 2018:
Expense March | Value at March | Expense Dec. | Value at Dec.. | |||||||||||||||||||
Intangible | Amortization | Value acquired | 31, 2018 | 31, 2018 | 31, 2018 | 31, 2018 | ||||||||||||||||
assets acquired | period (years) | $ | $ | $ | $ | $ | ||||||||||||||||
Patents and exclusive License Agreement | 9.74 | 1,306,031 | 134,126 | 1,045,530 | 100,567 | 944,963 | ||||||||||||||||
Trademark | Indefinite | 2,505,907 | - | 2,505,907 | - | 2,505,907 | ||||||||||||||||
Customer relationships | 10 | 1,431,680 | 143,206 | 1,153,543 | 107,376 | 1,046,167 | ||||||||||||||||
Non-compete agreement | 2 | 61,366 | 30,709 | 1,739 | 1,739 | - | ||||||||||||||||
Assembled Workforce | 1 | 275,720 | 15,864 | - | - | - | ||||||||||||||||
5,580,704 | 323,905 | 4,706,719 | 209,682 | 4,497,037 |
Amortization for the nine months ended December 31, 2018 was $209,682 (December 31, 2017 - $246,920).
Amortization for three months ended December 31, 2018 was $69,314 (December 31, 2017 - $76,985).
9 |
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and nine month periods ended December 31, 2018 and 2017
(Amounts expressed in U.S. Dollars) (unaudited)
5. | PREPAID EXPENSES AND OTHER RECEIVABLES |
December 31, 2018 | March 31, 2018 | |||||||
$ | $ | |||||||
Prepaid materials (i) | 1,526,304 | 86,957 | ||||||
Prepaid expenses | 202,962 | 301,104 | ||||||
Prepaid insurance | 74,828 | 36,497 | ||||||
Sales taxes receivable (ii) | 27,862 | 9,097 | ||||||
1,831,956 | 433,655 |
(i) Prepaid materials represent material deposits paid to our outsource manufacturing partner and other vendors for the production of our InMotion clinic line units.
(ii) Sales tax receivable represents net harmonized sales taxes (HST) input tax credits receivable from the Government of Canada.
6. | INVENTORIES |
December 31, 2018 | March 31, 2018 | |||||||
$ | $ | |||||||
Raw materials | 28,662 | 237,443 | ||||||
Finished goods | 306,944 | - | ||||||
335,606 | 237,443 |
During the three and nine month periods ended December 31, 2018, the Company expensed $392,190 and $986,362, respectively, from inventory as cost of goods sold (December 31, 2017 – $47,594 and $77,705).
During the three and nine month period ended December 31, 2018, the Company wrote down and expensed $47,772 and $62,589 of obsolete inventory (December 31, 2017 – $Nil and $Nil).
7. | EQUIPMENT |
Equipment consisted of the following as at December 31, 2018 and March 31, 2018:
December 31, 2018 | March 31, 2018 | |||||||||||||||||||||||
Accumulated | Accumulated | |||||||||||||||||||||||
Cost | Depreciation | Net | Cost | Depreciation | Net | |||||||||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||||||||
Computers and electronics | 282,576 | 237,882 | 44,694 | 256,505 | 223,750 | 32,755 | ||||||||||||||||||
Furniture and fixtures | 36,795 | 29,278 | 7,517 | 36,795 | 28,051 | 8,744 | ||||||||||||||||||
Demonstration equipment | 200,186 | 135,590 | 64,596 | 200,186 | 105,441 | 94,745 | ||||||||||||||||||
Manufacturing equipment | 88,742 | 86,100 | 2,642 | 88,742 | 85,668 | 3,074 | ||||||||||||||||||
Tools and parts | 11,422 | 6,539 | 4,883 | 11,422 | 5,741 | 5,681 | ||||||||||||||||||
Assets under capital lease | 23,019 | 11,509 | 11,510 | 23,019 | 8,057 | 14,962 | ||||||||||||||||||
642,740 | 506,898 | 135,842 | 616,669 | 456,708 | 159,961 |
Equipment is recorded at cost less accumulated depreciation. Depreciation expense during the three and nine month periods ended December 31, 2018 was $15,969 and $50,190, respectively (December 31, 2017 – $21,234 and $69,606).
10 |
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and nine month periods ended December 31, 20172018 and 2016 (unaudited)2017
(Amounts expressed in U.S. Dollars) (unaudited)
On April 21, 2016,Demand Notes payable
The Company had outstanding notes payable (“Notes”) of $Nil at December 31, 2018 ($51,479 – March 31, 2018) which was acquired when the Company acquired 100% of the common and preferred shares ofbought IMT through a transaction where Bionik Mergerco merged with and into IMT, with IMT surviving the merger as a wholly owned subsidiary of Bionik. Bionik issued 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 toon April 21, 2016. All shares have been issued at MarchThe Notes and interest were repaid during the fiscal quarter ended June 30, 2018.
Balance, March 31, 2018 | $ | 51,479 | ||
Accrued interest | 1,496 | |||
Repayment | (52,975 | ) | ||
Balance, December 31, 2018 | $ | - |
Interest expense incurred on the Notes totaled $1,496 for the three and nine month periods ended December 31, 2017.2018 (December 31, 2017 – $2,309 and $7,018), which was included in accrued liabilities until it was paid off.
Bionik also assumedConvertible Loans Payable
(a) On each of April 1, 2018 and July 20, 2018, the 3,895,000 optionsCompany received loans totaling $4,708,306 (collectively, the “July 20, 2018 loans” which is inclusive of $31,673 that was capitalized interest) which carry an interest rate of 1% per month and of which $2,297,928 came from related parties. $4,732,853 of the loans and accrued and unpaid interest thereon were converted as of July 20, 2018 at a 10% discount to acquire IMT Common Stock granted under IMT’s equity incentive planthe 30 day volume weighted average price (“VWAP”) of the Company’s stock price.
In the event the Company consummates a firm commitment or otherwise issuedunderwritten offering of its common stock by IMT. These options were exchanged for purchase of an aggregate of 3,000,000March 27, 2019, and the price per share thereof (the “Offering Price”) is less than the original conversion price on July 20, 2018, then in such event the Company shall issue to all convertible loan holder at July 20, 2018, at no further cost, additional shares of Company Common Stock,common stock equal to the number of which 1,000,000conversion shares the shareholders that they would have an exercisereceived upon conversion if the conversion price equaled the Offering Price, less the number of $0.25. 1,000,000 have an exercise priceshares of $0.95 and 1,000,000 have an exercise price of $1.05. Stock compensation expenseconversion shares actually issued on vested options of $2,582,890 was recorded on the options exchanged and this amount is included in the acquisition equation.July 20, 2018.
As a resultThe tables below reflect the fair value and anti-dilution features of the acquisitionconvertible loans, which resulted in accretion expense related to the July 20, 2018 loans for the three and six months ended September 30, 2018 of IMT, the Company acquired assets including three licensed patents, two license agreements, three FDA listed products, an FDA inspected manufacturing facility, extensive clinical$1,970,167 and sales data,$2,104,418, respectively, and international distributors. The Company retained an independent valuator to determine the purchase price allocation, which reflects the allocation of assets and goodwill. The following sets forth the purchase price allocation based on management’s best estimates ofa fair value including a summaryadjustment of major classes of consideration transferred$382,010 and $337,923, respectively, being expensed for the recognized amounts of assets acquiredthree and liabilities assumed at the acquisition date.six month periods ended September 30, 2018.
| ||||
At issuance | At July 20, 2018 | |||||||||||||||||||||||||||
Conversion feature fair value | ||||||||||||||||||||||||||||
Principal | Beneficial conversion | Anti-dilution | Fair value of debt | Accretion expense | Interest | Ending balance | ||||||||||||||||||||||
Convertible promissory note | $ | 4,708,306 | $ | 406,744 | $ | 1,697,674 | $ | 2,603,888 | $ | 2,104,418 | $ | 24,547 | $ | 4,732,853 |
Beneficial conversion | Anti-dilution | Total | ||||||||||||||||||||||||||
Conversion feature fair value | ||||||||||||||||||||||||||||
At Issuance | $ | 406,744 | $ | 1,697,674 | $ | 2,104,418 | ||||||||||||||||||||||
Fair value adjustment | $ | (406,744 | ) | $ | 68,821 | $ | (337,923 | ) | ||||||||||||||||||||
Balance allocated to equity on conversion | $ | - | $ | (1,766,495 | ) | $ | (1,766,495 | ) | ||||||||||||||||||||
Ending balance at June 30, 2018 | $ | - | $ | - | $ | - |
11 |
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and nine month periods ended December 31, 20172018 and 2016 (unaudited)2017
(Amounts expressed in U.S. Dollars) (unaudited)
(b) During the period between October 1, 2018 and December 31, 2018, the Company received $3,150,000 in new convertible loans (“New Loans”) subsequent to the loans converted July 20, 2018, which carry an interest rate of 1% per month and of which $300,000 came from related parties. The scheduleloans and interest are convertible at a 20% discount on the earlier of (i) March 28, 2019 and (ii) the consummation of an equity or equity-linked round of financing of the Company with gross proceeds of no less than $2,000,000.
The schedules below reflectsreflect the intangible assets acquiredbalance of the New Loans, which resulted in accretion expense of $316,642 being expensed for the IMT acquisitionthree months ended December 31, 2018.
At issuance | At December 31, 2018 | |||||||||||||||
Principal | Accretion expense | Interest | Loan Balance | |||||||||||||
Convertible promissory note | $ | 3,150,000 | $ | 316,642 | $ | 72,217 | $ | 3,538,859 |
(c) During the nine month period ended December 31, 2018, the Company received loans totaling $7,858,306 (which is inclusive of $31,673 that was capitalized interest) which carry an interest rate of 1% per month and the assets amortization periodof which $2,597,928 came from related parties. An accretion expense of $316,642 and expense$2,421,060, respectively, and a fair value adjustment of $Nil and $337,923, respectively, was expensed for the three and nine monthsmonth periods ended December 31, 2018 (December 31, 2017 - $216,302 and $290,375 accretion for the three and nine month periods and $Nil and $Nil fair value adjustment).
9. | RELATED PARTY TRANSACTIONS AND BALANCES |
a) | Due from related parties |
As at December 31, 2018, there was an outstanding loan to the Chief Technology Officer of the Company for $17,989 (March 31, 2018 – $18,897). The loan has an interest rate of 1% based on the Canada Revenue Agency’s prescribed rate for such advances and is denominated in Canadian dollars. During the three and nine month period ended December 31, 2018, the Company accrued interest receivable in the amount of $43 and $130 (December 31, 2017 – $47 and ($658)) and the year ended March 31, 2017:
Amortization | Value acquired | Expense March 31, 2017 | Value at March 31, 2017 | 3 Months Expense December 31, 2017 | 9 Months Expense December 31, 2017 | Value at December 31, 2017 | ||||||||||||||||||||||
Intangible assets acquired | period (years) | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
Patents and exclusive License Agreement | 9.74 | 1,306,031 | 126,375 | 1,179,656 | 33,522 | 100,604 | 1,079,052 | |||||||||||||||||||||
Trademark | Indefinite | 2,505,907 | - | 2,505,907 | - | - | 2,505,907 | |||||||||||||||||||||
Customer relationships | 10 | 1,431,680 | 134,931 | 1,296,749 | 35,792 | 107,414 | 1,189,335 | |||||||||||||||||||||
Non compete agreement | 2 | 61,366 | 28,918 | 32,448 | 7,671 | 23,038 | 9,410 | |||||||||||||||||||||
Assembled Workforce | 1 | 275,720 | 259,856 | 15,864 | - | 15,864 | - | |||||||||||||||||||||
5,580,704 | 550,080 | 5,030,624 | 76,985 | 246,920 | 4,783,704 |
December 31, 2017 | March 31, 2017 | |||||||
$ | $ | |||||||
Prepaid expenses and sundry receivables | 52,221 | 68,484 | ||||||
Prepaid insurance | 70,165 | 136,896 | ||||||
Sales taxes receivable (i) | 22,658 | 22,667 | ||||||
145,044 | 228,047 |
(i) Represents net harmonized sales taxes (HST) input tax credits receivableremaining fluctuation in the balance from the Government of Canada.prior year is due to changes in foreign exchange.
December 31, 2017 | March 31, 2017 | |||||||
$ | $ | |||||||
Raw materials | 264,334 | 119,985 | ||||||
Work in progress | 14,283 | 108,264 | ||||||
Finished Goods | 23,797 | - | ||||||
302,414 | 228,249 |
Equipment consisted of the following asAs at December 31, 20172018, $1,957 (March 31, 2018 – $208,567) was owing to the CEO of the Company; $9,496 (March 31, 2018 –$135,039) was owing to the Chief Technology Officer; and March$1,588 (March 31, 2017:
December 31, 2017 | March 31, 2017 | |||||||||||||||||||||||
Accumulated | Accumulated | |||||||||||||||||||||||
Cost | Depreciation | Net | Cost | Depreciation | Net | |||||||||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||||||||
Computers and electronics | 252,120 | 219,288 | 32,832 | 250,538 | 204,258 | 46,280 | ||||||||||||||||||
Furniture and fixtures | 36,795 | 27,598 | 9,197 | 36,795 | 26,096 | 10,699 | ||||||||||||||||||
Demonstration equipment | 200,186 | 92,539 | 107,647 | 184,586 | 44,420 | 140,166 | ||||||||||||||||||
Manufacturing equipment | 88,742 | 85,509 | 3,233 | 88,742 | 84,982 | 3,760 | ||||||||||||||||||
Tools and parts | 11,422 | 5,447 | 5,975 | 11,422 | 4,472 | 6,950 | ||||||||||||||||||
Assets under capital lease | 23,019 | 6,906 | 16,113 | 23,019 | 3,453 | 19,566 | ||||||||||||||||||
612,284 | 437,287 | 174,997 | 595,102 | 367,681 | 227,421 |
Equipment is recorded at cost less accumulated depreciation. Depreciation expense during2018 – $116,624) was owing to the three and nine months period ended December 31, 2017 was $21,234 and $69,606 (December 31, 2016 - $24,028 and $57,781).Chief Financial Officer, all related to business expenses. Balances owing are included in accounts payable or accrued liabilities.
12 |
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and nine month periods ended December 31, 20172018 and 2016 (unaudited)
(Expressed in U.S. Dollars)
(a) Demand Notes payable
The Company repaid on December 31, 2017 all outstanding demand notes payable (“Notes”) except Notes in the aggregate principal amount of $50,000, which was deferred to June 30, 2018 acquired from IMT on April 21, 2016.
Balance, March 31, 2017 | 330,600 | |||
Accrued interest | 7,018 | |||
Repayment of principal | (208,359 | ) | ||
Repayment of interest | (79,259 | ) | ||
Balance, December 31, 2017 | $ | 50,000 |
Interest expense incurred on the Notes totaled $2,309 and $7,018 for the three months and nine months periods ended December 31, 2017 (December 31, 2016 - $2,367 and $3,467), which is included in accrued liabilities.
(b) Promissory Notes payable
In February 2014, the Company borrowed $200,000 from an existing investor under the terms of a secured promissory note (“Promissory Note”). The Promissory Note bore interest at a simple interest rate equal to 10% per annum and interest is payable quarterly. Interest expenses incurred on the Promissory Note totaled $3,059 and $12,957 for the three and none months ended December 31, 2017 (December 31, 2016 - $5,041 and $13,973). The Promissory Note was paid in full during the quarter.
(c) Short term Loan
In December 2017, a company controlled by a Board member made a short-term loan to the Company of $400,000 with interest at 1.5% per month. Interest expenses incurred on the loan totaled $2,400 for the three and nine months ended December 31, 2017 (December 31, 2016 - $Nil and $Nil). The Company repaid this loan with interest of $3,200 in January 2018.
(d) Convertible Loans Payable
In December 2016, several shareholders of the Company agreed to advance the Company $1,500,000 of convertible notes in three tranches: $500,000 upon origination of the convertible loans and $500,000 on each of January 15, 2017 and February 15, 2017. A further $500,000 was advanced in March 2017 to bring the total of these convertible loans to approximately $2,000,000. The convertible loans bore interest at 6% until the original due date of March 31, 2017 and $17,488 was accrued and expensed as interest on these loans for the year ended March 31, 2017.
The convertible loans contain the following terms: convertible at the option of the holder at the price of the equity financing or payable on demand upon the completion of an equity financing greater than $5,000,000; automatically convertible at the price of the equity financing upon completion of an equity financing between $3,500,000 and $5,000,000; if no such equity financing is completed by November 15, 2017, then the loans shall become secured by a general security agreement over all assets of the Company; and, upon a change in control would either be payable on demand or convertible at the lesser of a price per share equal to that received by the parties in the change in control transaction or the market price of the shares. These conversion features were analyzed and determined to be contingent conversion features, accordingly, until the triggering event no beneficial conversion feature is recognized.
On August 14, 2017, the Company entered into an amendment to these convertible loans, whereby the interest was changed to a fixed rate of 12% per year from April 1, 2017 to August 14, 2017, and 3% per month from August 14, 2017 to maturity, which was extended to the earlier of March 31, 2018 or consummation of a qualified financing. The conversion feature was modified to contain the following terms: upon the consummation of an equity or equity-linked round of with an aggregate gross proceeds of $7,000,000, without any action on part of the Holder, the outstanding principal, accrued and unpaid interest and premium amount equal to (25%) of the principal amount less the accrued and unpaid interest, will be converted into shares of new round stock based upon the lesser of (a) the lowest issuance (or conversion) price of new round stock in case there is more than one tranche of new round stock or (b) ($0.25).
Further, the Company issued warrants to these debt holders amounting to 20% of the aggregate principal of the convertible loans divided by the exercise price, which would be determined as the lowest of a new round stock in a qualified financing, the average volume weighted average price for the sixty trading days prior to January 31, 2018 or $0.25. The warrants have a term of five years.
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and nine month periods ended December 31, 2017 and 2016 (unaudited)
(Amounts expressed in U.S. Dollars)
An additional $2,999,975 was received from these shareholders during the nine months ended December 31, 2017 for a total of $4,999,975. For the three months and nine months ended December 31, 2017, an additional $381,429 and $587,699 of interest was accrued and expensed on these convertible loans.
The Company has recognized a discount against the convertible loans for the relative fair value of the warrants and is accreting the discount using the effective interest rate method. The assumptions used in valuing the warrants using the binomial valuation model were as follows: exercise price of $0.25, volatility of 114%, risk-free interest rate of 1.91% and a term of five years.
The Company evaluated the fair value of the warrants attached to the convertible notes as $548,178 and recorded $290,375 of warrant accretion expense in the nine month period ended December 31, 2017.
Balance, March 31, 2017 | 2,017,488 | |||
Additional principal investment | 2,999,975 | |||
Fair value of warrants | (548,178 | ) | ||
Accretion expense | 290,375 | |||
Accrued Interest | 587,699 | |||
Balance, December 31, 2017 | $ | 5,347,359 |
(e) In May 2017, the Company’s Chinese joint venture partners loaned the Company $500,000 at an interest rate of 8% convertible into the Company’s common shares upon a capital raise (“Qualified Financing”) where gross proceeds exceed $3,000,000 at the lesser of $0.50 and the quotient of the outstanding balance on the conversion date by the price of the Qualified Financing. Additionally, the holders are entitled to warrants equaling 25% of the number of conversion shares to be issued at conversion. During the three and nine months ended December 31, 2017, $10,082 and $23,693 of interest was accrued and expensed on these convertible loans.
Balance, March 31, 2017 | - | |||
Additional principal investment | 500,000 | |||
Accrued Interest | 23,693 | |||
Balance, December 31, 2017 | $ | 523,693 |
(f) In December 2017, investors of the Company advanced funds under a new convertible loan offering. These convertible loans bear interest at a fixed rate of 3% per month until the earlie of (a) January 31, 2018 and (b) the consummation of a qualified financing defined as gross proceeds of no less than $7,000,000 and up to $14,000,000 raised in one or more tranches. On the maturity date, without any action on the part of the Holder, the outstanding principal and accrued and unpaid interest under the notes will be converted into shares of new round stock based upon a (15%) discount to the lesser of (i) (A) the VWAP average of the last 30 days ending on the closing of the qualified financing (or, in the event of multiple closings, the lowest VWAP average of the last 30 days ending on each closing of a qualified financing) in the event of a maturity date referred to in clause (b) of the definition thereof, or (B) the VWAP average of the last 30 days before the maturity date in the event of a maturity date referred to in clause (a) of the definition thereof, and (ii) ($0.18).
$1,200,000 was received from these investors during the nine months ended December 31, 2017 and $8,800 of interest was accrued and expensed on these convertible loans for the three months and nine months ended December 31, 2017.
Balance, March 31, 2017 | - | |||
Additional principal investment | 1,200,000 | |||
Accrued Interest | 8,800 | |||
Balance, December 31, 2017 | $ | 1,208,800 |
a) Due from related parties
As of December 31, 2017, there was an outstanding loan to the Chief Technology Officer and director of the Company for $19,374 (March 31, 2017 - $18,731). The loan has an interest rate of 1% based on the Canada Revenue Agency’s prescribed rate for such advances and is denominated in Canadian dollars. During the nine months ended December 31, 2017, the Company accrued interest receivable in the amount of ($649) (March 31, 2017 - $707). The remaining fluctuation in the balance from the prior year is due to changes in foreign exchange.
b) Accounts payable and accrued liabilities
As at December 31, 2017, $89,141 (March 31, 2017 - $Nil) was owing to the CEO of the Company; $47,307 (March 31, 2017 - $Nil to the former CTO) was owing to the Chief Technology Officer; $16,592 (March 31, 2017 – $Nil) was owing to the Chief Financial Officer, $97,500 (March 31, 2017 – $97,500) was owing to the Chief Commercialization Officer, and $639,375 (March 31, 2017 – $4,135) was owing to the former CEO and current Chairman of the Board, all related to business, compensation and severance expenses, all of which are included in accounts payable or accrued liabilities.
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and nine month periods ended December 31, 2017 and 2016 (unaudited)
(Amounts expressed in U.S. Dollars)
In connection with the acquisition of IMT, the Company acquired a license agreement dated June 8, 2009, pursuant to which the Company pays the licensors an aggregate royalty of 1% of sales based on patent #8,613,6391. No sales were made, as the technology under this patent has not been commercialized. One of the licensors is a founder of IMT and a former officer and director of the Company.
As at the effective date of the merger pursuant to the Merger Agreement, a former officer and director received an aggregate of 5,190,376 shares of the Company in return for his ownership of IMT securities, in addition to his IMT options which were as of the effective date of the merger exercisable for an aggregate of 360,231 shares of common stock of the Company.
10. | SHARE CAPITAL |
December 31, 2017 | March 31, 2017 | |||||||||||||||
Number of | Number of | |||||||||||||||
shares | $ | shares | $ | |||||||||||||
Exchangeable Shares: | ||||||||||||||||
Balance beginning of period/year | 47,909,336 | 47,910 | 50,000,000 | 50,000 | ||||||||||||
Converted into common shares | (2,000,000 | ) | (2,000 | ) | (2,090,664 | ) | (2,090 | ) | ||||||||
Balance at the end of period/year | 45,909,336 | 45,910 | 47,909,336 | 47,910 | ||||||||||||
Common Shares | ||||||||||||||||
Balance at beginning of the period | 48,885,107 | 48,884 | 22,591,292 | 22,591 | ||||||||||||
Shares issued on acquisition (Note 3) | - | - | 23,650,000 | 23,650 | ||||||||||||
Shares issued to exchangeable shares | 2,000,000 | 2,000 | 2,090,664 | 2,090 | ||||||||||||
Shares issued for services | - | - | 217,047 | 217 | ||||||||||||
Options exercised | - | - | 110,096 | 110 | ||||||||||||
Warrants exercise (a) | 5,000,172 | 5,000 | 174,759 | 175 | ||||||||||||
Cashless exercise of warrants | - | - | 51,249 | 51 | ||||||||||||
Balance at end of the period | 55,885,279 | 55,884 | 48,885,107 | 48,884 | ||||||||||||
TOTAL COMMON SHARES | 101,794,615 | 101,794 | 96,794,443 | 96,794 |
December 31, 2018 | March 31, 2018 | |||||||||||||||
Number of | Number of | |||||||||||||||
shares | $ | shares | $ | |||||||||||||
Exchangeable Shares: | ||||||||||||||||
Balance beginning of year | 295,146 | 295 | 319,396 | 319 | ||||||||||||
Converted into common shares (a) | (21,572 | ) | (22 | ) | (24,250 | ) | (24 | ) | ||||||||
Balance at the end of period | 273,574 | 273 | 295,146 | 295 | ||||||||||||
Common Shares | ||||||||||||||||
Balance at beginning of the period | 1,368,856 | 1,369 | 325,901 | 326 | ||||||||||||
Shares issued to exchangeable shares | 21,572 | 22 | 24,250 | 24 | ||||||||||||
Shares issued on conversion of loans (b) | 947,034 | 947 | 985,370 | 985 | ||||||||||||
Warrants exercised | - | - | 33,335 | 34 | ||||||||||||
Adjustment due to 1:150 share consolidation round-up | 502 | - | - | - | ||||||||||||
Balance at end of the period | 2,337,964 | 2,338 | 1,368,856 | 1,369 | ||||||||||||
TOTAL SHARES | 2,611,538 | 2,611 | 1,664,002 | 1,664 |
During the nine month period ended December 31, |
During the nine month period ended December 31, |
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 share of the Special Voting Preferred Stock, par value $0.001 per share, of the Company (the 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 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 the Special Voting Preferred Share. The Special Voting Preferred Share entitles the Trustee to exercise the number of votes equal to the number of exchangeableExchangeable 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.
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and nine month periods ended December 31, 20172018 and 2016 (unaudited)2017
(Amounts expressed in U.S. Dollars) (unaudited)
11. | STOCK OPTIONS |
The purpose of the Company’s equity incentive 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 or other securities 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 or other securities granted under the Plan shall not exceed 15% of the shares of common stock and Exchangeable Shares issued and outstanding (determined as of January 1 of each year). Optioned shares in respect of which options are not exercised shall be available for subsequent options.
On November 24, 2015, the Company granted 650,0004,334 options granted to employees at an exercise price of $183.00 per share that vest over three years at the anniversary date. The grant date fair value of the options was $694,384. During the year ended March 31, 2016, 250,0001,667 options were cancelled and induring the three and nine monthsmonth period ended December 31, 2018, $21,366 and $92,585 (December 31, 2017 $35,609–$35,609 and $106,828$106,828) in sharestock compensation expense was recognized. As of December 31, 2018 these options are fully expensed.
On December 14, 2015, the Company granted 2,495,00016,634 options to employees, directors and consultants at an exercise price of $150 per share that vest over three years at the anniversary date. The grant date fair value of the options was $1,260,437. During the years ended March 31, 2016, 2017 and 2017, 25,0002018 and for the nine month period ended December 31, 2018, 167 options, 267 options, 2,912 options and 40,0001000 options, respectively, were cancelled and in the first nine months ended December 31, 2017, 351,667 options were cancelled. On September 1, 2017, 666,667 options that were to vest equally December 14, 2017 and 2018 immediately vested. Infor the three and nine monthsmonth period ended December 31, 2018, $27,495 and $105,121 (December 31, 2017 $45,396–$45,396 and $450,690 in$450,690) of stock compensation expense was recognized. Ad at December 31, 2018, these options are full expensed.
On April 21, 2016, the Company granted 3,000,00020,000 stock options to employees of Bionik, Inc., the Company’s wholly-owned subsidiary (formerly IMT) in exchange for 3,895,000 options that existed before the Company purchased IMT of which 1,000,0006,667 have an exercise price of $0.25, 1,000,000$37.50 per share, 6,667 have an exercise price of $0.95$142.50 per share and 1,000,0006,666 have an exercise price of $1.05.$157.50 per share. The grant date fair value of vested options was $2,582,890 and has been recorded as part of the original acquisition equation (Note 3). Forequation. The options that have not yet vested, share compensation expense in the first three months and the nine months ended December 31, 2017 was $10,169 and $30,508 was recognized.are fully expensed.
On April 26, 2016, the Company granted 250,0001,667 options to an employee with an exercise price of $1.00$150 per share that vestsvest over three years at the anniversary date. The grant date fair value was $213,750. The employee left during the quarter ended December 31, 2018 and 556 options that has not vested expired. During the three and nine months ended December 31, 2017,2018, $15,833 and $51,458 (December 31, 2017- $17,813 and $53,438$53,438) was recognized as sharestock compensation expense.
On August 8, 2016, the Company granted 750,0005,000 options to an employee with an exercise price of $1.00$150 per share that vestsvest over three years at the anniversary date. The grant date fair value was $652,068. The employee left in April 2018 and 3,334 options that had not vested were cancelled and the remaining 1,667 options expired in November 2018. During the three months and nine months ended December 31, 2018, $12,075 and $48,301 (December 31, 2017 – $54,339 and $163,017$163,017) of sharestock compensation expense was recognized.
On February 6, 2017, the Company granted 400,0002,667 options to an employee with an exercise price of $0.70$105.00 per share that vestsvest over three years at the anniversary date. The grant date fair value was $245,200. Share compensation expense was recognized forDuring the three and nine months ended December 31, 2017 of2018, $20,433 and $61,300 (December 31, 2017 – $20,433 and $61,300) of stock compensation expense was recognized.
On February 13, 2017, the Company granted 250,0001,667 options to a consultant with an exercise price of $0.68$102.00 per share that vestsvest over one and one-half years, every sixnine months. The grant date fair value was $148,750. During the three months and nine months ended December 31, 2018, $Nil and $92,821 (December 31, 2017 $12,390– $12,396 and $37,188$37,188) of stock compensation expense was recognized. These options are now fully vested.
On August 3, 2017, 10,000 options with an exercise price of $31.50 per share were granted to an executive officer, which vest equally over three future years. In addition, this executive officer was also granted up to 13,334 additional performance options based on meeting sales targets for the years ended March 31, 2018 and 2019. The grant value was $387,209 and $7,546 was expensed as stock compensation for the three and nine months ended December 31, 2018 (December 31, 2017 - $22,639 and $37,370). The executive left in April 2018 and all of these options were cancelled.
On September 1, 2017, the Company granted 81,436 options with an exercise price of $24.15 per share equally to an executive officer and a consultant who is now the Chairman of the Company. Of such options, 13,573 have vested at issuance and (a) with respect to the executive officer, 50% of the remaining options vest on performance goals being met and 50% vest over 5 years, and (b) with respect to the Chairman, the remaining options vest over 5 years. The grant fair value was $1,832,304 and for the three and nine months ended December 31, 2018, $57,259 and $286,297 (December 31, 2017 - $38,173 and $343,919) in stock compensation expense was recognized.
On January 24, 2018, the Company granted 24,267 options with an exercise price of $23.25 per share to employees that vest equally on January 24, 2019, 2020 and 2021. The grant fair value was $491,036. During the nine month period ended December 31, 2018, 6,667 options were cancelled and for the three and nine months ended December 31, 2018, $34,643 and $111,611 in stock compensation expense was recognized.
14 |
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and nine month periods ended December 31, 2018 and 2017
(Amounts expressed in U.S. Dollars) (unaudited)
11. | STOCK OPTIONS (Continued) |
On April 20, 2018, the Company granted to an executive officer, 40,000 options with an exercise price of $9.74 per share that vest immediately with a 10-year expiry. The Options were valued using the Black-Scholes model and the following inputs were used: expected life of 10 years, expected volatility of 114% and a risk free rate of 1.59%. As these options fully vested on the grant date, $363,714 of stock based compensation was recognized during the nine months ended December 31, 2018.
On June 11, 2018, the Company granted to a newly-hired executive officer 5,000 options with an exercise price of $6.93 per share that vest over three years from the anniversary of the grant and expire in 7 years. The Options were valued using the Black-Scholes model and the following inputs were used: expected life of 7 years, expected volatility of 114% and a risk free rate of 1.59%. The grant fair value was $30,341, and $2,528 and $5,619 of stock compensation expense was recognized in the three and nine months ended December 31, 2018, respectively.
During the three and nine months ended December 31, 2018, the Company recorded $191,634 and $1,226,374 in share-based compensation related to the vesting of stock options (December 31, 2017 – $271,001 and $1,284,257).
The following is a summary of stock options outstanding and exercisable as of December 31, 2018:
Exercise Price ($) | Number of Options | Expiry Date | Exercisable Options | |||||||||
34.50 | 630 | June 20, 2021 | 630 | |||||||||
34.50 | 13,212 | July 1, 2021 | 13,212 | |||||||||
34.50 | 944 | February 17, 2022 | 944 | |||||||||
183.00 | 2,667 | November 24, 2022 | 2,667 | |||||||||
150.00 | 12,289 | December 14, 2022 | 12,289 | |||||||||
142.50 | 359 | March 28, 2023 | 359 | |||||||||
157.50 | 1,387 | March 28, 2023 | 1,387 | |||||||||
150.00 | 1,112 | April 26, 2023 | 1,112 | |||||||||
105.00 | 2,667 | February 6, 2024 | 889 | |||||||||
102.00 | 1,667 | February 13, 2024 | 1,667 | |||||||||
142.50 | 106 | March 3, 2024 | 106 | |||||||||
157.50 | 408 | March 3, 2024 | 408 | |||||||||
142.50 | 43 | March 14, 2024 | 43 | |||||||||
157.50 | 164 | March 14,2024 | 164 | |||||||||
142.50 | 485 | September 30, 2024 | 485 | |||||||||
157.50 | 1,876 | September 30, 2024 | 1,876 | |||||||||
142.50 | 24 | June 2, 2025 | 24 | |||||||||
157.50 | 90 | June 2, 2025 | 90 | |||||||||
37.50 | 442 | December 30, 2025 | 442 | |||||||||
142.50 | 328 | December 30, 2025 | 328 | |||||||||
24.15 | 81,436 | September 1, 2027 | 27,146 | |||||||||
23.25 | 17,600 | January 24, 2025 | - | |||||||||
9.735 | 40,000 | April 19, 2028 | 40,000 | |||||||||
6.93 | 5,000 | June 10, 2025 | - | |||||||||
184,936 | 106,268 |
The weighted-average remaining contractual term of the outstanding options was 7.42 (March 31, 2018 – 5.81) and for the options that are exercisable the weighted average was 7.09 (March 31, 2018 – 5.70).
15 |
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and nine month periods ended December 31, 2018 and 2017
(Amounts expressed in U.S. Dollars) (unaudited)
12. | WARRANTS |
The following is a continuity schedule of the Company’s common share purchase warrants:
Weighted-Average | ||||||||
Number of Warrants | Exercise Price ($) | |||||||
Outstanding and exercisable, March 31, 2015 | 72,157 | 202.50 | ||||||
Issued | 48,171 | 202.50 | ||||||
Exercised | (992 | ) | (120.00 | ) | ||||
Outstanding and exercisable, March 31, 2016 | 119,336 | 202.50 | ||||||
Exercised | (1,747 | ) | (120.00 | ) | ||||
Outstanding and exercisable, March 31, 2017 | 117,589 | 202.50 | ||||||
Exercised | (33,335 | ) | (37.50 | ) | ||||
Issued in connection with anti-dilution provision connected to warrant transaction | 559 | 112.35 | ||||||
Issued in connection with anti-dilution provision connected to warrant transaction | 6,275 | 194.00 | ||||||
Issued in connection to the warrant transaction to the broker | 2,667 | 37.50 | ||||||
Issued in connection with the conversion of loans and interest into common shares | 106,709 | 9.375 | ||||||
Issued in connection with the conversion of loans and interest into common shares | 15,658 | 90.00 | ||||||
Issued in connection with anti-dilution provision connected to warrant transaction | 136,388 | 73.02 | ||||||
Issued in connection with anti-dilution provision connected to warrant transaction | 13,464 | 44.28 | ||||||
Outstanding at March 31, 2018 | 365,974 | 53.19 | ||||||
Issued in connection with anti-dilution provision connected to warrant transaction | 67,952 | 55.71 | ||||||
Issued in connection with anti-dilution provision connected to warrant transaction | 6,305 | 34.50 | ||||||
Outstanding at December 31, 2018 | 440,231 | 44.21 |
During the year ended March 31, 2018, the Company consummated an offer to amend and exercise its outstanding warrants, enabling the holders of the warrants to exercise such warrants for $37.50 per share. The Company received net proceeds of $1,125,038. The Company also converted loans and interest due.
Due to the anti-dilution clause in the warrant agreement for such outstanding warrants, the warrants were adjusted to reflect an additional 559 shares underlying the $120 per share warrants and an additional 6,275 shares underlying the $210.00 per share warrants. Furthermore, as a result of the anti-dilution clause, the exercise price of the warrants was adjusted from $120.00 per share to $112.35 per share and from $210.00 per share to $194.00 per share.
Due to the anti-dilution clause in the warrant agreements for such outstanding warrants, the warrants were adjusted to reflect an additional 13,464 shares underlying the $112.35 per share warrant and an additional 136,388 shares underlying the $194.00 per share warrants. Furthermore, as a result of the anti-dilution clause, the exercise price of the warrants were adjusted from $112.50 per share to $44.28 per share and from $194.00 per share to $73.02 per share, all as a result of the loan and interest conversion for shares at March 31, 2018 and June 12, 2018.
The Company measured the effects of the above two transactions, which triggered anti-dilution clause using the binomial tree model and recorded a loss of $74,086 against the deficit for the year ended March 31, 2018.
The Company issued 2,667 warrants at $37.50 per share for four years expiring June 27, 2020 to the firm who facilitated the warrant offer.
The Company issued 15,658 warrants at $90.00 per share which expire in 5 years on March 31, 2023 and 106,709 warrants at $9.375 per share which expire August 14, 2022 and March 31, 2022 in connection with the loan and interest conversion transaction.
16 |
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and nine month periods ended December 31, 20172018 and 2016 (unaudited)2017
(Amounts expressed in U.S. Dollars)
(unaudited)
On August 3, 2017, 1,500,000 options at $0.21Due to the anti-dilution clause in the warrant agreements for such outstanding warrants, the warrants were adjusted to reflect an executive officer, which vest equally over three future years. In addition, this executive officer was also granted upadditional 67,952 shares underlying the $73.02 per share warrants and an additional 6,305 shares underlying the $44.28 per share warrants. Furthermore, as a result of the anti-dilution clause, the exercise price of the warrants were adjusted from $73.02 per share to 500,000 additional performance options based$55.71 per share and from $44.28 per share to $34.50 per share, all as a result of a loan and interest conversion for shares on meeting sales targets for the years ending March 31, 2018 and 2019. The performance options will vest at market price if the performance objectives are met. This grant had a grant date fair value of $387,209 and a share compensation expense of $22,639 and $37,370 was recognized for the three and nine months ended December 31, 2017. These options were valued using the Black-Scholes model and the following inputs: expected life of 7 years, expected volatility 114% and a risk-free rate of 1.73%.July 20, 2018.
On September 1, 2017, the Company granted 12,215,354 options at $0.161 equally to an executive officer and a consultant. 2,035,892 options have vested and 50% of the remaining options vest on performance being met and 50% vest annually over 5 years. The grant date fair value was $1,832,304 and $38,173 and $343,919 is the current expenses for the three and nine months ended December 31, 2017. These options were valued using the Black-Scholes model and the following inputs: expected life of 10 years, expected volatility 114% and a risk-free rate of 1.91%.
During the three and nine months ended December 31, 2017, the Company recorded $271,001 and $1,284,257 in share-based compensation related to the vesting of stock options (December 31, 2016 - $227,540 and $592,130).Common share purchase warrants
The following is a summary of stock options outstanding and exercisablecommon share purchase warrants as of December 31, 2017:2018:
Exercise Price ($) | Number of Options | Expiry Date | Exercisable Options | |||||||||
0.165 | 264,230 | April 1, 2021 | 264,230 | |||||||||
0.23 | 97,514 | June 20, 2021 | 97,514 | |||||||||
0.23 | 1,981,728 | July 1, 2021 | 1,981,728 | |||||||||
0.23 | 204,471 | February 17, 2022 | 204,471 | |||||||||
1.22 | 400,000 | November 24, 2022 | 266,667 | |||||||||
1.00 | 2,078,333 | December 14, 2022 | 1,803,333 | |||||||||
0.95 | 111,937 | March 28, 2023 | 111,937 | |||||||||
1.05 | 433,027 | March 28, 2023 | 433,027 | |||||||||
1.00 | 250,000 | April 26, 2023 | 83,333 | |||||||||
1.00 | 750,000 | August 8, 2023 | 250,000 | |||||||||
0.70 | 400,000 | February 6, 2024 | - | |||||||||
0.68 | 250,000 | February 13, 2024 | 166,667 | |||||||||
0.95 | 31,620 | March 3, 2024 | 31,620 | |||||||||
1.05 | 122,324 | March 3, 2024 | 122,324 | |||||||||
0.95 | 15,810 | March 14, 2024 | 15,810 | |||||||||
1.05 | 61,162 | March 14, 2024 | 61,162 | |||||||||
0.95 | 82,213 | September 30, 2024 | 82,213 | |||||||||
1.05 | 318,042 | September 30, 2024 | 318,042 | |||||||||
0.95 | 7,431 | June 2, 2025 | 7,431 | |||||||||
1.05 | 28,747 | June 2, 2025 | 28,747 | |||||||||
0.25 | 906,077 | July 28, 2025 | 906,077 | |||||||||
0.95 | 671,859 | July 29, 2025 | 671,859 | |||||||||
0.25 | 66,298 | December 30, 2025 | 49,160 | |||||||||
0.95 | 49,160 | December 30, 2025 | 27,261 | |||||||||
0.21 | 2,000,000 | August 3, 2024 | - | |||||||||
0.161 | 12,215,354 | September 1, 2027 | 2,035,892 | |||||||||
23,797,337 | 10,025,505 |
Exercise Price ($) | Number of Warrants |
Expiry Date | ||||||
90.00 | 15,658 | March 31, 2023 | ||||||
55.71 | 136,339 | February 26, 2019 | ||||||
55.71 | 28,531 | March 27, 2019 | ||||||
55.71 | 7,618 | March 31, 2019 | ||||||
55.71 | 59,061 | April 21, 2019 | ||||||
55.71 | 27,883 | May 27,2019 | ||||||
55.71 | 27,238 | June 30, 2019 | ||||||
34.50 | 28,527 | February 26, 2019 | ||||||
37.50 | 2,667 | June 27, 2020 | ||||||
9.375 | 64,025 | August 14, 2022 | ||||||
9.375 | 42,684 | March 31, 2022 | ||||||
440,231 |
The weighted-average remaining contractual term of the outstanding optionswarrants was 7.761.19 (March 31, 20172018 – 5.12)2.27).
The exercise price and fornumber of underlying shares of the options thatCompany’s outstanding warrants currently priced at $55.71 and $34.50 are exercisableexpected to be further adjusted pursuant to the weighted average was 6.23 (March 31, 2017 – 6.02)anti-dilution provisions in the warrant agreements, as a result of any further common stock issuances, whether upon the conversion of indebtedness or otherwise.
17 |
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and nine month periods ended December 31, 20172018 and 2016 (unaudited)2017
(Amounts expressed in U.S. Dollars)
The following is a continuity schedule of the Company’s common share purchase warrants:
Number of Warrants | Weighted- Average Exercise Price ($) | |||||||
Outstanding and exercisable, March 31, 2015 | 10,823,450 | 1.35 | ||||||
Issued | 7,225,625 | 1.35 | ||||||
Exercised | (148,787 | ) | (0.80 | ) | ||||
Outstanding and exercisable, March 31, 2016 | 17,900,288 | 1.35 | ||||||
Exercised | (262,045 | ) | (0.80 | ) | ||||
Outstanding and exercisable, March 31, 2017 | 17,638,243 | 1.35 | ||||||
Exercised | (5,000,172 | ) | 0.25 | |||||
Dilution warrants issued to $0.80 warrant holders | 83,752 | 0.749 | ||||||
Dilution warrants issued to $1.40 warrant holders | 941,191 | 1.2933 | ||||||
Outstanding at December 31, 2017 | 13,663,014 | 1.241 |
During the nine month period ended December 31, 2017, the Company consummated an offer to amend and exercise its then outstanding warrants, enabling the holders of the warrants to exercise such warrants for $0.25 per share. The Company received net proceeds of $1,125,038. In addition due to an anti-dilution clause in the warrant agreements for such outstanding warrants an additional 83,752 warrants were issued to the $0.80 warrant holders and 941,191 warrants were issued to the $1.40 warrant holders. Furthermore, as a result of the anti-dilution clause, the exercise price of the warrants changed from $0.80 to $0.749 and from $1.40 to $1.2933 as a result of this transaction. The Company measured the effects of the triggered anti-dilution clause using the binomial tree model and recorded a loss of $41,025 against retained earnings.
The Company issued 400,014 warrants exercisable at $0.25 for four years expiring June 27, 2020 to the firm who facilitated the warrant offer.
During the year ended March 31, 2017 a warrant holder exercised 262,045 warrants on a cashless basis based on the terms of the warrant agreement and received 51,249 shares of common stock.
During the year ended March 31, 2016, a warrant holder exercised 148,787 warrants on a cashless basis based on the terms of the warrant agreement and was issued 45,508 shares of common stock.
Common share purchase warrants
The following is a summary of common share purchase warrants outstanding after the warrant offer to amend and exercise the additional warrant issue and the re-pricing of the warrants as of December 31, 2017:
Exercise Price ($) | Number of Warrants | Expiry Date | ||||||
1.2933 | 5,873,289 | February 26, 2019 | ||||||
1.2933 | 1,229,040 | March 27, 2019 | ||||||
1.2933 | 328,166 | March 31, 2019 | ||||||
1.2933 | 2,544,240 | April 21, 2019 | ||||||
1.2933 | 1,201,164 | May 27, 2019 | ||||||
1.2933 | 1,173,370 | June 30, 2019 | ||||||
0.7490 | 1,313,745 | February 26, 2019 | ||||||
13,663,014 |
The weighted-average remaining contractual term of the outstanding warrants was 1.27 (March 31, 2017 – 1.77).
The exercise price and number of underlying shares with respect to the original $0.80 and the $1.40 warrants are expected to be further adjusted pursuant to the anti-dilution provisions therein, as a result of the issuance of the convertible promissory notes and warrants in 2016, 2017 and 2018. The anti-dilution provisions in these warrants are not able to be computed until the convertible promissory notes are converted, and the underlying shares can be determined in accordance with the terms thereunder.
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and nine month periods ended December 31, 2017 and 2016 (unaudited)
(Amounts expressed in U.S. Dollars)
13. | 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.
Commitments
a. On February 25, 2015, 262,9041,753 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 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 former Chief Technology Officer and the new Chief Technology Officer had transferred 314,5602,098 common shares to the lenders. For contributing the common shares to the lenders, the Company intends to reimburse the former Chief Technology Officer and the new Chief Technology Officer 320,0002,134 common shares each.collectively. As at December 31, 2017 and March 31, 2017,2018, these shares have not yet been issued.
b. In connection with the acquisition of IMT, the Company acquired a license agreement dated June 8, 2009, pursuant to which the Company pays the licensors an aggregate royalty of 1% of sales based on patent #8,613,691. No sales were made on the technology under this patent as it has not yet been commercialized. One of the licensors is a founder of IMT and a former officer and director of the Company.
c. On March 6, 2018, the Company signed a distribution agreement with Curexo Inc. for South Korea and as part of this agreement, the Company is obligated to buy a rehabilitative product from Curexo Inc. for $200,000 when this product is fully developed. It is not yet developed at December 31, 2018.
d. On May 17, 2017, the Company entered into a Co-operative Joint Venture Contract (the “JV Contract”) with Ginger Capital Investment Holding, Ltd. (the “JV Partner”) to form a China-based joint venture to commercialize the Company’s products (“China JV”) in which the Company has a 25% interest and the JV Partner has a 75% interest. The China JV entity formally was created on May 22, 2018. Under the terms of the JV Contract, the JV Partner is required to contribute $290,000 within 30 days of formation, $435,000 12 months later and $725,000 60 months after the date of formation. The Company is required to license certain intellectual property to the China JV. The Company is applying the equity method of accounting to the joint venture. As of December 31, 2018, the Company has provided certain technical information to the Chinese JV in order to obtain Chinese regulatory approvals.
14. | RISK MANAGEMENT |
The Company’s cash balances are maintained in two banksa bank in Canada and a Canadian Bank subsidiary in the US. US BankUSA bank. 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 fluctuationfluctuations, 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.
15. | SUBSEQUENT EVENTS |
(a) Subsequent to December 31, 2017,2018, the Company received an additional $606,400$1,500,000 from the lenders under the new terms of the new loans described in note 8(f).8, including $750,000 from a related party, who is a director of the Company.
(b) Subsequent to December 31, 2017, the Company issued 3,640,000 options at $0.155 to employees of the Company. The options will vest over three years - 1/3 on January 24, 2019, 1/3 on January 24, 2020 and 1/3 on January 24, 2021.2018, 524,293 exchangeable shares (on a pre-consolidated basis) were converted into 3,496 common shares.
(c) Subsequent to December 31, 2017, the Company received a short term loan of $500,000 due March 31, 2018 with interest of 1.5% per month from one of its directors.
Item 22. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-looking Statements
This Quarterly Report on Form 10-Q contains statements reflecting assumptions, expectations, projections, intentions or beliefs about future events that are intended as “forward-looking statements”. All statements included or incorporated by reference in this Quarterly Report on Form 10-Q, other than statements of historical fact, that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-lookingforward- looking statements. These statements appear in a number of places, including, but not limited to in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements represent our reasonable judgment of the future based on various factors and using numerous assumptions and are subject to known and unknown risks, uncertainties and other factors that could cause our actual results and financial position to differ materially from those contemplated by the statements. You can identify these statements by the fact that they do not relate strictly to historical or current facts, and use words such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “may,” “will”, “should,” “plan,” “project” and other words of similar meaning. In particular, these include, but are not limited to, statements relating to the following:
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Any or all of our forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and other factors including, among others:
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In addition, there may be other factors that could cause our actual results to be materially different from the results referenced in the forward-looking statements, some of which are included in this Quarterly Report on Form 10-Q, including in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Many of these factors will be important in determining our actual future results. Consequently, no forward-looking statement can be guaranteed. Our actual future results may vary materially from those expressed or implied in any forward-looking statements. All forward-lookingforward- looking statements contained in this Quarterly Report on Form 10-Q are qualified in their entirety by this cautionary statement. Forward-looking statements speak only as of the date they are made, and we disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q, except as otherwise required by applicable law.
This discussion and analysis should be read in conjunction with the accompanying condensed consolidated interim financial statements and related notes, and the Company’s Annual Report on Form 10-K for the year ended March 31, 20172018 as filed with the Securities and Exchange Commission.
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 (“U.S. GAAP”). 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. Bionik, Inc.’s (IMT) operations are included since its acquisition on April 21, 2016 to December 31, 2017.
Nature of Company Overview
Bionik Laboratories Corp. is a roboticshealthcare company focused on providing rehabilitation and mobility solutions to individualsimproving the quality of life of millions of people with neurological or mobility impairments by combining artificial intelligence and mobility challengesinnovative robotics technology to help individuals from hospital to home. home to regain mobility, enhance autonomy, and regain self-esteem.
The Company uses artificial intelligence and machine learning technologies to make rehabilitation methods and processes smarter and more intuitive to deliver greater recovery for patients with neurological or mobility impairments. These technologies allow large amounts of data to be collected and processed in real-time, enabling appropriately challenging and individualized therapy during every treatment session. This is the foundation of the InMotion therapy. The Company’s rehabilitation therapy products are built on an artificial intelligence platform, measuring the position, the speed and the acceleration of the patient 200 times per second. The artificial intelligence platform is designed to adapt in real time to the patient’s needs and progress while providing quantifiable feedback of a patient’s progress and performance, in a way that the Company believes a trained clinician cannot.
Based on this foundational work, the Company has a portfolio of products focused on upper and lower extremity rehabilitation for stroke and other mobility impairmobility-impaired individuals, including three productsInMotion robots currently in the market and fourtwo products in varying stages of development.
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The InMotion Systemstherapy uses the Company’s robots to assist patients to rewire a segment of their brains after injury, also known as neuroplasticity. The InMotion Robots - the InMotion ARM, In MotionInMotion Wrist and the InMotion HandARM/HAND – are designed to provide intelligent, adaptive therapy in a manner that has been clinically verifiedshown to maximize neuro-recovery. Bionikneurorecovery. The Company is also hasdeveloping a lower-body exoskeleton under development -home version of the ARKE - designed to allow paraplegicsInMotion upper-body rehabilitation technology, as well as other wheelchair usersa lower-body wearable assistive product based on the abilityCompany’s existing ARKE lower body exoskeleton technology, which could allow certain mobility impaired individuals to rehabilitate through walking. Bionik is developingwalk better. The Company intends to launch this mobility assistance solution into the consumer market. On June 20, 2017 we entered into a joint development and manufacturing agreement with a partner,Wistron Medical Tech Holding Company of Taiwan to jointly develop a lower body assistive robotic product based on some of the ARKE technology which should allow certain individuals with limited mobility to walk better. This product is expected to be launched infor the consumer home market.
The Company acquired its in-market FDA listed products on April 21, 2016, when it acquired all of the outstanding shares and, accordingly, all assets and liabilities of IMT, a Boston, Massachusetts-based global pioneer and leader in providing effective robotic products for neurorehabilitation, pursuant to an Agreement and Plan of Merger, dated March 1, 2016, with IMT, Hermano Igo Krebs, and Bionik Mergerco Inc., a Massachusetts corporation and the Company’s wholly owned subsidiary. The merger agreement provided for the merger of Bionik Mergerco with and into IMT, with IMT surviving the merger as its wholly-owned subsidiary. As consideration, IMT shareholders received an aggregate of 23,650,000 shares of the Company’s common stock.
Through the acquisition of IMT, Bionik has added the portfolio focused on upper and lower extremity rehabilitation of stroke patients. Our product and development pipeline now includes three FDA listed upper extremity clinical rehabilitation products; a lower body product InMotion AnkleBot is being developed for clinical trials, as well as other potential new development product candidates. In addition, our development team has begun improvements to our current products that are on the market to be more competitive. We plan to develop other biomechatronic solutions, including consumer-level medical assistive and rehabilitative products, through internal research and development and we may in the future further augment our product portfolio through technology acquisition opportunities.
The InMotion ARM, InMotion ARM/HAND, and InMotion Wrist are robotic therapies for the upper limbs. InMotion robotic therapies have been characterized as Class II medical devices by the U.S. Food and Drug Administration, (“FDA”)or FDA, and are listed with the FDA to market and sell in the United States. TheMore than 250 of our clinical robotic products for stroke rehabilitation have also been sold in over 20 other countries.15 countries, including the United States. In addition to these in-market products, the InMotion AnkleBot is a development candidate, andfully developed, clinical rehabilitation solutions, we are also developing the InMotion Home,“InMotion Home”, which is an upper extremity product that allows the patient to extend their therapy for as long as needed while rehabilitating at home. This rehabilitation solution is being developed on the same design platform as the InMotion clinical products. All
We believe recent payment changes in the US marketplace proposed and finalized by the Centers for Medicare and Medicaid Services create a favorable environment for greater clinical adoption of our robotic technology. For instance, the Improving Medicare Post- Acute Care Transformation Act of 2014, or the Impact Act of 2014, began the shift toward standardizing patient assessment data for quality measures. The updated Prospective Payment System (PPS), SNF QRP (Quality Reporting Program) and SNF VBP (Value Based Purchasing) programs have further shifted reimbursement toward the needs of the above products are designed to provide intelligent, patient-adaptive therapypatient and away from volume of services provided in the skilled nursing setting. Other programs have caused a mannersimilar shift in the Inpatient Rehabilitation Facility setting, as well. We expect that has been clinically verified to maximize neuro- recovery.in the next 12-18 months, further incentives toward quality based care will be implemented, resulting in providers being publicly ranked, as well as financially rewarded, for quality reporting and better outcomes.
Two hundred and fifty of our clinical robotics products for stroke have been sold in over 20 countries, including the United States. We have a growing body of clinical data for our products. More than 1,500 patients participated in trials using our InMotion robots, the results of which have been published in peer-reviewed medical journals (including the New England Journal of Medicine, Nature and Stroke). Of note, our InMotion robots are being used in an ongoing, multicenter randomized controlled phase III interventional trial, funded by the National Institute for Health Research Health Technology Assessment Program in the United Kingdom. The study includes the enrollment of 720 stroke patients in a multi-center, randomized controlled research trial to evaluate the clinical and cost effectiveness of robot-assisted training in post-stroke care was completed in 2018 with results to be published in 2019.
In addition to our proprietary in-house products, we have the exclusive right to market and sell the Morning Walk lower body rehabilitation technology owned by Curexo Inc., a South Korean company, within the United States. The Morning Walk is a gait assistance product for rehabilitation. We plan to develop other biomechatronic solutions, including consumer-level medical assistive and rehabilitative products, through internal research and development. We may in the future further augment our product portfolio through technology acquisition opportunities should they come available and if we are sufficiently capitalized to undertake these investments.
We have worked with industry leaders in manufacturing and design and have also expanded our development team through partnerships with researchers and academia. Most recently, on May 17, 2017, we entered into a Co-operative Joint Venture Contract with Ginger Capital Investment Holding Ltd., pursuant to which the Company has a 25% interest and Ginger Capital has a 75% interest. As of the date of this prospectus, Ginger Capital is obligated to contribute $290,000 to the joint venture and is required to contribute an additional $435,000 by May 22, 2019 and $725,000 by May 22, 2023. Three InMotion robots have been delivered by us to the joint venture, which will be used for product demonstration and for quality assessment by Chinese authorities.
We have also entered into an agreement with Cogmedix Inc., a wholly owned subsidiary of Coghlin Companies, a medical device development and manufacturing company located in Worchester, MA, for the production of our InMotion robots. The initial agreement is for turnkey, compliant manufacturing with the capability of scaling faster production to meet increased volume as the Company grows. In addition, our Massachusetts-baseMassachusetts-based manufacturing facility is compliant with ISO-13485 and FDA regulations.
We currently hold an intellectual property portfolio that includes 4 U.S. patents and one U.S. pending patent, all five of which are pending internationally, as well as other patents under development. We may file provisional patents from time to time, which may expire if we do not pursue full patents within 12 months of the filing date. The provisional patents may not be filed as full patents and new provisional patents may be filed as the technology evolves or changes. Additionally, we hold exclusive licenses to three additional patents of which one is currently being used for the InMotion Wrist and is licensed to us from the Massachusetts Institute of Technology.
We currently sell our products directly or can introduce customers to a third party finance company to lease at a monthly fee over the term or other fee structure for our products to hospitals, clinics, distribution companies and/or buying groups that supply those rehabilitation facilities.
We introduced our new enhanced commercial version of the InMotion product line in December 2017. We sold six InMotion robots in the year ended March 31, 2017, eleven InMotion robots in the year ended March 31, 2018, and twenty-one InMotion robots in the nine month period ended December 31, 2018.
We have a history of net losses. At December 31, 2018 the Company had an accumulated deficit of ($42,910,590) (March 31, 2018 —($35,776,340)). The Company incurred a comprehensive loss of ($7,127,966) for the nine month period ended December 31, 2018 (December 31, 2017 – ($8,436,636)). The Company had revenue for the nine month period ended December 31, 2018 of $1,978,675 (December 31, 2017 – $570,327). As of December 31, 2018, the Company had a working capital deficit of $(2,236,228) (March 31, 2018 – ($6,711,941)).
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History; Recent 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, 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 whereby, among other things, we changed our name to Bionik Laboratories Corp.
The Acquisition TransactionBionik 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. (the “Investment Agreement”), a company existing under the laws of Canada and our wholly owned subsidiary, (“Acquireco”), and Bionik Laboratories, Inc. (“Bionik Canada”), a company incorporated on March 24, 2011 under the Canada Business Corporations Act, 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”).Canada. After giving effect to the Acquisition Transaction,this and related transactions, we commenced operations through Bionik Canada. Subsequently, on April 21, 2016, we acquired Interactive Motion Technologies, Inc., or IMT, a Boston, Massachusetts-based provider of effective robotic products for neurorehabilitation, including all of its owned and licensed products both commercialized and in development.
Immediately prior
Between March 31, 2018 and June 2018, an aggregate of approximately $9.1 million of our outstanding indebtedness converted in accordance with their terms, as amended, into an aggregate of 1,249,008 shares of our common stock. Of the $9.1 million, $5,030,000 was provided by existing investors, which includes affiliates of the Company.
As of July 20, 2018, $4,732,853 in principal and interest represented by other outstanding promissory notes were converted in accordance with their terms into an aggregate of 683,395 shares of the Company’s common stock.
Our Board of Directors approved a convertible note financing for gross proceeds of up to $5 million in September 2018, of which an aggregate principal amount of $4.65 million has been subscribed for as of January 22, 2019. These convertible notes bear interest at a fixed rate of 1% per month. Upon the consummation of an equity or equity-linked offering of in excess of $2,000,000, the outstanding principal and accrued and unpaid interest on the convertible notes shall automatically convert into our common stock at a price per share equal to a 20% discount to the closingoffering price of our common stock in the offering. The convertible notes are unsecured. In the event that the equity or equity-linked offering is not consummated, we will be required to repay the principal and accrued and unpaid interest on the convertible notes on March 28, 2019.
We effected a one-for-one hundred fifty reverse stock split on October 29, 2018. As a result of the Acquisition Transaction, we transferred allreverse stock split, each one hundred fifty shares of our common stock automatically combined into and became one share of our common stock. Accordingly, as of November 13, 2018, there were 2,337,964 shares of our common stock issued and outstanding. Any fractional shares which would otherwise be due as a result of the business, properties, assets, operationsreverse stock split were rounded up to the nearest whole share. The reverse stock split automatically and goodwillproportionately adjusted, based on the one-for-one hundred fifty reverse stock split ratio, all issued and outstanding shares of our common stock and exchangeable shares, as well as common stock underlying stock options, warrants and other derivative securities outstanding at the time 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 alleffectiveness of the capitalreverse stock split. The exercise price on outstanding equity based-grants was proportionately increased, while the number of Strategic Dental Allianceshares available under our equity-based plans was also proportionately reduced. Share and per share data (except par value) for the periods presented reflect the effects of this reverse stock split. References to Brian E. Ray,numbers of shares of common stock and per share data in the accompanying financial statements and notes thereto have been adjusted to reflect the reverse stock split on 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,retroactive basis.
On December 14, 2018, we entered into an Assignment and Assumptiona Sale of Goods Agreement (the “Agreement”) with Tungsten 74CHC Management Services, LLC, or Kindred, pursuant to which, Tungsten 74 LLC assumed allamong other things, Kindred agreed to purchase from us in a first phase a minimum of 21 of the Company’s InMotion ARM Interactive Therapy Systems – a minimum of one for each of Kindred’s existing and soon-to-open affiliated inpatient rehabilitation hospitals and similar facilities described in the Agreement, and in a second phase a minimum of one InMotion ARM Interactive Therapy System for each future facilities of Kindred, during the four-year minimum term of the Agreement. Kindred entered into an initial purchase order for nine units of the InMotion ARM Interactive Therapy System for shipment on or before December 31, 2018.
On January 23, 2019, we announced the commercial launch of our remaining liabilities through the closingnewest generation InMotion ARM/HAND™ robotic system for clinical rehabilitation of the Acquisition Transaction (the “Assignmentstroke survivors 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 athose with mobility impairments due to neurological conditions. The improved new class of exchangeable shares (the “Exchangeable Shares”), which were issuedgeneration InMotion ARM/HAND was developed according to the existing common shareholderssame principals of Bionik Canada in exchange for all of their outstanding common shares, all of whichmotor learning and neuro-plasticity that 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.
As part of the Exchangeable Share Transaction, we enteredincorporated into the original InMotion ARM robotic system and utilizes artificial intelligence and data analysis to provide individualized therapy and reports that empower patients. It includes the following agreements, each dated February 26, 2015:new features:
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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.Corporate Information
AsOur principal executive office is located at 483 Bay Street, N105, Toronto, ON, Canada M5G 2C9 and our main corporate telephone number is (416) 640-7887 x 508. Our principal US office is located at 80 Coolidge Hill Road, Watertown, MA, USA 02472. Our website is www.bioniklabs.com. Information on our website does not constitute a conditionpart 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.this Quarterly Report on Form 10-Q.
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.
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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.
Between the closing of the Acquisition Transaction and June 30, 2015, we sold in a series of closing an aggregate of 16,408,250 units (the “Units”) for gross proceeds of $13,126,600 in a private placement offering (the “Offering”). Each Unit consisted of one share of common stock, par value $0.001 per share (the “Common Stock”) and a four year warrant (the “Warrant”) to purchase one share of Common Stock at an initial exercise price of $1.40 per share.
In addition, the placement agent in the Offering and its sub-agents were issued 10% warrant coverage for all Units sold in the Offering, exercisable at $0.80 per share for a period of 4 years.
Significant Accounting Policies and Estimates
The discussion and analysis of the financial condition and results of operations are based upon the condensed consolidated interim 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 to December 31, 2017,2018, we have generated a deficit of $29,554,125.$42,910,590.
We expect to incur additional operating losses during this quarter and through March 31, 20182019 and likely beyond, principally as a result of our continuing research and development, building the sales and marketing team, long sales cycles and general and administrative costs predominantly associated with being a public company.
Our results of operations are presentedThree and nine months ended December 31, 2018 compared to the three and nine months ended December 31, 2017.
Sales
Sales were $930,257 and $1,978,675 for the three and nine months ended December 31, 2018 (December 31, 2017 with comparatives– $260,960 and $570,327). Sales in the nine months ended December 31, 2018 represent the sale of 21 InMotion robots, service and warranty income compared to 6 InMotion robots, service and warranty income in the nine months ended December 31, 2017.
Cost of Sales and Gross Margin
Cost of Sales was $450,304 and $1,087,450 for the three and nine months ended December 31, 2016.2018 (December 31, 2017 – $88,357 and $177,482). The increase in 2018 compared to 2017 primarily related to the increased number of units sold in 2018 when compared to 2017.
Sales
The Company recorded revenue of $260,960 and $570,327Gross margin for the three and nine months ended December 31, 20172018 was $479,953 and $891,135 or 51.6% and 45.0% compared to $372,426$172,603 and $553,900$392,845 or 66% and 69% for the three and nine months ended December 31, 2016.2017. The increasedecline in gross margin percentage compared to prior period was negatively impacted by higher than normal manufacturing costs as the Company transitioned its production to an outsourcing arrangement. The gross margin in the revenues results from our growing sales team starting to deliver on a significant pipeline of opportunities, which we hope will continue in the future.
Cost of sales
The Company recorded cost of sales of $88,357 and $177,482 for the three and nine monthsquarter ended December 31, 2017, compared2018 also reflects the write-off of $47,772 of obsolete inventory. The prior year period’s higher gross margin was also related to $334,786 and $405,680 for the three and nine months ended December 31, 2016. The decrease in cost of good sold results from lower unit salesthe units only being reflected as well as a $43,009 inventory write-off in the period ended December 31, 2016.direct material costs.
Operating Expenses
Total operating expenses for the three and nine months ended December 31, 20172018 was $2,347,916$2,593,663 and $8,068,811$8,039,724, compared to $1,609,954$2,131,614 and $5,450,290$7,778,436 for the three and nine months ended December 31, 2016,2017, as further detailed below.
Sales and marketing expenses were $515,439 and $1,485,423 for the three and nine months ended December 31, 2017 was2018 compared to $432,260 and $1,313,077 compared to the three and nine months ended December 31, 2016 of $377,046 and $646,509. The sales and marketing team was expanded starting in August 2016, and January through February 2017 with the addition of five sales and marketing employees, including a Chief Commercialization Officer and marketing and sales support to support the launch of the new InMotion V2 product in the fall of 2017. Prior years expenses included two sales employees and their expenses since the acquisition of IMT on April 21, 2016.
Research and development expenses for the three and nine months ended December 31, 20172017. The increase in sales and marketing expenses primarily relates to new hires in the current fiscal year as well as increased trade show presence and commissions paid for the increased sales in 2018 over 2017.
Research and development expenses were $546,350$779,283 and $1,947,659 compared to$2,135,075 for the three and nine months ended December 31, 20162018, compared to research and development expenses of $571,671$546,350 and $1,803,234. The increase$1,947,659 for the three and nine months ended December 31, 2017 compared2017. The increase in research and development expenses is primarily due to December 31, 2016, primarily relatesnew hires in the current fiscal year to additionalimprove the Company’s development and prototyping costs for our new product development projects.team.
For the three and nine months ended December 31, 2017,2018, we incurred general and administrative expenses of $783,784$1,022,024 and $2,916,917,$2,932,980 compared to general and administrative expenses of $409,669$783,784 and $2,291,136$2,916,917 for the three and nine months ended December 31, 2016. The increase in these2017. General and administrative expenses is primarilyremained relatively constant from period to period due to higher public company related expenses the addition ofand legal and accounting costs due to fund raising efforts being offset by lower compensation and travel costs. Compensation included a new employee and a consultant, increased compensation toone-time accrual for severance for our new CEO who started September 1, 2017 as well as the amounts owing to the former CEO of the Company. The expenses for the three and nine month period ended December 31, 2016 include the expenses related to the IMT acquisition in 2016. In addition, the previous year’s costs included cost of our former Chief Operating Officer; this position was reallocated to research and development in the current fiscal year.2017.
For the three and nine months ended December 31, 2017,2018, the Company recorded $271,001$191,634 and $1,284,257$1,226,374 in share-based compensation expense compared to $227,540$271,001 and $651,630$1,284,257 for the three and nine months ended December 31, 2016, due to the increase in options issued in 2017 over 2016.2017.
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For the three and nine months ended December 31, 2017, the Company recorded $216,302 and $290,375 as warrant accretion expense compared to $Nil for the three and nine months ended December 31, 2016 due to the amortization of the fair value of warrants related to the convertible notes.
Other (Income) / Expenses
For the three and nine months ended December 31, 2017,2018, we incurred interestother expenses of $416,990$1,520 and $657,350$61,652 compared to interestother expenses of $13,808$416,931 and $23,839$657,999 for the three and nine months ended December 31, 2016.2017. The increasedecrease in interest expenseother expenses relates to the Company having more high interest bearingless interest-bearing debt during the three and nine month period ended December 31, 20172018 when compared to December 31, 2016.2017.
Some ofForeign exchange gain for 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 outstanding warrants, subject to certain important exceptions. Simultaneously, due to an anti-dilution clause, the number of shares of common stock that may be purchased upon exercise of each of these outstanding warrants shall be increased based on a pre-defined formula.
The adaptation of the FASB issued, ASU No. 2017-11,Earnings Per Share (Topic 260) Distinguishing Liabilities From Equity (Topic 480) Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments With Down Round Features II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instrument of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests With a Scope Exception, allows a financial instrument with a down-round feature to no longer automatically be classified as a liability solely based on the existence of the down-round provision. The update means the instrument does not have to be accounted for as a derivative and be subject to an updated fair value measurement each reporting period. The Company has adopted ASU No.2017-11 in the quarterperiod ended December 31, 2018 was $47,709 and $116,715 as compared to a gain of $11,485 for the three months and a loss of $102,671 for the period ended September 30, 2017. This is mainly a result of the fluctuation in the exchange rate of the Canadian Dollar to the United States Dollar.
Other Income
For the three and nine months ended December 31, 2017,2018, we had otherincurred $316,642 and $2,421,060 in accretion expense of $59 and other income of $649 compared to other income of $4,363$216,032 and $410,877$290,375 for the three and nine months ended December 31,2016. Prior year higher amounts are related31, 2017 due to refundable scientific tax credits thatthe debt converted.
For the three and nine months ended December 31, 2018, the Company is no longer eligible for.recognized a gain of $Nil and $337,923 in fair value adjustment connected to the convertible loans (December 31, 2017 – $Nil and $Nil).
For the period ended December 31, 2018, upon the increase of the number of our authorized shares, we recorded a gain of $2,048,697 (December 31, 2017 – $Nil) on the fair value revaluation of the shares to be issued, warrants and stock options outstanding at March 31, 2018.
Comprehensive Loss
Comprehensive loss for the three and nine months ended December 31, 20172018 amounted to $(2,580,759)$(2,384,163) and $(8,436,636)$(7,127,966) resulting in a loss per share of $(0.03)$(0.91) and $(0.08)$(3.14), compared to a loss of ($1,581,759)$(2,580,759) and ($4,915,032) for$(8,436,636) the three and nine months ended December 31, 2016, as adjusted2017, resulting in a loss per share of $(0.02)$(3.80) and loss per share of $(0.05)$(12.74).
Liquidity and Capital Resources
We have funded operations through the issuance of capital stock, loans, grants and investment tax credits received from the Government of Canada. The CompanyWe raised in itsour 2015 private offering aggregate gross proceeds of $13,126,600 which resulted in net proceeds of $11,341,397. Since 2015,During fiscal years 2017 and 2018, the Company also obtained funds through additional government tax credits, incurring new convertible indebtedness totaling $6,699,975,$9,111,375 that was converted into Company common shares, a short term loan of $400,000 the Company repaid and raising $1,125,038 in June 2017 from its warrant solicitation. Between April 2018 and July 20, 2018, the Company incurred convertible indebtedness totaling $4,708,306, which was converted into equity at July 20, 2018. Between October 2018 and January 2019, the Company incurred further convertible indebtedness totaling $4,650,000, all of which remains outstanding.
At December 31, 2017,2018, the Company had cash and cash equivalents of $998,661.$375,133. Subsequent to December 31, 2018, existing investors loaned an additional $1.5 million to the Company, evidenced by convertible promissory notes.
Based on our current burn rate, we need to raise additional capital in the short term to fund operations and meet expected future liquidity requirements, or we will be required to curtail or terminate some or all of our product lines or our operations. We are seekinghave filed a Registration Statement on Form S-1 and amendments, relating to a possible public offering of our common stock, and we believe we have the support of certain major shareholders who have provided convertible loans to meet the Company’s cash flow needs. The Company hopes to raise up to $14additional funds grossing approximately $10 million through a convertible notes offering,in the next three months which if successful, will enable us to continue operations based on our current burn rate, for at least the next 12 months. Further all of our convertible notes will automatically convert into equity if an upon the successful closing of at least $7 million in such offering. Wemonths; however, we cannot give any assurance at this time that we will successfully raise all or some of such capital or any other capital. The Company expects a combinationFurthermore, we do not have an established source of funds sufficient to cover operating costs after February 2018 at this time and accordingly, there can be no assurance that the foregoing and any other successful financings, if any,necessary debt or equity financing will be available, or will be available on terms acceptable to us, in which case we may be unable to meet the Company’s anticipated cash requirements for the next 12 months;our obligations or fully implement our business plan, if at all. These conditions however these conditions raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated interim financial statements do not include any adjustments to reflect the possible future effects on recoverability and reclassification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
Additionally, we will need additional funds to respond to business opportunities including potential acquisitions of complementary technologies, 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 will 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 or our operations.
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Net Cash Used in Operating Activities
During the nine months ended December 31, 2017,2018, we used cash in operating activities of $(5,215,697)($7,879,765) compared to $(5,540,946)($5,215,697) for the nine months ended December 31, 2016.2017. The decreasedincreased use of cash is mainly attributable to decreased prepaid expensescost of sales and increased accounts payable liability in the nine months ended December 31, 2017 over the nine months ended December 31, 2016.inventory build-up to support revenues and settlement of accrued commitments.
Net Cash Used in Investing Activities
During the three and nine months ended December 31, 2018, net cash used in investing activities was ($26,071) related to equipment purchases. For the nine months ended December 31, 2017, net cash used in investing activities was $(17,182) (December 31, 2016 - ($9,827)) related to equipment purchases.17,182).
Net Cash Provided by Financing Activities
Net cash provided by financing activities was $7,773,658 for the nine months ended December 31, 2018 compared to cash provided by financing activities of $5,687,890 for the nine months ended December 31, 2017 compared to net cash provided by financing activities of $749,968 for the nine months ended December 31, 2016.2017. The increase in the nine months ended December 31, 20172018 is due to receipt of an additional $4,699,975 as convertible loans $400,000 as a short term loan provided by a director of the Company and repaid in January 2018 and $1,125,038 received from the Company’s offer to amend and exercise its outstanding warrants which closed in June 2017, which resulted in 5,001,172 common shares being issued. The Company also paid back $200,000 of principal and $49,505 of interest to a promissory note holder and $208,359 of principal and $79,259 of interest to its demand loan holders.over 2017.
Recently Issued Accounting Pronouncements
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
In May 2014, the FASBFinancial Accounting Standards Board (“FASB”) issued ASUAccounting Standards Update (“ASU”) No. 2014-09, “RevenueRevenue from Contracts with Customers (Topic 606)”. The updated standard outlineswill replace most existing revenue recognition guidance in GAAP. The new standard introduces a single comprehensive model for entitiesfive-step process to usebe followed in determining the amount and timing of revenue recognition. It also provides guidance on accounting for revenue arising fromcosts incurred to obtain or fulfill contracts with customers, and supersedes most current revenue recognition guidance.establishes disclosure requirement, which are more extensive than those required under existing U.S. GAAP. The accounting standardFASB has issued numerous amendments to ASU 2014-09 from August 2015 through January 2018, which provide supplemental and clarifying guidance, as well as amend the effective date of the new standard. ASU 2014-09, as amended, is effective for annual reporting periods (includingthe Company in the interim reporting periods within those periods) beginning after December 15, 2017. Early adoption isperiod ended June 30, 2018. The standard permits the use of either the retrospective or modified retrospective (cumulative effect) transition method. The Company adopted the new standard using the modified retrospective transition method The Company has adopted ASU-2014-01 for the fiscal year ending March 31, 2019 and it did not permitted. The impacthave material effect on the condensed consolidated interimfinancial position and the consolidated results of operations.
As a result of the adoption of ASU-2014-09, the Company’s accounting policies have been updated. See “Revenue Recognition” below for these changes in accounting policies, as well as new disclosure requirements. The changes in accounting policies will also be reflected in the Company’s audited consolidated financial statements of adopting ASU 2014-09 will be assessed by management.for the year ending March 31, 2019.
In November 2015, the FASB issued ASU No. 2015-17, “Balance Sheet Classification of Deferred Taxes,” which requiresrequire 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 after December 15, 2017. The Company doeshas adopted ASU-2015-17 for the fiscal year ending March 31, 2019 and it did not anticipate that the adoption of ASU No. 2015-17 will have a material effect on the condensed consolidated interim financial position orand the consolidated results of operations.
In January 2016, the FASB issued ASU No. 2016-01 Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The updates makesmake several modifications to Subtopic 825-10, including the elimination of the available-for-sale classification of equity investments, and it requires equity investments with readily determinable fair values to be measured at fair value with changes in fair value recognized in operations. The update is effective for fiscal years beginning after December 2017. The Company is still assessinghas adopted ASU-2016-01 for the impact that the adoption of AS 2016-01 willfiscal year ending March 31, 2019 and it did not have material effect on the condensed consolidated interim financial position and the consolidated results of operations.
In February 2016, the FASB issued ASU 2016-02, Leases. This update requires organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The new guidance will also require additional disclosure about the amount, timing and uncertainty of cash flows arising from leases. The provisions of this update are effective for annual and interim periods beginning after December 15, 2018. The Company is still assessing the impact that the adoption of ASU 2016-02 will have on the consolidated financial position and the consolidated results of operations.
In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting”. Several aspects of the accounting for share-based payment award transaction are simplified, including (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The Company has adopted this policy during the period and there was no impact on the condensed consolidated interim financial statements.
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments”. This ASU provides eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for the fiscal year commencing after December 15, 2017. The Company is still assessinghas adopted ASU-2016-15 for the impact that the adoption of ASU 2016-15 willfiscal year ending March 31, 2019 and it did not have material effect on the consolidated statementfinancial position and the consolidated results of cash flows.operations.
In January 2017, the FASBFAS issued ASU 2017-01, “Business Combinations: Clarifying the definition of a Business” which amends the current definition of a business. Under ASU 2017-01, to be considered a business, an acquisition would have to include an input and a substantive process that together significantly contributes to the ability to create outputs. ASU 2017-01 further states that when substantially all of the fair value of gross assets acquitted is concentrated in a single asset (or a group of similar assets), the assets acquired would not represent a business. The new guidance also narrows the definition of the term “outputs” to be consistent with how it is described in Topic 606, Revenue from Contracts with Customers.
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The changes to the definition of a business will likely result in more acquisitions being accounted for as asset acquisitions. ASU 2017-01 is effective for acquisitions commencing on or after June 30, 2019, with early adoption permitted. Adoption of this guidance will be applied prospectively on or after the effective date.
In January 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and Other” ASU 2017-04 simplifies the accounting for goodwill impairment by eliminating Step 2 of the current goodwill impairment test, which required a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which the reporting unit’s carrying value exceeds its fair value, limited to the carrying value of the goodwill. ASU 2017-04 is effective for financial statements issued for fiscal years, and interim periods beginning after December 15, 2019.
In SeptemberMay 2017, the FASB issued ASU 2017-13, “Revenue Recognition2017-09, Compensation-Stock Compensation (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840),718): Scope of Modification Accounting (ASU 2107-9). The FASB issued the update to provide clarity and Leases (Topic 842)”. ASU 2017-13 amendsreduce the early adoption date option for certain companies relatedcost and complexity when applying guidance in Topic 718. The amendments in this update provide guidance about which changes to the adoptionterms or conditions of a share-based payment award require an entity to apply modifications accounting in Topic 718. ASU 2014-09 and ASU 2016-02.2017-09 is effective for the Company in the interim period ended June 30, 2018. The Company ishas adopted ASU-2017-09 during the quarter ended June 30, 2018 and it did not early adopting this standard; however, we are currently assessing the impact that the eventual adoption of this standard will have on the Company.
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 statementsposition and the consolidated results of operations.
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Off Balance Sheet Arrangements
We have no off-balance sheet transactions.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable for smaller reporting companies.
Item 4. Controls and Procedures
During the three and nine months ended December 31, 2017,2018, there were no changes in our internal controls over financial reporting (as defined in Rule 13a- 15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
We maintain “disclosure controls and procedures” as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
As of the end of the period covered by this Quarterly Report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(b) and 15d-15(b). Based upon this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures as of the end of the period covered by this Quarterly Report were ineffective due to a lack of segregation of duties and as a result of a transition of duties with new management starting as of September 1, 2017.effective.
None
Not applicable for smaller reporting companies
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
In the nine months ended December 31, 2018, an aggregate of 21,572 shares of our common stock were issued upon the exchange and redemption of outstanding Exchangeable Shares for shares of common stock. The securities were issued in private transactions in reliance upon exemptions from registration pursuant to Section 4(a)(2) of the Securities Act, as transactions not involving any public offering.
All other unregistered issuances of equity securities during the period covered by this quarterly report have been previously disclosed on our Current Reports on Form 8-K.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Mine Safety Disclosures
Not applicable
None
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Exhibit 101.INS - XBRL Instance Document
Exhibit 101.SCH - XBRL Taxonomy Extension Schema Document
Exhibit 101.CAL - XBRL Taxonomy Extension Calculation Linkbase Document
Exhibit 101.DEF - XBRL Taxonomy Extension Definition Linkbase Document
Exhibit 101.LAB - XBRL Taxonomy Extension Label Linkbase Document
Exhibit 101.PRE - XBRL Taxonomy Extension Presentation Linkbase Document
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.
BIONIK LABORATORIES CORP. | |||
By: | /s/ Eric Dusseux | ||
Name: Eric Dusseux | |||
Chief Executive Officer (Principal Executive Officer) | |||
By: | /s/ Leslie Markow | ||
Name: Leslie Markow | |||
Chief Financial Officer | |||
(Principal Financial and Accounting Officer) |