UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
Form 10-Q
(Mark One)
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| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF | |
| For the quarterly period ended December 31, | ||
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| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF | |
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For the period from ______________ to_______________
Commission file number: 333-201719001-40761
BIOTRICITY INC.
(NameExact name of Registrantregistrant as specified in Its Charter)its charter)
| Nevada | 30-0983531 | |
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State or | (I.R.S. Employer Identification No.) | |
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(800) 590-4155
203 Redwood Shores Parkway, Suite 600
Redwood City, California94065
(Address of principal executive offices)
(800)590 4155
(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 [X] ☒ No [ ]☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No[ ] ☒ No ☐
Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“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 ☐ |
Large accelerated filer [ ]
Accelerated filer [ ]
Non-accelerated filer [ ]
Smaller reporting company [X]
Emerging growth company [X]
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. [X]☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Yes [ ] No [X]
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: 23,268,659 shares of Common Stock, $0.001 par value, at February 12, 2018. The20, 2024. As at that same date, the Company also has 8,443,172160,672 Exchangeable Shares outstanding as of February 12, 2018, that convert directly into common shares, which when combined with its Common Stock produce an amount equivalent to 31,711,8319,419,629 outstanding voting securities.
BIOTRICITY INC.
| 2 |
i
PART 1
FINANCIAL INFORMATION
Item 1 – Condensed Consolidated Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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BIOTRICITY INC. AS OF DECEMBER 31, 2023 (unaudited) AND MARCH 31, 2023 (audited) (Expressed in US Dollars)
Commitments and contingencies [Note 11] Subsequent Events [Note 14] See accompanying notes to unaudited condensed consolidated interim financial statements
BIOTRICITY INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2023 AND 2022 (unaudited) (Expressed in US Dollars)
See accompanying notes to unaudited condensed consolidated interim financial statements
BIOTRICITY INC. FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2023 AND 2022 (unaudited)
See accompanying notes to unaudited condensed consolidated interim financial statements
BIOTRICITY INC. FOR THE NINE MONTHS ENDED DECEMBER 31, 2023 AND 2022 (UNAUDITED) (Expressed in US Dollars)
See accompanying notes to unaudited condensed consolidated interim financial statements
BIOTRICITY INC. DECEMBER 31, 2023 (Unaudited) (Expressed in US dollars) 1. NATURE OF OPERATIONS Biotricity 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, 2023 and 2022 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, 2024. 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 subsidiary. Significant intercompany accounts and transactions have been eliminated. Reclassifications Certain amounts presented in the prior year period have been reclassified to conform to current period condensed consolidated financial statement presentation. Interest expense related to debt principal, previously recorded as a selling, general and administrative expense in the condensed consolidated statements of operations and comprehensive loss in the prior year, was reclassified as a non-operating expense. Reverse Stock Split On June 29, 2023, the Company filed a Certificate of Amendment to its Amended and Restated Articles of Incorporation to effect a one-for-six (1-for-6) share consolidation (the “Reverse Split”). The Reverse Split became effective on July 3, 2023. As a result of the Reverse Split, every six shares of the Company’s issued and outstanding common stock were automatically converted into one share of common stock, without any change in the par value per share or to the number of shares authorized and began trading on a post-Reverse Split basis under the Company’s existing trading symbol, “BTCY,” when the market opened on July 3, 2023. No fractional shares were outstanding following the Reverse Split. Any holder who would have received a fractional share of common stock was automatically entitled to receive an additional fraction of a share of common stock to round up to the next whole share: shares were issued for this purpose on July 19, 2023. The Reverse Split does not impact the amount of authorized common stock or par value per share. Lastly, the Reverse Split does not impact the amount of authorized, issued or outstanding shares of preferred stock. All issued and outstanding common stock, common stock per share amounts and corresponding balance sheet accounts contained in the financial statements have been retroactively adjusted to reflect this Reverse Split for all periods presented. In addition, a proportionate adjustment was made to the per share exercise and conversion price and the number of shares issuable upon the exercise or conversion of all outstanding stock options, warrants, convertible debt and equity instruments to purchase shares of common stock.
BIOTRICITY INC. DECEMBER 31, 2023 (Unaudited) (Expressed in US dollars) Going Concern, Liquidity and Basis of Presentation The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company is in the early stages of commercializing its first product and is concurrently in development mode, operating a research and development program in order to develop, obtain regulatory clearance for, and commercialize other proposed products. The Company has incurred recurring losses from operations, and as of December 31, 2023, had an accumulated deficit of $123.1 million and a working capital deficiency of $14.69 million. Those conditions raise substantial doubt about its ability to continue as a going concern for a period of one year from the issuance of these condensed consolidated financial statements. The condensed consolidated financial statements do not include adjustments that might result from the outcome of this uncertainty. 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. During fiscal year ended March 31, 2022, the Company raised $499,900 through government EIDL loan. The Company also raised total net proceeds of $14,545,805 through the underwritten public offering that was concurrent with its listing onto the Nasdaq Capital Markets. 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 and short-term loans. In connection with this loan, the Company and Lender entered into a Guarantee and Collateral Agreement, as well as an Intellectual Property Security Agreement, wherein the Company agreed to secure the Credit Agreement with all of the Company’s assets, as well as secured by the Company’s right title and interest in the Company’s Intellectual Property. During the fiscal year ended March 31, 2023, the Company raised short-term loans and promissory notes, net of repayments of $1,476,121 from various lenders, and also raised convertible notes, net of redemptions of $2,355,318 from various lenders. During the nine months ended December 31, 2023, the Company entered into a Series B preferred stock financing that generated $1.9 million in net proceeds and the Company raised additional convertible notes, net of redemptions of $2.2 million from various lenders. The Company also raised additional short-term loans and promissory notes, net of repayments, of $0.7 million from various lenders. As we proceed with the commercialization of the Bioflux, Biotres, and Biocare 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. Based on the above facts and assumptions, we believe our existing cash, along with anticipated near-term financings, will be sufficient to continue 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. In December 2019, a novel strain of coronavirus (COVID-19) emerged in Wuhan, Hubei Province, China and spread globally, causing significant disruption to the global and US economy. On March 20, 2020, the Company announced the precautionary measures taken as well as announcing the business impact related to the coronavirus (COVID-19) pandemic. Though its operations have since returned to a normal state, the extent to which the COVID-19 pandemic may continue to affect the economy and the Company’s operations may depend on future developments.
BIOTRICITY INC. DECEMBER 31, 2023 (Unaudited) (Expressed in US dollars) 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Revenue 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. Both the Bioflux cardiac outpatient monitoring device, and the Biotres device are wearable devices. The cardiac data that the devices monitor and collect 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 are comprised of device sales revenues and technology fee revenues (technology as a service). The devices, together with their licensed software, are 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, from time to time, 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 and nine months ended December 31, |
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(Expressed in US dollars) Inventories Inventory is stated at the lower of
Significant accounting estimates and |
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized 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, promissory notes, convertible notes and derivative liabilities.
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.
BIOTRICITY INC. DECEMBER 31, 2023 (Unaudited) (Expressed in US dollars)
In determining the fair values of the derivative liabilities from the conversion and redemption features, the Company used Monte-Carlo and lattice 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.
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.
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 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, considering 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 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.
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.
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.
BIOTRICITY INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2023 (Unaudited) (Expressed in US dollars) The Company has adopted the Financial |
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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 consolidated 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, consolidated 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 loss in stockholders’ deficiency. The Company has not, to the date of these consolidated financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
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 consolidated 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.
BIOTRICITY INC. |
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CONDENSED CONSOLIDATED BALANCE SHEETS |
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(Expressed in US Dollars) |
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| As at December 31, 2017 | As at March 31, 2017 |
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| $ | $ |
CURRENT ASSETS |
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Cash | 2,482,262 | 424,868 |
Harmonized sales tax recoverable | 27,991 | 939 |
Deposits and other receivables | 29,682 | 14,705 |
Total current assets | 2,539,935 | 440,512 |
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Deposits and other receivables | 33,000 | 33,000 |
TOTAL ASSETS | 2,572,935 | 473,512 |
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CURRENT LIABILITIES |
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Accounts payable and accrued liabilities[Note 4] | 630,089 | 1,137,454 |
Convertible promissory notes[Note 5] | - | 1,556,990 |
Derivative liabilities[Note 6] | - | 2,163,884 |
TOTAL LIABILITIES | 630,089 | 4,858,328 |
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STOCKHOLDERS' EQUITY (DEFICIENCY) |
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Preferred stock, $0.001 par value, 10,000,000 authorized as at December 31, 2017 and March 31, 2017, respectively, 1 share issued and outstanding as at December 31, 2017 and March 31, 2017, respectively[Note 7] | 1 | 1 |
Common stock, $0.001 par value, 125,000,000 authorized as at December 31, 2017 and March 31, 2017, respectively. | 31,531 | 27,199 |
Shares to be issued[Note 7] | 601,729 | - |
Additional paid-in-capital | 25,594,234 | 14,308,583 |
Accumulated other comprehensive loss | (628,694) | (413,384) |
Accumulated deficit | (23,655,955) | (18,307,215) |
Total stockholders' equity (deficiency) | 1,942,846 | (4,384,816) |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) | 2,572,935 | 473,512 |
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Commitments [Note 9] |
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Subsequent Events [Note 10] |
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See accompanying notes to condensed consolidated interim financial statements |
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BIOTRICITY INC. |
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS |
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FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2017 AND 2016 |
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(Expressed in US Dollars) |
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| Three Months Ended December 31, 2017 | Three Months Ended December 31, 2016 | Nine Months Ended December 31, 2017 | Nine Months Ended December 31, 2016 |
| (unaudited) | (unaudited) | (unaudited) | (unaudited) |
| $ | $ | $ | $ |
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REVENUE | - | - | - | - |
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EXPENSES |
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General and administrative expenses[Notes 7, 8 and 9] | 1,717,666 | 1,858,536 | 3,825,602 | 3,547,990 |
Research and development expenses | 377,924 | 333,565 | 1,106,658 | 847,938 |
TOTAL OPERATING EXPENSES | 2,095,590 | 2,192,101 | 4,932,260 | 4,395,928 |
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Accretion expense including day one derivative loss[Note 5] | - | 307,216 | 879,416 | 901,299 |
Change in fair value of derivative liabilities[Note 6] | - | 125,353 | 20,588 | 714,453 |
NET LOSS BEFORE INCOME TAXES | (2,095,590) | (2,624,670) | (5,832,264) | (6,011,680) |
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Income taxes | - | - | - | - |
NET LOSS | (2,095,590) | (2,624,670) | (5,832,264) | (6,011,680) |
|
|
|
|
|
Translation adjustment | (23,424) | 24,635 | (193,771) | (185,057) |
|
|
|
|
|
COMPREHENSIVE LOSS | (2,119,014) | (2,600,035) | (6,026,035) | (6,196,737) |
|
|
|
|
|
LOSS PER SHARE, BASIC AND DILUTED | (0.068) | (0.100) | (0.186) | (0.236) |
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | 30,799,342 | 26,162,293 | 31,374,911 | 25,427,620 |
|
|
|
|
|
See accompanying notes to the condensed consolidated interim financial statements |
|
| ||
3
BIOTRICITY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31, 2017 AND 2016
(Expressed in US Dollars)
| Nine Months Ended December 31, 2017 | Nine Months Ended December 31, 2016 |
| (unaudited) | (unaudited) |
| $ | $ |
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
Net loss | (5,832,264) | (6,011,680) |
Adjustments to reconcile net loss to net cash used in operations |
|
|
Stock based compensation | 646,970 | 405,058 |
Issuance of shares for services | 1,325,128 | 805,329 |
Issuance of warrants for services, at fair value | 272,630 | 474,232 |
Accretion expense, including day one derivative loss | 879,416 | 901,296 |
Change in fair value of derivative liabilities | 20,588 | 714,454 |
Fair value of warrants issued | - | - |
|
|
|
Changes in operating assets and liabilities: |
|
|
Harmonized sales tax recoverable | (27,052) | 18,358 |
Deposits and other receivables | (14,977) | 838,492 |
Accounts payable and accrued liabilities | (507,365) | 16,613 |
Net cash used in operating activities | (3,236,926) | (1,837,848) |
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
Issuance of shares, net | 4,860,970 | - |
Proceeds from exercise of warrants | 428,311 | 105,500 |
Issuance of convertible debentures, net | - | 1,899,700 |
Proceeds from issuance of stock options | - | - |
Due to shareholders | - | (50,724) |
Net cash provided by financing activities | 5,289,281 | 1,954,476 |
|
|
|
Effect of foreign currency translation | 5,039 | (149,612) |
|
|
|
Net increase in cash during the period | 2,052,355 | 116,628 |
|
|
|
Cash, beginning of period | 424,868 | 53,643 |
|
|
|
Cash, end of period | 2,482,262 | 20,659 |
|
|
|
See accompanying notes to condensed consolidated interim financial statements | ||
4
BIOTRICITY, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 3, 2017 (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.
Both the Company and iMedical are engaged in research and development activities within the remote monitoring segment of preventative care. They are focused on a realizable healthcare business model that has an existing market and commercialization pathway. As such, its efforts to date have been devoted in building technology that enables access to this market through the development of a tangible product.
On February 2, 2016, the Company entered into an exchange agreement with 1061806 BC LTD. (“Callco”), a British Columbia corporation and wholly owned subsidiary (incorporated on February 2, 2016), 1062024 B.C. LTD., a company existing under the laws of the Province of British Columbia (“Exchangeco”), iMedical, and the former shareholders of iMedical (the “Exchange Agreement”), whereby Exchangeco acquired 100% of the outstanding common shares of iMedical, taking into account certain shares pursuant to the Exchange Agreement as further explained in Note 7 to the unaudited interim condensed consolidated financial statements. These subsidiaries were solely used for the issuance of exchangeable shares in the reverse takeover transaction and have no other transactions or balances. After giving effect to this transaction, the Company acquired all iMedical’s assets and liabilities and commenced operations through iMedical.
As a result of the Share Exchange, iMedical is now a wholly-owned subsidiary of the Company. This transaction has been accounted for as a reverse merger. Consequently, the assets and liabilities and the historical operations reflected in the unaudited interim condensed consolidated financial statements for the periods prior to February 2, 2016 are those of iMedical and are recorded at the historical cost basis. After February 2, 2016, the Company’s consolidated financial statements include the assets and liabilities of both iMedical and the Company and the historical operations of both after that date as one entity.
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 Exchange Commission (“SEC”) instructions to Form 10-Q and Article 8 of SEC Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with the Company’s audited financial statements for the three and twelve months ended March 31, 2017 and for the twelve months ended December 31, 2016 and December 31, 2015 and notes thereto included in the Form 10-KT filed with the SEC on June 29, 2017. 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 three and nine months ended December 31, 2017 are not necessarily indicative of the results that may be expected for the year ending March 31, 2018. The Company’s fiscal year-end is March 31.
The unaudited interim condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Significant intercompany accounts and transactions have been eliminated.
Liquidity and Basis of Presentation
The Company is in development mode, operating a research and development program to develop, obtain regulatory approval for, and commercialize its proposed products. The Company has incurred recurring losses from operations, and as at December 31, 2017, and has an accumulated deficit of $23,655,955. Management anticipates the Company will attain profitable status and improve its liquidity through continued business development and after additional debt or equity investment in the Company. The Company has developed and continues to pursue sources of funding that management believes if successful would be sufficient to support the Company’s operating plan and alleviate any substantial doubt as to its ability to meet its obligations at least for one year from the date these consolidated financial statements are issued. As an example of this, the Company filed a shelf prospectus under which it conducted a registered sale of shares during the three months ended December 31, 2017 that raised gross proceeds of $2,475,901.
The Company’s operating plan is predicated on a variety of assumptions including, but not limited to, the level of product demand, cost estimates, its ability to continue to raise additional debt and equity financing, the planned repayment dates of outstanding operating liabilities, and the state of the general economic environment in which the Company operates. There can be no assurance that these assumptions will prove to be accurate in all material respects, or that the Company will be able to successfully execute its operating plan. In the absence of additional financing, the Company may have to modify its operating plan to slow down the pace for development and commercialization of its proposed products.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of the unaudited interim condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Areas involving significant estimates and assumptions include: deferred income tax assets and related valuation allowance, accruals and valuation of derivatives, convertible promissory notes, stock options and warrants, as well as assumptions used by management in its assessment of liquidity. Actual results could differ from those estimates. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the period in which they become known.
Earnings (Loss) Per Share
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 no potentially dilutive shares outstanding as at December 31, 2017 and 2016.
Cash
Cash includes cash on hand and balances with banks.
6
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.
Foreign Currency Translation
The functional currency of the Canadian based company is the Canadian dollar and the US based company is USD. 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 interim unaudited condensed consolidated 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 cumulative other comprehensive income (loss) in stockholders’ deficit. The Company has not, to the date of these unaudited interim condensed consolidated financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
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:
| BIOTRICITY INC. DECEMBER 31, 2023 (Unaudited) (Expressed in US dollars) 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, deposits and other receivables, convertible promissory notes, derivative liabilities, and accounts payable. The Company's cash and derivative liabilities, which are carried at fair value, are classified as a Level 1 financial instruments. The Company’s bank accounts are maintained with financial institutions of reputable credit, therefore, bear minimal credit risk.
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, accounts payable and accrued liabilities. The Company’s derivative liabilities are carried at fair values and are classified as Level 3 financial instruments. The Company’s bank accounts are maintained with financial institutions of reputable credit, therefore, bear minimal credit risk.
The fair value of financial instruments measured on a recurring basis is as follows:
SCHEDULE OF FAIR VALUE OF FINANCIAL INSTRUMENTS
| As of December 31, 2023 | ||||||||||||||||
| Description | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
| Liabilities: | ||||||||||||||||
| Derivative liabilities, short-term | $ | 928,333 | $ | — | $ | — | $ | 928,333 | ||||||||
| Derivative liabilities, long-term | 1,139,293 | — | — | 1,139,293 | ||||||||||||
| Total liabilities at fair value | $ | 2,067,626 | $ | — | $ | — | $ | 2,067,626 | ||||||||
| As of March 31, 2023 | ||||||||||||||||
| Description | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
| Liabilities: | ||||||||||||||||
| Derivative liabilities, short-term | $ | 1,008,216 | $ | — | $ | — | $ | 1,008,216 | ||||||||
| Derivative liabilities, long-term | 759,065 | — | — | 759,065 | ||||||||||||
| Total liabilities at fair value | $ | 1,767,281 | $ | — | $ | — | $ | 1,767,281 | ||||||||
There were no transfers between fair value hierarchy levels during the three and nine months ended December 31, 2023 and 2022.
Operating Leases
The Company leases office space and certain office equipment under operating lease agreements. The lease term begins on the date of initial possession of the leased property for purposes of recognizing lease expense on a straight-line basis over the term of the lease. Lease renewal periods are considered on a lease-by-lease basis and are generally not included in the initial lease term.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740. The Company provides for federal 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 is more likely than not to be realized.
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.
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.
8
Recently Issued Accounting Pronouncements
In July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2017-11 (“ASU 2017-11”), which addressed accounting for (I) certain financial instruments with down round features and (II) replacement of the indefinite deferral for mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable non-controlling interests with a scope exception. The main provisions of Part I of ASU 2017-11 “change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS.” Under previous US GAAP, warrants with a down round feature are not being considered indexed to the entity’s own stock, which results in classification of the warrant as a derivative liability. Under ASU 2017-11, the down round feature qualifies for a scope exception from derivative treatment. ASU 2017-11 is effective for public companies as of December 15, 2018 and interim periods within that fiscal year. Early adoption is permitted, including adoption in an interim period, with adjustments reflected as of the beginning of the fiscal year. The Company has issued financial instruments with down round features. The Company opted to adopt ASU 2017-11 in its three-month interim period ended September 30, 2017, which is effective from April 1, 2017, with adjustments reflected in the accumulated deficit of stockholders’ deficiency as of April 1, 2017. Please refer to Note 6.
The amendments in this Update require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this Update do not provide a definition of restricted cash or restricted cash equivalents. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments in this Update should be applied using a retrospective transition method to each period presented. Management does not expect to have a significant impact of this ASU on the Company’s unaudited interim condensed consolidated financial statements.
In May 2017, an accounting pronouncement was issued by the Financial Accounting Standards Board (“FASB”) ASU 2017-09, “Compensation - Stock Compensation: Scope of Modification Accounting.” ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The updated guidance is effective for interim and annual periods beginning after December 15, 2017, and early adoption is permitted. The adoption of this pronouncement is not expected to have a material impact on the unaudited interim condensed consolidated financial position and/or results of operations.
On January 1, 2017, the Company adopted the accounting pronouncement issued by the Financial Accounting Standards Board (“FASB”) to simplify the presentation of deferred income taxes within the balance sheet. This pronouncement eliminates the requirement that deferred tax assets and liabilities are presented as current or noncurrent based on the nature of the underlying assets and liabilities. Instead, the pronouncement requires that all deferred tax assets and liabilities, including valuation allowances, be classified as noncurrent. We adopted this pronouncement on a retrospective basis. The adoption of this guidance did not have a material impact on the Company’s unaudited interim condensed consolidated financial position and/or results of operations.
On January 1, 2017, the Company adopted the accounting pronouncement issued by the FASB to simplify the accounting for goodwill impairment. This guidance eliminates the requirement that an entity calculate the implied fair value of goodwill when measuring an impairment charge. Instead, an entity would record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. The Company adopted this pronouncement on a prospective basis. The adoption of this guidance did not have a material impact on the Company’s unaudited interim condensed consolidated financial position and/or results of operations.
In February 2016, an accounting pronouncement was issued by the FASB 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 current accounting guidance. This pronouncement is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. The adoption is required to be applied on a modified retrospective basis for each prior reporting period presented. The Company has not yet determined the effect that the adoption of this pronouncement may have on its unaudited interim condensed consolidated financial position and/or results of operations.
4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
| As at December 31, 2017 | As at March 31, 2017 |
| $ | $ |
Accounts payable | 518,204 | 866,188 |
Accrued liabilities | 111,885 | 271,266 |
| 630,089 | 1,137,454 |
Accounts payable as at December 31, 2017, and March 31, 2017 include $191,173 and $195,081, respectively, due to a shareholder and executive of the Company, primarily as a result of bonus and allowance compensation payable in that individual’s capacity as an employee.
5. CONVERTIBLE PROMISSORY NOTES
Pursuant to the terms of an offering of up to $2,000,000, iMedical during the year ended December 31, 2015 issued convertible promissory notes to various accredited investors amounting to $1,368,978 in face value. These notes have a maturity date of 24 months and carry annual interest rate of 11%. The note holders have the right until any time until the note is fully paid, to convert any outstanding and unpaid principal portion of the note, and accrued interest, into fully paid and non-assessable shares of Common Stock. The note has a conversion price initially set at $1.78. Upon any future financings completed by the Company, the conversion price will reset to 75% of the future financing pricing. These notes do not contain prepayment penalties upon redemption. These notes were secured by all of the then present and after acquired property of the Company. However, the Company was entitled to force conversion of these notes, if during the term of the agreement, the Company completed a public listing and the common share price exceeded the conversion price for at least 20 consecutive trading days. At the closing of the offering, the Company issued cash (7%) and warrants (7% of the number of common shares into which the notes may be converted) to a broker. The broker received 3% in cash and warrants for those investors introduced by the Company. The warrants have a term of 24 months and a similar reset provision based on future financings.
Pursuant to the conversion provisions, in August 2016, the Company converted the promissory notes, in the aggregate face value of $1,368,978, into 912,652 shares of common shares as detailed below. The fair value of the common shares was $2,907,912 and $1,538,934 was allocated to the related derivative liabilities (see note 6) and the balance to the carrying value of the notes.
| 17 | ||||
Accreted
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023 (Unaudited)
(Expressed in US dollars)
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 equipment | 5 years |
| Leasehold improvement | 5 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 December 31, 2023 and March 31, 2023, 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 liabilities, current, and lease liabilities, 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 sheets and are expensed on a straight-line basis over the lease term in the consolidated statements of operations and comprehensive loss. The Company determines the lease term by agreement with lessor. As the Company’s lease does not provide 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 10 for further discussion.
Income Taxes
The 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 consolidated 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 is more likely than not to be realized.
| 18 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023 (Unaudited)
(Expressed in US dollars)
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.
Selling, General and Administrative
Selling, general and administrative expenses consist primarily of personnel-related costs including stock-based compensation for personnel in functions not directly associated with research and development activities. Other significant costs include sales and marketing costs, investor relations and legal costs relating to corporate matters, professional fees for consultants assisting with business development and financial matters, and office and administrative expenses.
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 consolidated statements of operations and comprehensive loss 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 expenses 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.
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. The Company also accounts 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. Accordingly, the Company records, as a discount to convertible notes, the amount bifurcated from the convertible notes attributed to any derivatives. Debt discounts under these arrangements are amortized over the term of the related debt.
Series B Convertible Preferred Stock
The Series B convertible preferred stock (“Series B Preferred Stock”) was accounted for as mezzanine equity and the embedded conversion and redemption features was accounted for as derivative liabilities with change in fair value at each reporting period end charged to consolidated statement of operation in accordance with ASC 480 and ASC 815.
The Company accounted for preferred stock redemptions and conversions in accordance to ASU-260-10-S99. For Series A preferred stock redemptions, 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 loss. For Series B preferred stock conversions, no gain or loss is recognized upon Series B preferred stock conversion except for the fair value adjustment for the conversion and redemption feature derivative liabilities on the conversion date.
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BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023 (Unaudited)
(Expressed in US dollars)
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 for fiscal years beginning after December 15, 2022. The Company adopted this guidance on April 1, 2023 and it did not have a significant impact on the Company’s consolidated financial statements.
4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
As of December 31, | As of March 31, | |||||||
| $ | $ | |||||||
| Trade and other payables | 4,656,265 | 3,435,123 | ||||||
| Accrued liabilities | 2,891,440 | 1,607,353 | ||||||
| Deferred revenue | 11,040 | — | ||||||
| Total | 7,558,745 | 5,042,476 | ||||||
Trade and other payables and accrued liabilities as at December 31, 2023 and March 31, 2023 included $725,649 and $446,771, respectively, due to a shareholder, who is a director and executive of the Company.
5. CONVERTIBLE PROMISSORY NOTES AND SHORT TERM LOANS
Series A Convertible Promissory Notes:
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 the 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.
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BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023 (Unaudited)
(Expressed in US dollars)
For the 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 $24.00 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 $24.00 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 $24.00 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.
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 $8,925,500 (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.
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 struck at $6.36 per share.
Prior to January 8, 2021 (final closing date), the Company determined that the conversion and redemption features 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.
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 by March 31, 2022.
On December 30, 2022, the Company exchanged $500,000 of Series A Notes along with its outstanding interest accrual of $121,500 into a new convertible note with the same note holder. The new convertible note has principal of $621,500, stated interest rate of 12% per annum, as well as option to convert outstanding principal and accrued interest at the conversion price, calculated at 75% multiplied by the average of the three lowest closing prices during the previous ten trading days prior to the receipt of the conversion notice. The new convertible note matured on December 30, 2023.
During the three and nine months ended December 31, 2023, the Company recognized discount amortization of $17,102 and $49,393, respectively, as accretion and amortization expense. As of December 31, 2023, the discount on Series A convertible notes was fully amortized. During three and nine months ended December 31, 2022, the Company recognized Nil discount amortization as the relevant discounts were fully amortized.
As of December 31, 2023, the Company recorded $149,184 of interest accruals for the Series A Notes.
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BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023 (Unaudited)
(Expressed in US dollars)
Series B Convertible Notes
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. The Company is 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 $6.36 per share for 100,000 warrant shares and $9.0 per share for 35,417 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 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 by March 31, 2022.
As of December 31, 2023, the Company recorded accrued interest in the amount of $88,263 related to the Series B Notes.
During the three and nine months ended December 31, 2023, the Company redeemed $16,667 and $119,043 of Series B Notes, through a cash payment of $20,000 and $142,851, respectively. A gain on redemption of $2,149 and $15,281 was recognized as a result of this redemption, representing the difference between the cash payment and the face value of Series B Notes redeemed net of the related derivative liabilities ($5,482 and $39,089 for the three and nine months ended December 31, 2023, respectively).
In total, as at December 31, 2023, the Company had $200,000 and $38,677 for Series A Notes and Series B Notes remaining outstanding beyond their contractual maturity date. These continued to accrue interest, and no repayment demand notification was 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.
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BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023 (Unaudited)
(Expressed in US dollars)
Series C Convertible Notes
During the three months ended June 30, 2023, the Company issued $1,017,700 (face value) in convertible promissory notes (the “Series C Notes”), in addition to $590,000 (face value) of such convertible promissory notes issued during the three months ended March 31, 2023
During the three months ended September 30, 2023, the Company issued additional Series C Notes in the amount of $205,000 (face value), which are convertible promissory 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 15% per annum.
In total, $1,812,700 (face value) of Series C Notes were issued up to December 31, 2023.
The Series C Notes were sold under subscription agreements to accredited investors. The Notes mature one year from the final closing date of the offering and accrue interest at 15% per annum.
For Series C Notes, commencing six months following the Issuance Date, and at any time thereafter, at the sole election of the Holder, any amount of the outstanding principal and accrued interest of this note (the “Conversion Amount”) could be converted into that number of shares of Common Stock equal to: the Conversion Amount divided by the “Optional Conversion Price”, which is defined as lower of (i) seventy-five percent (75%) of the VWAP for the five (5) Trading Days prior to the Conversion Date, or (ii) eighty percent (80%) of the gross sale price per share of Common Stock (or conversion or exercise price per share of Common Stock of any Common Stock Equivalents) sold in a Qualified Financing.
For Series C Notes, “Mandatory Conversion” of the notes would convert into common stock at the applicable “Mandatory Conversion Price”, if either (i) on each of any twenty (20) consecutive Trading Days (the “Measurement Period”) (A) the closing price of the Common Stock on the applicable Trading Market is at least $18.00 per share and (B) the dollar value of average daily trades of the Common Stock on the applicable Trading Market is at least $400,000 per Trading Day; or (ii) upon the closing of a Qualified Financing, provided that the dollar value of average daily trades of the Common Stock on the applicable National Exchange on each of the ten (10) consecutive Trading Days following such closing is at least $400,000 per Trading Day. Mandatory Conversion Price means, in the case of a Mandatory Conversion under situation (i) above, seventy percent (70%) of the VWAP over the Measurement Period, or in the case of a Mandatory Conversion under situation (ii) above, eighty percent (80%) of the gross sale price per share of Common Stock (or conversion or exercise price per share of Common Stock of any Common Stock Equivalents) sold in a Qualified Financing.
The Company was obligated to issue warrants that accompany the convertible notes and provide 100% warrant coverage. The warrants have a 4-year term from date of issuance and an exercise price that is 200% of the 5-day volume weighted average price of the Company’s common shares at the time of final closing.
The Company was obligated to pay the placement agent of the first series of Series C Notes a 10% cash fee for the face value of the notes.
The Company was also obligated to issue warrants to the placement agent that have a 10-year term and cover 8% of face value of the notes, with an exercise price that equals to the 5-day volume weighted average price of the Company’s common shares at the time final closing.
Net proceeds to the Company from Series C Notes issuance during the nine months ended December 31, 2023 amounted to $1,100,430 after payment of the relevant financing related fees.
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BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023 (Unaudited)
(Expressed in US dollars)
Prior to the final closing date (October 23, 2023), the Company determined that the conversion features contained in those Note, as well as the obligations to issue investor warrants and placement agent warrants 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 features, as well as the obligations related to investor warrant and placement agent warrant issuance. Subsequently, the exercise price of all warrants was concluded and locked to $4.18 and $2.09, respectively, for the note holder and placement agent warrants, as of the final closing date October 23, 2023. 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 October 23, 2023 and then transferred to equity (collectively, “End of warrants derivative treatment”).
For the Series C Notes, the Company recognized debt issuance costs of $Nil and $207,361 during the three and nine months ended December 31, 2023 and treated these as debt discounts. The Company also recognized additional debt discount in the amount of $Nil and $1,005,829 in connection with the recognition of derivative liabilities for the conversion features, investor warrants and placement agent warrants. The debt discounts are recorded as a contra liability against the convertible note and are amortized and recognized as accretion expenses using the effective interest method over the remaining lives of the Notes. Since total debt discount amount cannot exceed total gross proceeds upon issuance, the Company recognized accretion expenses up front of $Nil and $134,013 during the three and nine months ended December 31, 2023.
During the three and nine months ended December 31, 2023, the Company recognized discount amortization of $139,568 and $320,434, respectively, on Series C Notes as accretion and amortization expense. As of December 31, 2023, the remaining unamortized discount on Series C convertible notes was $ 1,471,345.
As of December 31, 2023, the Company recorded accrued interest in the amount of $184,911 related to the Series C Notes.
Convertible Preferred Notes
The Company entered into a convertible preferred note financing on September 25, 2023 and issued a convertible note (“Preferred Note”) for a principal amount of $1.0 million. The Preferred Note matures on the eighteen (18) month anniversary of the issuance date, or if there be more than one closing pursuant to a qualified offering as defined in the financing agreement, the eighteen (18) month anniversary of the last closing date of the offering (the “Maturity Date”). The Preferred Note bears interest at a fixed rate of 12% which is payable in cash monthly.
The Company also entered into a convertible preferred note financing on October 25, 2023 and issued a convertible note (“Preferred Note”) for a principal amount of $250,000. The Preferred Note matures on the eighteen (18) month anniversary of the issuance date, or if there be more than one closing pursuant to a qualified offering as defined in the financing agreement, the eighteen (18) month anniversary of the last closing date of the offering (the “Maturity Date”). The Preferred Note bears interest at a fixed rate of 12% which is payable in cash monthly.
The conversion of the Preferred Notes is automatic upon a Qualified Financing which is in the control of the Company, or at maturity of the notes, upon mutual agreement by the noteholder and the Company. Since the conversion is not in control of the holder of the note, the Company did not recognize a derivative liability in connection with the conversion option of the Other Convertible Notes.
The Company may prepay the Preferred Note in whole or in part, after providing fifteen (15) days written notice to the holder, either in cash or by the mutually consented conversion of the Preferred Note and any accrued interest thereon at a 15% discount to the stock’s 10-day VWAP.
As of December 31, 2023, the Company recorded accrued interest in the amount of $36,460 related to the Preferred Notes.
Other Convertible Preferred Notes
On January 23, 2023, the Company issued $2,000,000 (face value) in convertible preferred notes (“the Notes”) to an accredited investor. The Notes mature 18 months from the issuance date. This note bears interest rate at a fixed rate of 10% in the form of stock with a striker price equal to the closing stock price on the note issuance date. Therefore, the Company issued units of common stock in lieu of interest on this convertible note. These stocks were valued at $ and was recognized as a deferred cost on the convertible note, recorded as a contra liability against the convertible note, and was amortized and recognized as accretion expense using the effective interest rate method over the remaining lives of the Notes.
The conversion of the Notes is automatic upon a Qualified Financing which is in the control of the Company, or at maturity of the notes, upon mutual agreement by the noteholder and the Company. Since the conversion is not in control of the holder of the note, the Company did not recognize a derivative liability in connection with the conversion option of the Notes.
During the three and nine months ended December 31, 2023, the Company recognized discount amortization of $55,861 and $166,975, respectively, for the Notes, as part of the accretion and amortization expenses. As of December 31, 2023, the remaining unamortized discount on Notes was $19,428.
Other Short-Term Loans, Promissory Notes and Financing Facilities
In December 2022, the Company entered into a short-term bridge loan agreement with a collateralized merchant finance company that advanced gross proceeds of $400,000, prior to the deduction of issuance costs in the amount of $9,999. The issuance costs were recognized as a debt discount and amortized via the effective interest method. The term of the finance agreement is 40 weeks. The Company is required to make weekly payments of $13,995 ($560,000 in the aggregate). As of December 31, 2023, the principal was fully repaid and discount for this loan was fully amortized. The discount amortization during the three and nine months ended December 31, 2023 was nil and $6,142, respectively, and was recognized as part of the accretion and amortization expenses. In addition, the Company recognized $Nil and $66,213 accretion expenses, during the three and nine months ended December 31, 2023, related to the increase in present value of the loan over its term.
In December 2022, the Company also entered into a short-term collateralized bridge loan agreement with a finance company that advanced gross proceeds of $800,000, prior to the deduction of issuance costs in the amount of $32,000. The issuance costs were recognized as a debt discount and amortized via the effective interest method. The term of this second agreement is 40 weeks. The Company is required to make weekly payments of $29,556 ($13,999 for the first four weeks, and $1,120,000 in the aggregate). As of December 31, 2023, the principal was fully repaid and discount for this loan was fully amortized. The discount amortization during the three and nine months ended December 31, 2023 was $800 and $11,200, respectively, which was recognized as part of the accretion and amortization expenses. In addition, the Company recognized $481 and $150,760 accretion expenses, during the three and nine months ended December 31, 2023, related to the increase in present value of the loan over its term.
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BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023 (Unaudited)
(Expressed in US dollars)
In December 2022, the Company entered into a promissory note agreement with an individual investor that resulted in gross proceeds of $600,000 (the “Principal Amount”). The note has a fixed rate of interest at 25% per annum payable monthly on the first day of every month. This promissory note matured on December 15, 2023, when the Principal Amount became due. The note has various default provisions which would, if triggered, result in the acceleration of the Principal Amount plus any accrued and unpaid interest. The note also has a 3% early payment penalty provision. As of December 31, 2023, the amount of principal outstanding on the note was $600,000, and accrued interest outstanding on the note was $12,825. The note continues to accrue interest, and no repayment demand notification was received from noteholder.
On December 30, 2022, the Company extinguished 51,101 warrants that were originally issued to Series A Convertible Noteholders and replaced these warrants with a new promissory note issued to the same warrant holder. The new promissory note has principal balance of $270,000, stated interest of zero, and maturity date of December 31, 2023. The fair value of this new promissory note was $248,479 as of the issuance date, which was calculated using a discount rate that was comparable to other loan issuance at the same time as well as the market bond rates at the time of the promissory note issuance. The difference between the fair value of the new note and its principal balance was $21,521, and was recognized as a discount, and amortized via effective interest rate method. The Company compared the fair value of the extinguished warrants immediately prior to extinguishment against the fair value of the new promissory note issued. As of December 31, 2023, the obligation to repay the principal balance was waived and amount of principal outstanding on the note was $270,000, and the remaining unamortized discount was $Nil. During the three and nine months ended December 31, 2023, the Company recognized $Nil and $7,304, respectively, amortization of discount on this promissory note as accretion and amortization expenses.
On March 29, 2023, the Company entered into an additional collateralized bridge loan agreement with a finance company that advanced gross proceeds of $300,000, prior to the deduction of issuance costs in the amount of $12,000. The issuance costs were recognized as a debt discount and would be amortized via the effective interest method. The term of this agreement is 40 weeks. The Company is required to make weekly payments of $5,250 for the first four weeks, and $11,083 for the remaining 36 weeks, which is $420,000 in aggregate. On July 18, 2023, the Company entered into an amendment with the finance company and increased total proceeds borrowed to $700,000. The proceeds from the amended loan balance were netted against previously outstanding balance of the loan, along with an issuance cost in the amount of $28,000. The term of this new loan agreement is 40 weeks. The Company is required to make weekly payments of $24,500, which is $980,000 in aggregate. The Company accounted for this amendment as a debt extinguishment and recognized a loss on the amendment of $59,161 in other expenses. The issuance costs on the amended loan were recognized as a debt discount and would be amortized via the effective interest method. As of December 31, 2023, the amount of principal outstanding under this amended agreement was $357,445 and the remaining unamortized issuance cost discount was $11,900. During the three and nine months ended December 31, 2023, the Company recognized $9,100 and $16,100, respectively, of amortization of discount as accretion and amortization expenses. In addition, the Company recognized $108,245 and $300,651 accretion expenses, during the three and nine months ended December 31, 2023, related to the increase in present value of the loan over its term.
In June 2023, the Company entered into a secured revolving account purchase credit and inventory financing facility (the “Revolving Facility”) with a revolving loan lender, pursuant to which the lender may from time to time purchase certain discrete account receivables from the Company (with full recourse) or may make loans and provide other financial accommodations, the payment of which are guaranteed and secured by certain assets of the Company. In assigning the selling accounts receivables to the revolving loan lender, the Company is receiving 85% of their value as an advance of its regular collection of those receivables, limited to $1.2 million in financing, and expects to receive the remaining balance as part of normal collection activities. The inventory financing provided by this facility was limited to the lower of $0.3 million, or a 40% maximum of inventory balances. The Revolving Facility was accounted for as a secured borrowing. As of December 31, 2023, the Company had drawn $891,111 in accounts receivable financing and $300,000 in inventory financing with aggregate principal outstanding of $1,191,111.
On July 13, 2023, the Company entered into another short-term bridge loan agreement with a collateralized merchant finance company that advanced gross proceeds of $400,000, prior to the deduction of issuance costs in the amount of $24,000. The issuance costs were recognized as a debt discount and amortized via the effective interest method. The term of the finance agreement is 14 weeks. The Company is required to make weekly payments of $38,705 ($540,000 in the aggregate). As of December 31, 2023, the principal was fully repaid and discount for this loan was fully amortized. The discount amortization during the three and nine months ended December 31, 2023 was $5,143 and $24,000 respectively and was recognized as part of the accretion and amortization expenses. In addition, the Company recognized $10,949 and $141,870 accretion expenses during the three and nine months ended December 31, 2023, related to the increase in present value of the loan over its term.
On August 11, 2023, the Company issued two short term promissory notes (“August 2023 Notes”), each for a principal amount of $250,000, to one investor for aggregate gross proceeds of $500,000. The August 2023 Notes do not accrue formal interest, but do contain administrative fees in the aggregate of $75,000. One of the notes matures three months from the issuance date upon which the principal amount of $250,000 and an administrative fee of $25,000 is due. The second note matures six months from the issuance date upon which the principal amount of $250,000 and an administrative fee of $50,000 is due. The administrative fees were accrued as interest expenses for the period of the loans outstanding. As of December 31, 2023, the amount of principal outstanding on the note was $500,000, and accrued interest outstanding on the note was $62,500.
On December 8, 2023, the Company entered into a short-term bridge loan agreement with a collateralized merchant finance company that advanced gross proceeds of $630,000, prior to the deduction of issuance costs in the amount of $15,750. The issuance costs were recognized as a debt discount and amortized via the effective interest method. The term of the finance agreement is 44 weeks. The Company is required to make weekly payments of $19,195 ($844,200 in the aggregate). As of December 31, 2023, the amount of principal outstanding under this amended agreement was $598,014 and the remaining unamortized issuance cost discount was $14,676. During the three and nine months ended December 31, 2023, the Company recognized $1,074 and $1,074, respectively, of amortization of discount as accretion and amortization expenses. In addition, the Company recognized $25,599 and $25,599 accretion expenses during the three and nine months ended December 31, 2023, related to the increase in present value of the loan over its term.
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BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023 (Unaudited)
(Expressed in US dollars)
Total interest expense on the above convertible notes, short-term loan and promissory notes was $284,898 and $69,930 for the three months ended December 31, 2023 and 2022, respectively, and $689,493 and $126,574 during the nine months ended December 31, 2023 and 2022, respectively.
Total accretion expenses on the above convertible notes, short-term loan and promissory notes were $370,755 and Nil for the three months ended December 31, 2023 and 2022, respectively, and $1,421,729 and Nil during the nine months ended December 31, 2023 and 2022, respectively.
6. TERM LOAN AND CREDIT AGREEMENT
Term Loan
On December 21, 2021, the Company entered into a Credit Agreement (“Credit Agreement”) with SWK Funding LLC (“Lender’); as part of this, the Company has borrowed $12.4 million, with a maturity date of December 21, 2026. The principal will accrue interest at the LIBOR Rate plus 10.5% per annum (subject to adjustment as set forth in the Credit Agreement). Interest payments are due 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. 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.
As part of the loan transaction, the Company paid legal and professional costs directly in connection to the debt financing in the amount of $50,000 in cash.
Total costs directly in connection to the debt financing in the amount of $193,437 (professional fee $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 $1,574,068 of existing short-term loan and promissory notes and relevant accrued interests by using the proceeds from the loan.
Total costs directly in connection to the loan and fair value of warrants were in the amount of $1,042,149, and such costs were accounted as debt discount and amortized using the effective interest method. The amortization of such debt discount was included in the accretion and amortization expenses. For the three months ended December 31, 2023 and 2022, the amortization of debt discount expense was $51,950 and $51,061, respectively, and $154,616 and $151,971 during the nine months ended December 31, 2023 and 2022, respectively.
Total interest expense on the term loan for the three months ended December 31, 2023 and 2022 was $496,952 and $389,662, respectively, and $1,489,764 and $1,054,166 during the nine months ended December 31, 2023 and 2022, respectively. During November 2022, the unpaid interest of $364,000 was added to the outstanding principal balance, since then interest onwards would be calculated on the updated principal balance.
The Company had accrued interest payable of $455,620 and $239,614, respectively, as of December 31, 2023 and March 31, 2023.
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.
| 26 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023 (Unaudited)
(Expressed in US dollars)
In connection with the Credit Agreement, the Company issued 9,590 warrants (as adjusted for the Reverse Split) to the Lender, which were fair-valued at $198,713 at issuance (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.
At December 31, 2023, the Company was not in compliance with certain covenants of the term loan, for which it sought and received relief from the term loan lender.
7. FEDERALLY GUARANTEED LOAN
Economic Injury Disaster Loan (“EIDL”)
In April 2020, the Company received $370,900 from the U.S. Small Business Administration (SBA) under the captioned program. The loan has a term of 30 years and an interest rate of 3.75% per annum, without the requirement for payment in the 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.
As of December 31, 2023, the Company recorded accrued interest of $35,846 for the EIDL loan (March 31, 2023: $65,247).
Interest expense on the above loan was $8,231 and $8,230 for the three months ended December 31, 2023 and 2022, respectively, and $24,603 and $24,602 for the nine months ended December 31, 2023 and 2022, respectively.
8. DERIVATIVE LIABILITIES
The Company analyzed the compound features of variable conversion and redemption embedded in the series A and series B preferred shares instruments, 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. A roll-forward of activity is presented below for the nine months ended December 31, 2023 and 2022:
SCHEDULE OF DERIVATIVE LIABILITIES
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Derivative liabilities, beginning of period | 759,065 | 352,402 | ||||||
| Derivative liabilities recognized pursuant to issuance of Series B preferred shares (Note 9) | 642,417 | — | ||||||
| Change in fair value of derivatives during period | (142,830 | ) | 442,309 | |||||
| Reduction due to preferred shares converted | (119,359 | ) | (53,036 | ) | ||||
| Conversion to common shares | ||||||||
| Convertible note modification | ||||||||
| Convertible note redemption | ||||||||
| Derivative liabilities, end of period | 1,139,293 | 741,675 | ||||||
The lattice methodology was used to value the derivative components, using the following assumptions during the nine months ended December 31, 2023 and 2022:
SCHEDULE OF DERIVATIVE COMPONENTS VALUATION ASSUMPTIONS
| 2023 | 2022 | |||||||
| Dividend yield (%) | 12 | 12 | ||||||
| Risk-free rate for term (%) | 4.7 – 13.7 | 2.1 – 4.4 | ||||||
| Volatility (%) | 71.9 – 119.1 | 85.4 – 102 | ||||||
| Remaining terms (Years) | 0.25 – 2.01 | 1 – 3.01 | ||||||
| Stock price ($ per share) | 0.64 – 3.82 | 0.45 – 10.62 | ||||||
| 27 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023 (Unaudited)
(Expressed in US dollars)
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 (Note 5). Any noteholder and placement agent warrants that were issued after the finalization of exercise price was accounted for as equity. A roll-forward of activity is presented below for the nine months ended December 31, 2023 and 2022:
SCHEDULE OF DERIVATIVE LIABILITIES
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Balance beginning of period – March 31 | 1,008,216 | 520,747 | ||||||
| New Issuance | 1,224,933 | — | ||||||
| Conversion to common shares | (39,089 | ) | (192,794 | ) | ||||
| Change in fair value of derivative liabilities | 386,845 | 27,662 | ||||||
| End of derivative treatment | (1,652,572 | ) | (17,979 | ) | ||||
| Convertible note modification | — | (53,402 | ) | |||||
| Balance end of period – December 31 | 928,333 | 351,719 | ||||||
The Monte-Carlo methodology was used to value the convertible note and warrant derivative components during the six months ended December 31, 2023 and 2022, using the following assumptions:
SCHEDULE OF DERIVATIVE COMPONENTS VALUATION ASSUMPTIONS
| 2023 | 2022 | |||||||
| Risk-free rate for term (%) | 4.2 – 5.3 | 4.4 – 4.4 | ||||||
| Volatility (%) | 76.2 – 126.6 | 94 – 102 | ||||||
| Remaining terms (Years) | 0.25 – 1.49 | 1 – 1 | ||||||
| Stock price ($ per share) | 0.46 – 3.04 | 0.45 – 0.45 |
9. STOCKHOLDERS’ DEFICIENCY AND MEZZANINE EQUITY
(a) Authorized and Issued Stock
As at December 31, 2023, the Company is authorized to issue (March 31, 2023 – ) shares of common stock ($ par value), and (March 31, 2023 – ) shares of preferred stock ($ par value), of which (March 31, 2023 – ) are designated shares of Series A preferred stock ($ par value) and (March 31, 2023 – ) are designated shares of Series B preferred stock ($ par value).
At December 31, 2023, common shares and shares directly exchangeable into equivalent common shares that were issued and outstanding totaled (March 31, 2023 – ) shares; these were comprised of (March 31, 2023 – ) shares of common stock and (March 31, 2023 – ) exchangeable shares. At December 31, 2023, there were shares of Series A Preferred Stock that were issued and outstanding (March 31, 2023 – ) and there were shares of Series B Preferred Stock that were issued and outstanding (March 31, 2023 – ). Lastly, there is also 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 and outstanding as at December 31, 2023 and March 31, 2023.
| 28 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023 (Unaudited)
(Expressed in US dollars)
(b) Series A Preferred Stock
The number of Series A Preferred Stock issued and outstanding as of December 31, 2023 and March 31, 2023 was .
The Series A Preferred Stock is junior to the Company’s existing undesignated preferred stock, and unless otherwise set forth in the applicable certificate of designations, shall be junior to any future issuance of preferred stock. The purchase price (the “Purchase Price”) for the Series A Preferred Stock to date has been $1,000 per share. Except as otherwise expressly required by law, the Series A Preferred Stock does not have voting rights and does not have any liquidation rights.
Preferred Stock Dividends
Dividends shall be paid at the rate of 12% per annum of the amount of the Series A Preferred Stockholder’s (the “Holder”) Purchase Price. Dividends shall be paid quarterly unless the Holder and the Company mutually agree to accrue and defer any such dividend.
Conversion
The Series A Preferred Stock is convertible into shares of common stock commencing 24 months after the issuance date of the Series A Preferred Stock. Upon which, on a monthly basis, up to 5% of the aggregate amount of the Purchase Price can be converted (subject to adjustment for changes in the Holder’s ownership of the underlying Series A Preferred Stock). The conversion price is equal to the greater of $0.001 or a 15% discount to the volume-weighted average price (“VWAP”) of the Company’s common stock five Trading Days immediately prior to the conversion date (the “Conversion Rate). Additionally, subject to certain provisions, the Holder may exchange its Series A Preferred Stock into any common stock financing being conducted by the Company at a 15% discount to the pricing of that financing.
Other Adjustments and Rights
● The Conversion Rate (and shares issuable upon conversion of the Series A Preferred Stock) will be appropriately adjusted to reflect stock splits, stock dividends business combinations and similar recapitalization.
● The Holders shall be entitled to a proportionate share of certain qualifying distributions on the same basis as if they were holders of the Company’s common stock on an as converted basis.
Company Redemption
The Company may redeem all or part of the outstanding Series A Preferred Stock after one year from the date of issuance by paying an amount equal to the aggregate Purchase Price paid, adjusted for any reduction in Series A Preferred Stock holding, multiplied by 110% plus accrued dividends.
(c) Series B Preferred Stock and Mezzanine Equity
On September 19, 2023, the Company entered into a security purchase agreement (the “Purchase Agreement”) with an institutional investor (the “Investor”) for the issuance and sale of shares of the Company’s newly designated Series B Convertible Preferred Stock, $ par value (the “Series B Preferred Stock”), at a purchase price of $per share of Preferred Stock, and after accounted for other issuance related costs, the net proceeds received was in the amount of $1,900,000.
Shares of Series B Preferred Stock and shares of Common Stock of the Company that are issuable upon conversion of, or as dividends on, the Series B Preferred Stock were offered and were issued pursuant to the Prospectus Supplement, filed September 19, 2023, to the Prospectus included in the Company’s Registration Statement on Form S-3 (Registration No. 333-255544) filed with the Securities and Exchange Commission on April 27, 2021, and declared effective May 4, 2021.
| 29 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023 (Unaudited)
(Expressed in US dollars)
Pursuant to the Purchase Agreement, on September 19, 2023, the Company filed a certificate of designations of Series B Convertible Preferred Stock (the “Certificate of Designations”) with the Nevada Secretary of State designating shares of the Company’s shares of Preferred Stock as Series B Convertible Preferred Stock and setting forth the voting and other powers, preferences and relative, participating, optional or other rights of the Preferred Shares. Each share of Series B Preferred Stock has a stated value of $ per share.
The Series B Preferred Stock, with respect to the payment of dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company, ranks senior to all capital stock of the Company unless the holders of the majority of the outstanding shares of Series B Preferred Stock consent to the creation of other capital stock of the Company that is senior or equal in rank to the Series B Preferred Stock.
Holders of Series B Preferred Stock will be entitled to receive cumulative dividends (“Dividends”), in shares of common stock or cash on the stated value at an annual rate of 8% (which will increase to 15% if a Triggering Event (as defined in the Certificate of Designations) occurs. Dividends will be payable upon conversion of the Series B Preferred Stock, upon any redemption, or upon any required payment upon any Bankruptcy Triggering Event (as defined in the Certificate of Designations).
Holders of Series B Preferred Stock will be entitled to convert shares of Series B Preferred Stock into a number of shares of common stock determined by dividing the stated value (plus any accrued but unpaid dividends and other amounts due) by the conversion price. The initial conversion price is $3.50, subject to adjustment in the event the Company sells common stock at a price lower than the then-effective conversion price. Holders may not convert the Series B Preferred Stock to common stock to the extent such conversion would cause such holder’s beneficial ownership of common stock to exceed 4.99% of the outstanding common stock. In addition, the Company will not issue shares of common stock upon conversion of the Series B Preferred Stock in an amount exceeding 19.9% of the outstanding common stock as of the initial issuance date unless the Company receives shareholder approval for such issuances.
Holders may elect to convert shares of Series B Preferred Stock to common stock at an alternate conversion price equal to 80% (or 70% if the Company’s common stock is suspended from trading on or delisted from a principal trading market or if the Company has effected a reverse split of the common stock) of the lowest daily volume weighed average price of the common stock during the Alternate Conversion Measuring Period (as defined in the Certificate of Designations). In the event the Company receives a conversion notice that elects an alternate conversion price, the Company may, at its option, elect to satisfy its obligation under such conversion with payment in cash in an amount equal to 110% of the conversion amount.
The Series B Preferred Stock will automatically convert to common stock upon the 24-month anniversary of the initial issuance date of the Series B Preferred Stock.
At any time after the earlier of a holder’s receipt of a Triggering Event notice and such holder becoming aware of a Triggering Event and ending on the 20th trading day after the later of (x) the date such Triggering Event is cured and (y) such holder’s receipt of a Triggering Event notice, such holder may require the Company to redeem such holder’s shares of Series B Preferred Stock.
Upon any Bankruptcy Triggering Event (as defined in the Certificate of Designations), the Company will be required to immediately redeem all of the outstanding shares of Series B Preferred Stock.
The Company will have the right at any time to redeem all or any portion of the Series B Preferred Stock then outstanding at a price equal to 110% of the stated value plus any accrued but unpaid dividends and other amounts due.
Holders of the Series B Preferred Stock will have the right to vote on an as-converted basis with the common stock, subject to the beneficial ownership limitation set forth in the Certificate of Designations.
The Series B Preferred Stock was accounted for as Mezzanine Equity in accordance with ASC 480 - Distinguishing Liabilities from Equity and the embedded conversion and redemption features was separated from the host instrument and recognized as derivative liabilities with change in fair value at each reporting period end recognized in the consolidated statement of operations. (Note 8).
During the three months ended December 31, 2023, Series B preferred shares were converted into common shares. As a result of the conversion, the Company removed $ related to the book value of mezzanine equity for the shares converted. The Company removed $ related to the fair value of derivative liabilities related to the shares converted. The Company recognized corresponding credits common share par value and paid in capital.
A roll-forward of activity is presented below for the nine months ended December 31, 2023:
SCHEDULE OF SERIES B PREFERRED STOCK FOR MEZZANINE EQUITY
| 2023 | ||||
| $ | ||||
| Balance beginning of period – March 31 | — | |||
| Net proceeds received pursuant to the issuance of preferred shares | 1,900,000 | |||
| Recognition of derivative liabilities (Note 8) | (642,417 | ) | ||
| Conversion into common shares | (228,727 | ) | ||
| Balance end of period – December 31 | 1,028,856 | |||
| 30 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023 (Unaudited)
(Expressed in US dollars)
(d) Common share issuances
Issuances during the nine months ended December 31, 2023
The Company sold common shares through use of its registration statement, for gross proceeds of $123,347, raising a net amount of $119,285after paying a 3% placement fee and other issuance expenses. In addition, shares of common stock were issued to existing holders as a result of rounding to the nearest whole share, which was required at the time of executing the Reverse Split.
In addition, the Company issued common shares for services received with a fair value of $45,947 which was recognized as a general and administrative expense with a corresponding credit to additional paid-in capital.
Issuances during the nine months ended December 31, 2022
During the three months ended June 30, 2022, the Company issued common shares in connection with conversion of convertible notes (Note 5). The total amounts of debts settled is in amount of $406,118 that composed of face value of convertible promissory notes in amount of $302,000 (Note 5), carrying amount of conversion and redemption feature derived from notes in amount of $104,118. 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 $457,025. The difference, that represented a loss on conversion between amounts of debt settled and fair value of common shares issued, was in the amount of $50,908 and was recorded as loss on conversion of convertible promissory notes in statement of operations.
In addition, during the three months ended June 30, 2022, the Company removed of previously to be issued shares, in connection with cancellation of warrant exercises from certain warrant holders. In addition, the Company recognized additional shares to be issued for warrant exercise request received but not processed as of December 31, 2015
$
783,778
Accretion expense
585,200
Conversionquarter end. As a result of the cancellation of to be issued shares, $ 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.
Lastly, during the three months ended June 30, 2022, the Company issued common shares for services received, with a fair value of $7,500.
During the three months ended September 30, 2022, the Company issued common shares in connection with conversion of convertible notes transferred to equity
(1,368,978)
Accreted(Note 5). The total amounts of debts settled is in amount of $135,274 that composed of face value of convertible promissory notes in amount of $100,000 (Note 5), carrying amount of conversion and redemption feature derived from notes in amount of $35,274. 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 $175,294. The difference, that represented a loss on conversion, between amounts of debts settled and fair value of common shares issued was in the amount of $40,020 and was recorded as loss on conversion of convertible promissory notes in statement of operations.
During the three months ended September 30, 2022, the Company issued common shares for services received, with a fair value of $30,287.
During the three months ended December 31, 2017
2022, the Company issued common shares in connection with the conversion of convertible notes (Note 5). The total amounts of debts settled is in amount of $
-
In March 2016, the Company commenced a bridge offering207,002 that composed of up to an aggregate of $2,500,000 of convertible promissory notes. Up to March 31, 2017, the Company issued to various investors notes (“Bridge Notes”) in the aggregate face value of $2,455,000 (December 31, 2016 – $2,230,000). The Bridge Notes had a maturity date of 12 months and carried an annual interest rate of 10%. The Bridge Notes principal and all outstanding accrued interest were able to be converted into common stock based on the average of the lowest 3 trading days volume weighted average price over the last 10 trading days plus an embedded warrant at maturity. However, all the outstanding principal and accrued interest would convert into units/securities upon the consummation of a qualified financing, based upon the lesser of: (i) $1.65 per units/securities and (ii) the quotient obtained by dividing (x) the balance on the Forced Conversion date multiplied by 1.20 by (y) the actual price per unit/security in the qualified financing. Upon the maturity date of the notes, the Company also had an obligation to issue warrants exercisable into the number of shares of the Company securities that is equal to (i) in the case of a qualified financing, the number of shares issued upon conversion of the note and (ii) in all other cases, the number of shares of the Company's common stock equal to the quotient obtained by dividing the outstanding balance by 2.00.
On May 31, 2017, all Bridge Notes having a face value of $2,436,406, were converted into the Company’s common stock:
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In addition, the Company issued common shares for services received with a fair value of $112,631 which was recognized as a general and administrative expense with a corresponding credit to additional paid-in capital. (e) Common shares to be issued Activity during the nine months ended December 31, 2023 None. Activity during the nine months ended December 31, 2022 During the nine months ended December 31, 2022, the Company issued in satisfaction of its obligation of shares to be issued, and moved $77,300 out of the shares to be issued account into the additional paid in capital account.
BIOTRICITY INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2023 (Unaudited) (Expressed in US dollars) (f) Warrant issuances, exercises and other activity Warrant exercises and issuances during the nine months ended December 31, 2023 During the three months ended December 31, 2023, the Company issued note holder warrants and 69,062 placement agent warrants related to the final closing of Series C convertible notes (Note 5). These warrants relate to Series C Convertible Notes. Prior to the final closing date (October 23, 2023) of Series C Convertible Notes, the Company determined that the obligations to issue note holder warrants and placement agent warrants represented a 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. Subsequently, the exercise price of all warrants was concluded and locked to $4.18 and $2.09, respectively, for the note holder and placement agent warrants, as of the final closing date October 23, 2023. Since the exercise price was no longer a variable, the Company concluded that the note holder 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 October 23, 2023 and then transferred to equity (collectively, “End of warrants derivative treatment”). The warrants were therefore recognized with a reduction of $1,652,572 against the derivative liability and a corresponding credit against paid in capital. Warrant exercises and issuances during the nine months ended December 31, 2022 During the three months ended June 30, 2022, the Company issued 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. During the three months ended September 30, 2022, the Company issued 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 $77,332, and recognized as general and administrative expenses, with a corresponding credit to additional paid-in capital. During the three months ended December 31, 2022, the Company issued warrants as compensation to an executive of the Company who was not part of the Company stock options plan. The fair value of the warrants at issuance was $77,780 and was recognized as a general and administrative expense, with a corresponding credit to additional paid-in capital. In addition, the Company added 52,083 warrants to its outstanding warrant schedule in connection with warrants issued to Series B convertible note holders. This has no impact on paid-in capital as the fair value of warrants was already accounted for as part of the original Series B convertible note issuance accounting entries. Lastly, the Company extinguished and exchanged 51,101 warrants for promissory notes [Note 5] that resulted in an adjustment to additional paid-in capital in the amount of $71,768. Warrant activity during the nine months ended December 31, 2023 is indicated below: SCHEDULE OF WARRANTS OUTSTANDING
(g) Stock-based compensation 2016 Equity Incentive Plan 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 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.
BIOTRICITY INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2023 (Unaudited) (Expressed in US dollars) During the three months ended December 31, 2023 and 2022, the Company granted new stock options, and granted and during the nine months ended December 2023 and 2022, respectively. The Company recorded stock-based compensation of $ and $ during the three months ended December 31, 2023 and 2022, respectively, and $ and $ during the nine months ended December 31, 2023 and 2022, respectively, in connection with the Plan under selling, general and administrative expenses with corresponding credit to additional paid in capital. The amount of vested stock options outstanding as of December 31, |
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The embedded conversion features and reset feature in the notes and broker warrants were accounted for as a derivative liability based on FASB guidance (see Note 6).
6. DERIVATIVE LIABILITIES
As explained in Note 3 underNew Accounting PronouncementsASU 2017-11 provides a change to the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. During the quarter ended September 30, 2017, the Company adopted the provisions of ASU 2017-11 to account for the down round features of its warrants issued with its private placements effective April 1, 2017. The Company used a modified retrospective approach to adoption, which does not restate its financial statements as at the prior year end, March 31, 2017. Adoption is effective as of April 1, 2017, the beginning of the Company’s current fiscal year. The cumulative effect of this accounting standard update adjusted accumulated deficit as of April 1, 2017 by $483,524, with a corresponding adjustment to derivative liabilities:
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The impact on the unaudited June 30, 2017 Balance Sheet and Statement of Operations is as follows:
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In connection with the sale of debt or equity instruments, the Company may sell options or warrants to purchase its common stock. In certain circumstances, these options or warrants have previously been classified as derivative liabilities, rather than as equity. Additionally, the debt or equity instruments may contain embedded derivative instruments, which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative instrument liability.
2023 2022 Exercise price ($) Risk free interest rate (%) Expected term (Years) Expected volatility (%) Expected dividend yield (%) 0.00 0.00 Fair value of option ($) Expected forfeiture (attrition) rate (%) 0.00 0.00
2023 Equity Incentive Plan and the Employee Stock Purchase Plans
On March 31, 2023, the Company adopted the 2023 Equity Incentive Plan (the “2023 Plan”). The 2023 Plan authorizes grants of equity-based and incentive cash awards to eligible participants designated by the 2023 Plan’s administrator. The 2023 Plan will be administered by the Compensation Committee of the Company’s Board of Directors (the “Board”). An aggregate of shares of the Company’s common stock (the “Common Stock”), plus the number of shares available for issuance under the Company’s 2016 Equity Incentive Plan that had not been made subject to outstanding awards, were reserved for issuance under the 2023 Plan. Unless earlier terminated by the Board, the 2023 Plan will remain in effect until all Common Stock reserved for issuance has been issued, 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 of the 2023 Plan.
The Company also adopted the Employee Stock Purchase Plan (the “ESPP”). The ESPP allows eligible employees of the Company and the Company’s designated subsidiaries the ability to purchase shares of the Company’s Common Stock at a discount, subject to various limitations. Under the ESPP, employees will be granted the right to purchase Common Stock at a discount during a series of successive offerings, the duration and timing of which will be determined by the ESPP administrator (the “Administrator”). In no event can any single offering period be longer than 27 months. The purchase price (the “Purchase Price”) for each offering will be established by the Administrator. With respect to an offering under Section 423 of the Internal Revenue Code of 1986 (“Section 423 Offering”), in no case may such Purchase Price be less than the lesser of (i) an amount equal to 85 percent of the fair market value on the commencement date, or (ii) an amount not less than 85 percent of the fair market value the on the purchase date. In the event of financial hardship, an employee may withdraw from the ESPP by providing a request at least 20 Business Days before the end of the offering period (the “Offering Period”). Otherwise, the employee will be deemed to have exercised the purchase right in full as of such exercise date. Upon exercise, the employee will purchase the number of whole shares that the participant’s accumulated payroll deductions will buy at the Purchase Price. If an employee wants to decrease the rate of contribution, the employee must make a request at least 20 Business Days before the end of an Offering Period (or such earlier date as determined by the Administrator). An employee may not transfer any rights under the ESPP other than by will or the laws of descent and distribution. During a participant’s lifetime, purchase rights under the ESPP shall be exercisable only by the participant.
There were no issuances under either the 2023 Plan or the ESPP as of December 31, 2023.
Previously, the Company's derivative instrument liabilities were re-valued at the end of each reporting period, with changes in the fair value of the derivative liability recorded as charges or credits to income in the period in which the changes occurred. For options, warrants and bifurcated embedded derivative features that were accounted for as derivative instrument liabilities, the Company estimated fair value using either quoted market prices of financial instruments with similar characteristics or other valuation techniques. The valuation techniques require assumptions related to the remaining term of the instruments and risk-free rates of return, our current common stock price and expected dividend yield, and the expected volatility of our common stock price over the life of the option. The details of derivative liabilities (pre and post adoption of ASU 2017-11) were as follows:
| 33 | ||
Total
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023 (Unaudited)
(Expressed in US dollars)
10. OPERATING LEASE RIGHT-OF-USE ASSETS AND LEASE OBLIGATIONS
The Company has one operating lease primarily for office and administration.
During December 2021, the Company entered into a new lease agreement. The Company paid an $85,000 deposit that would be returned at the end of the lease. In December 2022, the Company started a new lease with an additional suite in the same premise as the existing lease.
When measuring the lease obligations, the Company discounted lease payments using its incremental borrowing rate. The weighted-average-rate applied was 11.4% as of December 31, 2023 and March 31, 2023. The weighted average remaining lease term as of December 31, 2023 and March 31, 2023 was 2.9 years and 2.5 years, respectively.
SCHEDULE OF OPERATING LEASES OBLIGATIONS
| 2023 | 2022 | |||||||
| Right of Use Asset | $ | $ | ||||||
| Beginning balance at March 31 | 1,587,492 | 1,242,700 | ||||||
| New leases | — | 685,099 | ||||||
| Amortization | (271,357 | ) | (255,146 | ) | ||||
| Ending balance at December 31 | 1,316,135 | 1,672,653 | ||||||
| 2023 | 2022 | |||||||
| Lease Liability | $ | $ | ||||||
| Beginning balance at March 31 | 1,722,095 | 1,330,338 | ||||||
| New leases | — | 685,099 | ||||||
| Repayment and interest accretion, net | (261,072 | ) | (231,533 | ) | ||||
| Ending balance at December 31 | 1,461,023 | 1,783,904 | ||||||
December 31, 2023 | March 31, 2023 | |||||||
| Lease Liability | $ | $ | ||||||
| Current portion of operating lease liability | 409,702 | 335,608 | ||||||
| Noncurrent portion of operating lease liability | 1,051,321 | 1,386,487 | ||||||
The operating lease expense was $140,759 and $53,286 for the three months ended December 31, 2023 and 2022, respectively, and $420,251 and $264,738 during the nine months ended December 31, 2023 and 2022, respectively, and is included in the selling, general and administrative expenses. Operating cash flows from operating leases amounted to 394,214 and $230,076 during the nine months periods ending December 31, 2023 and 2022, respectively.
The following table represents the contractual undiscounted cash flows for lease obligations as of December 31, 2023:
SCHEDULE OF CONTRACTUAL UNDISCOUNTED CASH FLOWS FOR LEASE OBLIGATION
| Calendar year | $ | |||
| 2024 | 552,293 | |||
| 2025 | 600,288 | |||
| 2026 | 565,359 | |||
| Total undiscounted lease liability | 1,717,940 | |||
| Less imputed interest | (256,917 | ) | ||
| Total | 1,461,023 | |||
| 34 | ||
$
Derivative liabilitiesBIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2023 (Unaudited)
(Expressed in US dollars)
11. COMMITMENTS AND CONTINGENCIES
There are no claims against the Company that were assessed as significant, which were outstanding as at December 31, 2023 or March 31, 2017
2,163,884
Derivative fair value at issuance
3,569,249
Transferred to equity upon conversion of notes (Notes 52023 and, 7)
(1,700,949)
Changeconsequently, no provision for such has been recognized in fair value of derivativesthe condensed consolidated financial statements.
42,128
Derivative liabilities as at June 30, 2017 (pre-adoption)12. PROPERTY AND EQUIPMENT
4,074,312
Adjustments relating to adoption of ASU 2017-11
Reversal of fair value
(21,540)
Transferred to accumulated deficit
(483,524)
Transferred to additional paid-in-capital
(3,569,248)
Derivative liabilities as at September 30, 2017 (post-adoption)During the three and nine months ended December 31, 20172023 and 2022, the Company did not purchase any property and equipment. The Company recognized depreciation expense for these assets in the amount of $1,489 during the three months ended December 31, 2023 and 2022, and $4,465 during the nine months ended December 2023 and 2022.
- SCHEDULE OF PROPERTY AND EQUIPMENT
Cost Office
equipment Leasehold improvement Total $ $ $ Balance at March 31, 2023 16,839 12,928 29,767 Additions — — — Disposals — — — Balance at December 31, 2023 16,839 12,928 29,767
| Accumulated depreciation | Office equipment | Leasehold improvement | Total | |||||||||
| $ | $ | $ | ||||||||||
| Balance at March 31, 2023 | 4,675 | 3,586 | 8,261 | |||||||||
| Depreciation for the period | 2,526 | 1,939 | 4,465 | |||||||||
| Disposals | — | — | — | |||||||||
| Balance at December 31, 2023 | 7,201 | 5,525 | 12,726 | |||||||||
| Net book value | ||||||||||||
| Balance at March 31, 2023 | 12,164 | 9,342 | 21,506 | |||||||||
| Balance at December 31, 2023 | 9,638 | 7,403 | 17,041 | |||||||||
The lattice methodology was used to value the derivative components, using the following assumptions:
|
During the three months ended December 31, 2023 and 2022, we recognized $11,004 of other income compared to $119,880 other expense, respectively. During the nine months ended December 31, 2023 and 2022, we recognized $118,941 other expense compared to $116,989 other expense, respectively. During the three and nine months ended December 31, Other (expense) income is comprised of the following: SCHEDULE OF OTHER EXPENSE INCOME
14. SUBSEQUENT EVENTS The Company’s management has evaluated subsequent events during the period from January 1 to February 20, 2024, the date the condensed consolidated financial statements were issued, pursuant to the requirements of ASC 855, and has determined the following material subsequent events:
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The projected annual volatility curve for valuation at issuance and period end was based on the comparable company’s annual volatility. The Company used market trade stock prices at issuance and period end date.
7. STOCKHOLDERS’ EQUITY (DEFICIENCY)
a)
Authorized stock
In contemplation of the acquisition of iMedical on February 2, 2016, the Company’s Board of Directors and shareholders approved the increase in authorized capital stock from 100,000,000 shares of common stock to 125,000,000 shares of common stock, with a par value of $0.001 per share, and from 1,000,000 shares of preferred stock to 10,000,000 shares of preferred stock, with a par value of $0.001 per share.
As at December 31, 2017, the Company is authorized to issue 125,000,000 (March 31, 2017 – 125,000,000) shares of common stock ($0.001 par value) and 10,000,000 (March 31, 2017 – 10,000,000) shares of preferred stock ($0.001 par value).
b)
Exchange Agreement
As initially described in Note 1 above, on February 2, 2016:
·
The Company issued approximately 1.197 shares of its common stock in exchange for each common share of iMedical held by iMedical shareholders who in general terms, were 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, were 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 of the Company 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 such 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, 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% discount to purchase price per share in the Company’s next 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.
Subsequent to December 31, 2017, certain exchangeable shareholders exercised their right to exchange those shares for 679,858 common shares of the Company. (also referNote 10)
c)
Share issuances
During May 2015, iMedical repurchased 1,316,700 (1,100,000 Pre-Exchange Agreement) of its outstanding common shares at cost from a former director. These shares were cancelled upon repurchase.
During the twelve months ended December 31, 2016, as explained in Note 6, the Company issued 912,652 shares of common stock in connection with the conversion of notes.
During the twelve months ended December 31, 2016, the Company issued an aggregate of 210,625 shares of common stock to six consultants. $604,475 representing the fair value of the shares issued was charged to operations. An additional 77,463 were issued, in connection with commitments relating to the December 31, 2016 year end, $200,855 representing the fair value of these shares charged to operations. The fair value of these shares was determined by using the market price of the common stock as at the date of issuance.
During the twelve months ended December 31, 2016, the Company issued an aggregate of 131,365 shares of its common stock upon exercise of warrants and received $105,500 of exercise cash proceeds.
During the three months ended March 31, 2017, the Company sold to accredited investors, an aggregate of 781,480 units (the “Units”) for gross proceeds of $1,367,573 at a purchase price of $1.75 per Unit, pursuant to a private offering of a minimum of $1,000,000, up to a maximum of $8,000,000 (the “Common Share Offering”). Each unit consists of one share of common stock, par value $0.001 per share and a three-year warrant to purchase one-half share of common stock at an initial exercise price of $3.00 per whole share. If the Company successfully raises a total of $3,000,000 in aggregate proceeds from the Common Share Offering (a “Qualified Financing”), the principal amount of the Bridge Notes along with the accrued interest as explained in Note 6 are convertible into Units, based upon the lesser of: (i) $1.60 per New Round Stock and (ii) the quotient obtained by dividing (x) the Outstanding Balance on the conversion date multiplied by 1.20 by (y) the actual price per New Round Stock in the Qualified Financing. The notes and the warrants are further subject to a “most-favored nation” clause in the event the Company, prior to maturity of the Bridge Notes, consummates a financing that is not a Qualified Financing. Upon completion of a Qualified Financing, in connection with the conversion of the Bridge Notes the Company would also pay the Placement Agent up to 8% in broker warrants with an exercise price of $3.00 and an expiry date of two years from the date of issuance. Because of the Common Share Offering, the Company incurred cash issuance costs of $129,650 and issued broker warrants and warrants to investors having fair values of $104,627 and $339,308, respectively. Cash issuance costs along with fair values of warrants have been adjusted against additional paid in capital.
During the three months ended March 31, 2017, the Company issued an aggregate of 162,772 shares of common stock (including 77,463 shares were issued as disclosed as at December 31, 2016) to various consultants. The fair value of these shares amounting to $413,573 have been expensed to general and administrative expenses in the consolidated statement of operations, with a corresponding credit to additional paid-in-capital. The fair value of these shares was determined by using the market price of the common stock as at the date of issuance.
During the three months ended June 30, 2017, the Company sold to accredited investors a further total of 1,282,769 Units, of which 57,143 were issued (refer to Note 7(d)), for gross proceeds of $2,244,845 (net proceeds of $1,926,780) and converted the aggregate principal amount of $2,455,000 (net proceeds of $2,274,800) raised in its Bridge Note offering, plus accrued interest thereon, into a further 1,823,020 Units (each of which correspond to one share and half of one warrant, as described above). In connection with the Common Share Offering, including the Bridge Notes that were converted into Units thereof, the Company incurred cash issuance costs of $438,065 and issued broker warrants and warrants to investors having fair values of $385,635 and $3,183,614, respectively. Cash issuance costs along with fair values of warrants have been adjusted against additional paid in capital.
During the three months ended June 30, 2017, the Company also issued an aggregate of 56,576 common stock to various consultants. The fair value of these shares amounted to $138,611 and has been expensed to general and administrative expenses in the condensed consolidated statement of operations, with a corresponding credit to additional paid-in-capital.
During the three months ended September 30, 2017, prior to closing its private placement offering on or about July 31, 2017, the Company sold to accredited investors a further total of 263,188 Units for gross proceeds of $460,579 (net proceeds of $413,629). Cash issuance costs of $46,950 have been adjusted against additional paid in capital. In connection with this private placement, the Company also issued 21,055 broker warrants and 131,594 warrants to investors (refer to warrant issuances).
During the three months ended September 30, 2017, the Company also issued an aggregate of 100,000 common stock to various consultants. The fair value of these shares amounted to $250,000 and has been expensed to general and administrative expenses in the condensed consolidated statement of operations, with a corresponding credit to additional paid-in-capital. The fair value of these shares was determined by using the market price of the common stock as at the date of issuance.
On December 22, 2017, the Company completed a registered offering, which raised gross proceeds of $2,475,901 million through the issuance of 450,164 common shares.
During the three months ended December 31, 2017, the Company also issued 136,672 shares as compensation to consultants that provide contractual services. The fair value of these shares amounted to $407,382 and has been expensed to general and administrative expenses in the consolidated statement of operations, with a corresponding credit to additional paid-in-capital. The fair value of these shares was determined by using the market price of the common stock as at the date of issuance.
On December 22, 2017, the Company completed a registered offering, which raised gross proceeds of $2,475,901 million through the issuance of 450,164 common shares.
During the three months ended December 31, 2017, the Company also issued 136,672 shares as compensation to consultants that provide contractual services. The fair value of these shares amounted to $407,382 and has been expensed to general and administrative expenses in the consolidated statement of operations, with a corresponding credit to additional paid-in-capital. The fair value of these shares was determined by using the market price of the common stock as at the date of issuance.
A total of 252,798 number of shares were issued as explained in warrant exercise paragraph f, of which 212,798 were issued before December 31, 2017 and 40,000 are to be issued and included in shares to be issued.
d)
Shares to be issued
As of December 31, 2017, the Company had obligations to issue a total of 128,651 shares, which consists of:
i)
88,651 shares under contract to consultants, advisors and other service providers. The fair value of these shares amounted to $498,529 and has been expensed to general and administrative expenses in the consolidated statement of operations, with a corresponding credit to additional paid-in-capital. The fair value of these shares was determined by using the market price of the common stock as at the date of issuance; and
ii)
40,000 shares to be issued in connection with exercise of warrants as explained in warrant exercise paragraph f.
e)
Warrant issuances
During September and October 2015, iMedical entered into agreements for the issuance for a total of 724,185 (605,000 pre-Exchange Agreement) warrants against services, entitling the holders to purchase one common share against each warrant at an exercise price of $0.84 ($1 pre-Exchange Agreement) per warrant to be exercised within 180 to 730 days from the issuance date. The fair value of the warrants on the issuance date was $672,749, which is included as consulting charges in general and administrative expenses during the year ended December 31, 2015 with corresponding credit to additional paid-in-capital. The fair value has been estimated using a multi-nomial lattice model with an expected life ranging from 180 to 730 days, a risk-free rate ranging from 0.04% to 1.07%, stock price of $2, annual attrition rate of 5% and expected volatility in the range of 98% to 100%, determined based on comparable companies’ historical volatilities.
During the year twelve months ended December 31, 2016, the Company issued 472,084 warrants in connection with consulting services, entitling the holders to purchase one common share against each warrant at an exercise price in the range of $2.00-$2.58. These warrants were fair valued amounting to approximately $474,232 which was charged to the statement of operations. The fair value has been estimated using a multi-nominal lattice model with an expected life ranging from 0.75 to 3 years, a risk-free rate ranging from 0.45 to 1.47, stock price of $2.15 to $2.58 annual attrition rate of up to 5% and expected volatility in the range of 101% to 105% determined based on comparable companies’ historical volatilities.
During the three months ended March 31, 2017, in connection with the private placement as explained above in “Share Issuances”, the Company issued 55,433 warrants to brokers and 390,744 to private placement investors. These warrants were fair valued at $443,935 and recorded as a reduction to additional paid in capital. Also during that period, 255,750 warrants fair valued at $402,206 were issued as compensation for services. For the valuation assumptions used, refer to Note 6.
During the three months ended June 30, 2017, in connection with its Common Share Offering, the Company issued 225,040 warrants to brokers, and 3,375,914 warrants to investors; of this latter amount, 2,734,530 related to warrants issued on conversion of convertible notes (refer to Note 5) and 641,384 related to private placement common share issuance warrants (refer to Note 7(c)). During the three months ended June 30, 2017, the Company also issued 62,500 warrants as compensation for services.
During the three months ended September 30, 2017, in connection with its Common Share Offering, the Company issued 21,055 warrants to brokers and 131,594 warrants to investors.
During the three months ended September 30, 2017, the Company also issued 47,500 warrants, which were fair valued at $31,987, and recorded as compensation for services, which have been expensed to general and administrative expenses in the condensed consolidated statement of operations, with a corresponding credit to additional paid-in-capital. The fair value has been estimated using a multi-nomial lattice model with an expected life of 3 years, a risk-free rate of 1.47% stock price of $2.18, annual attrition rate of 0% and expected volatility of 137.63%, determined based on comparable companies’ historical volatilities.
During the three months ended December 31, 2017, the Company issued 98,806 warrants, which were fair valued at a cumulative $97,654, and recorded as compensation for services, which have been expensed to general and administrative expenses in the condensed consolidated statement of operations, with a corresponding credit to additional paid-in-capital. The fair values have been estimated using a multi-nomial lattice model with an expected life of 3 years, risk free rates of 1.62% to 1.98%, stock prices of $2.18 to $7.59, an annual attrition rate of 0% and expected volatilities of 136.77% to 145.99%, determined based on comparable company historical volatilities.
At December 31, 2017 the Company had the following warrant securities outstanding:
*As explained above, on February 2, 2016 all outstanding warrants at that time had been increased by a factor of 1.197.
f)
Warrant exercises
During March and May 2015, 598,500 (500,000 pre-Exchange Agreement) warrants were exercised at a price of $0.84 ($1.01 pre-Exchange Agreement) per share and iMedical received gross cash proceeds of $500,584 (net proceeds of $470,758). About the proceeds received, iMedical paid in cash $35,420 as fees and issued 41,895 (35,000 pre-Exchange Agreement) broker warrants which were fair valued at $5,594 and were allocated to cash with corresponding credit to additional paid-in-capital. The fair value has been estimated using a multi-nomial lattice model with an expected life of 365 days, dividend yield of 0%, stock price of $0.84 ($1.01 pre-Exchange Agreement), a risk-free rate ranging from 0.04% to 1.07% and expected volatility of 94%, determined based on comparable companies’ historical volatilities.
During August and September 2015, 299,250 (250,000 pre-Exchange Agreement) warrants were exercised at a price of $0.85 ($1.05 pre-Exchange Agreement) per share and iMedical received gross cash proceeds of $253,800 (net proceeds of $236,438). In connection with the proceeds received, iMedical paid in cash $17,362 as fees and issued 20,947 (17,500 pre-Exchange Agreement) broker warrants which were fair valued at $14,627 and were allocated to cash with corresponding credit to additional paid-in-capital. The fair value has been estimated using a multi-nomial lattice model with an expected life of 24 months, a risk-free rate ranging from 0.04% to 1.07%, stock price of $2 and expected volatility in the range of 98% to 100%, determined based on comparable companies’ historical volatilities.
During December 2017, 112,798 broker warrants were exercised at exercises price of between $1.04 and $1.49, such that the Company received cash proceeds of $124,718. Also during December 2017, 140,000 consultant warrants were exercised at exercise prices between $2.00 and 2.58, for cash proceeds to the Company of $303,200.
g)
Stock-based compensation
2015 Equity Incentive Plan
On March 30, 2015, iMedical approved the Directors, Officers and Employees Stock Option Plan, under which it authorized and issued 3,000,000 options. This plan was established to enable iMedical to attract and retain the services of highly qualified and experience directors, officers, employees and consultants and to give such person an interest in the success of the company. As of December 31 and March 31, 2017, there were no outstanding vested options and 137,500 unvested options at an exercise price of $.0001 under this plan. These options now represent the right to purchase shares of the Company’s common stock using the same exchange ratio of approximately 1.1969:1, thus there were 164,590 (35,907 had been cancelled) adjusted unvested options as at December 31 and March 31, 2017. No other grants will be made under this plan.
The following table summarizes the stock option activities of the Company related to the 2015 equity incentive plan:
|
|
|
| Number of options | Weighted average exercise price ($) |
Granted | 3,591,000 | 0.0001 |
Exercised | (3,390,503) | 0.0001 |
Outstanding as of December 31, 2015 | 200,497 | 0.0001 |
Cancelled during 2016 | (35,907) | 0.0001 |
Outstanding as of December 31 and March 31, 2017 | 164,590 | 0.0001 |
The fair value of options at the issuance date were determined at $2,257,953 which were fully expensed during the twelve months ended December 31, 2015 based on vesting period and were included in general and administrative expenses with corresponding credit to additional paid-in-capital. During the twelve months ended December 31, 2015, 3,390,503 (2,832,500 Pre-exchange Agreement) options were exercised by those employees who met the vesting conditions; 50% of the grants either vest immediately or at the time of U.S. Food and Drug Administration (FDA) filing date and 50% will vest upon Liquidity Trigger. Liquidity Trigger means the day on which the board of directors resolve in favor of I) the Company is able to raise a certain level of financing; ii) a reverse takeover transaction that results in the Company being a reporting issuer, and iii) initial public offering that results in the Company being a reporting issuer. During the nine-month period ended December 31, 2017 and year-ended March 31, 2017, no outstanding options under this above plan were exercised.
2016 Equity Incentive Plan
On February 2, 2016, the Board of Directors of the Company approved 2016 Equity Incentive Plan (the “Plan”). The purpose of the Plan is to advance the interests of the participating company group and its stockholders by providing an incentive to attract, retain and reward persons performing services for the participating company group and by motivating such persons to contribute to the growth and profitability of the participating company group. 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 Committee; 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 pursuant to awards 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 15% 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.
During July 2016, the Company granted an officer options to purchase an aggregate of 2,499,998 shares of common stock at an exercise price of $2.20 subject to a 3-year vesting period, with the fair value of the options being expensed over a 3-year period. Two additional employees were also granted 175,000 options to purchase shares of common stock at an exercise price of $2.24 with a 1 year vesting period, with the fair value of the options being expensed over a 1 year period. One additional employee was also granted 35,000 options to purchase shares of common stock at an exercise price of $2.24 with a 2-year vesting period, with the fair value of the options expensed over a 2-year period.
During the three months ended December 2017, the Company granted an employee 100,000 options to purchase shares of common stock at an exercise price of $2.18, to vest on a quarterly basis over a 1 year period.
The fair value of the Plan was $2,439,493 at the time that options were originally granted. The following table summarizes the stock option activities of the Company:
|
|
|
| Number of options | Weighted average exercise price ($) |
Granted | 2,709,998 | 2.2031 |
Exercised | - | - |
Outstanding as of March 31, 2017 | 2,709,998 | 2.2031 |
Granted | 100,000 | 2.18 |
Outstanding as of December 31, 2017 | 2,809,998 | 2.2001 |
The weighted average remaining contractual life ranges from 8.84 to 9.01 years.
During the three months ended December 31, 2017, the Company recorded stock based compensation of $204,815 in connection with Plan (December 31, 2016 – $196,142) under general and administrative expenses with a corresponding credit to additional paid in capital.
The fair value of each option granted is estimated at the time of grant using multi-nomial lattice model using the following assumptionsfor both the 2015 equity incentive plan and the 2016 Plan:
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|
|
| Plan 2016 | Plan 2015 |
Exercise price ($) | 2.00 – 2.58 | 0.0001 |
Risk free interest rate (%) | 0.45 – 1.98 | 0.04 - 1.07 |
Expected term (Years) | 1.0 - 3.0 | 10.0 |
Expected volatility (%) | 101 – 146 | 94 |
Expected dividend yield (%) | 0.00 | 0.00 |
Fair value of option ($) | 0.674 - 0.87 | 0.74 |
Expected forfeiture (attrition) rate (%) | 0.00 – 5.00 | 5.00 - 20.00 |
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8. RELATED PARTY TRANSACTIONS AND BALANCES
The Company’s transactions with related parties were carried out on normal commercial terms and in the course of the Company’s business. Other than those disclosed elsewhere in the financial statements, related party transactions are as follows:
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|
| ||||
| Three Months Ended December 31, 2017 | Three Months Ended December 31, 2016 | Nine Months Ended December 31, 2017 | Nine Months Ended December 31, 2016 | ||
| $ | $ | $ | $ | ||
Consulting fees and allowance* | - | 20,000 | - | 127,622 | ||
Salary and allowance** | 165,052 | 50,000 | 435,156 | 50,000 | ||
Stock based compensation*** | 183,981 | 183,981 | 558,453 | 367,962 | ||
Total | 349,033 | 253,981 | 993,609 | 545,584 | ||
The above expenses were recorded under general and administrative expenses.
* Consulting fees and allowance represents amounts paid/payable to a related party owned by a shareholder that is a member of key management of the Company.
** Salary and allowance include salary, car allowance, vacation pay, bonus and other allowances paid or payable to key management of the Company.
*** Stock based compensation represent the fair value of the options, warrants and equity incentive plan for directors and key management of the Company.
9. COMMITMENTS
On January 8, 2016, the Company entered into a 40-month lease agreement for its office premises in California, USA. The monthly rent from the date of commencement to the 12th month is $16,530, from the 13th to the 24th month is $17,026, from the 25th to the 36th month is $17,536, whereas the final 3 months is $18,062.
10. SUBSEQUENT EVENTS
The Company’s management has evaluated subsequent events up to February 14, 2018, the date the condensed consolidated financial statements were issued, pursuant to the requirements of ASC 855 and has determined the following material subsequent events:
In January 2018, the Company issued 82,401 shares of common stock as compensation to three service providers and 40,000 shares as a result of a consultant warrant exercise, all of which were accounted for as shares to be issued as at December 31, 2018.
Also in January 2018, the Company issued 58,975 shares pursuant to the cashless exercise of 96,710 broker warrants.During this same period, a number of incumbent stakeholders who had invested in the Company through its exchangeable share structure, exercised their right to retract and exchange those exchangeable shares for 679,858 common shares of the Company.
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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 wereare 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 lookingforward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements.statements, except as may be required under applicable law. Past results are no guaranty of future performance. You should not place undue reliance on anyAny such forward-looking statements which 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”(the “Company”, “Biotricity”, “we”, “us” or, “our”) is a leading-edge 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 focusfocused on a segment of the multi-billion-dollarambulatory diagnostic mobile cardiac telemetry market, otherwise known as MCT.COM, while also providing the capability to perform all type of ambulatory cardiac studies.
To date, we are developingWe developed our Bioflux MCTFDA-cleared Bioflux® COM technology, which is comprised of a monitoring device and software component,components, which we made available to the market under limited release on April 6, 2018, in order to assess, establish and aredevelop 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. In 2021, the Company announced the initial launch of Bioheart, a direct-to-consumer heart monitor that offers the same continuous heart monitoring technology used by physicians. In addition to developing and receiving regulatory approval or clearance of other technologies that enhance its ecosystem, in 2022, the Company announced the launch of its Biotres Cardiac Monitoring Device (“Biotres”), a three-lead device for ECG and arrhythmia monitoring intended for lower risk patients, a much broader addressable market segment. We have since expanded our sales efforts to 35 states, with intention to expand further and compete in the processbroader 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 building strategic relationshipsa reduced operating overhead for the Company, and enables a more efficient market penetration and distribution strategy.
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We are a technology company focused on earning utilization-based recurring technology fee revenue. The Company’s ability to accelerate our go-to-market strategygrow this type of revenue is predicated on the size and growth.
Planquality of Operationits sales force and Recent Corporate Developments
We were incorporated on August 29, 2012their 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 Statemarkets currently served.
Full market release of Nevada. At the timeBioflux COM device for commercialization launched in April 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 incorporationtechnology. By increasing our sales force and geographic footprint, we had launched sales in 33 U.S. states by December 31, 2023.
On January 24, 2022 the nameCompany 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 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. In October 2023, the Company launched the cellular version of this device, the Biotres Pro.
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.
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. In recognition of its product development, in November 2022, the Company’s Bioheart received recognition as one of Time Magazine’s Best Inventions of 2022.
The COVID-19 pandemic has highlighted the importance of telemedicine and remote patient monitoring technologies. The Company continues 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. The Company’s goal is to position itself as an all-in-one cardiac diagnostic and disease management solution. The Company continues to grow its data set of billions of patient heartbeats, allowing it to further develop its predictive capabilities relative to atrial fibrillation and arrythmias.
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In October 2022, the Company launched its Biocare Cardiac Disease Management Solution, after successfully piloting this technology in two facilities that provide cardiac care to more than 60,000 patients. 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 technology puts actionable data into the hands of physicians in order to assist them in making effective treatment decisions quickly. During March 2023, the Company launched its patient-facing Biocare app on Android and Apple app stores; this further allows the Company to expand its footprint in providing full-cycle chronic care management solutions to its clinic and patient network. In January 2024, the Company appointed Dr. Fareeha Siddiqui, a scientist and expert in community health and diagnostics, to the position of VP of Healthcare to spearhead the roll-out and adoption of Biocare to existing and new customers. This has the potential for being a significant business for us in 2026 and beyond.
The Company identified the importance of recent developments in accelerating its path to profitability, including the launch of important new products identified, which have a ready market through cross-selling to existing large customer clinics, and large new distribution partnerships that allow the Company to sell into large hospital networks. Additionally, in September 2022, the Company was awarded a NIH Grant from the National Heart, Blood, and Lung Institute for AI-Enabled real-time monitoring, and predictive analytics for stroke due to chronic kidney failure. This is a significant achievement that broadens our technology platform’s disease space demographic. The grant focusses on Bioflux-AI as an innovative system for real-time monitoring and prediction of stroke episodes in chronic kidney disease patients. The Company received $238,703 under this award in March 2023, used to defray research, development and other associated costs.
Management has indicated that its mission is to innovate and create transformative healthcare products while ensuring financial discipline, in order to drive margin and revenue growth to deliver value creation for our investors. Our commitment to innovation means that we harness data intelligently to explore novel avenues for enhancing healthcare outcomes. Through cutting-edge research and development, we believe we are redefining medical diagnostics and patient care and innovating new AI-driven solutions.
As a result of providing its Bioflux and Biotres products, Biotricity has monitored over two billion heartbeats for atrial fibrillation (afib), a leading cause of strokes. Over the past two years, these efforts have benefited over 28,000 patients diagnosed with afib, by providing them with the prospect of earlier medical intervention – which also produces significant healthcare savings to patients and the healthcare system.
We have announced that we are expanding our AI technology development in remote cardiac care, leveraging proprietary AI technology in order to provide a suite of predictive monitoring tools to enhance new disease profiling, improve patient management, and revolutionize the healthcare industry for disease prevention.
We have also strengthened relationships with Amazon and Google. The healthcare AI market opportunity is projected to grow to $208.2 billion by 2030 according to Grand View Research. Our Company has already established a strong foothold, having already built a powerful proprietary cardiac AI model that combines Google’s TensorFlow, AWS infrastructure, big data and a continuous learning engine. This combination allows us to rapidly improve our cardiac technology. In the near future, we believe the capabilities of our company was Metasolutions, Inc. On January 27, 2016, we filedcardiac AI model will allow us to support healthcare professionals in handling exponentially more patients while identifying the most critical data. This will enable healthcare workers to elevate the quality of care while serving a larger number of patients. As growing patient numbers further stress the shortage of healthcare professionals, our technology could help alleviate this pressing issue. We have engineered our technology to not only improve patient care and outcomes, but to do so in a manner that supports more patients. This has led to increasing sales of our remote cardiac monitoring devices and the ramp-up of our subscription-based service, increasing our recurring revenue over the past few quarters and charting a clear path to profitability.
The Company has relationships with the Secretarystrongest hospital Group Purchasing Organizations (GPO’s) in the United States, which we anticipate will translate into an ability to sell to over 80% of StateUS hospitals. We expect this to positively impact revenue growth in future quarters.
Our technology is globally useful; cardiac disease is the number one chronic care condition across the globe. We have recently made inroads or received approvals from the regulatory bodies of other countries that will allow us to sell in another jurisdictions. These sets us up for new initiatives we intend to move on in 2026.
From a market perspective, increasing interest and demand continue to drive the adoption of our suite of products, which are focused on chronic cardiac disease prevention and management. Our efforts in commercialization and development have yielded tremendous progress in remote monitoring solutions for diagnostic and post-diagnostic products.
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Recent Developments
Subscription Agreement
On October 31, 2023, we entered into a subscription agreement (the “Agreement”) pursuant to which we issued an unsecured convertible preferred note (the “Note”) in the principal amount of $1,000,000 to an investor (“Investor”). The Note bears interest at a rate of 12% per annum, paid in cash monthly. The Note matures on the earlier of 18 months or if there is more than one closing, the 18-month anniversary of the State of Nevada a Certificate of Amendment to our Articles of Incorporation, effective as of February 1, 2016, whereby, among other things, we changed our name to Biotricity, Inc.
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On February 2, 2016, we acquired iMedical Innovation Inc., a company existing under the laws of Canada, through our indirect subsidiary 1062024 B.C. LTD., a company existing under the lawslast closing date of the Province of British Columbia. Immediately prioroffering (the “Maturity Date”).
The Note and accrued interest may be prepaid by us in whole or in part in cash or by a conversion, mutually consented to by us and the Investor, at a price that is equal to a 15% discount to the closing10-day VWAP of the acquisition, we transferredour Common Stock. The Investor may, at its option, convert all of the then-existing business, properties, assets, operations, liabilitiesoutstanding balance and goodwillaccrued interest on the Note, at any time subsequent to the consummation of a Qualified Financing through to earlier of the Company,Early Payout Date or the Maturity Date, as such terms are defined in the Note, at a conversion price equal to W270 SA, a Costa Rican corporation. Accordingly,20% discount to the lesser of (i) the actual price paid for the securities issued in the Qualified Financing or (ii) if there is no Qualified Financing as of the Maturity Date, by mutual consent and election of us and the Investor, at a 15% discount to the average VWAP for ten (10) consecutive trading days immediately prior to the closingMaturity Date.
The Note includes standard Events of Default, including, but not limited to: (i) failure to issue and deliver shares upon conversion, (ii) default in the payment of principal or interest, when same is due, (iii) the entry of a decree or order adjudging us as bankrupt or insolvent; or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of us, or appointing a receiver, liquidator, assignee, trustee or sequestrator (or other similar official) of us or of any substantial part of our property, or ordering the winding-up or liquidation of our affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 days; or (iv) our institution of proceedings to be adjudicated as bankrupt or insolvent, or the consent by us to the institution of bankruptcy or insolvency proceedings against us, or the filing by us of a petition or answer or consent seeking reorganization or relief under the Federal Bankruptcy Code or any other applicable federal or state law.
Nasdaq Listing
On August 4, 2023, we received a deficiency letter from the Listing Qualifications Department (the “Staff”) of the acquisition,Nasdaq Stock Market (“Nasdaq”) notifying us that, for the preceding 30 consecutive business days, our Market Value of Listed Securities (“MVLS”) was below the $35 million minimum requirement for continued inclusion on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(b)(2) (the “MVLS Requirement”). In accordance with Nasdaq Listing Rule 5810(c)(3)(C), Nasdaq granted us 180 calendar days, or until January 29, 2024 (the “Compliance Date”), to regain compliance with the MVLS Requirement.
On January 30, 2024, we received a delisting determination letter (the “Letter”) from the Staff advising us that the Staff had no assetsdetermined that we did not regain compliance with the MVLS Requirement by the Compliance Date because our MVLS did not close at or liabilities, and subsequentabove $35 million for a minimum of 10 consecutive business days prior to the closing we commenced operations through iMedical.AsCompliance Date. As a result, trading of our Common Stock on the Nasdaq Capital Market was subject to suspension at the opening of business on February 8, 2024, and a Form 25-NSE would have been filed with the SEC to remove our securities from listing and registration on the Nasdaq Stock Market unless we treatedrequested an appeal of the acquisitionStaff’s determination.
On February 6, 2024, we submitted a hearing request to the Nasdaq Hearings Panel (the “Panel”) to appeal the Staff’s delisting determination. The hearing request has stayed the suspension of our securities and the filing of a Form 25-NSE pending the Panel’s decision. At the hearing, we intend to present a plan to regain compliance with the MVLS Requirement.
Results of Operations
Three Months Ended December 31, 2023 and 2022
The following table sets forth our results of operations for the three months ended December 31, 2023 and 2022.
For the three months ended December 31, | ||||||||||||
| 2023 | 2022 | Period to Period Change | ||||||||||
| Revenue | $ | 2,972,972 | $ | 2,459,181 | $ | 513,791 | ||||||
| Cost of revenue | 804,986 | 1,057,215 | (252,229 | ) | ||||||||
| Gross profit | 2,167,986 | 1,401,966 | 766,020 | |||||||||
| Gross Margin | 72.9 | % | 57.0 | % | ||||||||
| Operating expenses: | ||||||||||||
| Selling, general and administrative | 2,996,804 | 4,363,964 | (1,367,160 | ) | ||||||||
| Research and development | 452,956 | 876,460 | (423,504 | ) | ||||||||
| Total operating expenses | 3,449,760 | 5,240,424 | (1,790,664 | ) | ||||||||
| Loss from operations | (1,281,774 | ) | (3,838,458 | ) | 2,556,684 | |||||||
| Interest expense | (790,080 | ) | (413,402 | ) | (376,678 | ) | ||||||
| Accretion and amortization expenses | (422,706 | ) | (51,061 | ) | (371,645 | ) | ||||||
| Change in fair value of derivative liabilities | (326,683 | ) | (99,705 | ) | (226,978 | ) | ||||||
| Gain (loss) upon convertible promissory note conversion and redemption | 2,148 | 5,391 | (3,243 | ) | ||||||||
| Other (expense) income, net | 11,004 | (119,880 | ) | 130,884 | ||||||||
| Net loss before income taxes | (2,808,091 | ) | (4,517,115 | ) | 1,709,024 | |||||||
| Income taxes | — | — | — | |||||||||
| Net loss before dividends | $ | (2,808,091 | ) | $ | (4,517,115 | ) | $ | 1,709,024 | ||||
The results for the three months ended December 31, 2023, demonstrate year-over-year revenue growth and improvements in key operating metrics. Specifically, our recurring technology fees, device sales, and gross margins all demonstrated positive growth while maintaining cost control through management’s efforts to ensure cost reduction and expense management in order to make progress on its plan to achieve positive cash flow and profitability.
Revenue and cost of revenue
By increasing our sales force and geographic footprint, we are actively selling in 35 U.S. states. The Company earned combined device sales and technology fee income totaling $2.97 million during the three months ended December 31, 2023 – 20.9% growth in revenue over the $2.46 million earned in the prior year comparable quarter. During the last two quarters, we have also focused on improving the quality of our earnings by converting existing business to our subscription revenue model from a per use model and have directed the vast majority of our new business in that same subscription model.
Technology fees increased to $2.78 million during the three months ended December 31, 2023, which is a 23.4% increase over the corresponding three-month period of the prior year. The majority of these fees are recurring, and their growth can be attributed to strong customer retention that is supported by the quality of customer and cardiologist-friendly support services that emphasize accuracy of diagnostics and ease-of-use.
Device sales comprised 6.5% of our total revenue, or $193 thousand for the three-month period ended December 31, 2023. This period was the highest selling device quarter reported to-date. These device sales will positively impact technology fee subscription revenues in the next quarter and beyond. Device sales achieved and the revenues reported should be seen in the context of the fact that they occurred in a traditionally low selling quarter, which included thanksgiving and Christmas vacation periods, when we would have also expected lower usage-based revenues.
Gross profit percentage was 73% for the three months ended December 31, 2023, as compared to 57% in the corresponding prior year quarter. This increase in gross margin can primarily be attributed to improved margins on technology fees. Gross margin on technology fees stayed consistently above 70%. The company gained efficiencies in using AI for workflow automation and continued improving its revenue mix where technology fees are expected to comprise an increasing proportion of revenue. We anticipate continued improvement in overall blended gross margin over time. Technology fees comprised 94.3% of total revenue for the three-month period ended December 31, 2023.
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Operating Expenses
Total operating expenses for the three months ended December 31, 2023 were $3.45 million as compared to $5.24 million for the three months ended December 31, 2022. See further explanations below.
Selling, General and administrative expenses
Our selling, general and administrative expenses for the three months ended December 31, 2023 was $3 million, compared to approximately $4.36 million during the three months ended December 31, 2022, a reverse merger31.3% reduction. Despite our increased sales efforts and recapitalizationthe resulting revenue growth, we reduced total selling, general and administrative expenses by $1.37 million during the three months ended December 31, 2023 when compared to the comparable prior year quarter period primarily due to a revised focus on using our outside sales force to engage new business, while using less expensive inside sales personnel to support existing business. We have also increased our focus on monitoring of spending efficiency over our fixed general and administrative expenses in the current period.
Research and development expenses
For the three months ended December 31, 2023 we recorded research and development expenses of $0.45 million, compared to $0.88 million incurred for three months ended December 31, 2022. The research and development activity related to both existing and new products. The decrease in research and development activity was a result of the timing of activities associated with the development of new technologies for our ecosystem and product enhancements.
Interest Expense
For the three months ended December 31, 2023 and 2022, we incurred interest expenses of $0.79 million and $0.41 million, respectively. The increase in interest expenses during the current period was primarily the result of increases in borrowings outstanding and variable market interest rates.
Accretion and amortization expenses
For the three months ended December 31, 2023 and 2022, we incurred accretion expenses of $0.42 million and $51 thousand, respectively. The increase in the current period was largely the result of debt discount amortization related to new convertible notes entered towards the end of the prior fiscal year.
Change in fair value of derivative liabilities
For the three months ended December 31, 2023 and 2022, we recognized a loss of $0.33 million and $99.7 thousand, respectively, related to the change in fair value of derivative liabilities. The fair value changes were largely attributed to the underlying change in our equity fair value coupled with the timing of anticipated settlement events.
Gain (loss) upon convertible promissory notes conversion and redemption
During the three months ended December 31, 2023 and 2022, we recorded a gain of $2 thousand versus a gain of $5 thousand, respectively, related to the redemption or conversion of our convertible promissory notes. The change of gain upon convertible notes conversion was the result of decreased volumes of conversions and redemptions in the current period as compared to the comparable period in the prior year.
Other (expense) income, net
During the three months ended December 31, 2023 and 2022, we recognized $11 thousand of net other income compared to $120 thousand net other expense, respectively. Other (expense) income, net comprises of non-operating costs from note modifications and financing income contained in our revenue contracts.
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Net loss attributed to common stockholders
As a result of the foregoing, the net loss attributable to common stockholders for the three months ended December 31, 2023 was $2.80 million compared to a net loss of $4.75 million during the comparable quarter in the prior year. This represents a 37.9% year-over-year reduction in net loss, and a reduction in loss per share to $0.124 from $0.434 for the three-month period ended December 31, 2022.
This improved result was reported despite some mitigating factors that include the increased expenses associated with necessary infrastructure growth and rising variable interest rates, which impact short term notes and our term debt, resulting in a year-over-year increase of $377 thousand in interest that impacted this quarter.
Nine Months Ended December 31, 2023 and 2022
The following table sets forth our results of operations for the nine months ended December 31, 2023 and 2022.
For the nine months ended December 31, | ||||||||||||
| 2023 | 2022 | Period to Period Change | ||||||||||
| Revenue | $ | 8,885,034 | $ | 6,896,622 | $ | 1,988,412 | ||||||
| Cost of revenue | 2,801,066 | 2,989,290 | (188,224 | ) | ||||||||
| Gross profit | 6,083,968 | 3,907,332 | 2,176,636 | |||||||||
| Gross Margin | 68.5 | % | 56.7 | % | ||||||||
| Operating expenses: | ||||||||||||
| Selling, general and administrative | 10,004,350 | 13,336,888 | (3,332,538 | ) | ||||||||
| Research and development | 1,863,551 | 2,526,550 | (662,999 | ) | ||||||||
| Total operating expenses | 11,867,901 | 15,863,438 | (3,995,537 | ) | ||||||||
| Loss from operations | (5,783,933 | ) | (11,956,106 | ) | 6,172,173 | |||||||
| Interest expense | (2,203,860 | ) | (1,205,342 | ) | (998,518 | ) | ||||||
| Accretion and amortization expenses | (1,576,345 | ) | (151,970 | ) | (1,424,375 | ) | ||||||
| Change in fair value of derivative liabilities | (244,014 | ) | (469,971 | ) | 225,957 | |||||||
| Gain (loss) upon convertible promissory note conversion and redemption | 15,280 | (85,537 | ) | 100,817 | ||||||||
| Other income (expense) | (118,941 | ) | (116,989 | ) | (1,952 | ) | ||||||
| Net loss before income taxes | (9,911,813 | ) | (13,985,915 | ) | 4,077,102 | |||||||
| Income taxes | — | — | — | |||||||||
| Net loss before dividends | $ | (9,911,813 | ) | $ | (13,985,915 | ) | $ | 4,077,102 | ||||
The results for the nine months ended December 31, 2023, demonstrate year-over-year revenue growth and improvements in key operating metrics. Specifically, our recurring technology fees, device sales, and gross margins all demonstrated positive growth while maintaining cost control through management’s efforts to ensure cost reduction and expense management in order to make progress on its plan to achieve positive cash flow and profitability.
Revenue and cost of revenue
By increasing our sales force and geographic footprint, we are actively selling in 35 U.S. states. The Company earned combined device sales and technology fee income totaling $8.89 million during the nine months ended December 31, 2023 – 28.8% growth in revenue over the $6.90 million earned in the prior comparable period.
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Technology fees increased to $8.28 million during the nine months ended December 31, 2023, which is a 32.7% increase over the corresponding nine month period of the prior year. The majority of these fees are recurring, and their growth can be attributed to strong customer retention that is supported by the quality of customer and cardiologist-friendly support services that emphasize accuracy of diagnostics and ease-of-use. Device sales comprised 6.8% of our total revenue, or $0.60 million for the nine month period ended December 31, 2023. Gross profit percentage was 68.5% for the nine months ended December 31, 2023, as compared to 56.7% in the corresponding prior year period. This increase in gross margin can primarily be attributed to improved margins on technology fees. Given consistent gross margin on technology fees above 70%, and efficiencies gained in using AI in operational automation as well as an evolving revenue mix where technology fees are expected to comprise an increasing proportion of revenue, we anticipate continued improvement in overall blended gross margin over time. Technology fees comprised 93.2% of total revenue for the nine-month period ended December 31, 2023.
Operating Expenses
Total operating expenses for the nine months ended December 31, 2023, were $11.87 million as compared to $15.86 million for the nine months ended December 31, 2022. See further explanations below.
Selling, General and administrative expenses
Our selling, general and administrative expenses for the nine months ended December 31, 2023 was $10 million, compared to approximately $13.34 million during the nine months ended December 31, 2022 – a 25.0% reduction. Despite our increased sales efforts and the resulting revenue growth, we reduced total selling, general and administrative expenses by $3.37 million for the fiscal quarter ended December 31, 2023 when compared to the comparable prior year period primarily due to increased monitoring of spending efficiency over our fixed general and administrative expenses in the current period.
Research and development expenses
For the nine months ended December 31, 2023 we recorded research and development expenses of $1.86 million, compared to $2.53 million incurred for nine months ended December 31, 2022. The research and development activity related to both existing and new products. The decrease in research and development activity was a result of the timing of activities associated with the development of new technologies for our ecosystem and product enhancements.
Interest Expense
For the nine months ended December 31, 2023 and 2022, we incurred interest expenses of $2.20 million and $1.21 million, respectively. The increase in interest expense during the current period was primarily the result of increase in borrowings outstanding and market interest rates.
Accretion and amortization expenses
For the nine months ended December 31, 2023 and 2022, we incurred accretion expenses of $1.58 million and $0.15 million, respectively. The increase in the current period was a result of debt discount amortization related largely to new convertible notes entered towards the end of the prior fiscal year.
Change in fair value of derivative liabilities
For the nine months ended December 31, 2023 and 2022, we recognized a loss of $0.24 million versus a loss of $0.47 million, respectively, related to the change in fair value of derivative liabilities. The fair value changes were largely attributed to the underlying change in our equity fair value coupled with the timing of anticipated settlement events.
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Gain (loss) upon convertible promissory notes conversion and redemption
During the nine months ended December 31, 2023 and 2022, we recorded a gain of $15 thousand versus a loss of $86 thousand, respectively, related to the redemption or conversion of our convertible promissory notes. The change of loss upon conversion upon convertible notes conversion was largely the result of decreased volumes of conversions and redemptions in the current quarter as compared to the comparable quarter in the prior year.
Other (expense) income, net
During the nine months ended December 31, 2023 and 2022, we recognized $119 thousand net other expense compared to $117 thousand, respectively. Other (expense) income, net comprises of non-operating costs from note modifications, transaction expense on the Series B preferred share issuance and financing income contained in our revenue contracts.
Net loss attributed to common stockholders
As a result of the foregoing, the net loss attributable to common stockholders for the nine months ended December 31, 2023 was $10.53 million compared to a net loss of $14.68 million during the comparable period in the prior year. This represents a 28.3% year-over-year reduction in net loss, and a reduction in loss per share to $1.191 from $1.699 for the nine-month period ended December 31, 2022.
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 purposes, with iMedicalprinciples (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: other income and expense, net, as well as the acquirereffect of special items that related to one-time, non-recurring expenditures or expenditures that do not reduce operating cash flows. 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, and are an important indicator to management of its progress towards achieving operational cash flow break-even and profitability. See notes in the table below for accounting purposes.additional information regarding special items. The table below demonstrates significant reductions in quarterly negative EBITDA of $2.46 million from the corresponding three-month period a year earlier, and a reduction of $6.50 million from the corresponding prior year nine month period ended December 31, 2022. This resulted from management’s consistent effort to grow the recurring technology fee revenue base, while controlling administrative costs and reducing the costs associated with selling its services and processing the provision of those to customers. Management believes that they have achieved these results by continuous improvement to their technology, including thru the implementation of AI, operationally.
Critical Accounting Policies
The Financial Statements have beenIt 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 accounting principles generally acceptedGAAP. We believe that providing these non-GAAP measures in addition to the United StatesGAAP measures allows management, investors and other users of America (“US GAAP”)our financial information to more fully and are expressed in United States Dollars. Significant accounting policies are summarized below: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.
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UseEBITDA and Adjusted EBITDA
| Three Months Ended | Nine Months Ended | |||||||||||||||
| December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | |||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Net loss attributable to common stockholders | (3,045,995 | ) | (4,747,489 | ) | (10,528,856 | ) | (14,676,245 | ) | ||||||||
| Add: | ||||||||||||||||
| Provision for income taxes | — | — | — | — | ||||||||||||
| Interest expense | 790,080 | 413,402 | 2,203,860 | 1,205,342 | ||||||||||||
| Accretion and amortization expense (1) | 424,194 | 52,550 | 1,580,810 | 156,435 | ||||||||||||
| Preferred stock dividends | 237,904 | 230,374 | 617,043 | 690,330 | ||||||||||||
| EBITDA | (1,593,817 | ) | (4,051,163 | ) | (6,127,143 | ) | (12,624,138 | ) | ||||||||
| Add (Less) | ||||||||||||||||
| Stock-based compensation | 170,140 | 63,125 | 544,655 | 365,653 | ||||||||||||
| (Gain) loss expense related to convertible note conversion and redemption (2) | (2,148 | ) | (5,391 | ) | (15,280 | ) | 85,537 | |||||||||
| Fair value change on derivative liabilities (3) | 326,683 | 99,705 | 244,014 | 469,971 | ||||||||||||
| Other expense (income) (4) | (11,004 | ) | 119,880 | 118,941 | 116,989 | |||||||||||
| Adjusted EBITDA | (1,110,146 | ) | (3,773,844 | ) | (5,234,813 | ) | (11,585,988 | ) | ||||||||
| Weighted average number of common shares outstanding | 8,979,430 | 8,690,506 | 8,842,890 | 8,635,900 | ||||||||||||
| Adjusted Loss per Share, Basic and Diluted | (0.124 | ) | (0.434 | ) | (0.592 | ) | (1.342 | ) | ||||||||
(1) This relates to recognition of Estimates
The preparation ofaccretion expenses related to the audited financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Areas involving significant estimates and assumptions include: deferred income tax assets and related valuation allowance, accruals and valuation of derivatives, convertible promissorydebt discount balances on notes, stock options and warrants, as well as assumptions used by management in its assessmentfixed asset depreciation expense.
(2) This relates to one-time recognition of liquidity. Actual results could differ from those estimates. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earningsexpenses (gains) related to our financing transactions.
(3) Fair value changes on derivative liabilities corresponds to changes in the period in which they become known.underlying stock value and thus does not reflect our day to day operations
Earnings (Loss) Per Share
We have adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 260-10 which provides for calculation of “basic”(4) Loss from note and “diluted” earnings per share. Basic earnings per share includes no dilutionwarrant modifications 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 shareother financing transactions that do not 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, 2017.Company’s core operating activities.
CashTranslation Adjustment
Cash includes cash on hand and balances with banks.
Foreign Currency Translation
The functional currency of the US-based company is the US dollar and the Canadian-based company is the Canadian 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 US 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 cumulative 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.
Fair Value of Financial Instruments
Accounting Standards Codification Topic 820 “Fair Value Measurements and Disclosures” (“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. Our 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 and accounts payable. Our cash, which is carried at fair value, is classified as a Level 1 financial instrument. Our bank accounts are maintained with financial institutions of reputable credit, therefore, bear minimal credit risk.
Income Taxes
We account for income taxes in accordance with ASC 740. We provide for federal 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 is more likely than not to be realized.
Research and Development
We are engaged in research and development work. Research and development costs, which relate primarily to software development, are charged to operations as incurred. Under certain research and development arrangements with third parties, we 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. Research and development costs were $377,924 and $1,106,658 adjustment for the three and nine months ended December 31, 2017, compared to $333,565 and $847,938, respectively, for the corresponding periods ended December 31, 2016.
Impairment of Long-Lived Assets
In accordance with ASC Topic 360-10, we review the carrying amount of long-lived assets for the existence of facts or circumstances, both internally and externally, that suggest impairment. We determine if the carrying amount of a long-lived asset is impaired based on anticipated undiscounted cash flows, before interest, from the use of the asset. In the event of impairment,2023 was a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the asset. Fair value is determined based on appraised value of the assets or the anticipated cash flows from the use of the asset or asset group, discounted at$0.20 million and $99.1 thousand, respectively, versus a rate commensurate with the risk involved.
Stock Based Compensation
We account 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.
We account 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. We issue compensatory shares for services including, but not limited to, executive, management, accounting, operations, corporate communication, financial and administrative consulting services.
Operating Leases
We lease office space and certain office equipment under operating lease agreements. The lease term begins on the date of initial possession of the leased property for purposes of recognizing lease expense on a straight-line basis over the term of the lease. Lease renewal periods are considered on a lease-by-lease basis and are generally not included in the initial lease term.
Convertible Notes Payable and Derivative Instruments
We account 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.
We account 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, we record, as a discount to convertible notes, the intrinsic value of such conversion options based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt.
Recently Issued Accounting Pronouncements
In July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2017-11 (“ASU 2017-11”), which addressed accounting for (I) certain financial instruments with down round features and (II) replacement of the indefinite deferral for mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable non-controlling interests with a scope exception. The main provisions of Part I of ASU 2017-11 change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS.” Under previous US GAAP, warrants with a down round feature are not being considered indexed to the entity’s own stock, which results in classification of the warrant as a derivative liability. Under ASU 2017-11, the down round feature qualifies for a scope exception from derivative treatment. ASU 2017-11 is effective for public companies as of December 15, 2018 and interim periods within that fiscal year. Early adoption is permitted, including adoption in an interim period, with adjustments reflected as of the beginning of the fiscal year. The Company has issued financial instruments with down round features. The Company opted to adopt ASU 2017-11 in the three-month interim period ended December 31, 2017, with adjustments reflected in the accumulated deficit of stockholders’ deficiency as of April 1, 2017. For details of the adjustments, please refer to Note X of the Financial Statements.
In May 2017, an accounting pronouncement was issued by the Financial Accounting Standards Board (“FASB”) ASU 2017-09, “Compensation - Stock Compensation: Scope of Modification Accounting.” ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The updated guidance is effective for interim and annual periods beginning after December 15, 2017, and early adoption is permitted. The adoption of this pronouncement will not have a material impact on the financial position and/or results of operations.
On January 1, 2017, the Company adopted the accounting pronouncement issued by the Financial Accounting Standards Board (“FASB”) to simplify the presentation of deferred income taxes within the balance sheet. This pronouncement eliminates the requirement that deferred tax assets and liabilities are presented as current or noncurrent based on the nature of the underlying assets and liabilities. Instead, the pronouncement requires that all deferred tax assets and liabilities, including valuation allowances, be classified as noncurrent. We adopted this pronouncement on a retrospective basis. The adoption of this guidance did not have a material impact on the Company’s unaudited condensed financial position and/or results of operations.
On January 1, 2017, the Company adopted the accounting pronouncement issued by the FASB to simplify the accounting for goodwill impairment. This guidance eliminates the requirement that an entity calculate the implied fair value of goodwill when measuring an impairment charge. Instead, an entity would record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. The Company adopted this pronouncement on a prospective basis. The adoption of this guidance did not have a material impact on the Company’s unaudited condensed financial position and/or results of operations.
In February 2016, an accounting pronouncement was issued by the FASB 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 current accounting guidance. This pronouncement is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. The adoption is required to be applied on a modified retrospective basis for each prior reporting period presented. The Company has not yet determined the effect that the adoption of this pronouncement may have on its unaudited condensed financial position and/or results of operations.
Results of Operations
From its inception in July 2009 through to December 31, 2017, Biotricity has generated a deficit of $23,655,955. We expect to incur additional operating losses, principally because of the anticipated initial limited sales we expect to be associated with a measured and well-executed commercialization path for Bioflux, our planned first product, as well as anticipated costs of continued research and development associated with product improvement and new product development. As we approach final stages of the commercialization, we also expect to devote significant resources towards capital expenditures in order to install an adequate operating infrastructure that can provide excellent customer service and sales support.
Three and Nine Months Ended December 31, 2017 and December 31, 2016
Operating Expenses
Total operating expenses for the three and nine month periods ended December 31, 2017 were $2,095,590 and $4,932,260, compared to $2,192,101 and $4,395,928, respectively, for the three and nine month periods ended December 31, 2016, as further described below.
For the three and nine-month period ended December 31, 2017, we incurred general and administrative expenses of $1,717,666 and $3,825,602, compared to $1,858,536 and $3,547,990, respectively, for the three and nine month periods ended December 31, 2016. The fluctuations in these balances are in line with increased professional fees and product marketing and promotion incurred in preparing for the launch of a developed product, as tempered by cost controls associated with consolidating the Company’s operations in one office and the payroll and compensation-related cost savings associated with building an engineering division that is less reliant on contract consultants.
For the three and nine month periods ended December 31, 2017, we incurred research and development expenses of $377,924 and $1,106,658 compared to research and development expenses of $333,565 and $847,938 for the three and nine month periods ended December 31, 2016. The increases for the three and nine month periods ended December 31, 2017 reflect the increased activity associated with completing our FDA approval process, preparing Bioflux for commercialization and engineering future product enhancements.
Results for the nine months ended December 2017 were also affected by the fact that, during the three month period ended September 30, 2017, the Company adopted ASU 2017-11. As a result, change in fair value of derivative liabilities of $21,540, previously recognized as an expense during the three-month period ended June 30, 2017, were reversed.
Net Loss
Net loss for the three and nine months ended December 31, 2017 was $2,095,590 and $5,832,264 compared to a net loss of $2,624,670$73 thousand and $6,011,680, respectively,a gain of $0.62 million during the three and nine months ended December 31, 2017, resulting in a loss per share of $0.0682022, respectively. This translation adjustment represents gains and $0.186 (2016: $0.100 and $0.236)
Translation Adjustment
Translation losses for the three and nine month periods ended December 31, 2017 were $23,424 and $193,771 respectively, as compared to a gain of $24,635 and a loss of $185,057, respectively, for the three and nine months ended December 31, 2016. These translation adjustments represent losses and gains 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.dollars over the course of the reporting period.
Global Economic Conditions
Generally, worldwide economic conditions remain uncertain, particularly due to the effects of the COVID-19 pandemic and increased inflation. The general economic and capital market conditions both in the U.S. and worldwide, have been volatile in the past and at times have adversely affected our access to capital and increased the cost of capital. The capital and credit markets may not be available to support future capital raising activity on favorable terms. If economic conditions decline, our future cost of equity or debt capital and access to the capital markets could be adversely affected.
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The COVID-19 pandemic that began in late 2019 introduced significant volatility to the global economy, disrupted supply chains and had a widespread adverse effect on the financial markets. Additionally, our operating results could be materially impacted by changes in the overall macroeconomic environment and other economic factors. Changes in economic conditions, supply chain constraints, logistics challenges, labor shortages, the conflict in Ukraine, and steps taken by governments and central banks, particularly in response to the COVID-19 pandemic as well as other stimulus and spending programs, have led to higher inflation, which has led to an increase in costs and has caused changes in fiscal and monetary policy, including increased interest rates.
Liquidity and Capital Resources
Management has noted the existence of substantial doubt about our ability to continue as a going concern. Additionally, our independent registered public accounting firm included an explanatory paragraph in the report on our financial statements as of and for the years ended March 31, 2023 and 2022, respectively, noting the existence of substantial doubt about our ability to continue as a going concern. Our existing cash deposits may not be sufficient to fund our operating expenses through at least twelve months from the date of this filing. To continue to fund operations, we will need to secure additional funding through public or private equity or debt financings, through collaborations or partnerships with other companies or other sources. We may not be able to raise additional capital on terms acceptable to us, or at all. Any failure to raise capital when needed could compromise our ability to execute our business plan. If we are unable to raise additional funds, or if our anticipated operating results are not achieved, we believe planned expenditure may need to be reduced in order to extend the time period that existing resources can fund our operations. If we are unable to obtain the necessary capital, it may have a material adverse effect on our operations and the development of our technology, or we may have to cease operations altogether.
The development and commercialization of our product offerings are subject to numerous uncertainties, and we could use our cash resources sooner than we expect. Additionally, the process of developing our products is costly, and the timing of progress can be subject to uncertainty; our ability to successfully transition to profitability may be dependent upon achieving further regulatory approvals and achieving a level of product sales adequate to support our cost structure. Though we are optimistic with respect to our revenue growth trajectory and our cost control initiatives, we cannot be certain that we will ever be profitable or generate positive cash flow from operating activities.
The Company is in commercialization mode, while continuing to pursue the development of its next generation COM 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. |
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The Company is in the early stages of commercializing its products. 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 approvalapprovals for, and commercialize itsother proposed products.
We generally require cash to:
·
fund our operations 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 working capital requirements,
·
develop and execute our productimprove its liquidity through continued business development and market introduction plans,
·
fund research and development efforts, and
·
pay anyafter additional equity or debt obligations as they come due.
As a resultcapitalization of its being in development-mode, pre-revenue operations, the Company. The Company has incurred recurring losses from operations, and as at December 31, 2017,2023, has an accumulated deficit of $23,655,955. Management anticipates$122.54 million. On August 30, 2021 the Company will attain profitable statuscompleted an underwritten public offering of its common stock that concurrently facilitated its listing on the Nasdaq Capital Market. On December 31, 2023, the Company has a working capital deficit of $14.69 million. 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 improveExchange 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 liquidity through continued business development and after additional debt or equity investmentshares to investors only by means of a prospectus, including a prospectus supplement, which forms part of an effective registration statement.
On December 31, 2023, we had cash deposits in the Company. To do this, theaggregate of approximately $85 thousand.
The Company has developed and continues to pursue sources of funding including but not limitedthat management believes will be sufficient to those described below.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 three monthsfiscal year ended DecemberMarch 31, 2017, we sold to accredited investors an aggregate of 450,164 shares of our common stock, for gross proceeds of $2,475,901 at a purchase price of $5.50 per share (the “Purchase Price”), in a registered direct offering. After payment of offering expenses such as legal, accounting and printing costs and other fees associated with registering and listing the common stock, net proceeds received were approximately $2.4 million. The registered direct offering closed on December 22, 2017.
During the three months ended December 31, 2017,2022, the Company issued 136,672 shares as compensation to consultants that provide contractual services. Subsequent to December 31 to February 5, 2018, the Company has issued or is in the process of issuing a further 82,401 shares under contract to consultants, advisors and other service providers. During this same period, incumbent stakeholders who have invested in the Companyraised $499,900 through its exchangeable share structure, exercised their right to exchange those shares for 679,858 common shares of the Company.
government EIDL loan. The Company also raised $0.3 million dollarstotal net proceeds of $14,545,805 through the underwritten public offering that was concurrent with its listing onto the Nasdaq Capital Markets. The Company raised additional net proceeds of $11,756,563 through a term loan transaction (Note 6) and issued 140,000 of common shares to consultants exercising warrants, in addition to issuing a further 171,593 common shares as partmade repayment of the cashless exercise of warrants previously issued promissory notes and short-term loans. In connection with this loan, the Company and Lender entered into a Guarantee and Collateral Agreement, as well as an Intellectual Property Security Agreement, wherein the Company agreed to brokers as partsecure the Credit Agreement with all of its Unit Offering, which funded the Company’s research and development endeavors,assets, as well its growing operations. Common shares issuedas secured by the Company’s right title and outstanding as at February 1, 2018 were 23,268,659, not including outstanding exchangeable sharesinterest in the Company’s Intellectual Property. During the fiscal year ended March 31, 2023, the Company raised short-term loans and promissory notes, net of 8,443,172.
In prior quarters, therepayments of $1,476,121 from various lenders. The Company also raised capital by issuing (i) convertible notes, that then converted into common stock or (ii) unitsnet of common stock and warrants sold in a private offering (described in the following paragraphs):redemptions of $2,355,318 from various lenders.
During the nine months ended December 31, 2017, not including2023, the Company raised additional convertible notes issuedfrom various lenders of approximately $2.2 million net of issuance costs. In addition, the Company raised additional short-term loans and then converted (described inpromissory notes, net of repayments, of $0.7 million from various lenders. Lastly, on September 19, 2023, the next paragraph), we sold to accredited investorsCompany entered into a security purchase agreement with an aggregateinstitutional investor for the issuance and sale of 1,545,957 Units, for gross proceeds220 shares of $2,705,424the Company’s newly designated Series B Convertible Preferred Stock, $0.001 par value (the “Series B Preferred Stock”), at a purchase price of $1.75$9,090.91 per Unit (the “Purchase Price”), in a private offering of a minimum of $1,000,000 and up to a maximum of $8,000,000 (subject to an overallotment option). Each Unit consists of one share of our common stock and a three-year warrant to purchase one-half share of common stock at an initial exercise price of $3.00 per whole share. After payment of placement agent fees and expenses but before the payment of other offering expenses such as legal and accounting expenses, net proceeds received were approximately $2,156,444. The Units were offered for sale until July 31, 2017.
During the fiscal quarter ended March 31, 2017, we closed a bridge offering that raised an aggregate face value of $2,455,000 through the sale of convertible promissory notes to various investors. After the payment of placement agent fees but before the payment of other offering expenses such as legal and accounting fees, we received netSeries B Preferred Stock, or gross proceeds of $2,303,561. On May 31, 2017,$2,000,000. Net proceeds after issuance costs amounted to $1,900,000 for the outstanding convertible promissory notes converted into an aggregateSeries B Preferred Stock. Shares of 1,823,020Series B Preferred Stock and shares of common stock of the Company that are issuable upon conversion of, or as dividends on, the Series B Preferred Stock were offered and were issued pursuant to the terms of the notes, which also included with warrants to purchase 911,510 shares, pursuantProspectus Supplement, filed September 19, 2023, to the terms ofProspectus included in the convertible notes, at an exercise price of $3.00. Furthermore, pursuant toCompany’s Registration Statement on Form S-3 (Registration No. 333-255544) filed with the conversion terms of the notes, we issued to the holders thereof five-year warrants to purchase an aggregate of 1,823,020 shares of common stock at an exercise price per share of $2.00.
Securities and Exchange Commission on April 27, 2021, and declared effective May 4, 2021.
From inception to closing, the Unit Offering raised total gross proceeds of $6,527,997, including $2,455,000 initially raised as convertible Bridge Notes that were converted. After payment of Placement Agent fees and expenses but before the payment of other Unit Offering expenses such as legal and accounting expenses, we received net cash proceeds, from the commencement of the Unit Offering to August 10, 2017, of approximately $5,849,367, including the net cash proceeds of $2,274,800 received as a result of sale and subsequent conversion of the convertible Bridge Notes. Based on the multiple closings that were completed by August 10, 2017, the Company paid to the Placement Agent and its sub-agents an aggregate of approximately $678,630 in fees, and issued Placement Agent’s Warrants to purchase an aggregate of 301,528 shares of common stock. As part of Units issued, the Company issued 4,150,462 shares and 2,075,231 warrants to investors.
As we proceed with the commercialization of the Bioflux, productBiotres and Biocare products and continue their development, we have devoted and expect to continue to devote significant resources in the areas ofon capital expenditures, andas well as research and development costs and operations, marketing and sales expenditures.
We expect to require additional funds to further develop our business plan, including the anticipatedcontinuous commercialization and expansion of the Bioflux and Biolife products.technologies that will form part of its BioSphere eco-system. Based on ourthe current operating plans, we will require approximately $4 million to complete the development of Bioflux including marketing, sales, regulatory and clinical costs to first introduce this product into the market place. We expect to require approximately $4 million additional funds to also complete the development of our Biolife product, increase penetration in new and existing markets and expand our intellectual property platform, which we anticipate will lead to profitability. Since it is impossible to predict with certainty the timing and amount of funds required to launch the Bioflux and Biolife product in any other markets or for the development and launch of any other planned future products, we anticipate that we will need to raise additional funds through equity or debt offerings, or otherwise, in order to meet our expected future liquidity requirements. We are currently in discussion to raise additional debt and equity financing of which we can give no assurance of success.
Based on these aboveknown facts and assumptions, we believe our existing cash and cash equivalents, access to funding sources, along with anticipated near-term debt and equity financings, [willwill be sufficient to meet our needs for the next twelve months from the filing date of the Quarterly Report on Form 10-Q].this report. We will needintend to seek and opportunistically acquire 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 financingsfinancing 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.
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The following is a summary of cash flows for each of the periods set forth below.
| For the Nine Months Ended | ||||||||
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Net cash used in operating activities | $ | (5,528,119 | ) | $ | (11,669,667 | ) | ||
| Net cash used in investing activities | — | — | ||||||
| Net cash provided by (used in) financing activities | 4,953,181 | 4,119 | ||||||
| Net increase (decrease) in cash | $ | (574,938) | $ | (11,665,548 | ) | |||
Net Cash Used in Operating Activities
During the nine months ended December 31, 2017,2023, we used cash in operating activities in the amount of $5.53 million. The cash in operating activities was primarily due to selling expenses as well as research, product development, business development, marketing and general operations. The decrease in cash used reflects management’s concerted effort to contain costs while increasing revenues, on the path of achieving break-even.
During the nine months ended December 31, 2022, we used cash in operating activities of $3,236,926 compared to $1,837,848$11.7 million. These activities involved expenditures for the nine months ended December 31, 2016. This was primarily due to a concerted effort to pay down the Company’s trade liabilities,sales, infrastructure and business development, as well as use share-based compensation to pay for the work of consultants, advisors and other service providers, including increased expenditures undertaken on research, product development, business development, marketing and operating activities.activities, and continued research and product development.
Net Cash from FinancingUsed in Investing Activities
Net cash from financingused in investing activities was $5,289,281 for the nine months ended December 31, 2017 compared to $1,954,476 for the nine months ended December 31, 2016. The increase is primarily due to the sale of securities in our registered offering, which raised net proceeds of $4,860,970Nil during the nine months ended December 31, 2017,2023 and 2022.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was $4.95 million as compared to $4 thousand during the nine months ended December 31, 2023 and 2022, respectively.
For the nine months ended December 31, 2023, the net cash provided by financing activities related primarily to net proceeds attributed to the issuance of Series B preferred stock in the amount of $1.9 million, the issuance of convertible notes in the amount of $2.3 million and the issuance of short term loans and promissory notes in the amount of approximately $1.4 million, net of repayments. Lastly, we issued common stock resulting in $0.1 million of net proceeds.
For the nine months ended December 31, 2022, the net cash provided by financing activities related primarily to net proceeds attributed to short term loans and promissory notes in the amount of 1.89 million. This was largely offset by the redemption of preferred stock in the amount of $0.9 million and the payment of preferred stock dividends in the amount of $0.94 million.
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with GAAP. These accounting principles require us to make estimates and judgments that can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the convertible note offeringreported amounts of revenue and Unit offeringexpense during the periods presented. We believe that the estimates and judgments upon which closedwe rely are reasonably based upon information available to us at the time that we make these estimates and judgments. To the extent that there are material differences between these estimates and actual results, our financial results will be affected. The accounting policies that reflect our more significant estimates and judgments and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, included in our 2023 Form 10-K filed on June 29, 2023.
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During the earlier part of the fiscal year.
Net Cash Used in Investing Activities
The Company did not use any net cash in investing activities in thethree and nine month periodsmonths ended December 31, 2017 or 2016.2023, there were no material changes to our critical accounting estimates disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2023 Form 10-K filed on June 29, 2023.
Off-Balance Sheet ArrangementsRecent Accounting Pronouncements
We have no off-balance sheet arrangements that have or are reasonably likelyRefer to haveNote 3— Summary of Significant Accounting Policies to our condensed consolidated financial statements included elsewhere in this report for a current or future effect on our financial condition, changes in financial condition, revenues or expenses, resultsdiscussion of operations, liquidity, capital expenditures or capital resources.recently issued accounting pronouncements.
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Not applicable.required for a smaller reporting company.
31
Item 4.
Controls and ProceduresProcedures..
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'sCompany’s Exchange Act reports is recorded, processed, summarized and reported within the time communicated to the Company'sCompany’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'sCompany’s disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching the Company'sCompany’s desired disclosure control objectives. In designing periods specified in the SEC's rules and forms, and that such information is accumulated 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. The Company's certifying officers have concluded that the Company's disclosure controls and procedures are effective in reaching that level of assurance.
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 not 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, recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms relating to the Company, since the assessment and control of disclosure decisions is currently performed by a small team. The Company has improved this situation by adding additional review levels and plans to further remediate this issue as it plans to expand its management team and build a fulsome internal control framework required by a more complex entity.
Changes in Internal Controls
On October 27,2017, the Company hired a new Chief Financial Officer.
There were no changes in the Company’s internal controls over financial reporting that occurred during the nine-month period ended December 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
Internal control systems, no matter how well designed and operated, have inherent limitations. 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 2023 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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PART II
OTHER INFORMATION
Item 1.
Legal Proceedings.
None.From time to time, we may be involved in various claims and legal proceedings relating to claims arising out of our operations. We are not currently a party to any legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
Item 1A.
Risk Factors
Not applicablerequired for smaller reporting companies.
Item 2.
Unregistered Sales of Equity Securities, and Use of Proceeds.Proceeds, and Issuer Purchases of Equity Securities.
All unregistered issuance of securities during the period covered by this quarterly report have been previously disclosed on the Company’s current reports on Form 8-K.None.
Item 3.
Defaults Upon Senior Securities.
None.
Item 4.
Mine Safety Disclosures.
Not applicable.
Item 5.
Other Information.
None.
Item 6. Exhibits
Exhibits
* Filed herewith.
31.1** Furnished herewith.
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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31.2SIGNATURES
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.1
XBRL Instance.
101.SCH
XBRL Taxonomy Extension Schema.
101.CAL
XBRL Taxonomy Extension Calculation.
101.DEF
XBRL Taxonomy Extension Definition.
101.LAB
XBRL Taxonomy Extension Labels.
101.PRE
XBRL Taxonomy Extension Presentation.
33
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 1420th day of February 2018.2024.
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) |
| 50 |
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)
34