UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

 

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  
 For the quarterly period ended December 31, 2021June 30, 2022
  
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the period from ______________ to_______________

 

Commission file number: 000-56074

 

BIOTRICITY INC.

(Exact name of registrant as specified in its charter)

 

Nevada 30-0983531

State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

275 Shoreline Drive203 Redwood Shores Parkway, Suite 150600

Redwood City, California 94065

(Address of principal executive offices)

 

(650) 832-1626

(Registrant’s Telephone Number, Including Area Code)

 

Indicate by check whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐

 

Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act).

 

Large accelerated filer ☐Accelerated filer ☐
Non-accelerated filer ☒Smaller reporting company ☒
Emerging growth company ☐ 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ ☐No No ☒

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $0.001 per share BTCY The NASDAQ Stock Market LLC

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 49,810,32250,431,245 shares of Common Stock, $0.001 par value, at February 11,August 12, 2022. As at that same date, the Company also has 1,466,718 Exchangeable Shares outstanding that convert directly into common shares, which when combined with its Common Stock produce an amount equivalent to 51,277,04051,897,963 outstanding voting securities.

 

 

 

 

 

BIOTRICITY INC.

 

Part I – Financial Information 
  
Item 1 – Condensed Consolidated Financial Statements3
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations2528
Item 3 – Quantitative and Qualitative Disclosures About Market Risk3240
Item 4 – Controls and Procedures3240
  
Part II – Other Information 
Item 1 – Legal Proceedings3341
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds3341
Item 3 – Defaults Upon Senior Securities3341
Item 4 – Mine Safety Disclosures3341
Item 5 – Other Information3341
Item 6 – Exhibits3341
Signatures3442

 

2

 

PART 1

FINANCIAL INFORMATION

 

Item 1 – Condensed Consolidated Financial Statements

 

Condensed Consolidated Balance Sheets at December 31, 2021June 30, 2022 (unaudited) and March 31, 20212022 (audited)4
  
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended December 31,June 30, 2022 and 2021 and 2020 (unaudited)5
  
Condensed Consolidated Statements of Stockholders’ Equity (Deficiency)Deficiency for the three and nine months ended December 31,June 30, 2022 and 2021 and 2020 (unaudited)6
  
Condensed Consolidated Statements of Cash Flows for the ninethree months ended December 31,June 30, 2022 and 2021 and 2020 (unaudited)87
  
Notes to the Condensed Consolidated Financial Statements98

 

3

 

BIOTRICITY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

AS AT DECEMBER 31, 2021JUNE 30, 2022 (unaudited) AND MARCH 31, 20212022 (audited)

(Expressed in US Dollars)

 

 As at December 31, 2021  As at March 31, 2021  As at June 30, 2022  As at March 31, 2022 
 $ $  $ $ 
CURRENT ASSETS                
Cash  16,790,346   2,201,562   7,207,974   12,066,929 
Accounts receivable, net  1,989,063   1,520,836   1,826,920   2,006,678 
Inventory  

359,834

   272,493   1,431,054   842,924 
Deposits and other receivables  

470,622

   326,664   380,592   406,280 
Total current assets  19,609,865   4,321,555   10,846,540   15,322,811 
                
Deposits and other receivables  33,000   - 
Deposits  85,000   85,000 
Long-term accounts receivable  2,723   50,358   -   - 
Property, plant and equipment  28,947   - 
Property and equipment [Note 11]  25,970   27,459 
Operating right-of-use lease asset [Note 10]  1,370,960   66,120   1,192,169   1,242,700 
TOTAL ASSETS  21,045,495   4,438,033   12,149,679   16,677,970 
                
CURRENT LIABILITIES                
Accounts payable and accrued liabilities [Note 4]  2,916,973   2,520,124   2,701,077   2,595,747 
Convertible promissory notes and short term loans [Note 5]  1,138,014   4,278,018   1,238,000   1,540,000 
Derivative liabilities [Note 8]  572,005   3,633,856   419,332   520,747 
Operating lease liability [Note 10]  201,852   58,257   219,033   210,320 
Total current liabilities  4,828,844   10,490,255   4,577,442   4,866,814 
                
Federally guaranteed loans [Note 7]  870,800   370,900   870,800   870,800 
Term loan [Note 6]  11,563,363   -   11,662,742   11,612,672 
Derivative liabilities [Note 8]  286,811  410,042   537,318   352,402 
Operating lease liability [Note 10]  1,176,606   -   1,061,795   1,120,018 
TOTAL LIABILITIES  

18,726,424

   11,271,197   18,710,097   18,822,706 
                
STOCKHOLDERS’ EQUITY (DEFICIENCY)        
Preferred stock, $0.001 par value, 10,000,000 authorized as at December 31, 2021 and March 31, 2021, respectively, 1 share issued and outstanding as at December 31, 2021 and March 31, 2021, respectively [Note 9]  1   1 
Preferred stock, $0.001 par value, 20,000 authorized as at December 31, 2021 and March 31, 2021, respectively, 7,201 and 8,045 preferred shares issued and outstanding as at December 31, 2021 and as at March 31, 2021, respectively [Note 9]  7   8 
Preferred stock, value  1   1 
Common stock, $0.001 par value, 125,000,000 authorized as at December 31, 2021 and March 31, 2021, respectively. Issued and outstanding common shares: 48,190,142 and 36,124,964 as at December 31, 2021 and March 31, 2021, respectively, and exchangeable shares of 1,466,718 and 2,889,978 outstanding as at December 31, 2021 and March 31, 2021, respectively [Note 9]  49,657   39,015 
Shares to be issued 1,233,329 and 268,402 shares of common stock as at December 31, 2021 and March 31, 2021, respectively) [Note 9]  4,086,361   280,960 
STOCKHOLDERS’ DEFICIENCY        
Preferred stock, $0.001 par value, 10,000,000 authorized as at June 30, 2022 and March 31, 2022, respectively, 1 share issued and outstanding as at June 30, 2022 and March 31, 2022, respectively [Note 9]  1   1 
Preferred stock, $0.001 par value, 20,000 authorized as at June 30, 2022 and March 31, 2022, respectively, 6,872 and 7,201 preferred shares issued and outstanding as at June 30, 2022 and as at March 31, 2022, respectively [Note 9]  7   7 
Preferred stock  1   1 
Common stock, $0.001 par value, 125,000,000 authorized as at June 30, 2022 and March 31, 2022, respectively. Issued and outstanding common shares: 50,219,034 and 49,810,322 as at June 30, 2022 and March 31, 2022, respectively, and exchangeable shares of 1,466,718 and 1,466,718 outstanding as at June 30, 2022 and March 31, 2022, respectively [Note 9]  51,686   51,277 
Shares to be issued 95,515 and 123,817 shares of common stock as at June 30, 2022 and March 31, 2022, respectively) [Note 9]  72,299   102,299 
Additional paid-in-capital  85,874,483   56,298,726   91,912,772   91,507,478 
Accumulated other comprehensive loss  (636,027)  (634,186)  (535,652)  (768,656)
Accumulated deficit  (87,055,411)  (62,817,688)  (98,061,531)  (93,037,142)
Total stockholders’ equity (deficiency)  2,319,071   (6,833,164)  (6,560,418)  (2,144,736)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY  21,045,495   4,438,033   12,149,679   16,677,970 

 

See accompanying notes to unaudited condensed consolidated interim financial statements

 

4

 

BIOTRICITY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE THREE AND NINE MONTHS ENDED DECEMBERJUNE 31, 20212022 AND 20202021 (unaudited)

(Expressed in US Dollars)

 

                 
  3 Months Ended
December 31, 2021		  3 Months Ended
December 31, 2020		  9 Months Ended
December 31, 2021		  9 Months Ended
December 31, 2020		 
  $  $  $  $ 
               
REVENUE            1,930,108               1,001,252   5,501,527   2,197,734 
                 
Cost of Revenue  1,105,271   859,363   2,372,011   1,643,724 
GROSS PROFIT  824,837   141,889   3,129,516   554,010 
                 
EXPENSES                
General and administrative expenses [Notes 8, 9 and 10]  4,659,638   3,338,382   13,921,014   9,152,010 
Research and development expenses  900,499   681,411   2,115,134   1,507,634 
TOTAL OPERATING EXPENSES  5,560,137   4,019,793   16,036,148   10,659,644 
                 
Other (income)/expense [Note 8] [Note 9]  264,734   (8,637)  1,101,095   (25,604)
Accretion and amortization expenses [Note 5] [Note 6]  1,334,842   380,692   8,834,728   722,795 
Change in fair value of derivative liabilities [Note 8]  774,773   (349,714)  676,182   (783,193)
NET LOSS BEFORE INCOME TAXES  (7,109,649)  (3,900,245)  (23,518,637)  (10,019,632)
                 
Income taxes  -   -   -   -  
NET LOSS BEFORE DIVIDENDS  (7,109,649)  (3,900,245)  (23,518,637)  (10,019,632)
                
Less: Preferred Stock Dividends  233,222   218,904  719,086   649,336 
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS  (7,342,871)  (4,119,149)  (24,237,723)  (10,668,968)
                
Translation adjustment  (20,064)  366,788   (1,841)  187,247 
                 
COMPREHENSIVE LOSS  (7,362,935)  (3,752,361)  (24,239,564)  (10,481,721)
                
LOSS PER SHARE, BASIC AND DILUTED  (0.149)  (0.111)  (0.554)  (0.288)
                
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING  49,168,264  37,256,315   43,747,569   37,038,957 

       
  Three Months Ended
June 30, 2022		  Three Months Ended
June 30, 2021		 
  $  $ 
         
REVENUE  2,056,052   1,764,110 
         
Cost of Revenue  830,923   594,029 
GROSS PROFIT  1,225,129   1,170,081 
         
EXPENSES        
General and administrative expenses [Notes 8, 9 and 10]  4,881,003   3,583,600 
Research and development expenses  821,176   588,997 
TOTAL OPERATING EXPENSES  5,702,179   4,172,597 
         
Other (income)/expense  -   (8,782)
Loss upon convertible promissory notes conversion [Note 9]  50,908   28,215 
Accretion and amortization expenses [Note 6]  50,070   2,335,167 
Change in fair value of derivative liabilities [Note 8]  198,224   298,983 
NET LOSS BEFORE INCOME TAXES  (4,776,252)  (5,656,099)
         
Income taxes  -   - 
NET LOSS BEFORE DIVIDENDS  (4,776,252)  (5,656,099)
         
Less: Preferred Stock Dividends  248,137   241,264 
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS  (5,024,389)  (5,897,363)
         
Translation adjustment  233,004   6,560 
         
COMPREHENSIVE LOSS  (4,791,385)  (5,890,803)
         
LOSS PER SHARE, BASIC AND DILUTED  (0.098)  (0.151)
         
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING  51,440,944   39,095,637 

 

See accompanying notes to unaudited condensed consolidated interim financial statements

 

5

 

BIOTRICITY INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIENCY)DEFICIENCY

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31,JUNE 30, 2022 AND 2021 AND 2020 (unaudited)

 

                                         
  Preferred stock  

Common stock

and exchangeable common shares

  

Shares to be

Issued

  Additional
paid in
capital		  Accumulated
other
comprehensive
(loss) income		  Accumulated
deficit		  Total 
  Shares  $  Shares  $  Shares  $  $  $  $  $ 
Balance, September 30, 2021 (unaudited)  8,146   9   48,876,312   48,876   1,014,303   3,130,926   84,893,876   (615,963)  (79,712,541)  7,745,183 
Issuance costs: warrants to brokers [Note 9]  -   -   -   -   -   -      -   -   - 
Conversion of convertible notes into common shares [Note 9]  -   -   207,516  208   -   -  875,105   -   -   875,313 
Issuance of additional shares to convertible note holders [Note 9]          37,820  38   -   -  153,133   -   -   153,171 
Conversion of preferred shares into common shares [Note 9]  (715) (1)  -   -   288,756   1,198,914  (715,000)  -   -   483,913 
Preferred stock purchased back via cash  (230) -  -   -   -   -  (230,000)  -   -   (230,000)
Issuance of shares for services [Note 9]  -   -   131,522  132   (81,522)  (255,979) 398,348   -   -   142,501 
Exercise of warrants for cash [Note 9]  -   -   42,500  43   11,792   12,500  26,608   -   -   39,151 
Issuance of warrants for services [Note 9]  -    -    -    -    -    -   371,763   -    -    371,763 
Stock based compensation - ESOP [Note 9]  -    -    -    -    -    -   100,650   -    -    100,650 
Cashless exercise of warrants [Note 9]  -    -    361,190   361               -    -    361 
Issuance of shares for private placement [Note 9]                               
Issuance of shares for private placement [Note 9]                                        
Issuance of warrants for private placement investors [Note 9]                               
Issuance of preferred shares for private placement investors [Note 9]                                        
Issuance of shares from uplisting [Note 9]                                        
Issuance of shares from uplisting [Note 9], shares                                        
Issuance of preferred shares for private placement                                        
Issuance of preferred shares for private placement, shares                                        
Derivative liabilities adjustment pursuant to issuance of preferred stock [Note 9]                                        
Derivative liabilities adjustment pursuant to issuance of preferred Shares [Note 8] [Note 9]                                        
Translation adjustment  -   -    -    -    -    -    -    (20,064)       (20,064)
Net loss before dividends for the period  -    -    -    -    -    -    -    -    (7,109,649)  (7,109,649)
Preferred stock dividends  -   -    -    -    -    -    -    -    (233,222)  (233,222)
Balance, December 31, 2021 (unaudited)  7,201   8   49,656,860   49,657   1,233,329   4,086,361   85,874,483   (636,027)  (87,055,411)  2,319,071 

  Preferred stock  

Common stock

and exchangeable common shares

  

Shares to be

Issued

  Additional paid in capital  Accumulated other comprehensive (loss) income  Accumulated deficit  Total 
  Shares  $  Shares  $  Shares  $  $  $  $  $ 
Balance, September 30, 2020 (unaudited)  8,046   9   37,256,315   37,257   412,500   400,591   46,100,176   (1,036,850)  (52,914,180)  (7,412,997)
Issuance of shares for services  -   -   540,000   540   (73,000)  (149,876)  519,916   -   -   370,580 
Issuance of warrants for services  -   -   -   -   -   -   73,329   -   -   73,329 
Stock based compensation - ESOP  -   -   -   -   -   -   13,781   -   -   13,781 
Translation adjustment  -   -   -   -   -   -   -   366,790   -   366,790 
Net loss before dividends for the period  -   -   -   -   -   -   -   -   (3,900,245)  (3,900,245)
Preferred stock dividends  -   -   -   -   -   -   -   -   (218,905)  (218,905)
Balance, December 31, 2020 (unaudited)  8,046   9   37,796,315   37,797   339,500   250,715   46,707,202   (670,060)  (57,033,330)  (10,707,667)

                               
  Preferred stock  Common stock  and exchangeable common shares  Shares to be Issued  Additional paid in capital  Accumulated other comprehensive loss  Accumulated deficit    Total 
  Shares  $  

Shares  

  $  Shares    $  $  $  $  $ 
Balance, March 31, 2022 (audited)  7,201   8   51,277,040   51,277   123,817   102,299   91,507,478   (768,656)  (93,037,142)  (2,144,736)
Conversion of convertible notes into common shares [Note 9]  -   -   404,545   405   -   -   456,621   -   -   457,026 
Preferred stock purchased back via cash [Note 8]  (329)  -   -   -   -   -   (285,427)  -   -   (285,427)
Issuance of shares for services [Note 9]  -   -   4,167   4   -   -   7,496   -   -   7,500 
Exercise of warrants for cash [Note 9]  -   -   -   -   (28,302)  (30,000)  -   -   -   (30,000)
Issuance of warrants for services [Note 9]  -   -   -   -   -   -   77,414   -   -   77,414 
Stock based compensation - ESOP [Note 9]  -   -   -   -   -   -   149,190   -   -   149,190 
Translation adjustment  -   -   -   -   -   -   -   233,004   -    233,004 
Net loss before dividends for the period  -   -   -   -   -   -   -   -   (4,776,252)  (4,776,252)
Preferred stock dividends  -   -   -   -   -   -   -   -   (248,137)  (248,137)
Balance, June 30, 2022 (unaudited)  6,872   8   51,685,752   51,686   95,515   72,299   91,912,772   (535,652)  (98,061,531)  (6,560,418)

 

  Preferred stock  

Common stock

and exchangeable common shares

  

Shares to be

Issued

  Additional paid in capital  Accumulated other comprehensive loss  Accumulated deficit  Total 
  Shares  $  Shares  $  Shares  $  $  $  $  $ 
Balance, March 31, 2021 (audited)  8,046   9   39,014,942   39,015   268,402   280,960   56,298,726   (634,186)  (62,817,688)  (6,833,164)
Conversion of convertible notes into common shares  -             -    201,604   202   327,274   1,190,502   479,558   -    -    1,670,262 
Exercise of warrants for cash  -    -    100,236   100   37,736   40,000   106,150   -    -    146,250 
                                         
Issuance of warrants for services  -   -   -   -   -   -   151,897   -   -   151,897 
Stock based compensation - ESOP  -   -   -   -   -   -   155,851   -   -   155,851 
Translation adjustment  -   -   -   -   -   -   -   6,560   -   6,560 
Net loss before dividends for the period  -   -   -   -   -   -   -   -   (5,656,099)  (5,656,099)
Preferred stock dividends  -   -   -   -   -   -   -   -   (241,264)  (241,264)
Balance, June 30, 2021 (unaudited)  8,046   9   39,316,782   39,317   633,412   1,511,462   57,192,182   (627,626)  (68,715,051)  (10,599,707)

See accompanying notes to unaudited condensed consolidated interim financial statements

6

  Preferred stock  Common stock and exchangeable common shares  Shares to be Issued  Additional paid in capital  Accumulated other comprehensive (loss) income  Accumulated deficit  Total 
  Shares  $  Shares  $  Shares  $  $  $  $  $ 
Balance, March 31, 2021  8,046   9   39,014,942   39,015   268,402   280,960   56,298,726   (634,186)  (62,817,688)  (6,833,164)
Issuance of common shares for private placement [Note 9]  -   

-

   69,252   69   -   

-

   249,931   

-

   

-

   250,000 
Issuance of preferred shares for private placement investors [Note 9]  

100

   

-

   -   -   

-

   

-

   100,000   

-

   

-

   100,000 
Issuance of additional shares to convertible note holders [Note 9]  

-

   

-

   37,820   38   

-

   -   153,133   

-

   

-

   153,171 
Issuance of shares from uplisting [Note 9]  

-

   -   5,382,331   5,382   

-

   

-

   14,540,423   

-

   

-

   14,545,805 
Conversion of convertible notes into common shares [Note 9]  -   -   4,056,204   4,056   602,059   2,528,987   12,992,240   

-

   

-

   15,525,283 
Conversion of preferred shares into common shares [Note 9]  (715)  (1)  

-

   

-

   288,756   1,198,914   (715,000)  -   -   483,913 
Preferred stock purchased back via cash  (230)  -  -   -   -   -   (230,000)  -   -   (230,000)
Issuance of shares for services [Note 9]  -   -   313,188   313   -   -   966,779   -   -   967,092 
Exercise of warrants for cash [Note 9]  -   -   336,753   337   73,112   77,500   441,127   -   -   518,964 
Issuance of warrants for services [Note 9]  -   -   -   -   -   -   668,013   -   -   668,013 
Derivative liabilities adjustment pursuant to issuance of preferred Shares [Note 8]  -   -   -   -   -   -   (17,084)  -   -   (17,084)
Stock based compensation - ESOP [Note 9]  -   -   -   -   -   -   426,280   -   -   426,280 
Cashless exercise of warrants [Note 9]  -   -   446,370   446   1,000   -   (85)  -   -   361 
Translation adjustment  -   -   -   -   -   -   -   (1,841)  -   

(1,841

)
Net loss before dividends for the period  -   -   -   -   -   -   -   -   (23,518,637)  (23,518,637)
Preferred stock dividends  -   -   -   -   -   -   -   -   (719,086)  (719,086)
Balance, December 31, 2021 (unaudited)  7,201   8   49,656,860   49,657   1,233,329   4,086,361   85,874,483   (636,027)  (87,055,411)  2,319,071 

 

  Preferred stock  Common stock and exchangeable common shares  Shares to be Issued  Additional paid in capital  Accumulated other comprehensive (loss) income  Accumulated deficit  Total 
  Shares  $  Shares  $  Shares  $  $  $  $  $ 
Balance, March 31, 2020  7,831   8   36,381,815   36,382   178,750   169,490   44,015,397   (857,307)  (46,364,362)  (3,000,393)
Issuance of preferred shares for private placement  215   1   

-

   

-

   

-

   

-

   215,000   

-

   

-

   215,001 
Derivative liabilities adjustment pursuant to issuance of preferred stock  -   -   -   -   -   -   (41,749)  -   -   (41,749)
Issuance of shares for services  -   -   1,414,500   1,415   63,250   13,284   1,862,857   -   -   1,877,556 
Exercise of warrants for cash  -   -   -   -   97,500   67,941   -   -   -   67,941 
Issuance of warrants for services  -   -   -   -   -   -   173,523   -   -   173,523 
Stock based compensation - ESOP  -   -   -   -   -   -   482,175   -   -   482,175 
Translation adjustment  -   -   -   -   -   -   -   187,247  -   187,247
Net loss before dividends for the period  -   -   -   -   -   -   -   -   (10,019,632)  (10,019,632)
Preferred stock dividends  -   -   -   -   -   -   -   -   (649,336)  (649,336)
Balance, December 31, 2020 (unaudited)  8,046   9   37,796,315   37,797   339,500   250,715   46,707,202   (670,060)  (57,033,330)  (10,707,667)

See accompanying notes to unaudited condensed consolidated interim financial statements

7

 

BIOTRICITY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINETHREE MONTHS ENDED DECEMBER 31,JUNE 30, 2022 AND 2021 AND 2020 (UNAUDITED)

(Expressed in US Dollars)

 

     
 Nine Months Ended December 31, 2021 Nine Months Ended December 31, 2020  Three Months Ended June 30, 2022 Three Months Ended June 30, 2021 
 $ $  $  $ 
          
CASH FLOWS FROM OPERATING ACTIVITIES                
Net loss  (23,518,637)  (10,019,631)  (4,776,252)  (5,656,099)
Adjustments to reconcile net loss to net cash used in operations        
Adjustments to reconcile net loss to net cash used in operations:        
Stock based compensation  426,280   482,175   149,190   155,851 
Issuance of shares for services  967,092   1,877,556   7,500   - 
Issuance of warrants for services  469,300   173,523   77,414   151,897 
Accretion and amortization expenses  8,834,728   722,795   50,070   2,335,167 
Change in fair value of derivative liabilities  676,182  (783,193)  198,224   298,983 
Loss on debt and preferred stock conversion, net  1,116,339   

-

 
Property, plant and equipment depreciation  819   

-

 
Loss upon convertible promissory notes conversion  50,908   28,213 
Property and equipment depreciation  1,489   - 
                
Changes in operating assets and liabilities:                
Accounts receivable, net  (420,592)  (944,097)  179,758   (401,818)
Inventory  (87,341)  (9,128)  (588,130)  92,694 
Deposits and other receivables  (176,958)  44,075   (4,312)  (86,221)
Accounts payable and accrued liabilities  1,304,505   954,741   614,747   399,937 
Net cash used in operating activities  (10,408,283)  (7,501,184)  (4,039,394)  (2,681,396)
                
CASH FLOWS FROM INVESTING ACTIVITIES        
property, plant and equipment  (29,766)  

-

 
Net cash used in investing activities  (29,766)  

-

 
        
CASH FLOWS FROM FINANCING ACTIVITIES                
Issuance of common shares, net  250,000   

-

 
Issuance of preferred shares, net  100,000   215,000 
Redemption of preferred shares  (230,000)  

-

   (328,904)  - 
Exercise of warrants for cash  518,964   67,941   12,500   146,250 
Federally guaranteed loans  499,900   1,570,900   -   499,900 
Proceeds from (repayment to) convertible notes, net  (1,660,220)  404,895 
Proceeds from (repayment to) convertible debentures, net  -   7,929,404 
Issuance of shares from uplisting  14,545,805   

-

 
Proceeds pursuant to term loan, net  11,756,563   

-

 
Proceeds from short term loan and promissory notes, net  -   139,780 
Preferred Stock Dividend  (767,962)  (570,920)  (516,817)  (204,842)
Net cash provided by financing activities  25,013,050   9,617,220 
Net cash (used in) provided by financing activities  (833,221)  581,088 
                
Effect of foreign currency translation  13,783   258,305  13,660  100,334 
Net increase in cash during the period  14,575,001   2,116,037
Net decrease in cash during the period  (4,858,955)  (1,999,974)
Cash, beginning of period  2,201,562   949,848   12,066,929   2,201,562 
Cash, end of period  16,790,346   3,324,190   7,207,974   201,588 

 

See accompanying notes to unaudited condensed consolidated interim financial statements

 

87

 

BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021JUNE 30, 2022 (Unaudited)

(Expressed in US dollars)

 

1. NATURE OF OPERATIONS

 

Biotricity Inc. (formerly MetaSolutions, Inc.) (the “Company”) was incorporated under the laws of the State of Nevada on August 29, 2012. iMedical Innovations Inc. (“iMedical”) was incorporated on July 3, 2014 under the laws of the Province of Ontario, Canada and became a wholly-owned subsidiary of Biotricity through reverse take-over on February 2, 2016.

 

Both the Company and iMedical are engaged in research and development activities within the remote monitoring segment of preventative care. They are focused on a realizable healthcare business model that has an existing market and commercialization pathway. As such, its efforts to date have been devoted to building and commercializing an ecosystem of technologies that enable access to this market.

 

2. BASIS OF PRESENTATION, MEASUREMENT AND CONSOLIDATION

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) for interim financial information and the Securities and Exchange Commission (“SEC”) instructions to Form 10-Q and Article 8 of SEC Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements and should be read in conjunction with Biotricity’s audited consolidated financial statements for the years ended March 31, 20212022 and 20202021 and their accompanying notes.

 

The accompanying unaudited condensed consolidated financial statements are expressed in United States dollars (“USD”). In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of financial position and results of operations for the interim periods presented have been reflected herein. Operating results for the interim periods presented herein are not necessarily indicative of the results that may be expected for the year ending March 31, 2022.2023. The Company’s fiscal year-end is March 31.

 

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.subsidiary. Significant intercompany accounts and transactions have been eliminated.

 

Certain prior year amounts have been reclassified to conform to the current year’s presentation.

 

Liquidity and Basis of Presentation

 

The Company commencedis in the early stages of commercializing its first product. Itproduct and is concurrently in development mode, operating a research and development program in order to develop, an ecosystem of medical technologies, and, where required or deemed advisable, obtain regulatory approvalsclearance for, and commercialize other proposed products. The Company launched its first commercial sales programhas incurred recurring losses from operations, and as partat June 30, 2022, had an accumulated deficit of $98,061,531 and a limited market release, during the year ended March 31, 2019, using an experienced professional in-house sales team. A full market release ensued during the year ended March 31, 2020.working capital surplus of $6,269,098. Management anticipates the Company will continue on its revenue growth trajectory and improve its liquidity through continued business development and after additional equity or debt capitalization of the Company. The Company has incurred recurring losses from operations, and as at December 31, 2021, has an accumulated deficit of $87,055,411(March 31, 2021 - $62,817,688). On August 30, 2021, the Company completed an underwritten public offering of its common stock that concurrently facilitated its listing on the Nasdaq Capital Market. On December 31, 2021, the Company has a working capital surplus of $14,781,021(March 31, 2021 – working capital deficiency of $6,168,700. Prior to listing on the Nasdaq Capital Market, the Company had also filed a shelf Registration Statement on Form S-3 (No. 333-255544) with the Securities and Exchange Commission on April 27, 2021, which was declared effective on May 4, 2021. This facilitates better transactional preparedness when the Company seeks to issue equity or debt to potential investors, since it continues to allow the Company to offer its shares to investors only by means of a prospectus, including a prospectus supplement, which forms part of an effective registration statement. As such, the Company has developed and continues to pursue sources of funding that management believes will be sufficient to support the Company’s operating plan and alleviate any substantial doubt as to its ability to meet its obligations at least for a period of one year from the date of these consolidated financial statements. During the fiscal year ended March 31, 2021, the Company closed a number of private placements offering of convertible notes, which have raised net cash proceeds of $11,375,690 (with total face value of $12,525,500). As of December 31, 2021, $11,048,000 of convertible notes issued during last fiscal year was converted into common shares. During fiscal quarter ended June 30, 2021, the Company raised an additional $499,900 through government EIDL loan, and $250,000 through short term loans. Duringloan. In addition, during the fiscal quarter ended September 30, 2021, the Company raised total net proceeds of $14,545,805through the underwritten public offering that was concurrent with its listing onto the Nasdaq Capital Markets. DuringFurthermore, during the fiscal quarter ended December 31, 2021, the Company raised an additional net proceeds of $11,756,563 through a term loan transaction (Note 6) and made repayment of the previously issued promissory notes (Note 5 (a)) and short-term loan (Note 5 (a)).

 

As we proceed with the commercialization of the Bioflux product development, we expect to continue to devote significant resources on capital expenditures, as well as research and development costs and operations, marketing and sales expenditures.

98

 

Based on the above facts and assumptions, we believe our existing cash, along with anticipated near-term equity financings, will be sufficient to meet our needs for the next twelve months from the filing date of this report. However, we will need to seek additional debt or equity capital to respond to business opportunities and challenges, including our ongoing operating expenses, protecting our intellectual property, developing or acquiring new lines of business and enhancing our operating infrastructure. The Company’s operating plan is predicated on a varietyterms of assumptions including, but not limitedour future financings may be dilutive to, the levelor otherwise adversely affect, holders of product demand, cost estimates, its ability to continue to raiseour common stock. We may also seek additional financing and the state of the general economic environment in which the Company operates.funds through arrangements with collaborators or other third parties. There can be no assurance that these assumptions will prove to be accurate in all material respects, or that the Companywe will be able to successfully execute its operating plan. In the absence ofraise this additional appropriate financing, the Companycapital on acceptable terms, or at all. If we are unable to obtain additional funding on a timely basis, we may havebe required to modify itsour operating plan and otherwise curtail or slow down the pace of development and commercialization of itsour proposed products. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in case of equity financing.product lines.

 

DueIn December 2019, a novel strain of coronavirus (COVID-19) emerged in Wuhan, Hubei Province, China. While initially the outbreak was largely concentrated in China and caused significant disruptions to its economy, it has now spread to several other countries and infections have been reported globally.

On March 17, 2020, as a result of COVID-19 infections having been reported throughout both Canada and the United States, certain national, provincial, state and local governmental issued proclamations and/or directives aimed at minimizing the spread of COVID-19. Accordingly, on March 17, 2020, the Company closed all corporate clinics for all in-clinic non-essential services to protect the health and safety of its employees, partners and patients. On March 20, 2020, the Company announced the precautionary measures taken as well as announcing the business impact related to the disruptioncoronavirus (COVID-19) pandemic.

The ultimate impact of the COVID-19 crisis,pandemic on the Company’s operations remains unclear and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of any future ongoing COVID-19 outbreaks, new information which may emerge concerning the severity of the COVID-19 pandemic, and any additional preventative and protective actions that governments, or the Company, may direct, which may result in an extended period of continued business disruption, reduced patient traffic and reduced operations. The full long-term financial impact cannot be reasonably estimated at this time but it has until recently had a material adverse impact on our business, financial condition, and results of operations.

The measures taken to date may impact the Company’s fiscal year 2023 business and potentially beyond. Management expects that all of its business segments, across all of its geographies, may be impacted to some degree, but the significance of the full impact of the COVID-19 outbreak on the Company’s business activities mightand the duration for which it may have an impact cannot be subject to certain levels of adverse impact; to the date of the issuance of these condensed consolidated financial statements, the Company continues to assess the respective impact on its business, results of operations, financial position and cash flows, and will adjust its financial records, as required, when reliable estimates become available.determined at this time. 

 

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

UseRevenue Recognition

The Company adopted Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers” (“ASC 606”) on April 1, 2018. In accordance with ASC 606, revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services by applying the core principles – 1) identify the contract with a customer, 2) identify the performance obligations in the contract, 3) determine the transaction price, 4) allocate the transaction price to performance obligations in the contract, and 5) recognize revenue as performance obligations are satisfied.

9

The Bioflux mobile cardiac telemetry device, a wearable device, is worn by patients for a monitoring period up to 30 days. The cardiac data that the device monitors and collects is curated and analyzed by the Company’s proprietary algorithms and then securely communicated to a remote monitoring facility for electronic reporting and conveyance to the patient’s prescribing physician or other certified cardiac medical professional. Revenues earned with respect to this device are comprised of Estimatesdevice sales revenues and technology fee revenues (technology as a service). The device, together with its licensed software, is available for sale to the medical center or physician, who is responsible for the delivery of clinical diagnosis and therapy. The remote monitoring, data collection and reporting services performed by the technology culminate in a patient study that is generally billable when it is complete and is issued to the physician. In order to recognize revenue, management considers whether or not the following criteria are met: persuasive evidence of a commercial arrangement exists, and delivery has occurred or services have been rendered. For sales of devices, which are invoiced directly, additional revenue recognition criteria include that the price is fixed and determinable and collectability is reasonably assured; for device sales contracts with terms of more than one year, the Company recognizes any significant financing component as revenue over the contractual period using the effective interest method, and the associated interest income is reflected accordingly on the statement of operations and included in other income; for revenue that is earned based on customer usage of the proprietary software to render a patient’s cardiac study, the Company recognizes revenue when the study ends based on a fixed billing rate. Costs associated with providing the services are recorded as the service is provided regardless of whether or when revenue is recognized.

The Company may also earn service-related revenue from contracts with other counterparties with which it consults. This contract work is separate and distinct from services provided to clinical customers, but may be with a reseller or other counterparties that are working to establish their operations in foreign jurisdictions or ancillary products or market segments in which the Company has expertise and may eventually conduct business.

The Company recognized the following forms of revenue for the three months ended June 30, 2022 and 2021:

SCHEDULE OF REVENUE RECOGNITION

  For Three Months Ended
June 30, 2022
$		  For Three Months Ended
June 30, 2021
$		 
Technology fee sales  1,889,982   1,464,937 
Device sales  166,070   299,173 
Revenue  2,056,052   1,764,110 

Inventory

Inventory is stated at the lower of cost and market value, cost being determined on a weighted average cost basis. Market value of our inventory, which is all purchased finished goods, is determined based on its estimated net realizable value, which is generally the selling price less normally predictable costs of disposal and transportation. The Company records write-downs of inventory that is obsolete or in excess of anticipated demand or market value based on consideration of product lifecycle stage, technology trends, product development plans and assumptions about future demand and market conditions. Actual demand may differ from forecasted demand, and such differences may have a material effect on recorded inventory values. Inventory write-downs are charged to cost of revenue and establish a new cost basis for the inventory.

Significant accounting estimates and assumptions

 

The preparation of the consolidated financial statements in conformity with US GAAP requires management to makethe use of estimates and assumptions to be made in applying the accounting policies that affect the reported amounts of assets, liabilities, revenue and liabilitiesexpenses and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Areas involving significantliabilities. The estimates and related assumptions include: deferred income taxare based on previous experiences and other factors considered reasonable under the circumstances, the results of which form the basis for making the assumptions about the carrying values of assets and related valuation allowance, accrualsliabilities that are not readily apparent from other sources.

The estimates and valuation of derivatives, convertible promissory notes, stock options, andunderlying assumptions used in the going concern assessment. Actual results could differ from those estimates. Theseare reviewed on an ongoing basis. Revisions to accounting estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earningsrecognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Significant accounts that require estimates as the basis for determining the stated amounts include share-based compensation, impairment analysis and fair value of warrants, structured notes, convertible debt and conversion liabilities.

10

●Fair value of stock options

The Company measures the cost of equity-settled transactions with employees by reference to the fair value of equity instruments at the date at which they become known.are granted. Estimating fair value for share-based payments requires determining the most appropriate valuation model for a grant of such instruments, which is dependent on the terms and conditions of the grant. The estimate also requires determining the most appropriate inputs to the Black-Scholes option pricing model, including the expected life of the instrument, risk-free rate, volatility, and dividend yield.

●Fair value of warrants

In determining the fair value of the warrant issued for services and issue pursuant to financing transactions, the Company used the Black-Scholes option pricing model with the following assumptions: volatility rate, risk-free rate, and the remaining expected life of the warrants that are classified under equity.

●Fair value of derivative liabilities

In determining the fair values of the derivative liabilities from the conversion and redemption features, the Company used valuation models with the following assumptions: dividend yields, volatility, risk-free rate and the remaining expected life. Changes in those assumptions and inputs could in turn impact the fair value of the derivative liabilities and can have a material impact on the reported loss and comprehensive loss for the applicable reporting period.

●Functional currency

Determining the appropriate functional currencies for entities in the Company requires analysis of various factors, including the currencies and country-specific factors that mainly influence labor, materials, and other operating expenses.

●Useful life of property and equipment

The Company employs significant estimates to determine the estimated useful lives of property and equipment, considering industry trends such as technological advancements, past experience, expected use and review of asset useful lives. The Company makes estimates when determining depreciation methods, depreciation rates and asset useful lives, which requires considering industry trends and company-specific factors. The Company reviews depreciation methods, useful lives and residual values annually or when circumstances change and adjusts its depreciation methods and assumptions prospectively

●Provisions

Provisions are recognized when the Company has a present obligation, legal or constructive, as a result of a previous event, if it is probable that the Company will be required to settle the obligation and a reliable estimate can be made of the obligation. The amount recognized is the best estimate of the expenditure required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligations. Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate of the expected future cash flows.

●Contingencies

Contingencies can be either possible assets or possible liabilities arising from past events, which, by their nature, will be resolved only when one or more uncertain future events occur or fail to occur. The assessment of the existence and potential impact of contingencies inherently involves the exercise of significant judgment and the use of estimates regarding the outcome of future events.

●Inventory obsolescence

Inventories are stated at the lower of cost and market value. Market value of our inventory, which is all purchased finished goods, is determined based on its estimated net realizable value, which is generally the selling price less normally predictable costs of disposal and transportation. The Company estimates net realizable value as the amount at which inventories are expected to be sold, taking into consideration fluctuations in retail prices less estimated costs necessary to make the sale. Inventories are written down to net realizable value when the cost of inventories is estimated to be unrecoverable due to obsolescence, damage, or declining selling prices.

11

●Income and other taxes

The calculation of current and deferred income taxes requires the Company to make estimates and assumptions and to exercise judgment regarding the carrying values of assets and liabilities which are subject to accounting estimates inherent in those balances, the interpretation of income tax legislation across various jurisdictions, expectations about future operating results, the timing of reversal of temporary differences and possible audits of income tax filings by the tax authorities. In addition, when the Company incurs losses for income tax purposes, it assesses the probability of taxable income being available in the future based on its budgeted forecasts. These forecasts are adjusted to take into account certain non-taxable income and expenses and specific rules on the use of unused credits and tax losses.

When the forecasts indicate that sufficient future taxable income will be available to deduct the temporary differences, a deferred tax asset is recognized for all deductible temporary differences. Changes or differences in underlying estimates or assumptions may result in changes to the current or deferred income tax balances on the consolidated statements of financial position, a charge or credit to income tax expense included as part of net income (loss) and may result in cash payments or receipts. Judgment includes consideration of the Company’s future cash requirements in its tax jurisdictions. All income, capital and commodity tax filings are subject to audits and reassessments. Changes in interpretations or judgments may result in a change in the Company’s income, capital, or commodity tax provisions in the future. The amount of such a change cannot be reasonably estimated.

●Incremental borrowing rate for lease

The determination of the Company’s lease obligation and right-of-use asset depends on certain assumptions, which include the selection of the discount rate. The discount rate is set by reference to the Company’s incremental borrowing rate. Significant assumptions are required to be made when determining which borrowing rates to apply in this determination. Changes in the assumptions used may have a significant effect on the Company’s consolidated financial statements.

 

Earnings (Loss) Per Share

 

The Company has adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 260-10 which provides for calculation of “basic” and “diluted” earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income or loss available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. Diluted earnings per share exclude all potentially dilutive shares if their effect is anti-dilutive. There were 0no potentially dilutive shares outstanding as at December 31, 2021June 30, 2022 and 2020.2021.

Cash

Cash includes cash on hand and balances with banks.

Foreign Currency Translation

The functional currency of the Company’s Canadian-based subsidiary is the Canadian dollar and the US-based parent is the U.S. dollar. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities are translated using the historical rate on the date of the transaction. All exchange gains or losses arising from translation of these foreign currency transactions are included in net income (loss) for the year. In translating the financial statements of the Company’s Canadian subsidiaries from their functional currency into the Company’s reporting currency of United States dollars, balance sheet accounts are translated using the closing exchange rate in effect at the balance sheet date and income and expense accounts are translated using an average exchange rate prevailing during the reporting period. Adjustments resulting from the translation, if any, are included in accumulated other comprehensive income (loss) in stockholders’ equity. The Company has not, to the date of these consolidated financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

12

Accounts Receivable

Accounts receivable consists of amounts due to the Company from medical facilities, which receive reimbursement from institutions and third-party government and commercial payors and their related patients, as a result of the Company’s normal business activities. Accounts receivable is reported on the balance sheets net of an estimated allowance for doubtful accounts. The Company establishes an allowance for doubtful accounts for estimated uncollectible receivables based on historical experience, assessment of specific risk, review of outstanding invoices, and various assumptions and estimates that are believed to be reasonable under the circumstances, and recognizes the provision as a component of selling, general and administrative expenses. Uncollectible accounts are written off against the allowance after appropriate collection efforts have been exhausted and when it is deemed that a balance is uncollectible.

 

Fair Value of Financial Instruments

 

ASC 820 defines fair value, establishes a framework for measuring fair value and expands required disclosure about fair value measurements of assets and liabilities. ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

 

● Level 1 – Valuation based on quoted market prices in active markets for identical assets or liabilities.

 

● Level 2 – Valuation based on quoted market prices for similar assets and liabilities in active markets.

 

● Level 3 – Valuation based on unobservable inputs that are supported by little or no market activity, therefore requiring management’s best estimate of what market participants would use as fair value.

 

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

 

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments or interest rates that are comparable to market rates. These financial instruments include cash, accounts receivable, deposits and other receivables, convertible promissory notes and short term loans, federally-guaranteed loans, term loans and accounts payable and accrued liabilities. The Company’s cash and derivative liabilities, which are carried at fair values, are classified as a Level 1 and Level 3, respectively. The Company’s bank accounts are maintained with financial institutions of reputable credit, therefore, bear minimal credit risk.

 

1013

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful lives of the assets. Maintenance and repairs are charged to expense as incurred, and improvements and betterments are capitalized. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives as follow:

SCHEDULE OF PROPERTY AND EQUIPMENT ESTIMATED USEFUL LIVES

Office equipment5 years
Leasehold improvement5 years

Impairment for Long-Lived Assets

The Company applies the provisions of ASC Topic 360, Property, Plant, and Equipment, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets, including right-of-use assets, used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal. Based on its review at March 31, 2022 and 2021, the Company believes there was no impairment of its long-lived assets.

 

Leases

 

The Company is the lessee in a lease contract when the Company obtains the right to use the asset. Operating leases are included in the line items right-of-use asset, lease liability,obligation, current, and lease liability,obligation, long-term in the consolidated balance sheet.

 

Right-of-use (“ROU”) asset represents the Company’s right to use an underlying asset for the lease term and lease obligations represent the Company’s obligations to make lease payments arising from the lease, both of which are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Leases with a lease term of 12 months or less at inception are not recorded on the consolidated balance sheet and are expensed on a straight-line basis over the lease term in ourthe consolidated statement of income.operations. The Company determines the lease term by agreement with lessor. As ourthe Company’s lease dodoes not provide an implicit interest rate, the Company uses the Company’s incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. Refer to Note 12 for further discussion.

 

Government loanIncome Taxes

 

LoansThe Company accounts for income taxes in accordance with ASC 740. The Company provides for Federal, State and Provincial income taxes payable, as well as for those deferred because of the timing differences between reporting income and expenses for financial statement purposes versus tax purposes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recoverable or settled. The effect of a change in tax rates is recognized as income or expense in the period of the change. A valuation allowance is established, when necessary, to reduce deferred income tax assets to the amount that were received from the federal government, which contain certain operating conditions and with terms of over twelve months, are recorded by the Company as long-term liabilities.is more likely than not to be realized.

 

Research and Development

Research and development costs, which relate primarily to product and software development, are charged to operations as incurred. Under certain research and development arrangements with third parties, the Company may be required to make payments that are contingent on the achievement of specific developmental, regulatory and/or commercial milestones. Before a product receives regulatory approval, milestone payments made to third parties are expensed when the milestone is achieved. Milestone payments made to third parties after regulatory approval is received are capitalized and amortized over the estimated useful life of the approved product.

Stock Based Compensation

The Company accounts for share-based payments in accordance with the provision of ASC 718, which requires that all share-based payments issued to acquire goods or services, including grants of employee stock options, be recognized in the statement of operations based on their fair values, net of estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Compensation expense related to share-based awards is recognized over the requisite service period, which is generally the vesting period.

The Company accounts for stock based compensation awards issued to non-employees for services, as prescribed by ASC 718-10, at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the guidelines in ASC 505-50. The Company issues compensatory shares for services including, but not limited to, executive, management, accounting, operations, corporate communication, financial and administrative consulting services.

14

Convertible Promissory Notes Payable and Derivative Instruments

 

The Company has adopted the provisions of ASU 2017-11 to account for the down round features of warrants issued with private placements effective as of April 1, 2017. In doing so, warrants with a down round feature previously treated as derivative liabilities in the consolidated balance sheet and measured at fair value are henceforth treated as equity, with no adjustment for changes in fair value at each reporting period. Previously, the Company accounted for conversion options embedded in convertible notes in accordance with ASC 815. ASC 815 generally requires companies to bifurcate conversion options embedded in convertible notes from their host instruments and to account for them as free-standing derivative financial instruments. ASC 815 provides for an exception to this rule when convertible notes, as host instruments, are deemed to be conventional, as defined by ASC 815-40. The Company accounts for convertible notes deemed conventional and conversion options embedded in non-conventional convertible notes which qualify as equity under ASC 815, in accordance with the provisions of ASC 470-20, which provides guidance on accounting for convertible securities with beneficial conversion features. Accordingly, the Company records, as a discount to convertible notes, the intrinsic value of such conversion options based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt.

 

Preferred Shares Extinguishments

The Company accounted for preferred stock redemptions and conversions in accordance to ASU-260-10-S99. For preferred stock redemptions and conversion, the difference between the fair value of consideration transferred to the holders of the preferred stock and the carrying amount of the preferred stock is accounted as deemed dividend distribution and subtracted from net income.

Recently Issued Accounting Pronouncements

 

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments.” This pronouncement, along with subsequent ASUs issued to clarify provisions of ASU 2016-13, changes the impairment model for most financial assets and will require the use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. In developing the estimate for lifetime expected credit loss, entities must incorporate historical experience, current conditions, and reasonable and supportable forecasts. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. On November 19, 2019, the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), finalized various effective date delays for private companies, not-for-profit organizations, and certain smaller reporting companies applying the credit losses (CECL), the revised effective date is January 1, 2023.

11

 

In July 2019, the FASB issued ASU 2019-07, Codification Updates to SEC Sections. This ASU amends various SEC paragraphs pursuant to the issuance of SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization. One of the changes in the ASU requires a presentation of changes in stockholders’ equity in the form of a reconciliation, either as a separate financial statement or in the notes to the financial statements, for the current and comparative year-to-date interim periods. The Company presented changes in stockholders’ equity as separate financial statements for the current and comparative year-to-date interim periods beginning on April 1, 2019. The additional elements of the ASU did not have a material impact on the Company’s consolidated financial statements.

15

 

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company is currently evaluating the impacts of the provisions of ASU 2019-12 on its financial condition, results of operations, and cash flows.

 

In March 2020, the FASB issued ASU No. 2030-20 Codification Improvements to Financial Instruments, An Amendment of the FASB Accounting Standards Codification: a)in ASU No. 2016-01, b) in Subtopic 820-10, c) for depository and lending institutions clarification in disclosure requirements, d) in Subtopic 470-50, e) in Subtopic 820-10, f) Interaction of Topic 842 and Topic 326, g) Interaction of the guidance in Topic 326 and Subtopic 860-20.The amendments in this Update represent changes to clarify or improve the Codification. The amendments make the Codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. For public business entities updates under the following paragraphs: a), b), d) and e) are effective upon issuance of this final update. The effective date for c) is for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company does not expect that the new guidance will significantly impact its consolidated financial statements.

 

In MayApril 2021, theThe FASB issued ASU 2021-04 Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contractsto codify the final consensus reached by the Emerging Issues Task Force (EITF) on how an issuer should account for modifications made to equity-classified written call options (hereafter referred to as a warrant to purchase the issuer’s common stock). The guidance in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. This update provides guidance forthe ASU requires the issuer to treat a modification orof an equity-classified warrant that does not cause the warrant to become liability-classified as an exchange of the original warrant for a freestanding equity-classified written call option thatnew warrant. This guidance applies whether the modification is not withinstructured as an amendment to the scopeterms and conditions of another Topic. This update is effective for fiscal years beginning after December 15, 2021.the warrant or as termination of the original warrant and issuance of a new warrant. The Company is currently evaluatingdoes not expect that the effect of this ASU on the Company’s condensednew guidance will significantly impact its consolidated financial statements and related disclosures.statements.

 

The Company continuescontinue to evaluate the impact of the new accounting pronouncement, including enhanced disclosure requirements, on our business processes, controls and systems.

 

4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

 SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

 As at
December 31, 2021
$		  As at
March 31, 2021
$		       
Accounts payable  1,429,254   1,041,385 
 As at
June 30, 2022
$		  As at
March 31, 2022
$		 
Accounts payable and deferred revenue  1,457,901   1,159,477 
Accrued liabilities  1,487,718   1,478,739   1,243,176   1,436,270 
Accounts payable and accrued liabilities  2,916,973   2,520,124   2,701,077   2,595,747 

 

Accounts payable as at December 31, 2021June 30, 2022 included $1,127 20,300 current account with a shareholder and executive (March 31, 2021:2022: $2,851182,995 due to shareholder and executive) of the Company, primarily as a result of that individual’s role as an employee. These amounts are unsecured, non-interest bearing and payable on demand.

 

1216

 

5. CONVERTIBLE PROMISSORY NOTES AND SHORT TERM LOANS

a)The Company has issued various promissory notes and obtained several short term loans. The promissory notes and short-term loans are generally for a 1-year term at interest rates of between 10% and 12%, with allowance for the Company to repay early, and the possibility to convert into equity on the basis of mutual consent. Warrants to purchase the Company’s shares of common stock were granted pursuant to the issuance of certain promissory notes. Management has evaluated the terms of these notes issued in accordance with the guidance provided by ASC 470 and ASC 815 and concluded that there is no derivative or beneficial conversion feature attached to these notes.

During the year ended March 31, 2021, the Company raised additional $500,000 in promissory notes that were subject to the same terms of the notes previously issued. During the year ended March 31, 2021, the Company made repayment of the notes and short term loan in the amount of $908,082, and one noteholder further paid the Company $67,941 to exercise warrants related to 97,500 shares of the Company’s common stock. During the year ended March 31, 2021, one noteholder converted a $100,000 note and $15,000 accrued interest into 115 Series A preferred shares.

During the three months ended June 30, 2021, the Company raised additional $250,000 in short-term loans; this was repaid during the three months ended September 30, 2021. Similarly, during the three months ended September 30, 2021, while awaiting to complete the financing transaction that was part of the Company’s path towards achieving its listing onto the Nasdaq Capital Market, it drew on interim short-term financing of $576,000, which was fully repaid during that same period.

During the three months ended December 31, 2021, the Company repaid its remaining promissory note and short term loan outstanding as well as relevant accrued interest, as part of the term loan transaction (Note 6).

As at December 31, 2021, the Company had promissory note outstanding of Nil (March 31, 2021 – $600,577).

As at December 31, 2021, the Company also had short term loan of Nil (March 31, 2021 – $1,059,643) outstanding.

General and administrative expenses included financing charges and interest expense on the above notes of $41,479 and $267,959 for the three and nine months ended December 31, 2021 (December 31, 2020, $109,699 and 39,667) respectively.  

 

a)(b)As at June 30 and March 31, 2022, the Company had a promissory note balance of nil and a short term loan balance of nil. Consequently, general and administrative expenses for the three months ended June 30, 2022 and 2021 included interest expense for those items of nil and $56,220, respectively).

b)During the year ended March 31, 2021, the Company issued $11,275,500 (face value) in two series of convertible promissory notes (the “Series A Notes”) sold under subscription agreements to accredited investors. The Notes mature one year from the final closing date of the offering and accrue interest at 12% per annum.

 

For first series of Series A Notes, commencing six months following the Issuance Date, and at any time thereafter (provided the Holder has not received notice of the Company’s intent to prepay the note), at the sole election of the Holder, any amount of the outstanding principal and accrued interest of this note (the “Outstanding Balance”) could be converted into that number of shares of Common Stock equal to: (i) the Outstanding Balance divided by (ii) 75% of the volume weighted average price of the Common Stock for the 5 trading days prior to the Conversion Date (the conversion price).

 

For the first series of Series A Notes, the notes would automatically convert into common stock (in each case, subject to the trading volume of the Company’s common stock being a minimum of $500,000 for each trading day in the 20 consecutive trading days immediately preceding the conversion date), upon the earlier to occur of (i) the Company’s common stock being listed on a national securities exchange, in which event the conversion price would be equal to 75% of the volume weighted average price of the common stock for the 20 trading days prior to the conversion date, or (ii) upon the closing of the Company’s next equity round of financing for gross proceeds of greater than $5,000,000, in which event the conversion price would be equal to 75% of the price per share of the common stock (or of the conversion price in the event of the sale of securities convertible into common stock) sold in such financing. The Company could, at its discretion redeem the notes for 115% of their face value plus accrued interest.

13

 

For second series of Series A Notes, the notes could be converted into shares of common stock, at the option of the holder, commencing six months from issuance, at a conversion price equal to the lower of $4.00 per share or 75% of the volume weighted average price of the common stock for the five trading days prior to the conversion date

 

For the second series of Series A Notes, the notes would automatically convert into common stock (in each case, subject to the trading volume of the Company’s common stock being a minimum of $500,000 for each trading day in the 20 consecutive trading days immediately preceding the conversion date), upon the earlier to occur of (i) the Company’s common stock being listed on a national securities exchange, in which event the conversion price would be equal to the lower of $4.00 per share or 75% of the volume weighted average price of the common stock for the 20 trading days prior to the conversion date, or (ii) upon the closing of the Company’s next equity round of financing for gross proceeds of greater than $5,000,000, in which event the conversion price would be equal to the lower of $4.00 per share or 75% of the price per share of the common stock (or of the conversion price in the event of the sale of securities convertible into common stock) sold in such financing. The Company could, at its discretion redeem the notes for 115% of their face value plus accrued interest.

 

17

The Company was obligated to issue warrants that accompany the convertible notes and provide 50% warrant coverage. The warrants have a 3-year term from date of issuance and an exercise price that is 120% of the 20-day volume weighted average price of the Company’s common shares at the time final closing.

 

The Company was obligated to pay the placement agent of the first series of Series A Notes a 12% cash fee for $8,925,550 (face value) of the notes and 2.5% cash fee and other sundry expenses for the remaining $2,350,000 (face value) of the notes.

 

Net proceeds to the Company from Series A Notes issuance up to March 31, 2021 amounted to $10,135,690 after payment of the relevant financing related fees.

 

The Company was also obligated to issue warrants to the placement agent that have a 10-year term and cover 12% of funds raised for $8,925,550 (face value) of the notes (first series) and 2.5% of funds raised for the remaining $2,350,000 (face value) of notes (second series), with an exercise price that is 120% of the 20-day volume weighted average price of the Company’s common shares at the time final closing. On final closing, which occurred on January 8, 2021, the warrants’ exercise price was struckat $1.06 $1.06 per shareper share..

 

Prior to January 8, 2021 (final closing date), the Company determined that the conversion and redemption features, investor warrants and placement agent warrants contained in those Notes represented a single compound derivative liability that meets the requirements for liability classification under ASC 815. The Company accounted for these obligations by determining the fair value of the related derivative liabilities associated with the embedded conversion and redemption features, as well as investor warrants and placement agent warrants. The initial fair value of the derivative liabilities generated as a result of issuing the Series A Notes was $6,932,194 (Note 8).

 

Subsequently, the exercise price of all warrants was concluded and locked to $1.06 as of January 8, 2021. Since the exercise price was no longer a variable, the Company concluded that the noteholder and placement agent warrants should no longer be accounted for as a derivative liability in accordance with ASC 815 guidelines related to equity indexation and classification. The derivative liabilities related to those warrants were therefore marked to market as of January 8, 2021 and then transferred to equity (collectively, “End of warrants derivative treatment”) (Note 8. Therefore, the remaining derivative liabilities only related to the conversion and Note 9).redemption features of the convertible notes.

 

For the Series A Notes, The Company recognized debt issuance costs in the amount of $2,301,854 and treated these as a deduction from the convertible note liabilities directly, as a contra-liability, and amortized the debt issuance cost over the term of the Notes. The Company also recognized initial debt discount in the amount of $8,088,003 and accreted the interest over the remaining lives of those Notes. The debt issuance costs were fully amortized as of March 31, 2022.

As at March 31, 2022, $700,000 of Series A Notes remained unconverted and outstanding, which was equal to the face value of the relevant convertible notes.

There was no conversion of Series A Notes during the three months ended June 30, 2022.

 

At December 31, 2021,June 30, 2022, the Company recorded $88,044129,699 of interest accruals for the Series A Notes. In connection with the foregoing, the Company relied upon the exemption from registration provided by Section 4(a)(2) under the Securities Act of 1933, as amended, for transactions not involving a public offering.

 

During the year ended March 31, 2021, $739,000 (face value) of Series A Notes together with their respective unpaid interest were converted into 751,487 common shares, out of which 18,402 common shares were issued subsequent to year end.

During the three months ended June 30, 2021, $1,157,500 (face value) of Series A Notes together with their respective unpaid interests were converted into 528,878 common shares, out of which 345,676 common shares were issued subsequent to June 30, 2021 (Note 9 c).

During the three months ended September 30, 2021, $8,679,000 (face value) of Series A Notes together with their respective unpaid interests were converted into 3,085,399 common shares, out of which 908,197 were common shares that would be issued subsequent to September 30, 2021 (Note 9 c).

There was no conversion of Series A Notes during the three months ended December 31, 2021.

1418

 

In addition, during the year ended March 31, 2021, the Company also issued $1,312,500 (face value) of convertible promissory notes (“Series B Notes”) to various accredited investors.

 

Commencing six months following the issuance date, and at any time thereafter, subject to the Company’s Conversion Buyout clause, at the sole election of the holder, any amount of the outstanding principal and accrued interest of the note (the “outstanding balance”) could be converted into that number of shares of Common Stock equal to: (i) the outstanding balance divided by (ii) the Conversion Price. Partial conversions of the note shall have the effect of lowering the outstanding principal amount of the note. The holder may exercise such conversion right by providing written notice to the Company of such exercise in a form reasonably acceptable to the Company (a “conversion notice”). Conversion price means (subject in all cases to proportionate adjustment for stock splits, stock dividends, and similar transactions), seventy-five percent (75%) multiplied by the average of the three (3) lowest closing prices during the previous ten (10) trading days prior to the receipt of the conversion notice.

 

The Series B Notes will automatically convert into common stock upon a merger, consolidation, exchange of shares, recapitalization, reorganization, as a result of which the Company’s common stock shall be changed into another class or classes of stock of the Company or another entity, or in the case of the sale of all or substantially all of the assets of the Company other than a complete liquidation of the Company. Within the first 180 days after the issuance date, the Company may, at its discretion redeem the notes for 115% of their face value plus accrued interest.interest. The Company is obligated to issue warrants that accompany the convertible notes and provide 50% warrant coverage.coverage. The warrants have a 3-year term from date of issuance and an exercise price that is $1.06 per share for 100,000 warrant shares and $1.5 per share for 212,500 warrant shares.

 

Net proceeds to the Company from convertible note issuances to March 31, 2021 amounted to $1,240,000 after the original issuance discount as well as payment of the financing related fees. The Company determined that the conversion and redemption features contained in the Series B Notes represented a single compound derivative liability that meets the requirements for liability classification under ASC 815. The Company accounted for these obligations by determining the fair value of the related derivative liability associated with the embedded conversion and redemption features. The initial fair value of the derivative liabilities generated as a result of issuing the Series B Notes was $497,042 (Note 8).

 

The Company recognized debt issuance costs in the amount of $10,000 and treated these as a deduction from the convertible note liabilities directly, as a contra-liability, and amortized the debt issuance cost over the term of the Series B Notes. The Company recognized initial debt discount in the amount of $1,312,500 and accreted the interest over the remaining lives of those notes. The debt issuance costs were fully amortized as of March 31, 2022.

As at March 31, 2022, $840,000 of Series B Notes remained unconverted and outstanding, which was equal to the face value of the relevant convertible notes.

During the three months ended June 30, 2022, $302,000 (face value) of Series B Notes were converted into 390,464 common shares (Note 9 c).

 

At December 31, 2021,June 30, 2022, the Company recorded $53,72374,550 of interest accruals for the Series B Notes. In connection with the foregoing, the Company relied upon the exemption from registration provided by Section 4(a)(2) under the Securities Act of 1933, as amended, for transactions not involving a public offering.

During the three months ended December 31, 2021, $472,500 (face value) of Series B Notes were converted into 207,516 common shares (Note 9 c).

15

 SCHEDULE OF CONVERTIBLE PROMISSORY NOTES AND SHORT TERM LOANS

Total
$
Year endedBalance at March 31, 202120221,540,000
Face value of convertible notes issued12,588,000
Debt discountThree months ended June 30, 2022(9,400,503)
Debt issuance cost(2,311,854)
Day 1 value of convertible notes issued875,643
Accretion of debt discount1,802,807
Amortization of debt issuance cost678,348
Total accretion and amortization expenses2,481,155
Conversion to common shares (Note 9)(739,000302,000)
Balance at March 31, 20212,617,798
Three months ended June 30, 2021
Accretion of debt discount1,833,967
Amortization of debt issuance cost501,200
Total accretion and amortization expenses2,335,167
Conversion to common shares (Note 9)(1,157,500)
Balance at June 30, 202120223,795,4651,238,000
Three months ended September 30, 2021
Accretion of debt discount4,627,415
Amortization of debt issuance cost537,304
Total accretion and amortization expenses5,164,719
Conversion to common shares (Note 9)(8,679,000)
Balance at September 30, 2021281,184
Three months ended December 31, 2021
Accretion of debt discount782,726
Amortization of debt issuance cost546,604
Total accretion and amortization expenses1,329,330
Conversion to common shares (Note 9)(472,500)
Balance at December 31, 20211,138,014

 

16

In total, at June 30, 2022, the Company had issued $1,238,000 in convertible notes that remained outstanding to several noteholders beyond their contractual maturity date. These continued to accrue interest, and no repayment demands were received from noteholders, notwithstanding the fact that these noteholders have continued to convert portions of these notes subsequently, and it is management’s expectation that all of these notes will eventually convert. In connection with the foregoing, the Company relied upon the exemption from registration provided by Section 4(a)(2) under the Securities Act of 1933, as amended, for transactions not involving a public offering.

General and administrative expenses include interest expense on the above debt instruments of $36,31231,414 and $515,810265,658 for the three and nine months ended December 31,June 30, 2022 and 2021, (December 31, 2020: $76,282, $160,958), respectively.

19

 

6. TERM LOAN

 

On December 21, 2021, the Company entered into a Credit Agreement (“Credit Agreement”) with SWK Funding LLC (“Lender’), wherein the Company has borrowed $12,000,000, with a maturity date of December 21, 2026. The principal will accrue interest at the LIBOR Rate plus 10.5% (subject to adjustment as set forth in the Credit Agreement). Interest payments are due on each February,May, August and November commencing February 15, 2022. Pursuant to the Credit Agreement, the Company will be required to make interest only payments for the first 24 months (which may be extended to 36 months under prescribed circumstances), after which payments will include principal amortization that accommodates a 40% balloon principal payment at maturity. Prepayment of amounts owing under the Credit Agreement are allowed under prescribed circumstances.circumstances. Pursuant to the Credit Agreement the Company is subject to an Origination Fee in the amount of $120,000. Upon Termination of the Credit Agreement, the Company shall pay an Exit Fee of $600,000. 

 

The Company and Lender also entered into a Guarantee and Collateral Agreement (“Collateral Agreement”) wherein the Company agreed to secure the Credit Agreement with all of the Company’s assets. The Company and Lender also entered into an Intellectual Property Security Agreement dated December 21, 2021 (the “IP Security Agreement”) wherein the Credit Agreement is also secured by the Company’s right title and interest in the Company’s Intellectual Property.

 

In connection with the Credit Agreement, the Company issued 57,536 warrants to the lender,Lender, which waswere fair-valued at $198,713(Note 9). The warrants are accounted as a deduction from liability as well as a credit into additional paid-in capital, and amortized using the effective interest method.

 

As part of the loan transaction, the Company paid legal and professional costs directly in connection to the debt financing in the amount of $50,000in cash.

 

Total costs directly in connection to the debt financing in the amount of $193,437 (professional(professional fee $48,484; 48,484; lender’s origination fee, due diligence fee, and other expenses in the amount of $144,953) was deduced from the gross proceeds in the amount of $12,000,000.

 

The Company also repaid $1,574,068of existing short-term loan and promissory notes and relevant accrued interests (Note 5(a)) by using the proceeds from the loan.

 

Total costs directly in connection to the loan and fair value of warrants was in the amount of $1,042,149 ... And such costs were accounted as debt discount, and amortized using the effective interest method. For three months ended December 31, 2021,June 30, 2022, the amortization of debt discount expense was in the amount of $5,21250,070 and included in the accretion and amortization expenses.

 

Total interest expense on the term loan for the 3 months ended December 31, 2021June 30, 2022 was $38,333348,833.

7. FEDERALLY GUARANTEED LOANS

 

Economic Injury Disaster Loan (“EIDL”)

 

In April 2020, the Company received $370,900from the U.S. Small Business Administration (SBA) under the captioned program. The loan has a term of 30 yearsyears and an interest rate of 3.75%3.75%, without the requirement for payment in its first 12 months. The Company may prepay the loan without penalty at will.

 

In May 2021, the Company received an additional $499,900 from the SBA under the same terms.

 

Payment Protection Program (“PPP”) Loan

 

In May 2020, Biotricity received loan proceeds of $1,200,000 (the “PPP Loan”) under the Paycheck Protection Program established by the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) administered by the U.S. Small Business Administration (“SBA”). The Company met the criteria for the loan forgiveness and applied for the loan forgiveness in March 2021. For the year ended March 31, 2021, the Company recognized the loan forgiveness as a reduction to payroll expense in the amount of $1,156,453 and a reduction to the rent expense of $43,547. The loan forgiveness was granted by the SBA in May 2021. As at December 31, 2021,June 30, 2022, the balance of outstanding PPP loan is NIL (March 31, 2021:2022: NIL).

20

 

8. DERIVATIVE LIABILITIES

 

On December 19, 2019 and January 9, 2020, the Company issued 7,830 Series A preferred shares; 6,000 of these were issued for cash proceeds of $6,000,000 and 1,830 of these were issued on conversion of $1,830,000 of promissory notes that had previously been issued for cash proceeds in October 2019.

 

On May 22, 2020, another 215 Series A preferred shares were issued as a result of a combined transaction that included the conversion of $100,000 in promissory notes (Note 5(a)) and $15,000 (Note 5(a)) in accrued interest for 115 preferred shares, as well as a purchase of 100 preferred shares for cash proceeds of $100,000.

 

During the three months ended September 30, 2021, an additional 100 Series A preferred shares were issued for cash proceeds of $100,000 (Note 9 c).

During the three months ended December 31, 2021, the Company redeemed $230,000 preferred shares through cash. The total amount of the preferred shares redeemed and derivative liabilities derecognized was $225,919. The difference of redemption value of $230,000 and the carrying value of preferred shares on the day of redemption was $4,081 was recognized as a deemed dividend distribution.

In addition, during the three months ended December 31, 2021, the Company converted $715,000preferred shares into 288,756 common shares. A gain uponshares (Note 9(c)). The difference between the total amount of the preferred shares redemption inconverted, derivative liabilities derecognized and unpaid interests at the time of conversion ($1,076,513), and the fair value of the common shares converted ($1,226,406) was $149,893 and was recognized as deemed dividend distribution.

During the three months ended June 30, 2022, the Company redeemed $328,904 preferred shares through cash. The total amount of the preferred shares redeemed and derivative liabilities derecognized was $39,427296,032. The difference of redemption value of $328,904 and the carrying value of preferred shares on the day of redemption was recorded in other expenses.$32,872 and was recognized as a deemed dividend distribution 

 

The Company analyzed the compound features of variable conversion and redemption embedded in the preferred shares instrument, for potential derivative accounting treatment on the basis of ASC 820 (Fair Value in Financial Instruments), ASC 815 (Accounting for Derivative Instruments and Hedging Activities), Emerging Issues Task Force (“EITF”) Issue No. 00–19 and EITF 07–05, and determined that the embedded derivatives should be bundled and valued as a single, compound embedded derivative, bifurcated from the underlying equity instrument, treated as a derivative liability, and measured at fair value.

 SCHEDULE OF DERIVATIVE LIABILITIES

Total
$

Derivative liabilities as at March 31, 202020221,144,733352,402
Derivative fair value at issuance during fiscal 202141,749
Change in fair value of derivatives(776,440)
Derivative liabilities as at March 31, 2021410,042
Change in fair value of derivatives during the period(203,525195,521)
Reduction due to preferred shares redeemed(10,605)
Derivative liabilities as at June 30, 20212022206,517537,318
Derivative fair value at issuance during three months ended September 30, 202117,084
Change in fair value of derivatives during the period(101,773)
Derivative liabilities as at September 30, 2021121,828
Reduction due to preferred shares redeemed / converted(479,791)
Change in fair value of derivatives during the period644,774
Derivative liabilities as at December 31, 2021286,811

17

 

The lattice methodology was used to value the derivative components, using the following assumptions for the three months ended December 31, 2021:June 30, 2022:

SCHEDULE OF DERIVATIVE COMPONENTS VALUATION ASSUMPTIONS

Assumptions
Dividend yield12%
Risk-free rate for term0.40% -0.77%
Volatility116.42.13% - 101.32.54%
Volatility94.4% - 101.9%
Remaining terms (Years)2.331.50 to 4.003.01
Stock price ($ per share)$2.911.23 to $4.331.77

21

 

In addition, the Company recorded derivative liabilities related to the conversion and redemption features of the convertible notes, as well as warrants that were issued in connection with the convertible notes, during the year ended March 31, 2021 (Note 5(b))5). As the warrant exercise price became final and locked, the derivative liabilities related to those warrants were marked to market and transferred to equity (Note 5(b))5). Any noteholder and placement agent warrants that were issued after the finalization of exercise price was accounted for as equity.

 SCHEDULE OF DERIVATIVE LIABILITIES

  Total 
  $ 
For the year ended March 31, 2021
Derivative fair value at issuance
Series A notes (Note 5(b))6,932,194
Series B notes (Note 5(b))497,042
7,429,236
Fair value change upon end of warrants derivative treatment (Note 5(b))(82,444)
Carrying amount of warrants liability transferred into equity upon end of warrants derivative treatment (Note 5(b))(3,937,664)
Conversion to common shares (Note 5(b))(225,284)
Change in fair value of derivative liabilities450,012
    
Balance at March 31, 20212022  3,633,856520,747 
     
For the three months ended June 30, 20212022    
Conversion to common shares (Note 5(b))  (403,108104,118)
Change in fair value of derivative liabilities  502,5082,703 
     
Balance at June 30, 20212022  3,733,256
For the three months ended September 30, 2021
Conversion to common shares (Note 5(b))(2,744,711)
Change in fair value of derivative liabilities(295,801)
Balance at September 30, 2021692,744
For the three months ended December 31, 2021
Conversion to common shares (Note 5(b))(250,738)
Change in fair value of derivative liabilities129,999
Balance at December 31, 2021572,005419,332 

 

The monte-carlo methodology was used to value the convertible note and warrant derivative components, using the following assumptions for the three months ended December 31, 2021:June 30 2022:

SCHEDULE OF WARRANT DERIVATIVE COMPONENTS VALUATION ASSUMPTIONS

Conversion and
redemption
features
Risk-free rate for term (%)0.291.82 – 0.392.37
Volatility (%)78.087.6 – 83.395.5
Remaining terms (Years)0.020.50 – 0.290.63
Stock price ($ per share)3.981.10 – 4.531.77

18

 

9. STOCKHOLDERS’ EQUITY (DEFICIENCY)

 

a) Authorized stock

 

As at December 31, 2021,June 30, 2022, the Company is authorized to issue 125,000,000 (March 31, 20212022 – 125,000,000) shares of common stock ($0.001 par value) and 10,000,000 (March 31, 20212022 – 10,000,000) shares of preferred stock ($0.001 par value), 20,000 of which (March 31, 20212022 – 20,000) are designated shares of Series A preferred stock ($0.001 par value).

 

At December 31, 2021,June 30, 2022, common shares and shares directly exchangeable into equivalent common shares that were issued and outstanding totalledtotaled 49,656,86051,685,752 (March 31, 20212022 – 39,014,94251,277,040); these were comprised of 48,190,142 50,219,034(March 31, 20212022 – 36,124,96449,810,322) shares of common stock and 1,466,718(March 31, 20212022 – 2,889,9781,466,718) exchangeable shares. There is currently one share of the Special Voting Preferred Stock issued and outstanding, held by one holder of record, which is the Trustee in accordance with the terms of the Trust Agreement. The Company has also issued a Series A preferred stock, $0.001 par value; 20,000 shares have been designated as authorized (as at December 31June 30 and March 31, 2021)2022); 7,2016,872 Series A preferred shares were issued and outstanding as at December 31, 2021June 30, 2022 (March 31, 2021:2022: 8,0457,201).

 

b) Exchange Agreement

 

On February 2, 2016, the Company was formed through reverse-take-over:

 

 ●The Company issued approximately 1.197 shares of its common stock in exchange for each common share of iMedical held by the iMedical shareholders who in general terms, are not residents of Canada (for the purposes of the Income Tax Act (Canada). Accordingly, the Company issued 13,376,947 shares;
 ●Shareholders of iMedical who in general terms, are Canadian residents (for the purposes of the Income Tax Act (Canada)) received approximately 1.197 Exchangeable Shares in the capital of Exchangeco in exchange for each common share of iMedical held. Accordingly, the Company issued 9,123,031 Exchangeable Shares;
 ●Each outstanding option to purchase common shares in iMedical (whether vested or unvested) was exchanged, without any further action or consideration on the part of the holder of such option, for approximately 1.197 economically equivalent replacement options with an inverse adjustment to the exercise price of the replacement option to reflect the exchange ratio of approximately 1.197:1;
 ●Each outstanding warrant to purchase common shares in iMedical was adjusted, in accordance with the terms thereof, such that it entitles the holder to receive approximately 1.197 shares of the common stock of the Company for each warrant, with an inverse adjustment to the exercise price of the warrants to reflect the exchange ratio of approximately 1.197:1
 ●Each outstanding advisor warrant to purchase common shares in iMedical was adjusted, in accordance with the terms thereof, such that it entitles the holder to receive approximately 1.197 shares of the common stock of the Company for each advisor warrant, with an inverse adjustment to the exercise price of the Advisor Warrants to reflect the exchange ratio of approximately 1.197:1; and
 ●The outstanding 11% secured convertible promissory notes of iMedical were adjusted, in accordance with the adjustment provisions thereof, as and from closing, so as to permit the holders to convert (and in some circumstances permit the Company to force the conversion of) the convertible promissory notes into shares of the common stock of the Company at a 25% 25% discount to purchase price per share in Biotricity’s next offering.offering.

 

Issuance of common stock, exchangeable shares and cancellation of shares in connection with the reverse takeover transaction as explained above represents recapitalization of capital retroactively adjusting the accounting acquirer’s legal capital to reflect the legal capital of the accounting acquiree.

 

1922

 

c) Share issuances

 

Share issuances during the year ended March 31, 20212022

 

During the year ended March 31, 2021, the Company recorded preferred stock dividends for the Series A preferred stock in amount of $962,148 (2020 - $257,927) and made a payment in the amount of $602,969 (2020 - $180,000).

During the year ended March 31, 2021,2022, the Company issued 733,0854,696,083 common shares (not including 19,263 shares that were part of to be issued shares from prior year conversions) were issued in connection with conversion of convertible notes (Note 5(b)) not including another 18,402 that were to be issued subsequent to year end.. The total amounts of convertible notesdebts settled wasis in amount of $1,011,28614,522,812 comprisedthat composed of face value of convertible promissory notes in the amount of $739,000 (Note 5(b), carrying amount of conversion and redemption feature derived from notes in the amount of $225,284 and unpaid interest in the amount of $47,002. The fair value of the shares issued and to be issued was determined based on the market price upon conversion and was in the amount of $1,076,561 and $38,460 respectively. The difference between amounts of notes settled and the fair value of common shares issued was $103,735, which was recorded as a loss on conversion of convertible promissory notes in the statement of operations.

During the year ended March 31, 2021, the Company issued 1,900,042 common shares in payment of services provided, as well as the exercise of warrants.

During the year ended March 31, 2021, the Company also issued an aggregate of 898,084 shares of its common stock to investors as part of the one-for-one exchange of previously issued exchangeable shares into the Company’s Common Stock, which is a non-cash transaction.

Share issuances during the nine months ended December 31, 2021

During the three months ended June 30, 2021, the Company issued 183,202 common shares in connection with conversion of convertible notes (Note 5(b)), not including another 345,676 that were to be issued subsequent to June 30, 2021. The total amounts of convertible notes settled is in amount of $1,642,049 comprised of face value of convertible promissory notes with a face value of $1,157,50010,309,000 (Note 5(b)), carrying amount of conversion and redemption feature derived from notes in amount of $403,1083,398,557 (Note 8) and unpaid interest in the amount of $81,441815,255. The fair value of the shares issued and to be issued was determined based on the market price upon conversion and was in the amount of $479,760 15,678,454and $1,190,502 respectively.. The difference that represented a loss on conversion, between amounts of notesdebts settled and the fair value of common shares issued was in the amount of $28,2131,155,642 and was recorded as other expensesloss on conversion of convertible promissory notes in the condensed consolidated statement of operations.

 

During the three monthsyear ended June 30, 2021, the Company also issued an aggregate of 1,423,260 shares of its common stock to investors as part of the one-for-one exchange of previously issued exchangeable shares into the Company’s Common Stock, which is a non-cash transaction.

During three months ended June 30, 2021,March 31, 2022, the Company issued 100,236658,355 common shares in connection with warrant exercises for cash, proceedsand 446,370 common shares in connection with cashless warrant exercises (Note 9(e)). In addition, the Company issued 451,688 common shares for services provided (not including 250,000that were part of to be issued shares from prior year commitment). The fair value of common shares issued for services provided was $146,2501,414,449. The fair value of common shares was determined based on the fair value on the date of approval of common share issuance.

 

During the three monthsyear ended September 30, 2021,March 31, 2022, the Company issued 3,013,67369,252 common shares in connection with conversionfor cash proceeds of convertible notes (Note 5(b)), and 908,197 shares to be issued subsequent to September 30, 2021. The total amount of debts settled was $12,157,500250,000, which consisted of face value of $8,679,000 (Note 5(b)), carrying amount ofwere initially received as a promissory note, and paid through the conversion and redemption feature derived from notes in the amount of $2,744,711 and unpaid interest in the amount of $733,789. The fair value of the shares issued and to be issued was determined based on the market price upon conversion and was in the amount of $11,641,222 and $1,338,485 respectively. The difference, between the amounts of notes settled and the fair value ofissuance common shares issued, which represents a loss on conversion, was inwithin the amount of $822,207 and was recorded as other expenses in the condensed consolidated statement of operations.same quarter.

 

During the three monthsyear ended September 30, 2021,March 31, 2022, the Company issued 5,382,331 common shares in connection with the equity financing that was concurrent with its listing on the Nasdaq Capital Market, for total net cash proceeds of $14,545,805.

 

During the three monthsyear ended September 30, 2021, the Company issued 181,666 common shares for services received, with a fair value of $568,615.

During the three months ended September 30, 2021, The Company issued 69,252 common shares for cash proceeds of $250,000, which were initially received as a promissory note, and paid through the issuance common shares within the same quarter.

During the three months ended September 30, 2021, the Company issued 279,197 (cash exercise – 194,017; cashless exercise – 85,180) common shares in connection with warrant exercises, for a cash exercise proceeds of $308,564. In addition, the Company issued 633,412 common shares in connection with shares that were to be issued at previous quarter end.

During the three months ended September 30, 2021,March 31, 2022, an additional 100 Series A preferred shares were issued for cash proceeds of $100,000(Note 8). The fair valueCompany issued 288,756 common shares as a result of preferred share conversions (Note 8).

During the year ended March 31, 2022, the Company also issued an aggregate of 1,423,260 shares of its common stock to investors as part of the derivative at issuance date, inone-for-one exchange of previously issued exchangeable shares into the amount of $17,804, was recognized withCompany’s Common Stock, which is a corresponding debit in stockholder’s equity.non-cash transaction. 

Share issuances during the three months ended June 30, 2022

 

During the three months ended December 31, 2021,June 30, 2022, the Company issued 207,516404,545 common shares in connection with conversion of convertible notes (Note 5(b))5). The total valueamounts of debts settled wasis in amount of $723,238406,118 (Note 5(b)), which consistedthat composed of face value of convertible promissory notes in amount of $472,500302,000 and(Note 5), carrying amount of the conversion and redemption feature derived from notes in the amount of $250,738104,118. The fair value of the shares issued and to be issued was determined based on the market price upon conversion and was in the amount of $875,313457,026. The difference, that represented a loss on conversion, between the amounts of notesdebts settled and the fair value of common shares issued which represents a loss on conversion, was in the amount of $152,07550,908 and was recorded as other expensesloss on conversion of convertible promissory notes in the condensed consolidated statement of operations.

During the three months ended December 31, 2021, the Company also issued 37,820 additional common shares to convertible note holders with respect to an adjustment of the conversion price on previously converted notes. Fair value of such shares was $153,171 and was recorded as other expenses in the condensed consolidated statement of operations.

During the three months ended December 31, 2021, the Company issued 50,000 common shares for services received, with a fair value of $142,500.

During the three months ended December 31, 2021, the Company issued 361,190 common shares for cash less warrant exercises, and 42,500 common shares for warrant exercises with cash proceeds of $26,650.

 

d) Shares to be issued

 

During the three months ended December 31, 2021,June 30, 2022, the Company issuedremoved 81,52240,094 of previously to be issued shares, in connection with its contractual obligations to issue shares for services received. Ascancellation of December 31, 2021, 932,781 shares to be issuedwarrant exercises from previous periods remained outstanding.certain warrant holders. In addition, the Company recognized additional 11,792 shares to be issued for warrant exercise request received as well as 288,756 shares to be issued in connection with preferred share conversion requests received, but not processed as of quarter end. As a result of the cancellation of to be issued shares, $42,500 was reduced from balance of shares to be issued, and the Company increased the balance of the shares to be issued by $12,500 upon the warrants exercise.

 

2023

e) Warrant issuances and exercises

 

Warrant exercises and issuances during the year ended March 31, 2022

During the year ended March 31, 2021,2022, 97,500 658,355warrants were exercised (2020(2021 – nil)97,500) pursuant to receipt of exercise proceeds of $67,941872,292. (Note 5(a))446,370warrants were exercised pursuant to cashless warrant exercise. In addition, $103,950 warrant exercise proceeds receivable was recorded as part of deposit and other receivables as of March 31, 2022.

 

During the year ended March 31, 2021,2022, the Company issued 449,583212,594 warrants, including 25,000 as compensation for advisor and consultant services, which were fair valued. The vested portion of $and 275,801187,594 related to these warrants were recognized in general and administrative expenses, with a corresponding credit to additional paid in capital. As of December 31, 2020, the Company extended the expiry dates of 788,806 warrants previously issuedas compensation to an executive of the Company in order to extend their term from 3 to 10 years in accord with the same term extension made to the options of all other Company employees in fiscal 2020. Aswho was not part of this revision in terms, 288,806 of these same warrants, previously issued and expensed, were repriced to reflect current market conditions; the resulting increase in the fair value of these warrants of $464,971 was expensed to general and administrative expenses. In addition, the Company issued 1,065,857 warrants to brokers, and 5,631,132 warrants to convertible note holders, in connection with the convertible note issuance (Note 5(b)).stock options plan. The warrants’ fair value has been estimated using a monte-carlo model (Note 9), which were initially recorded as derivative liabilities, then recorded as equity upon the end of derivative treatment of such warrants (Note 5(b) and Note 8).

During the three months ended June 30, 2021, the Company issued 60,000 warrants as compensation for advisor and consultant services, including 50,000 warrants issued to an executive of the Company. The warrantswarrant expenses were fair valued at $151,897 and was recognized as general and administrative expenses, with a corresponding credit to additional paid-in capital.

During the three months ended June 30, 2021, 100,236 of warrants previously issued on convertible notes were exercised for cash of $106,250541,443, and recognized as a credit to common stock and additional paid in capital accordingly.

During the three months ended June 30, 2021, one warrant holder provided cash of $40,000 to exercise 37,736 warrants, such that 37,736 shares were to be issued as at June 30, 2021. Total shares to be issued for warrant exercise requests received but not processed was 24,584 as at September 30, 2021.

During the three months ended September 30, 2021, the Company issued 65,000 warrants as compensation for advisor and consultant services, including 50,000 warrants issued to an executive of the Company. The warrants were fair valued at $144,353 and their respective value recognized in general and administrative expenses, with a corresponding credit to additional paid-in capital.

 

During the three monthsyear ended September 30, 2021, 194,017 of warrants previously issued on convertible notes were exercised for cash of $308,564, recognized as a credit to common stock and additional paid in capital in amount of $194 and $308,370 respectively.

During the three months ended September 30, 2021, as a result of cashless exercise of warrants that were previously issued on convertible notes, 85,180 common shares were issued and 1,000 common shares were to be issued subsequent to September 30, 2021 to placement agents in settlement of placement agent warrants.

During the three months ended September 30, 2021, one warrant holder paid cash of $25,000 to exercise 23,584 warrants, which led to 23,584 common shares to be issued as at September 30, 2021.

During the three months ended September 30, 2021, the Company issued 373,404 share purchase warrants to underwriter and accounted for this transaction under additional paid-in capital along with the uplisting transaction. The fair value of those warrants, in the amount of $900,371, was determined by using Black Scholes model, based on the following key inputs and assumptions: expiry date August 26, 2026, exercise price $3.75, rate of returns 0.77%, and volatility 111.9%.

During the three months ended DecemberMarch 31, 2021, as a result of cashless exercise of warrants that were previously issued on convertible notes, 361,190 common shares were issued to placement agents in settlement of placement agent warrants. In addition, 42,500 of warrants previously issued to external consultants were exercised for cash proceeds of $26,650, which was recognized as a credit to common stock and additional paid in capital in amount of $40 and $26,608 respectively. 11,792 of warrants previously issued to convertible note holders were exercised for cash proceeds of $12,500, which was recognized as shares to be issued.

During the three months ended December 31, 2021, the Company issued 50,000 warrants to an executive of the Company. The warrants were fair valued at $173,050 and their respective value recognized in general and administrative expenses, with a corresponding credit to additional paid-in capital. The warrant fair value was determined by using the Black Scholes model, based on the following key inputs and assumptions: expiry date December 31, 2031, exercise price $2.4, rate of return of Nil, and volatility 121.5%.

During the three months ended December 31, 2021,2022, the Company issued 57,536 share purchase warrants to lenders in connection with the term loan.loan (Note 6). The fair value of thosethese warrants, in the amount of $198,713, was recorded as part of the discount of the loan, with a corresponding credit to additional paid-in capital. The warrants were not considered as derivative instruments. The fair value of these warrants was determined by using the Black Scholes model, based on the following key inputs and assumptions: expiry date December 21, 2028, exercise price $6.26, rate of return 1.401.40%%, and volatility 121.71121.71%%.

 

During the year ended March 31, 2022, the Company issued 373,404 share purchase warrants to underwriter. The warrants were not considered as a derivative instrument and was accounted as additional paid-in capital along with the uplisting transaction. The warrants were fair valued at $900,371. The fair value of these warrants was determined by using Black Scholes model, based on the following key inputs and assumptions: expiry date August 26, 2026, exercise price $3.75, rate of returns 0.77%, and volatility 111.9%. 

Warrant exercises and issuances during the three months ended June 30, 2022

During the three months ended June 30, 2022, the Company issued 53,827 warrants as compensation to an executive of the Company who was not part of the Company stock options plan. The warrant expenses were fair valued at $77,414, and recognized as general and administrative expenses, with a corresponding credit to additional paid-in capital. 

 

Warrant issuances, exercises and expirations or cancellations during the three months ended December 31, 2021June 30, 2022 and preceding periods resulted in warrants outstanding at the end of those respective periods as follows:

 SCHEDULE OF WARRANTS OUTSTANDING

 Broker Warrants  Consultant Warrants  Warrants Issued on Conversion of Convertible Notes  Private Placement Warrants  Total  Broker and Other Warrants (1)  Consultant Warrants  Warrants Issued on Conversion of Convertible Notes  Private Placement Warrants  Total 
As at March 31, 2020  321,314   2,049,837   2,734,530   1,163,722   6,269,403 
                    
Less: Expired/cancelled  (128,676)  (271,365)  (911,510)  (1,163,722)  (2,475,273)
Less: Exercised      (97,500)          (97,500)
Add: Issued  1,065,857   449,583   5,631,132   -   7,146,572 
As at March 31, 2021  1,258,495   2,130,555   7,454,152   -   10,843,202   1,258,495   2,130,555   7,454,152   -   10,843,202 
                                        
Less: Expired/cancelled  -   (93,750)  -   -   (93,750)  (150,841)  (298,333)  -   -   (449,174)
Less: Exercised  -   -   (137,972)  -   (137,972)  (662,389)  (242,500)  (555,029)  -   (1,459,918)
Add: Issued  -   60,000   -   -   60,000   430,940   212,594   -   -   643,534 
As at June 30, 2021  1,258,495   2,096,805   7,316,180   -   10,671,480 
As at March 31, 2022  876,205   1,802,316   6,899,123   -   9,577,644 
                                        
Less: Expired/cancelled  -   (229,583)  -   -   (229,583)  -   -   (1,563,980)  -   (1,563,980)
Less: Exercised  (153,560)  -   (193,097)  -   (346,657)  -   -   (11,792)  -   (11,792)
Add: Issued  373,404   65,000   -   -   438,404   -   53,827   -   -   53,827- 
As at September 30, 2021  1,478,339   1,932,222   7,123,083   -   10,533,644 
                    
Less: Expired/cancelled  (109,504)  (60,000)  -   -   (169,504)
Less: Exercised  (482,280)  (42,500)  (11,792)  -   (536,572)
Add: Issued  57,536   

50,000 

   -   -   - 
As at December 31, 2021  917,541   1,879,722   7,111,291   -   9,908,554 
As at June 30, 2022  876,205   1,856,143   5,323,351         -   8,055,698 
                                        
Exercise Price  1.06 to 6.26   0.48 to 3.50   

1.06 to 2.00 

           1.06 to 6.26   0.48 to 3.15   1.06 to 2.00         
Expiration Date  July 2022 to January 2031   January 2022 to December 2031   

May 2022 to February 2024

           July 2022 to January 2031   July 2022 to June 2032   January 2024 to February 2024         

 

(1)This includes 57,536 warrants issued to the term loan Lender (see Note 6, above).

2124

 

f) Stock-based compensation

 

On February 2, 2016, the Board of Directors of the Company approved the Company’s 2016 Equity Incentive Plan (the “Plan”). The purpose of the Plan is to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Company and by motivating such persons to contribute to the growth and profitability of the Company. The Plan seeks to achieve this purpose by providing for awards in the form of options, stock appreciation rights, restricted stock purchase rights, restricted stock bonuses, restricted stock units, performance shares, performance units and other stock-based awards.

 

The Plan shall continue in effect until its termination by the board of directors or committee formed by the board; provided, however, that all awards shall be granted, if at all, on or before the day immediately preceding the tenth (10th) anniversary of the effective date. The maximum number of shares of stock that may be issued under the Plan shall be equal to 3,750,000 shares; provided that the maximum number of shares of stock that may be issued under the Plan pursuant to awards shall automatically and without any further Company or shareholder approval, increase on January 1 of each year for not more than 10 years from the effective date, so the number of shares that may be issued is an amount no greater than 20% of the Company’s outstanding shares of stock and shares of stock underlying any outstanding exchangeable shares as of such January 1; provided further that no such increase shall be effective if it would violate any applicable law or stock exchange rule or regulation, or result in adverse tax consequences to the Company or any participant that would not otherwise result but for the increase.

 

Based on the 2016 Option Plan, the Company is authorized to issue employee options with a 10-year term. On March 31, 2020, the Company’s Board of Directors approved the amendment of certain prior options grants, issued to current employees, previously issued with a 3-year term, such that the respective options issued under these agreements would have their term extended to 10 years. The Company revalued these options using a lattice model with an expected life of 10 years, risk free rates of 0.460.46% % to 0.750.75%%, stock price of $0.974 and expected volatility of 132.2132.2%%, in order to recognize the additional expense associated with the longer term and recognized a one-time charge of $1,600,515 in share-based compensation, with a corresponding adjustment to adjusted paid in capital.

 

During the year ended March 31, 2021, the Company granted 2,610,647 stock options with a weighted average remaining contractual life of 8.7 years. The Company recorded stock-based compensation of $790,535 in connection with ESOP 2016 Plan under general and administrative expenses with corresponding credit to additional paid in capital.

22

During the three months ended June 30, 2021,2022,  the Company granted 170,53210,180 of options with a weighted average remaining contractual life of 9.310 years. The Company recorded stock-based compensation of $155,851149,190 in connection with ESOP 2016 Plan (June 30, 20202021 - $232,519155,851), under general and administrative expenses with corresponding credit to additional paid in capital.

 

During the three months ended September 30, 2021, the Company granted 174,426 of options with a weighted average remaining contractual life of 9.6 years. The Company recorded stock-based compensation of $169,778 in connection with ESOP 2016 Plan (September 30, 2020 - $229,647), under general and administrative expenses with corresponding credit to additional paid in capital.

During the three months ended December 31, 2021, the Company granted 35,798 of options with a weighted average remaining contractual life of 10 years, and a fair value of $123,605. The Company recorded stock-based compensation of $100,651 in connection with ESOP 2016 Plan (December 30, 2020 - $13,871), under general and administrative expenses with corresponding credit to additional paid in capital.

The following table summarizes the stock option activities of the Company to December 31, 2021:June 30, 2022:

 SCHEDULE OF STOCK OPTION ACTIVITIES

 

Number of
options

 

Weighted
Average exercise
price ($)

  Number of
options		  Weighted
Average exercise
price ($)		 
Granted  4,147,498   3.2306   4,147,498   3.2306 
Exercised  -   -   -   - 
Outstanding as of March 31, 2018  4,147,498   3.2306   4,147,498   3.2306 
Granted  270,521   1.8096   270,521   1.8096 
Exercised  -   -   -   - 
Outstanding as of March 31, 2019  4,418,019   3.1436   4,418,019   3.1436 
Granted  88,100   0.7763   88,100   0.7763 
Expired  (112,509)  2.723   (112,509)  2.723 
Outstanding as of March 31, 2020  4,393,610   3.1069   4,393,610   3.1069 
Granted  2,610,647   1.0072   2,610,647   1.0072 
Exercised  -   -   -   - 
Outstanding as of March 31, 2021  7,004,256   2.3268   7,004,256   2.3268 
Granted  170,532   1.7931   596,458   1.5272 
Expired  (56,433)  1.5937 
Forfeited  (134,567)  1.5124 
Exercised  -   -   -   - 
Outstanding as of June 30, 2021  7,174,788   2.3141 
Outstanding as of March 31, 2022  7,409,714   2.3466 
Granted  174,426   2.5579   10,180   1.7700 
Exercised  -   -   -   - 
Outstanding as of September 30, 2021  7,349,214   2.3199 
        
Granted  35,798   3.9800 
Exercised  -   - 
Expired  

21,167

   1.2432  
Forfeited  

107,900

   

1.3295  

 
Outstanding as of December 31, 2021  7,255,945   2.3459 
Outstanding as of June 30, 2022  7,419,894   2.3458 

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The fair value of each option granted is estimated at the time of grant using the Black Scholes model using the following assumptions, for each of the respective fiscal year:

SCHEDULE OF FAIR VALUE OF OPTION GRANTED USING VALUATION ASSUMPTIONS

  2022  2021  2020  2019 
Exercise price ($)  0.74 – 3.98   0.74-2.89   1.40-2.00   1.40-2.00 
Risk free interest rate (%)  0.30 – 1.72   0.18 – 1.72   0.52-2.81   2.27-2.81 
Expected term (Years)  2.0 – 10.0   2.0 – 10.0   2.0-3.0   2.0-3.0 
Expected volatility (%)  106.6 – 129.9   106.8 – 129.9   97.8-141.1   97.8-141.1 
Expected dividend yield (%)  0.00   0.00   0.00   0.00 
Fair value of option ($)  0.59 – 3.52   0.72 - 1.72   0.76   0.588 
Expected forfeiture (attrition) rate (%)  0.00   0.00   0.00   0.00 

 

23
  2023  2022  2021  2020 
Exercise price ($)  1.77   2.40 – 3.98   0.74-2.89   1.40-2.00 
Risk free interest rate (%)  3.00 – 3.01   0.34 – 2.32   0.18 – 1.72   0.52-2.81 
Expected term (Years)  5.5 – 6.5   2.0 – 10.0   2.0 – 10.0   2.0-3.0 
Expected volatility (%)  109.3 – 119.5   106.6 – 129.9   106.8 – 129.9   97.8-141.1 
Expected dividend yield (%)  0.00   0.00   0.00   0.00 
Fair value of option ($)  1.438 – 1.565   1.19 – 3.52   0.72 - 1.72   0.76 
Expected forfeiture (attrition) rate (%)  0.00   0.00   0.00   0.00 

10. OPERATING LEASE RIGHT-OF-USE ASSETS AND LEASE OBLIGATIONS

 

The Company has one operating lease primarily for office and administration.

 

As of December 1, 2021, the Company entered into a new lease agreement. The discount rate applied was Company paid $12%85,000 deposit that representedwould be returned at the Company’send of the lease.

When measuring the lease obligations, the Company discounted lease payments using its incremental borrowing rate. The weighted-average-rate applied is 11.4%.

SCHEDULE OF DISCOUNTED LEASE PAYMENTOPERATING LEASES OBLIGATIONS

$
Operating lease right-of-use asset - initial recognitionBalance at March 31, 20221,394,1971,242,700
Amortization(23,23750,531)
Balance at December 31, 2021June 30, 20221,370,9601,192,169
Operating lease obligation - initial recognitionBalance at March 31, 20221,394,1971,330,338
Repayment and interest accretion(15,73849,510)
Balance at December 31, 2021June 30, 20221,378,4591,280,828
Current portion of operating lease obligation201,852219,033
Noncurrent portion of operating lease obligation1,176,6061,061,795

The operating lease expense was $119,465and $255,020121,735 for  the three and nine months ended December 31, 2021, andJune 30, 2022 (June 30, 2021: $67,607) was included in the general and administrative expenses.

 

The following table represents the contractual undiscounted cash flows for lease obligations as at June 30, 2022

SCHEDULE OF CONTRACTUAL UNDISCOUNTED CASH FLOWS FOR LEASE OBLIGATION

Less than one year351,154
Beyond one year1,279,787
Total undiscounted lease obligations1,630,941

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11. PROPERTY AND EQUIPMENT

During the year-ended March 31, 2022, the Company purchased leasehold improvements of $12,928 (useful life: 5 years) as well as furniture & fixtures of $16,839(useful life: 5 years). The Company recognized depreciation expense for these assets in the amount of $1,489during the three months ended June 30, 2022.

SCHEDULE OF PROPERTY AND EQUIPMENT

Cost Office
equipment		  Leasehold improvement  Total
   $   $   $ 
Balance at March 31, 2022  16,839   12,928   29,767 
Additions  -   -   - 
Balance at June 30, 2022  16,839   12,928   29,767 

Accumulated depreciation 

Office

equipment

  Leasehold
improvement		  Total 
   $   $   $ 
Balance at March 31, 2022  1,308   1,000   2,308 
Depreciation for the quarter  842   647   1,489 
Balance at June 30, 2022  2,150   1,647   3,797 
             
Net book value            
Balance at March 31, 2022  15,531   11,928   27,459 
Balance at June 30, 2022  14,689   11,281   25,970 

12. CONTINGENCIES

 

There are no unrecognized claims against the Company that were assessed as significant, which were outstanding as at December 31, 2021June 30, 2022 and, consequently, no additional provision for such has been recognized in the consolidated financial statements during the three and nine months then ended.

 

12. 13. SUBSEQUENT EVENTS

 

The Company’s management has evaluated subsequent events up to February 14,August 15, 2022, the date the condensed consolidated financial statements were issued, pursuant to the requirements of ASC 855, and has determined the following material subsequent events:

 

The Company issued 117,647 shares in connection with Series B convertible Note conversion request received subsequent to June 30, 2022. During the same period, from January 1 to February 14, 2022, the Company issued 138,50022,772 shares of common stock to as equity-based compensation to an advisor andfor contractual services rendered; it also issued 248,49071,792 shares, which were part of common stockthe Company’s obligation of shares to be issued at of June 30, 2022, in connection with warrant exercises for cash proceeds of $354,980. In addition, the company issued 1,233,190 out of the total to be issued shares obligation it had as of December 31, 2021.

exercise requests.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Cautionary Note Regarding Forward-Looking Statements

 

Except for historical information contained herein, this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. These forward-looking statements are based on various factors and were derived utilizing numerous important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements. Important assumptions and other factors that could cause actual results to differ materially from those in the forward-looking statements, include but are not limited to: (a) any fluctuations in sales and operating results; (b) risks associated with international operations; (c) regulatory, competitive and contractual risks; (d) development risks; (e) the ability to achieve strategic initiatives, including but not limited to the ability to achieve sales growth across the business segments through a combination of enhanced sales force, new products, and customer service; (f) competition in the Company’s existing and potential future product lines of business; (g) the Company’s ability to obtain financing on acceptable terms if and when needed; (h) uncertainty as to the Company’s future profitability; (i) uncertainty as to the future profitability of acquired businesses or product lines; and (j) uncertainty as to any future expansion of the Company. Other factors and assumptions not identified above were also involved in the derivation of these forward-looking statements and the failure of such assumptions to be realized as well as other factors may also cause actual results to differ materially from those projected. The Company assumes no obligation to update these forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements, except as may be required under applicable law. Past results are no guaranty of future performance. Any such forward-looking statements speak only as of the dates they are made. When used in this Report, the words “believes,” “anticipates,” “expects,” “estimates,” “plans,” “intends,” “will” and similar expressions are intended to identify forward-looking statements.

 

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the financial statements and footnotes thereto included in this Quarterly Report on Form 10-Q (the “Financial Statements”).

 

Company Overview

 

Biotricity Inc. (“Company”, “Biotricity”, “we”, “us” or “our”)

 

Biotricity Inc. (the “Company”, “Biotricity”, “we”, “us”, “our”) is a medical technology company focused on biometric data monitoring solutions. Our aim is to deliver innovative, remote monitoring solutions to the medical, healthcare, and consumer markets, with a focus on diagnostic and post-diagnostic solutions for lifestyle and chronic illnesses. We approach the diagnostic side of remote patient monitoring by applying innovation within existing business models where reimbursement is established. We believe this approach reduces the risk associated with traditional medical device development and accelerates the path to revenue. In post-diagnostic markets, we intend to apply medical grade biometrics to enable consumers to self-manage, thereby driving patient compliance and reducing healthcare costs. We intend to first focus on a segment of the diagnostic mobile cardiac telemetry market, otherwise known as MCT, while providing our chosen markets with the capability to also perform other cardiac studies.

25

 

We developed our FDA-approvedFDA-cleared Bioflux® MCT technology, comprised of a monitoring device and software components, which we made available to the market under limited release on April 6, 2018, in order to assess, establish and develop sales processes and market dynamics. The fiscal year ended March 31, 2021 marked the Company’s first year of expanded commercialization efforts, focused on sales growth and expansion. We have expanded our sales efforts to 20 states, with intention to expand further and compete in the broader US market using an insourcing business model. Our technology has a large potential total addressable market, which can include hospitals, clinics and physicians’ offices, as well as other Independent Diagnostic Testing Facilities (“IDTFs)”. We believe our solution’s insourcing model, which empowers physicians with state-of-the-art technology and charges technology service fees for its use, has the benefit of a reduced operating overhead for the Company, and enables a more efficient market penetration and distribution strategy. This, when combined with the value the Company’s solution in the diagnosis of cardiac arrhythmias, enhancement of patient outcomes, improved patient compliance, and the corresponding reduction of healthcare costs, is driving growth and increasing revenues.

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We are a technology company focused on earning utilization-based recurring technology fee revenue. The Company’s ability to grow this type of revenue is predicated on the size and quality of its sales force and their ability to penetrate the market and place devices with clinically focused, repeat users of its cardiac study technology. The Company plans to grow its sales force in order to address new markets and achieve sales penetration in the markets currently served.

 

The fiscal year ended March 31, 2021 marked the trailing 24-month period of fullFull market release of the Bioflux MCT device for commercialization originally launched in limited market release in April 2018,2019, after receiving its second and final required FDA clearance. To commence commercialization, we ordered device inventory from our FDA-approved manufacturer and hired a small, captive sales force, with deep experience in cardiac technology sales; we expanded on our limited market release, which identified potential anchor clients who could be early adopters of our technology. By increasing our sales force and geographic footprint, we havehad launched sales in 2629 U.S. states by December 31, 2021.June 30, 2022.

 

On January 24, 2022 the Company announced that it has received the 510(k) FDA clearance of its Biotres patch solution, which is a novel product in the field of Holter monitoring. This three-lead technology is can provide connected Holter monitoring that is designed to produce more accurate arrythmia detection than is typical of competing remote patient monitoring solutions. It is also foundational, since already developed improvements to this technology will follow which are not known by the Company to be currently available in the market, for clinical and consumer patch solution applications.

 

During 2021, the Company also announced that it received a 510(k) clearance from the FDA for its Bioflux Software II System, engineered to improve workflows and reduce estimated analysis time from 5 minutes to 30 seconds. ECG monitoring requires significant human oversight to review and interpret incoming patient data to discern actionable events for clinical intervention, highlighting the necessity of driving operational efficiency. This improvement in analysis time reduces operational costs and allows the company to continue to focus on excellent customer service and industry-leading response times to physicians and their at-risk patients. Additionally, these advances mean we can focus our resources on high-level operations and sales to help drive greater revenue.

 

The Company has also developed or is developing several other ancillary technologies, which will require application for further FDA clearances, which the Company anticipates applying for within the next to twelve months. Among these are:

 

 ●advanced ECG analysis software that can analyze and synthesize patient ECG monitoring data with the purpose of distilling it down to the important information that requires clinical intervention, while reducing the amount of human intervention necessary in the process;
   
 ●the Bioflux® 2.0, which is the next generation of our award winning Bioflux®

 

During 2021 and the early part of 2022, the Company has also commercially launched its Bioheart technology, which is a consumer technology whose development was forged out of prior the development of the clinical technologies that are already part of the Company’s technology ecosystem, the BioSphere. This technology and other consumer technologies and applications such as the Biokit and Biocare have been developed to allow the Company to transform and use its strong cardiac footprint to expand into remote chronic care management solutions that will be part of the BioSphere.

 

The COVID-19 pandemic has highlighted the importance of telemedicine and remote patient monitoring technologies. During the nine months ended December 31, 2021, the Company has continued to develop a telemedicine platform, with capabilities of real-time streaming of medical devices. Telemedicine offers patients the ability to communicate directly with their health care providers without the need of leaving their home. The introduction of a telemedicine solution is intended to align with the Company’s Bioflux product and facilitate remote visits and remote prescriptions for cardiac diagnostics, but it will also serve as a means of establishing referral and other synergies across the network of doctors and patients that use the technologies we are building within the Biotricity ecosystem. The intention is to continue to provide improved care to patients that may otherwise elect not to go to medical facilities and continue to provide economic benefits and costs savings to healthcare service providers and payers that reimburse.

 

2629

 

Critical Accounting Policies

 

The unaudited condensed consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and are expressed in United States Dollars. Significant accounting policies are summarized below:

 

UseRevenue Recognition

The Company adopted Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers” (“ASC 606”) on April 1, 2018. In accordance with ASC 606, revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services by applying the core principles – 1) identify the contract with a customer, 2) identify the performance obligations in the contract, 3) determine the transaction price, 4) allocate the transaction price to performance obligations in the contract, and 5) recognize revenue as performance obligations are satisfied.

The Bioflux mobile cardiac telemetry device, a wearable device, is worn by patients for a monitoring period up to 30 days. The cardiac data that the device monitors and collects is curated and analyzed by the Company’s proprietary algorithms and then securely communicated to a remote monitoring facility for electronic reporting and conveyance to the patient’s prescribing physician or other certified cardiac medical professional. Revenues earned with respect to this device are comprised of Estimatesdevice sales revenues and technology fee revenues (technology as a service). The device, together with its licensed software, is available for sale to the medical center or physician, who is responsible for the delivery of clinical diagnosis and therapy. The remote monitoring, data collection and reporting services performed by the technology culminate in a patient study that is generally billable when it is complete and is issued to the physician. In order to recognize revenue, management considers whether or not the following criteria are met: persuasive evidence of a commercial arrangement exists, and delivery has occurred or services have been rendered. For sales of devices, which are invoiced directly, additional revenue recognition criteria include that the price is fixed and determinable and collectability is reasonably assured; for device sales contracts with terms of more than one year, the Company recognizes any significant financing component as revenue over the contractual period using the effective interest method, and the associated interest income is reflected accordingly on the statement of operations and included in other income; for revenue that is earned based on customer usage of the proprietary software to render a patient’s cardiac study, the Company recognizes revenue when the study ends based on a fixed billing rate. Costs associated with providing the services are recorded as the service is provided regardless of whether or when revenue is recognized.

The Company may also earn service-related revenue from contracts with other counterparties with which it consults. This contract work is separate and distinct from services provided to clinical customers, but may be with a reseller or other counterparties that are working to establish their operations in foreign jurisdictions or ancillary products or market segments in which the Company has expertise and may eventually conduct business.

The Company recognized the following forms of revenue for the three months ended June 30, 2022 and 2021:

  For Three Months Ended
June 30, 2022
$		  For Three Months Ended
June 30, 2021
$		 
Technology fee sales  1,889,982   1,464,937 
Device sales  166,070   299,173 
   2,056,052   1,764,110 

Inventory

Inventory is stated at the lower of cost and market value, cost being determined on a weighted average cost basis. Market value of our inventory, which is all purchased finished goods, is determined based on its estimated net realizable value, which is generally the selling price less normally predictable costs of disposal and transportation. The Company records write-downs of inventory that is obsolete or in excess of anticipated demand or market value based on consideration of product lifecycle stage, technology trends, product development plans and assumptions about future demand and market conditions. Actual demand may differ from forecasted demand, and such differences may have a material effect on recorded inventory values. Inventory write-downs are charged to cost of revenue and establish a new cost basis for the inventory.

Significant accounting estimates and assumptions

 

The preparation of the unaudited condensed consolidated financial statements in conformity with US GAAP requires management to makethe use of estimates and assumptions to be made in applying the accounting policies that affect the reported amounts of assets, liabilities, revenue and liabilitiesexpenses and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Areas involving significantliabilities. The estimates and related assumptions include: deferred income taxare based on previous experiences and other factors considered reasonable under the circumstances, the results of which form the basis for making the assumptions about the carrying values of assets and related valuation allowance, accrualsliabilities that are not readily apparent from other sources.

The estimates and valuation of derivatives, convertible promissory notes, stock options and warrants, as well asunderlying assumptions used by management in its assessment of liquidity. Actual results could differ from those estimates. Theseare reviewed on an ongoing basis. Revisions to accounting estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earningsrecognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

30

Significant accounts that require estimates as the basis for determining the stated amounts include share-based compensation, impairment analysis and fair value of warrants, structured notes, convertible debt and conversion liabilities.

●Fair value of stock options

The Company measures the cost of equity-settled transactions with employees by reference to the fair value of equity instruments at the date at which they become known.are granted. Estimating fair value for share-based payments requires determining the most appropriate valuation model for a grant of such instruments, which is dependent on the terms and conditions of the grant. The estimate also requires determining the most appropriate inputs to the Black-Scholes option pricing model, including the expected life of the instrument, risk-free rate, volatility, and dividend yield.

●Fair value of warrants

In determining the fair value of the warrant issued for services and issue pursuant to financing transactions, the Company used the Black-Scholes option pricing model with the following assumptions: volatility rate, risk-free rate, and the remaining expected life of the warrants that are classified under equity.

●Fair value of derivative liabilities

In determining the fair values of the derivative liabilities from the conversion and redemption features, the Company used valuation models with the following assumptions: dividend yields, volatility, risk-free rate and the remaining expected life. Changes in those assumptions and inputs could in turn impact the fair value of the derivative liabilities and can have a material impact on the reported loss and comprehensive loss for the applicable reporting period.

●Functional currency

Determining the appropriate functional currencies for entities in the Company requires analysis of various factors, including the currencies and country-specific factors that mainly influence labour, materials, and other operating expenses.

●Useful life of property and equipment

The Company employs significant estimates to determine the estimated useful lives of property and equipment, considering industry trends such as technological advancements, past experience, expected use and review of asset useful lives. The Company makes estimates when determining depreciation methods, depreciation rates and asset useful lives, which requires considering industry trends and company-specific factors. The Company reviews depreciation methods, useful lives and residual values annually or when circumstances change and adjusts its depreciation methods and assumptions prospectively

●Provisions

Provisions are recognized when the Company has a present obligation, legal or constructive, as a result of a previous event, if it is probable that the Company will be required to settle the obligation and a reliable estimate can be made of the obligation. The amount recognized is the best estimate of the expenditure required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligations. Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate of the expected future cash flows.

●Contingencies

Contingencies can be either possible assets or possible liabilities arising from past events, which, by their nature, will be resolved only when one or more uncertain future events occur or fail to occur. The assessment of the existence and potential impact of contingencies inherently involves the exercise of significant judgment and the use of estimates regarding the outcome of future events.

●Inventory obsolescence

Inventories are stated at the lower of cost and market value. Market value of our inventory, which is all purchased finished goods, is determined based on its estimated net realizable value, which is generally the selling price less normally predictable costs of disposal and transportation. The Company estimates net realizable value as the amount at which inventories are expected to be sold, taking into consideration fluctuations in retail prices less estimated costs necessary to make the sale. Inventories are written down to net realizable value when the cost of inventories is estimated to be unrecoverable due to obsolescence, damage, or declining selling prices.

31

●Income and other taxes

The calculation of current and deferred income taxes requires the Company to make estimates and assumptions and to exercise judgment regarding the carrying values of assets and liabilities which are subject to accounting estimates inherent in those balances, the interpretation of income tax legislation across various jurisdictions, expectations about future operating results, the timing of reversal of temporary differences and possible audits of income tax filings by the tax authorities. In addition, when the Company incurs losses for income tax purposes, it assesses the probability of taxable income being available in the future based on its budgeted forecasts. These forecasts are adjusted to take into account certain non-taxable income and expenses and specific rules on the use of unused credits and tax losses.

When the forecasts indicate that sufficient future taxable income will be available to deduct the temporary differences, a deferred tax asset is recognized for all deductible temporary differences. Changes or differences in underlying estimates or assumptions may result in changes to the current or deferred income tax balances on the consolidated statements of financial position, a charge or credit to income tax expense included as part of net income (loss) and may result in cash payments or receipts. Judgment includes consideration of the Company’s future cash requirements in its tax jurisdictions. All income, capital and commodity tax filings are subject to audits and reassessments. Changes in interpretations or judgments may result in a change in the Company’s income, capital, or commodity tax provisions in the future. The amount of such a change cannot be reasonably estimated.

●Incremental borrowing rate for lease

The determination of the Company’s lease obligation and right-of-use asset depends on certain assumptions, which include the selection of the discount rate. The discount rate is set by reference to the Company’s incremental borrowing rate. Significant assumptions are required to be made when determining which borrowing rates to apply in this determination. Changes in the assumptions used may have a significant effect on the Company’s consolidated financial statements.

 

Earnings (Loss) Per Share

 

We haveThe Company has adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 260-10 which provides for calculation of “basic” and “diluted” earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income or loss available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. Diluted earnings per share exclude all potentially dilutive shares if their effect is anti-dilutive. There were no potentially dilutive shares outstanding as at December 31,June 30, 2022 and 2021.

Cash

Cash includes cash on hand and balances with banks.

Foreign Currency Translation

The functional currency of the Company’s Canadian-based subsidiary is the Canadian dollar and the US-based parent is the U.S. dollar. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities are translated using the historical rate on the date of the transaction. All exchange gains or losses arising from translation of these foreign currency transactions are included in net income (loss) for the year. In translating the financial statements of the Company’s Canadian subsidiaries from their functional currency into the Company’s reporting currency of United States dollars, balance sheet accounts are translated using the closing exchange rate in effect at the balance sheet date and income and expense accounts are translated using an average exchange rate prevailing during the reporting period. Adjustments resulting from the translation, if any, are included in accumulated other comprehensive income (loss) in stockholders’ equity. The Company has not, to the date of these consolidated financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

32

Accounts Receivable

Accounts receivable consists of amounts due to the Company from medical facilities, which receive reimbursement from institutions and third-party government and commercial payors and their related patients, as a result of the Company’s normal business activities. Accounts receivable is reported on the balance sheets net of an estimated allowance for doubtful accounts. The Company establishes an allowance for doubtful accounts for estimated uncollectible receivables based on historical experience, assessment of specific risk, review of outstanding invoices, and various assumptions and estimates that are believed to be reasonable under the circumstances, and recognizes the provision as a component of selling, general and administrative expenses. Uncollectible accounts are written off against the allowance after appropriate collection efforts have been exhausted and when it is deemed that a balance is uncollectible.

 

Fair Value of Financial Instruments

 

ASC 820 defines fair value, establishes a framework for measuring fair value and expands required disclosure about fair value measurements of assets and liabilities. ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

 

●Level 1 – Valuation based on quoted market prices in active markets for identical assets or liabilities.
●Level 2 – Valuation based on quoted market prices for similar assets and liabilities in active markets.
●Level 3 – Valuation based on unobservable inputs that are supported by little or no market activity, therefore requiring management’s best estimate of what market participants would use as fair value.

● Level 1 – Valuation based on quoted market prices in active markets for identical assets or liabilities.

● Level 2 – Valuation based on quoted market prices for similar assets and liabilities in active markets.

● Level 3 – Valuation based on unobservable inputs that are supported by little or no market activity, therefore requiring management’s best estimate of what market participants would use as fair value.

 

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

 

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments or interest rates that are comparable to market rates. These financial instruments include cash, accounts receivable, deposits and other receivables, convertible promissory notes and short-termshort term loans, federally-guaranteed loans, term loans and accounts payable and accrued liabilities, and derivative liabilities. The Company’s cash and derivative liabilities, which are carried at fair values, are classified as a Level 1 and Level 3, respectively. The Company’s bank accounts are maintained with financial institutions of reputable credit, therefore, bear minimal credit risk.

 

2733

LeasesProperty and Equipment

 

On April 1, 2019,Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful lives of the assets. Maintenance and repairs are charged to expense as incurred, and improvements and betterments are capitalized. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives as follow:

Office equipment5 years
Leasehold improvement5 years

Impairment for Long-Lived Assets

The Company applies the provisions of ASC Topic 360, Property, Plant, and Equipment, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets, including right-of-use assets, used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal. Based on its review at March 31, 2022 and 2021, the Company adopted Accounting Standards Codification Topic 842, “Leases” (“ASC 842”) to replace existing lease accounting guidance. This pronouncement is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet for most leases. Expenses associated with leases will continue to be recognized in a manner similar to previous accounting guidance. The Company adopted ASC 842 utilizing the transition practical expedient added by the Financial Accounting Standards Board (“FASB”), which eliminates the requirement that entities apply the new lease standard to the comparative periods presented in the yearbelieves there was no impairment of adoption.its long-lived assets.

Leases

 

The Company is the lessee in a lease contract when the Company obtains the right to use the asset. Operating leases are included in the line items right-of-use asset, lease obligation, current, and lease obligation, long-term in the consolidated balance sheet.

Right-of-use (“ROU”) asset represents the Company’s right to use an underlying asset for the lease term and lease obligations represent the Company’s obligations to make lease payments arising from the lease, both of which are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Leases with a lease term of 12 months or less at inception are not recorded on the consolidated balance sheet and are expensed on a straight-line basis over the lease term in ourthe consolidated statement of income.operations. The Company determines the lease term by agreement with lessor. As ourthe Company’s lease does not provide an implicit interest rate, the Company uses the Company’s incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. Refer to Note 12 for further discussion.

 

Government loanIncome Taxes

 

For loans received from federal governmentThe Company accounts for income taxes in accordance with ASC 740. The Company provides for Federal, State and Provincial income taxes payable, as well as for those deferred because of the timing differences between reporting income and expenses for financial statement purposes versus tax purposes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recoverable or settled. The effect of a change in tax rates is recognized as income or expense in the period of the change. A valuation allowance is established, when necessary, to reduce deferred income tax assets to the amount that contains certain operating conditions and with terms over twelve month time, the Company records those loans as long term liabilities.is more likely than not to be realized.

 

Research and Development

Research and development costs, which relate primarily to product and software development, are charged to operations as incurred. Under certain research and development arrangements with third parties, the Company may be required to make payments that are contingent on the achievement of specific developmental, regulatory and/or commercial milestones. Before a product receives regulatory approval, milestone payments made to third parties are expensed when the milestone is achieved. Milestone payments made to third parties after regulatory approval is received are capitalized and amortized over the estimated useful life of the approved product.

Stock Based Compensation

The Company accounts for share-based payments in accordance with the provision of ASC 718, which requires that all share-based payments issued to acquire goods or services, including grants of employee stock options, be recognized in the statement of operations based on their fair values, net of estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Compensation expense related to share-based awards is recognized over the requisite service period, which is generally the vesting period.

The Company accounts for stock based compensation awards issued to non-employees for services, as prescribed by ASC 718-10, at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the guidelines in ASC 505-50. The Company issues compensatory shares for services including, but not limited to, executive, management, accounting, operations, corporate communication, financial and administrative consulting services.

34

Convertible Notes Payable and Derivative Instruments

The Company has adopted the provisions of ASU 2017-11 to account for the down round features of warrants issued with private placements effective as of April 1, 2017. In doing so, warrants with a down round feature previously treated as derivative liabilities in the consolidated balance sheet and measured at fair value are henceforth treated as equity, with no adjustment for changes in fair value at each reporting period. Previously, the Company accounted for conversion options embedded in convertible notes in accordance with ASC 815. ASC 815 generally requires companies to bifurcate conversion options embedded in convertible notes from their host instruments and to account for them as free-standing derivative financial instruments. ASC 815 provides for an exception to this rule when convertible notes, as host instruments, are deemed to be conventional, as defined by ASC 815-40. The Company accounts for convertible notes deemed conventional and conversion options embedded in non-conventional convertible notes which qualify as equity under ASC 815, in accordance with the provisions of ASC 470-20, which provides guidance on accounting for convertible securities with beneficial conversion features. Accordingly, the Company records, as a discount to convertible notes, the intrinsic value of such conversion options based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt.

Preferred Shares Extinguishments

The Company accounted for preferred stock redemptions and conversions in accordance to ASU-260-10-S99. For preferred stock redemptions and conversion, the difference between the fair value of consideration transferred to the holders of the preferred stock and the carrying amount of the preferred stock is accounted as deemed dividend distribution and subtracted from net income.

Recently Issued Accounting Pronouncements

 

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments.” This pronouncement, along with subsequent ASUs issued to clarify provisions of ASU 2016-13, changes the impairment model for most financial assets and will require the use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. In developing the estimate for lifetime expected credit loss, entities must incorporate historical experience, current conditions, and reasonable and supportable forecasts. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. On November 19, 2019, the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), finalized various effective date delays for private companies, not-for-profit organizations, and certain smaller reporting companies applying the credit losses (CECL), the revised effective date is January 1, 2023.

 

In July 2019, the FASB issued ASU 2019-07, Codification Updates to SEC Sections. This ASU amends various SEC paragraphs pursuant to the issuance of SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization. One of the changes in the ASU requires a presentation of changes in stockholders’ equity in the form of a reconciliation, either as a separate financial statement or in the notes to the financial statements, for the current and comparative year-to-date interim periods. The Company presented changes in stockholders’ equity as separate financial statements for the current and comparative year-to-date interim periods beginning on April 1, 2019. The additional elements of the ASU did not have a material impact on the Company’s consolidated financial statements.

 

2835

 

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company is currently evaluating the impacts of the provisions of ASU 2019-12 on its financial condition, results of operations, and cash flows.

 

In March 2020, the FASB issued ASU No. 2030-20 Codification Improvements to Financial Instruments, An Amendment of the FASB Accounting Standards Codification: a)in ASU No. 2016-01, b) in Subtopic 820-10, c) for depository and lending institutions clarification in disclosure requirements, d) in Subtopic 470-50, e) in Subtopic 820-10, f) Interaction of Topic 842 and Topic 326, g) Interaction of the guidance in Topic 326 and Subtopic 860-20.The amendments in this Update represent changes to clarify or improve the Codification. The amendments make the Codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. For public business entities updates under the following paragraphs: a), b), d) and e) are effective upon issuance of this final update. The effective date for c) is for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company does not expect that the new guidance will significantly impact its consolidated financial statements.

 

In April 2021, The FASB issued ASU 2021-04 to codify the final consensus reached by the Emerging Issues Task Force (EITF) on how an issuer should account for modifications made to equity-classified written call options (hereafter referred to as a warrant to purchase the issuer’s common stock). The guidance in the ASU requires the issuer to treat a modification of an equity-classified warrant that does not cause the warrant to become liability-classified as an exchange of the original warrant for a new warrant. This guidance applies whether the modification is structured as an amendment to the terms and conditions of the warrant or as termination of the original warrant and issuance of a new warrant. The Company does not expect that the new guidance will significantly impact its consolidated financial statements.

The Company continue to evaluate the impact of the new accounting pronouncement, including enhanced disclosure requirements, on our business processes, controls and systems.

Results of Operations

 

The Company earned revenues of $5.5$2.1 million for the ninethree months ended December 31, 2021June 30, 2022 compared to $2.2$1.8 million in the corresponding prior year period – a 150%17% increase.

 

During the three months ended December 31, 2021,June 30, 2022, the Company earned combined device sales and technology fee income totalling $1.93totaling $2.1 million. This represents a 93%17% increase from the corresponding quarter of fiscal 2021, an2021. Although total gross revenues were flat compared to the immediately preceding three months ended March 31, 2022, when gross revenues were also $2.1 million, technology fees comprised a larger percentage of total revenues, at 91.9%; this represents a $425,000 increase of approximately $0.93 million overin technology fees in the revenue earned in that quarter.latest quarter compared to the corresponding prior year quarter, which is a 30% increase, and reflects increased technology fee revenue-producing activity. Revenues for the latestrecent prior reporting period, which were 7% higher than the respective revenues of the immediately preceding quarter,periods reflected the continued impact of COVID on customer clinic operations and closures across the US. The Omicron variant afflicted many of the US states that the Company operates in during the quarter, creating continued business turbulence and clinic closures that caused patients to delay their cardiac medical appointments.in. It also impeded the ability of company sales professionals from engaging in in-person sales meetings with their customers. Thesecustomers; and closures were compounded by the seasonally low Christmas vacation. This was a continuation of the turbulence encountered due to COVID in the prior quarter, which wasvacation periods, and exacerbated by hurricanes that affected the southern US. Management anticipates that the lower-than-expected sales growth and the technology services foregone during this period will result in a pent-upincreased demand for cardiac services in the next quarter – a trend experienced during past periods of clinic closures. Thiscoming quarters and this expectation is reflected in management’s decision to acquire additional professional sales talent and grow its sales force by more than 33% duringin order to support the intervening months. Management expects the slower growth trend to be transient and anticipates continuous improvement in the growth trajectory of the Company’s revenues.

 

During the three months ended December 31, 2021,June 30, 2022, Biotricity incurred a net loss of $7.3$5.0 million and a comprehensive loss of approximately $7.4$4.8 million, compared to $4.1 million and $3.8$5.9 million in the comparative periodsperiod of fiscal 2021. This resulted in a net loss per common share of $0.149 and $0.554$0.098 per share for the three and nine months ended December 31, 2021, respectively (2020: $0.111, $0.288)June 30, 2022 (2021: $0.151).

For the three and nine months ended December 31, 2021,June 30, 2022, Biotricity’s net loss included one-time expenses related to accretion and other expenses related to convertible note conversions, as well as one-time fair value adjustments on derivative liabilities. Total impact of such one-time expenses was $1.3 million and $6.3 million, respectively, for the three and nine months ended December 31, 2021. In addition, during the nine months ended December 31, 2021, Biotricity incurred $0.95 million one-time investor relation and professional fee expenses in pursuit of its listing on a national exchange. Removing the impact of these one-time, non-operating expenses, would have resulted in a normalized net loss of $6.0 million and a normalized comprehensive loss of $6.0 million for the three months ended December 31, 2021, as well as a normalized net loss of $17.0 million and a normalized comprehensive loss of $17.0 million for the nine months ended December 31, 2021. The normalizedNormalized loss per common share, would have been $0.122adjusted for these one-time expenses, are illustrated in the EBITDA and $0.389 for the three and nine months ended December 31, 2021.

Adjusted EBITDA section below.

 

During the three months ended December 31, 2021,June 30, 2022, the Company experienced a gross margin of 43%60%. This is a lower percentage from the respective nine-monthprior year quarter percentage of 57%66%, as a result of increased raw material costs and sales mix for the latter three month period, where the company focused on selling devices that are later expecteddiscounts provided to produce higher margin technology fee revenues,customers in order to generate increased volumes of sales, Management expects that the cost of devices sold, as well as cellular and other costs associated with technology fees, will become lower as a percentage of revenues as business sales volumes expand.

 

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Three and Nine Months Ended December 31, 2021 and 2020June 30, 2022

 

Operating Revenues and Expenses

 

Operating Expenses

 

Total operating expenses for the three and nine months ended December 31, 2021June 30, 2022 were $5.6 million and $16.0$5.7 million compared to $4.0 million and $10.7$4.2 million respectively, for the corresponding periodsperiod of the prior year, as further described below.

 

General and administrative expenses

 

Our general and administrative expenses for the three and nine months ended December 31, 2021June 30, 2022 was $4.7 million and $13.9$4.9 million, compared to $3.3$3.6 million and $9.2 million, respectively, for the corresponding prior year periods.period. The increase in general and administrative expenses was a result of investment made by the Company in building its professional sales force, offset by more efficient office and administrative spending activities.force.

 

Research and development expenses

 

During the three and nine months ended December 31, 2021June 30, 2022 we incurred research and development expenses of $0.9 and $2.1$0.8 million, compared to $0.68$0.6 million and $1.5 million infor the corresponding prior year.year period. The increase in research and development activity is directly related to the development of new technologies for our ecosystem, and our pursuit of FDA clearance of new products (including the Biotres), as well as the development of continuous product enhancements to our existing products.

 

Other income, and loss upon convertible promissory notes conversion

During the three months ended June 30. 2022, we incurred Nil other income as compared to $8,782 other income in the corresponding prior year period.

In addition, we incurred loss of $0.05 million upon conversion of convertible notes, as compared to $0.03 million in the corresponding prior year period.

Accretion and amortization expense related to convertible notes and the term loan

 

During the three and nine months ended December 31, 2021,June 30, 2022, we incurred accretion and amortization expense related to debt financing of $1.3$0.05 million, and $8.8 million, respectively, compared to $0.38 million and $0.72$2.3 million in the prior year. The increasedecrease compared to prior year’s comparative periods was a result of full amortization ofduring the quarter ending March 31, 2022 for the debt discount related to Series A and Series B convertible notes. Therefore, there was no amortization of Series A and Series B convertible notes that were closeddebt discount during January 2021.the three months ended June 30, 2022. The remaining amortization in the three months ended June 30. 2022 related to the amortization of debt discount related to the SWK term loan.

 

Change in fair value of derivative liabilities

 

During the three and nine months ended December 31, 2021,June 30, 2022, the Company recognized a loss of $0.77$0.2 million and loss of $0.68 million, respectively, related to the change in fair value of derivative liabilities related to preferred shares and convertible notes. The company recognized a gain of $0.35 million and loss of $0.78$0.3 million in corresponding prior year periods.period.

EBITDA and Adjusted EBITDA

Earnings before interest, taxes, depreciation and amortization expenses (EBITDA) and Adjusted EBITDA, which are presented below, are non-generally accepted accounting principles (non-GAAP) measures that we believe are useful to management, investors and other users of our financial information in evaluating operating profitability . EBITDA is calculated by adding back interest, taxes, depreciation and amortization expenses to net income.

Adjusted EBITDA is calculated by excluding from EBITDA the effect of the following non-operational items: equity in earnings and losses of unconsolidated businesses and other income and expense, net, as well as the effect of special items that related to one-time, non-recurring expenditures. We believe that this measure is useful to management, investors and other users of our financial information in evaluating the effectiveness of our operations and underlying business trends in a manner that is consistent with management’s evaluation of business performance. Further, the exclusion of non-operational items and special items enables comparability to prior period performance and trend analysis. See notes in the table below for additional information regarding special items.

It is management’s intent to provide non-GAAP financial information to enhance the understanding of Biotricity’s GAAP financial information, and it should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. We believe that providing these non-GAAP measures in addition to the GAAP measures allows management, investors and other users of our financial information to more fully and accurately assess business performance. The non-GAAP financial information presented may be determined or calculated differently by other companies and may not be directly comparable to that of other companies.

37

EBITDA and Adjusted EBITDA

  Three months
ended
June 30, 2022		  Three months
ended
June 30, 2021		 
  $  $ 
Net loss attributable to common stockholders  (5,024,389)  (5,897,363)
Add:        
Provision for income taxes  -   - 
Interest expense  388,388   395,685 
Depreciation expense  1,488   - 
EBITDA  (4,634,512)  (5,501,678)
         
Add (Less)        
Accretion expense related to convertible note conversion (1)  -   488,731 
Other (income) expense related to convertible note conversion (2)  50,908   28,215 
Fair value change on derivative liabilities (3)  198,224   298,983 
         
Adjusted EBITDA  (4,385,381)  (4,685,749)
         
Weighted average number of common shares outstanding  51,440,944   39,095,637 
         
Adjusted Loss per Share, Basic and Diluted  (0.085)  (0.120)

(1) This relates to one-time recognition of accretion expenses relate to the remaining debt discount balances on notes that were converted.

(2) This relates to one-time recognition of expenses reflecting the difference between the book value of the convertible note and relevant unamortized discounts, and the fair value of shares that the notes were converted into.

(3) Fair value changes on derivative liabilities corresponds to changes in the underlying stock value and thus does not reflect our day to day operations

 

Translation Adjustment

 

Translation adjustment for the three and nine months ended December 31, 2021June 30, 2022 was a loss of $20,064 and a loss of $1,841, respectively.$0.2 million. The company recognized a gainloss of $0.37$0.07 million and gain of $0.19 million in the corresponding prior year periods.period. This translation adjustment represents gains and losses that result from the translation of currency in the financial statements from our functional currency of Canadian dollars to the reporting currency in U.S. dollars over the course of the reporting period.

 

Liquidity and Capital Resources

 

The Company is in commercialization mode, while continuing to pursue the development of its next generation MCT product as well as new products that are being developed.

 

We generally require cash to:

 

 ●purchase devices that will be placed in the field for pilot projects and to produce revenue,
   
 ●launch sales initiatives,
   
 ●fund our operations and working capital requirements,
   
 ●develop and execute our product development and market introduction plans,

 

 ●fund research and development efforts, and
   
 ●pay any expense obligations as they come due.

 

3038

 

The Company is in the early stages of commercializing its first product. It is concurrently in development mode, operating a research and development program in order to develop an ecosystem of medical technologies, and, where required or deemed advisable, obtain regulatory approvals for, and commercialize other proposed products. The Company launched its first commercial sales program as part of a limited market release, during the year ended March 31, 2019, using an experienced professional in-house sales team. A full market release ensued during the year ended March 31, 2020. Management anticipates the Company will continue on its revenue growth trajectory and improve its liquidity through continued business development and after additional equity or debt capitalization of the Company. The Company has incurred recurring losses from operations, and as at December 31, 2021,June 30, 2022, has an accumulated deficit of $87,055,411$98,061,531 (March 31, 20212022 - $62,817,688)$93,037,142). On August 30, 2021 the Company completed an underwritten public offering of its common stock that concurrently facilitated its listing on the Nasdaq Capital Market. On December 31, 2021,June 30, 2022, the Company has a working capital surplus of $14,781,021$6,269,098 (March 31, 20212022 – working capital deficiency of $6,168,700)$10,455,997). Prior to listing on the Nasdaq Capital Market, The Company had also filed a shelf Registration Statement on Form S-3 (No. 333-255544) with the Securities and Exchange Commission on April 27, 2021, which was declared effective on May 4, 2021. This facilitates better transactional preparedness when the Company seeks to issue equity or debt to potential investors, since it continues to allow the Company to offer its shares to investors only by means of a prospectus, including a prospectus supplement, which forms part of an effective registration statement. As such, the Company has developed and continues to pursue sources of funding that management believes will be sufficient to support the Company’s operating plan and alleviate any substantial doubt as to its ability to meet its obligations at least for a period of one year from the date of these consolidated financial statements. During the fiscal year ended March 31, 2021, the Company closed a number of private placements offering of convertible notes, which have raised net cash proceeds of $11,375,690 (face value $12,525,500). As of December 31, 2021, $11,048,000 face value of convertible notes issued during last fiscal year was converted into common shares. During fiscal quarter ended June 30, 2021, the Company raised an additional $499,900 through government EIDL loan, and $250,000 through short term loans. During the fiscal quarter ended Sept 30, 2021, the Company raised total net proceeds of $14,545,805 through the underwritten public offering that was concurrent with its listing onto the Nasdaq Capital Markets. During the fiscal quarter ended December 31, 2021, the Company raised additional net proceeds of $11,756,563 through a term loan transaction (Note 6) and made repayment of the previously issued promissory notes (Note 5 (a)) and short-term loan. In connection with this loan, (Note 5 (a)).the Company and Lender also entered into a Guarantee and Collateral Agreement wherein the Company agreed to secure the Credit Agreement with all of the Company’s assets. The Company and Lender also entered into an Intellectual Property Security Agreement dated December 21, 2021 wherein the Credit Agreement is also secured by the Company’s right title and interest in the Company’s Intellectual Property.

 

As we proceed with the commercialization of the Bioflux product development, we expect to continue to devote significant resources on capital expenditures, as well as research and development costs and operations, marketing and sales expenditures.

 

The Company is in its strongest ever capital position as at December 31, 2021. We expect to require additional funds to further develop our business plan, including the continuous commercialization and expansion of the technologies that will form part of its BioSphere eco-system. Based on the current known facts and assumptions, we believe our existing cash and cash equivalents, along with anticipated near-term equity financings, will be sufficient to meet our needs for the next twelve months from the filing date of this report. However, we will need to seek additional debt or equity capital to respond to business opportunities and challenges, including our ongoing operating expenses, protecting our intellectual property, developing or acquiring new lines of business and enhancing our operating infrastructure. The terms of our future financings may be dilutive to, or otherwise adversely affect, holders of our common stock. We may also seek additional funds through arrangements with collaborators or other third parties. There can be no assurance we will be able to raise this additional capital on acceptable terms, or at all. If we are unable to obtain additional funding on a timely basis, we may be required to modify our operating plan and otherwise curtail or slow the pace of development and commercialization of our proposed product lines.

 

Net Cash Used in Operating Activities

 

During the ninethree months ended December 31, 2021,June 30, 2022, we used cash in operating activities of $10.4$4.0 million compared to $7.5$2.7 million for the corresponding period of the prior year. These activities involved expenditures for sales, infrastructure and business development, as well as marketing and operating activities, and continued research and product development.

 

3139

Net Cash from Financing Activities

 

Net cash used by financing activities was $0.8 million for the three months ended June 30, 2022, compared to $0.6 million net cash provided by financing activities was $25.0 million for the ninethree months ended December 31, 2021 compared to $9.6 million for the nine months ended December 31, 2020.June 30, 2021.

 

Net Cash Used in Investing Activities

 

Net cash used by investing activities was $29,766$Nil for the ninethree months ended December 31, 2021 (December 31, 2020:June 30, 2022 (June 30, 2021: Nil).

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Not required for a smaller reporting company.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 13a-15(e). The Company’s disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching the Company’s desired disclosure control objectives. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Therefore, even a system which is determined to be effective cannot provide absolute assurance that all control issues have been detected or prevented. Our systems of internal controls are designed to provide reasonable assurance with respect to financial statement preparation and presentation.

 

At the end of the period being reported upon, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to ensure that the material information required to be included in our Securities and Exchange Commission reports is accumulated and communicated to our management, including our principal executive and financial officer, as well as recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms relating to the Company.

 

Changes in Internal Controls

 

There were no changes in the Company’s internal controls over financial reporting that occurred during the three-month period ended December 31, 2021June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

 

3240

PART II

 

OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

None.

 

Item 1A. Risk Factors

 

Not required for smaller reporting companies.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

During the period from July 1 to August 16,12, the Company received conversion notices to convert $5,268,000$100,000 in convertibles notes together with $428,000 in accrued interest, into common shares. Pursuant to receipt of these conversion notices, the Company has processed the issuance of 2,273,400117,647 common shares. During this same period, the Company has issued 59,88371,792 common shares to investors in the respective convertible notesnote investors who have exercised warrants issued in prior periods. Also, during this same period, the Company issued 36,06022,772 common shares to brokers who exercised placement agent warrants receivedconsultants for services as compensation.compensation for services rendered. In connection with the foregoing, the Company relied upon the exemption from registration provided by Section 4(a)(2) under the Securities Act of 1933, as amended, for transactions not involving a public offering.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits

 

31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

 

101.INSInline XBRL Instance Document
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

* Filed herewith.

** Furnished herewith.

 

3341

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, this 1415th day of FebruaryAugust 2022.

 

BIOTRICITY INC.

 

By:/s/ Waqaas Al-Siddiq 
Name:Waqaas Al-Siddiq 
Title:Chief Executive Officer 
 (principal executive officer) 
   
By:/s/ John Ayanoglou 
Name:John Ayanoglou 
Title:Chief Financial Officer 
 (principal financial and accounting officer) 

 

3442