UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For
the quarterly period ended | |
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the period from ______________ to_______________
Commission
file number:
(Exact name of registrant as specified in its charter)
| State
or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Registrant’s Telephone Number, Including Area Code)
Indicate
by check whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act).
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller
reporting company | |
| Emerging
growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| OTCQB |
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: shares of Common Stock, $ par value, at August 19, 2024. As at that same date, the Company also has 160,672 Exchangeable Shares outstanding that convert directly into common shares, which when combined with its Common Stock produce an amount equivalent to 22,615,316 outstanding voting securities.
BIOTRICITY INC.
| 2 |
PART 1
FINANCIAL INFORMATION
Item 1 – Condensed Consolidated Financial Statements
| 3 |
BIOTRICITY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2024 (unaudited) AND MARCH 31, 2024 (audited)
(Expressed in US Dollars)
As at June 30, 2024 | As at March 31, 2024 | |||||||
| $ | $ | |||||||
| CURRENT ASSETS | ||||||||
| Cash | ||||||||
| Accounts receivable, net | ||||||||
| Inventory [Note 3] | ||||||||
| Deposits and other receivables | ||||||||
| Total current assets | ||||||||
| Deposits and other receivables [Note 10] | ||||||||
| Long-term accounts receivable | ||||||||
| Property and equipment [Note 12] | ||||||||
| Operating right of use assets [Note 10] | ||||||||
| TOTAL ASSETS | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable and accrued liabilities [Note 4] | ||||||||
| Convertible promissory notes and short term loans [Note 5] | ||||||||
| Term loan, current | ||||||||
| Derivative liabilities [Note 8] | ||||||||
| Operating lease obligations, current [Note 10] | ||||||||
| Total current liabilities | ||||||||
| Federally guaranteed loans [Note 7] | ||||||||
| Term loan [Note 6] | ||||||||
| Derivative liabilities [Note 8] | ||||||||
| Operating lease obligations | ||||||||
| TOTAL LIABILITIES | ||||||||
| MEZZANINE EQUITY | ||||||||
| Series B Convertible Redeemable preferred stock, $ par value, shares authorized as of June 30, 2024 and March 31, 2024, respectively, and shares issued and outstanding as of June 30, 2024 and March 31, 2024, respectively [Note 9] | ||||||||
| STOCKHOLDERS’ DEFICIENCY | ||||||||
| Preferred stock, $ par value, shares authorized as of June 30, 2024 and March 31, 2024, respectively, share issued and outstanding as of June 30, 2024 and March 31, 2024 [Note 9] | ||||||||
| Series A preferred stock, $ par value, shares authorized as at June 30, 2024 and March 31, 2024, respectively, and preferred shares issued and outstanding as at June 30, 2024 and March 31, 2024, respectively [Note 9] | ||||||||
| Common stock, $ par value, shares authorized as at June 30, 2024 and March 31, 2024, respectively. Issued and outstanding common shares: and as at June 30, 2024 and March 31, 2024, respectively, and exchangeable shares of outstanding as at June 30, 2024 and March 31, 2024, respectively [Note 9] | ||||||||
| Shares to be issued and shares of common stock as at June 30, 2024 and March 31, 2024, respectively) [Note 9] | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated other comprehensive income | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficiency | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ DEFICIENCY | ||||||||
Commitments and contingencies [Note 11]
Subsequent events [Note 13]
See accompanying notes to unaudited condensed consolidated interim financial statements
| 4 |
BIOTRICITY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE THREE MONTHS ENDED JUNE 30, 2024 AND 2023 (unaudited)
(Expressed in US Dollars)
Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | |||||||
| $ | $ | |||||||
| REVENUE | ||||||||
| Cost of Revenue | ||||||||
| GROSS PROFIT | ||||||||
| OPERATING EXPENSES | ||||||||
| Selling, general and administrative expenses | ||||||||
| Research and development expenses | ||||||||
| TOTAL OPERATING EXPENSES | ||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ||||
| Interest expense | ( | ) | ( | ) | ||||
| Accretion and amortization expenses [Note 5,6] | ( | ) | ( | ) | ||||
| Change in fair value of derivative liabilities [Note 8] | ( | ) | ||||||
| Gain (loss) upon convertible promissory notes conversion and redemption [Note 9] | ( | ) | ||||||
| Other income (expense) [Note 9] | ( | ) | ||||||
| NET LOSS BEFORE INCOME TAXES | ( | ) | ( | ) | ||||
| Income taxes [Note 3] | ||||||||
| NET LOSS BEFORE DIVIDENDS | ( | ) | ( | ) | ||||
| Preferred Stock Dividends | ( | ) | ( | ) | ||||
| Deemed Dividends [Note 9] | ( | ) | ||||||
| NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS | ( | ) | ( | ) | ||||
| Translation adjustment | ( | ) | ||||||
| COMPREHENSIVE LOSS | ( | ) | ( | ) | ||||
| LOSS PER SHARE, BASIC AND DILUTED | ) | ) | ||||||
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||
See accompanying notes to unaudited condensed consolidated interim financial statements
| 5 |
BIOTRICITY INC.
CONDENSED CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND STOCKHOLDERS’ DEFICIENCY
FOR THE THREE MONTHS ENDED JUNE 30, 2024 AND 2023 (unaudited)
Mezzanine Equity | Total Mezzanine Equity | Preferred stock | Common stock and exchangeable common shares | Shares to be Issued | Additional paid in capital | Accumulated other comprehensive income | Accumulated deficit | Total Stockholders’ Deficiency | ||||||||||||||||||||||||||||||||||||||||||||
| Shares | $ | $ | Shares | $ | Shares | $ | Shares | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of mezzanine equity [Note 9] | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares from shares to be issued [Note 9] | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares from at-the-market transaction [Note 9] | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of mezzanine equity into common shares [Note 9] | ( | ) | ( | ) | ( |
) | ||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of preferred shares into common shares [Note 9] | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of convertible notes into common shares [Note 9] | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares for services [Note 9] | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares for settlement of accounts payable [Note 9] | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock based compensation - ESOP [Note 9] | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Translation adjustment | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss before dividends for the period | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred stock dividends | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Deemed Dividend [Note 9] | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2024 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||
| 6 |
| Preferred stock | Common stock and exchangeable common shares | Shares to be Issued | Additional paid in capital | Accumulated other comprehensive loss | Accumulated deficit | Total | ||||||||||||||||||||||||||||||||||
| Shares | $ | Shares | $ | Shares | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
| Balance, March 31, 2023 (audited) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Stock based compensation - ESOP [Note 9] | — | — | — | |||||||||||||||||||||||||||||||||||||
| Translation adjustment | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Net loss before dividends for the period | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Preferred stock dividends | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance, June 30, 2023 (unaudited) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated interim financial statements
| 7 |
BIOTRICITY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 2024 AND 2023 (UNAUDITED)
(Expressed in US Dollars)
Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | |||||||
| $ | $ | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Adjustments to reconcile net loss to net cash used in operations: | ||||||||
| Stock based compensation | ||||||||
| Issuance of shares for services | ||||||||
| Issuance of warrants for services | ||||||||
| Accretion and amortization expenses | ||||||||
| Change in fair value of derivative liabilities | ( | ) | ||||||
| (Gain) loss upon convertible promissory notes conversion and redemption | ( | ) | ||||||
| Property and equipment depreciation | ||||||||
| Non-cash lease expense | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net | ( | ) | ( | ) | ||||
| Inventory | ( | ) | ||||||
| Deposits and other receivables | ( | ) | ( | ) | ||||
| Accounts payable and accrued liabilities | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Issuance of common shares, net | ||||||||
| Issuance of preferred shares, net | ||||||||
| Proceeds from convertible debentures, net | ||||||||
| Proceeds from short term loan and promissory notes, net | ( | ) | ||||||
| Preferred Stock Dividend | ( | ) | ( | ) | ||||
| Net cash provided by (used in) financing activities | ||||||||
| Net decrease in cash during the period | ( | ) | ( | ) | ||||
| Effect of foreign currency translation | ( | ) | ( | ) | ||||
| Cash, beginning of period | ||||||||
| Cash, end of period | ||||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Interest paid | ||||||||
| Taxes | ||||||||
See accompanying notes to unaudited condensed consolidated interim financial statements
| 8 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 (Unaudited)
(Expressed in US dollars)
1. NATURE OF OPERATIONS
Biotricity Inc. (formerly MetaSolutions, Inc.) (the “Company” or “Biotricity”) 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.
The Company (directly and through its subsidiary) is engaged in research and development activities within the remote monitoring segment of preventative care. It is 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 condensed consolidated interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and are expressed in United States dollars (“USD”).
The condensed consolidated interim financial statements of the Company have been prepared on a historical cost basis except derivative liabilities which are carried at fair value.
The condensed consolidated interim 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 consolidated financial statement presentation.
Reverse Split
On
June 29, 2023, the Company filed a Certificate of Amendment to its Amended and Restated Articles of Incorporation to effect a
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.
Going Concern, Liquidity and Basis of Presentation
The
accompanying condensed consolidated interim 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 product ecosystem and is concurrently continuing 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 June 30, 2024, had an
accumulated deficit of $
| 9 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 (Unaudited)
(Expressed in US dollars)
Management anticipates the Company will continue on its revenue growth trajectory and improve its liquidity through continued business development and after additional equity and debt capitalization of the Company.
During the fiscal year ended March 31, 2023,
the Company raised funds through short-term loans and promissory notes, net of repayments of $
During
the fiscal year ended March 31, 2024, the Company raised funds through short-term loans and promissory notes, net of repayments of
$
Additionally,
on September 19, 2023, the Company entered into a security purchase agreement with an institutional 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 Series B Preferred Stock (Note 9),
or gross proceeds of $
As we proceed with the commercialization of the Bioflux, Biocore, 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.
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.
| 10 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 (Unaudited)
(Expressed in US dollars)
Both the Bioflux mobile cardiac telemetry device, and the Biocore 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 earn service-related revenue from contracts with other counterparties with which it consults. This contract work is separate and distinct from services provided to clinical customers, but may be with a reseller or other counterparties that are working to establish their operations in foreign jurisdictions or ancillary products or market segments in which the Company has expertise and may eventually conduct business.
The Company recognized the following forms of revenue for the three months ended June 30, 2024 and 2023:
| 2024 | 2023 | |||||||
| $ | $ | |||||||
| Technology fees | ||||||||
| Device sales | ||||||||
Inventories
Inventory is stated at the lower of cost and market value, cost being determined on a weighted average cost basis. Market value of our finished goods inventory and raw material inventory is determined based on its estimated net realizable value, which is generally the selling price less normally predictable costs of disposal and transportation. The Company records write-downs of inventory that is obsolete or in excess of anticipated demand or market value based on consideration of product lifecycle stage, technology trends, product development plans and assumptions about future demand and market conditions. Actual demand may differ from forecasted demand, and such differences may have a material effect on recorded inventory values. Inventory write-downs are charged to cost of revenue and establish a new cost basis for the inventory.
| June 30, 2024 | March 31, 2024 | |||||||
| $ | $ | |||||||
| Raw material | ||||||||
| Finished goods | ||||||||
| 11 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 (Unaudited)
(Expressed in US dollars)
Significant accounting estimates and assumptions
The preparation of the condensed consolidated financial statements requires the use of estimates and assumptions to be made in applying the accounting policies that affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities. The estimates and related assumptions are based on previous experiences and other factors considered reasonable under the circumstances, the results of which form the basis for making the assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources.
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:
| ● | Fair value of stock options |
The Company measures the cost of equity-settled transactions with employees by reference to the fair value of equity instruments at the date at which they are granted. Estimating fair value for share-based payments requires determining the most appropriate valuation model for a grant of such instruments, which is dependent on the terms and conditions of the grant. The estimate also requires determining the most appropriate inputs to the Black-Scholes option pricing model, including the expected life of the instrument, risk-free rate, volatility, and dividend yield.
| ● | Fair value of warrants |
In determining the fair value of the warrant issued for services and issue pursuant to financing transactions, the Company used the Black-Scholes option pricing model with the following assumptions: volatility rate, risk-free rate, and the remaining expected life of the warrants that are classified under equity.
| ● | Fair value of derivative liabilities |
In determining the fair values of the derivative liabilities from the conversion and redemption features, the Company used 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.
| ● | Functional currency |
Determining the appropriate functional currencies for entities in the Company requires analysis of various factors, including the currencies and country-specific factors that mainly influence labor, materials, and other operating expenses.
| ● | Useful life of property and equipment |
The Company employs significant estimates to determine the estimated useful lives of property and equipment, considering industry trends such as technological advancements, past experience, expected use and review of asset useful lives. The Company makes estimates when determining depreciation methods, depreciation rates and asset useful lives, which requires considering industry trends and company-specific factors. The Company reviews depreciation methods, useful lives and residual values annually or when circumstances change and adjusts its depreciation methods and assumptions prospectively.
| 12 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 (Unaudited)
(Expressed in US dollars)
| ● | Provisions |
Provisions are recognized when the Company has a present obligation, legal or constructive, as a result of a previous event, if it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the obligation. The amount recognized is the best estimate of the expenditure required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligations. Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate of the expected future cash flows.
| ● | Contingencies |
Contingencies can be either possible assets or possible liabilities arising from past events, which, by their nature, will be resolved only when one or more uncertain future events occur or fail to occur. The assessment of the existence and potential impact of contingencies inherently involves the exercise of significant judgment and the use of estimates regarding the outcome of future events.
| ● | Inventory obsolescence |
Inventories are stated at the lower of cost and market value. Market value of our inventory, which is all purchased finished goods, is determined based on its estimated net realizable value, which is generally the selling price less normally predictable costs of disposal and transportation. The Company estimates net realizable value as the amount at which inventories are expected to be sold, taking into consideration fluctuations in retail prices less estimated costs necessary to make the sale. Inventories are written down to net realizable value when the cost of inventories is estimated to be unrecoverable due to obsolescence, damage, or declining selling prices.
| ● | Income and other taxes |
The calculation of current and deferred income taxes requires the Company to make estimates and assumptions and to exercise judgment regarding the carrying values of assets and liabilities which are subject to accounting estimates inherent in those balances, the interpretation of income tax legislation across various jurisdictions, expectations about future operating results, the timing of reversal of temporary differences and possible audits of income tax filings by the tax authorities. In addition, when the Company incurs losses for income tax purposes, it assesses the probability of taxable income being available in the future based on its budgeted forecasts. These forecasts are adjusted to take into account certain non-taxable income and expenses and specific rules on the use of unused credits and tax losses.
When the forecasts indicate that sufficient future taxable income will be available to deduct the temporary differences, a deferred tax asset is recognized for all deductible temporary differences. Changes or differences in underlying estimates or assumptions may result in changes to the current or deferred income tax balances on the consolidated balance sheets, a charge or credit to income tax expense included as part of net income (loss) and may result in cash payments or receipts. Judgment includes consideration of the Company’s future cash requirements in its tax jurisdictions. All income, capital and commodity tax filings are subject to audits and reassessments. Changes in interpretations or judgments may result in a change in the Company’s income, capital, or commodity tax provisions in the future. The amount of such a change cannot be reasonably estimated.
| ● | Incremental borrowing rate for lease |
The determination of the Company’s lease obligation and right-of-use asset depends on certain assumptions, which include the selection of the discount rate. The discount rate is set by reference to the Company’s incremental borrowing rate. Significant assumptions are required to be made when determining which borrowing rates to apply in this determination. Changes in the assumptions used may have a significant effect on the Company’s consolidated financial statements.
| 13 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 (Unaudited)
(Expressed in US dollars)
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 loss per share of common stock is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted earnings or loss per share of common stock is computed similarly to basic earnings or loss per share except the weighted average shares outstanding are increased to include additional shares from the assumed exercise of any common stock equivalents, if dilutive. The Company’s warrants, options, convertible promissory notes, convertible preferred stock, shares to be issued and restricted stock awards while outstanding are considered common stock equivalents for this purpose. Diluted earnings are computed utilizing the treasury method for the warrants, stock options, shares to be issued and restricted stock awards. Diluted earnings with respect to the convertible promissory notes and convertible preferred stock utilizing the if-converted method were not applicable during the periods presented as no conditions required for conversion had occurred. No incremental common stock equivalents were included in calculating diluted loss per share because such inclusion would be anti-dilutive given the net loss reported for the periods presented.
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 condensed consolidated interim 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.
| 14 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 (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, 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:
| As of June 30, 2024 | ||||||||||||||||
| Description | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
| Assets: | ||||||||||||||||
| Cash | $ | $ | $ | $ | ||||||||||||
| Total assets at fair value | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Derivative liabilities, short-term | $ | $ | $ | $ | ||||||||||||
| Derivative liabilities, long-term | ||||||||||||||||
| Total liabilities at fair value | $ | $ | $ | $ | ||||||||||||
| As of March 31, 2024 | ||||||||||||||||
| Description | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
| Assets: | ||||||||||||||||
| Cash | $ | $ | $ | $ | ||||||||||||
| Total assets at fair value | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Derivative liabilities, short-term | $ | $ | $ | $ | ||||||||||||
| Derivative liabilities, long-term | ||||||||||||||||
| Total liabilities at fair value | $ | $ | $ | $ | ||||||||||||
There were no transfers between fair value hierarchy levels during the three months ended June 30, 2024 and 2023.
| 15 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 (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:
| Office equipment | |
| Leasehold improvement |
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 June 30, 2024 and March 31, 2024, 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 Operating right of use assets, Operating lease obligations, current, and Operating lease obligations, long-term in the consolidated balance sheet.
Right-of-use (“ROU”) asset represents the Company’s right to use an underlying asset for the lease term and lease obligations represent the Company’s obligations to make lease payments arising from the lease, both of which are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Leases with a lease term of 12 months or less at inception are not recorded on the consolidated balance sheet and are expensed on a straight-line basis over the lease term in the consolidated statement 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 12 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.
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.
| 16 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 (Unaudited)
(Expressed in US dollars)
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 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.
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 the consolidated statement of operation and comprehensive loss 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 preferred stock redemptions and conversion, the difference between the fair value of consideration transferred to the holders of the preferred stock and the carrying amount of the preferred stock is accounted as deemed dividend distribution and subtracted from net loss.
Segment Information
Operating segments are defined as components of an entity where discrete financial information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and assessing performance. The Company has identified its Chief Executive Officer (“CEO”) as the chief operating decision maker (“CODM”). The Company operates in one operating segment. The Company’s CODM allocates resources and assesses performance at the consolidated level. The Company’s property and equipment and operating right of use lease asset are in the United States as of June 30, 2024 and 2023.
| 17 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 (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 has adopted Topic 326 on the Company’s consolidated financial statements according to the effective date and the adoption has no significant impact on the Company’s consolidated financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. There is no significant impact from adopting ASU 2019-12 on the Company’s financial condition, results of operations, and cash flows.
In April 2021, The FASB issued ASU 2021-04 to codify the final consensus reached by the Emerging Issues Task Force (EITF) on how an issuer should account for modifications made to equity-classified written call options (hereafter referred to as a warrant to purchase the issuer’s common stock). The guidance in the ASU requires the issuer to treat a modification of an equity-classified warrant that does not cause the warrant to become liability-classified as an exchange of the original warrant for a new warrant. This guidance applies whether the modification is structured as an amendment to the terms and conditions of the warrant or as termination of the original warrant and issuance of a new warrant. The Company adopted this guidance for the fiscal year beginning April 1, 2022. There is no significant impact from adopting ASU 2021-04 on the Company’s financial condition, results of operations, and cash flows.
On March 28, 2023, the FASB issued ASU No. 2023-01, Leases (Topic 842): Common Control Arrangements. ASU 2023-01 is designed to clarify the accounting for leasehold improvements associated with common control leases, thereby reducing diversity in practice. The new standard is effective for the Company for its fiscal year beginning January 1, 2024, with early adoption permitted. There is no significant impact from adopting ASU No. 2023-01 on the Company’s financial condition, results of operations, and cash flows.
In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”) to improve the disclosures regarding a public entity’s reportable segments and address requests from investors for additional, more detailed information about a reportable segment’s expenses. The Company is required to adopt the guidance in the fourth quarter of fiscal 2025, though early adoption is permitted. There is no significant impact from adopting ASU 2023-07 on the Company’s financial condition, results of operations, and cash flows.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures (“ASU 2023-09”) to provide disaggregated income tax disclosures on rate reconciliation and income taxes paid. The Company is required to adopt the guidance in the fourth quarter of fiscal 2026, though early adoption is permitted. The Company is currently evaluating the impact of this amendment on its consolidated financial statements.
The Company continues to evaluate the impact of the new accounting pronouncement, including enhanced disclosure requirements, on our business processes, controls and systems.
4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
As at June 30, 2024 | As at March 31, 2024 | |||||||
| $ | $ | |||||||
| Trade and other payables | ||||||||
| Accrued liabilities | ||||||||
| Deferred revenue | ||||||||
| Total | ||||||||
Trade
and other payables and accrued liabilities as at June 30, 2024 and March 31, 2024 included $
| 18 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 (Unaudited)
(Expressed in US dollars)
5. CONVERTIBLE PROMISSORY NOTES AND SHORT TERM LOANS
Series A Convertible Promissory Notes:
During
the year ended March 31, 2021, the Company issued $
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:
For
the first series of Series A Notes,
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 $
For
the second series of Series A Notes,
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 $
| 19 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 (Unaudited)
(Expressed in US dollars)
On
December 30, 2022, the Company exchanged $
Prior
to year ended March 31, 2022, $
During
the three months ended June 30, 2024, and June 30, 2023, the Company recognized discount amortization of $ and $
As
of June 30, 2024, and March 31, 2024, the Company recorded $
During
the three months ended June 30, 2024, and June 30, 2023, the Company recognized interest expense in the amount of $
Series B Convertible Notes
During
the year ended March 31, 2021, the Company also issued $
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.
Net
proceeds to the Company from convertible note issuances to March 31, 2021 amounted to $
| 20 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 (Unaudited)
(Expressed in US dollars)
The
Company recognized debt issuance costs in the amount of $
During
the year ended March 31, 2022, $
During
the year ended March 31, 2023, $
During
the year ended March 31, 2023, $
During
the year ended March 31, 2024, the Company redeemed $
During
the three months ended June 30, 2023, the Company redeemed $
During
the three months ended June 30, 2024, the Company redeemed $
In
total, the Company had issued $
The Series A and Series B notes 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.
As
of June 30, 2024, and March 31, 2024, the Company recorded accrued interest in the amount of $
During
the three months ended June 30, 2024, and June 30, 2023, the Company recognized interest expense in the amount of $
Series C Convertible Notes
The Company has issued Series C Notes in total of $
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
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
| 21 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 (Unaudited)
(Expressed in US dollars)
For
Series C Notes, “Mandatory Conversion” of
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 $
For
the Series C Notes, the Company recognized debt issuance costs of $
During
the three months ended June 30, 2024, and June 30, 2023 the Company recognized discount amortization of $
During the three months ended June 30, 2024, convertible
notes with a face value of $
| 22 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 (Unaudited)
(Expressed in US dollars)
As
of June 30, 2024, and March 31, 2024, the Company recorded accrued interest in the amount of $
During
the three months ended June 30, 2024, and June 30, 2023, the Company recognized interest expense in the amounts of $
Other Convertible Notes
On
January 23, 2023, the Company issued $
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.
As of June 30, 2024, and March 31, 2024, respectively, the discount on Other Convertible Notes was fully amortized.
During
the three months ended June 30, 2024, and June 30, 2023 the Company recognized discount amortization of $ and $
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 $
| 23 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 (Unaudited)
(Expressed in US dollars)
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 $
The
Company entered into a convertible preferred note financing on January 9, 2024 and issued a convertible note (“Preferred
Note”) for a principal amount of $
The
Company entered into a convertible preferred note financing on June 17, 2024 and issued a convertible note (“Preferred
Note”) for a principal amount of $
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
As
of June 30, 2024, and March 31, 2024, the Company recorded accrued interest in the amount of $
During the three months ended June 30, 2024 and 2023, the Company recognized interest expense in the amount of $.
Other Short-term loans and Promissory Notes
In
December 2022, the Company entered into a short-term bridge loan agreement with a collateralized merchant finance company that advanced
gross proceeds of $
| 24 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 (Unaudited)
(Expressed in US dollars)
In
December 2022, the Company also entered into a short-term collateralized bridge loan agreement with a finance company that advanced
gross proceeds of $
In
December 2022, the Company entered into a promissory note agreement with an individual investor that resulted in gross proceeds of $
On
December 30, 2022, the Company extinguished
On
March 29, 2023, the Company entered into an additional collateralized bridge loan agreement with a finance company that advanced
gross proceeds of $
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.
| 25 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 (Unaudited)
(Expressed in US dollars)
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 $
On
August 11, 2023, the Company issued two short term promissory notes (“August 2023 Notes”), each for a principal amount
of $
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 $
During January 2024, the Company entered into a short
term loan agreement with an individual lender that resulted in gross proceeds of $
During
February 2024, the Company entered into a promissory note agreement with an individual investor that resulted in gross proceeds of
$
On
February 2, 2024, the Company entered into a short-term bridge loan agreement with a collateralized merchant finance company that
advanced gross proceeds of $
| 26 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 (Unaudited)
(Expressed in US dollars)
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 $
As
part of the loan transaction, the Company paid legal and professional costs directly in connection to the debt financing in the amount
of $
Total
costs directly in connection to the debt financing in the amount of $
The
Company also repaid $
Total
costs directly in connection to the loan and fair value of warrants was in the amount of $
During
November 2022, unpaid interest of $
Total
interest expense on the term loan for the three months ended June 30, 2024 and 2023 $
The
Company had accrued interest payable of $
The Company and Lender also entered into a Guarantee and Collateral Agreement (“Collateral Agreement”) wherein the Company agreed to secure the Credit Agreement with all of the Company’s assets. The Company and Lender also entered into an Intellectual Property Security Agreement dated December 21, 2021 (the “IP Security Agreement”) wherein the Credit Agreement is also secured by the Company’s right title and interest in the Company’s Intellectual Property.
In
connection with the Credit Agreement, the Company issued
At June 30, 2024, 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.
| 27 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 (Unaudited)
(Expressed in US dollars)
7. FEDERALLY GUARANTEED LOAN
Economic Injury Disaster Loan (“EIDL”)
In
April 2020, the Company received $
In
May 2021, the Company received an additional $
As
of June 30, 2024 and March 31, 2024, the Company recorded accrued interest of $
Interest
expense on the above loan was $
8. DERIVATIVE LIABILITIES
The Company analyzed the compound features of variable conversion and redemption embedded in the preferred shares instrument, for potential derivative accounting treatment on the basis of ASC 820 (Fair Value in Financial Instruments), ASC 815 (Accounting for Derivative Instruments and Hedging Activities), Emerging Issues Task Force (“EITF”) Issue No. 00–19 and EITF 07–05, and determined that the embedded derivatives should be bundled and valued as a single, compound embedded derivative, bifurcated from the underlying equity instrument, treated as a derivative liability, and measured at fair value. A roll-forward of activity is presented below for the three months ended June 30, 2024 and 2023:
| Fiscal Year 2025 | Fiscal Year 2024 | |||||||
| $ | $ | |||||||
| Derivative liabilities, beginning of period - March 31 | ||||||||
| New issuance [Note 9] | ||||||||
| Change in fair value of derivatives during period – June 30 | ( | ) | ||||||
| Reduction due to preferred shares converted [Note 9] | ( | ) | ||||||
| Derivative liabilities, end of period | ||||||||
The lattice methodology was used to value the derivative components of Series A Preferred Stock, using the following assumptions during the three months ended June 30, 2024 and 2023:
| June 30, 2024 | June 30, 2023 | |||||||
| Dividend yield (%) | ||||||||
| Risk-free rate for term (%) | ||||||||
| Volatility (%) | ||||||||
| Remaining terms (Years) | ||||||||
| Stock price ($ per share) | - | – | ||||||
The Monte Carlo simulation methodology was used to value the derivative components of Series B Preferred Stock, using the following assumptions during the three months ended June 30, 2024:
| June 30, 2024 | ||||
| Dividend yield (%) | ||||
| Risk-free rate for term (%) | ||||
| Volatility (%) | ||||
| Remaining terms (Years) | ||||
| Stock price ($ per share) | - | |||
| 28 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 (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 three months ended June 30, 2024 and 2023:
| Fiscal Year 2025 | Fiscal Year 2024 | |||||||
| $ | $ | |||||||
| Balance beginning of period – March 31 | ||||||||
| New Issuance | ||||||||
| Conversion to common shares | ( | ) | ||||||
| Change in fair value of derivative liabilities | ( | ) | ||||||
| Convertible note redemption | ( | ) | ( | ) | ||||
| Balance end of period – June 30 | ||||||||
The Monte-Carlo methodology was used to value the convertible note and warrant derivative components during the three months ended June 30, 2024 and 2023, using the following assumptions:
| June 30, 2024 | June 30, 2023 | |||||||
| Risk-free rate for term (%) | ||||||||
| Volatility (%) | ||||||||
| Remaining terms (Years) | ||||||||
| Stock price ($ per share) | - | - |
9. STOCKHOLDERS’ DEFICIENCY
(a) Authorized and Issued Stock
As at June 30, 2024, the Company is authorized to issue (March 31, 2024 – ) shares of common stock ($ par value), and (March 31, 2024 – ) shares of preferred stock ($ par value), of which (March 31, 2024 – ) are designated shares of Series A preferred stock ($ par value) and (March 31, 2024 – ) are designated shares of Series B preferred stock ($ par value).
At June 30, 2024, common shares and shares directly exchangeable into equivalent common shares that were issued and outstanding totaled (March 31, 2024 – ) shares; these were comprised of (March 31, 2024 – ) shares of common stock and (March 31, 2024 – ) exchangeable shares. At June 30, 2024, there were Series A shares of Preferred Stock that were issued and outstanding (March 31, 2024 – ), and there were shares of Series B Preferred Stock that were issued and outstanding (March 31, 2024 – ). 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 June 30, 2024 and March 31, 2024.
(b) Series (A) Preferred Stock
The number of Series A Preferred Stock issued and outstanding as of June 31, 2024 and 2023 was and , respectively.
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 $
| 29 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 (Unaudited)
(Expressed in US dollars)
Preferred Stock Dividends
Dividends
shall be paid at the rate of
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; on a monthly basis, up to
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 holdings, multiplied by
During the three months ended June 30, 2024, $
(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, 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 $
During
the three months ended March 31, 2024, a further
Series B preferred shares were issued for net proceeds of $
| 30 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 (Unaudited)
(Expressed in US dollars)
Pursuant to the initial 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
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 $
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
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 and comprehensive loss. (Note 8).
| 31 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 (Unaudited)
(Expressed in US dollars)
During
the three months ended December 31, 2023, Series B preferred shares and dividends accrued thereon were converted into common
shares. As a result of the conversion, the Company reduced the book value of mezzanine equity by $ and reduced its accrued dividends
liability by $
During the three months ended March 31, 2024, Series B preferred shares and dividends accrued thereon were converted into to be issued common shares. As a result of the conversion, the Company reduced the book value of mezzanine equity by $. The Company also reduced the fair value of derivative liabilities related to the shares converted by $. The Company recognized corresponding credits to be issued common share par value and paid in capital.
During
the three months ended June 30, 2024, Series B preferred shares and dividends accrued
thereon were converted into common shares. As a result of the conversion,
the Company reduced the book value of mezzanine equity by $and reduced its accrued dividends liability by
$
A roll-forward of activity is presented below for the three months ended June 30, 2024:
| Fiscal Year 2025 | ||||
| $ | ||||
| Balance beginning of year – March 31 | ||||
| Net proceeds received pursuant to the issuance of preferred shares | ||||
| Recognition of derivative liabilities (Note 8) | ( | ) | ||
| Conversion into common shares | ( | ) | ||
| Balance end of year – June 30 | ||||
(d) Share issuances
Share issuances during the three months ended June 30, 2024
The Company issued common shares to Series B preferred shareholders in relation to shares to be issued obligation as of March 2024 for Series B preferred share conversions. The Company issued another common shares to Series B preferred shareholders for an additional request to convert Series B preferred shares (Note 9(c)).
During
the three months ended June 30, 2024, convertible notes with a face value of $
During the three months ended June 30, 2024, $
The
Company issued
common shares in settlement of $
in amount due to a shareholder which was part of the accounts payable. The Company recognized a loss upon debt extinguishment of
$
The
Company issued
common shares for net proceeds of $
In
addition, the Company issued common shares for services received with a fair value of $
Share issuances during the three months ended June 30, 2023
None.
| 32 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 (Unaudited)
(Expressed in US dollars)
(e) Shares to be issued
Activity during the three months ended June 30, 2024
The Company issued common shares to Series B preferred shareholders in relation to shares to be issued obligation as of March 31, 2024 for Series B preferred share conversions.
The
Company issued common shares and recognized the obligation for shares to be issued to Series C convertible note holders
upon receiving conversion requests for notes totaling $
Activity during the three months ended June 30, 2023
None.
(f) Warrant issuances, exercises and other activity
Warrant exercises and issuances during the three months ended June 30, 2024
None.
Warrant exercises and issuances during the three months ended June 30, 2023
None.
Warrant activity during the three months ended June 30, 2024 is indicated below:
| Broker Warrants | Consultant and Noteholder Warrants | Warrants Issued on Convertible Notes | Total | |||||||||||||
| As at March 31, 2024 | ||||||||||||||||
| Expired/cancelled | ||||||||||||||||
| Exercised | ||||||||||||||||
| Issued | ||||||||||||||||
| As at June 30, 2024 | ||||||||||||||||
| Exercise Price | $ | $ | $ | |||||||||||||
| Expiration Date | ||||||||||||||||
(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.
| 33 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 (Unaudited)
(Expressed in US dollars)
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.
During the three months ended June 30, 2024, and June 30, 2023, the Company granted and stock options and recorded stock-based compensation of $ and $, respectively, under selling, general and administrative expenses with corresponding credit to additional paid in capital.
Number of Options | Weighted Average Exercise Price | |||||||
| Outstanding at March 31, 2024 | $ | |||||||
| Granted | $ | |||||||
| Exercised | $ | |||||||
| Expired | ( | ) | $ | |||||
| Forfeited | ( | ) | $ | |||||
| Outstanding at June 30, 2024 | $ | |||||||
June 30, 2024 | June 30, 2023 | |||||||
| Exercise price ($) | ||||||||
| Risk free interest rate (%) | % | |||||||
| Expected term (Years) | - | |||||||
| Expected volatility (%) | %- | % | ||||||
| Expected dividend yield (%) | ||||||||
| Fair value of option ($) | - | |||||||
| Expected forfeiture (attrition) rate (%) | ||||||||
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.
| 34 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 (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 $
When
measuring the lease obligations, the Company discounted lease payments using its incremental borrowing rate. The weighted-average-rate
applied is
Fiscal Year 2024 | Fiscal Year 2023 | |||||||
| Right of Use Asset | $ | $ | ||||||
| Beginning balance at March 31 | ||||||||
| New leases | ||||||||
| Amortization | ( | ) | ( | ) | ||||
| Ending balance at June 30 | ||||||||
| 2024 | 2023 | |||||||
| Lease Liability | $ | $ | ||||||
| Beginning balance at March 31 | ||||||||
| New leases | ||||||||
| Repayment and interest accretion, net | ( | ) | ( | ) | ||||
| Ending balance at June 30 | ||||||||
| 35 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2024 (Unaudited)
(Expressed in US dollars)
| June 30, 2024 | March 31, 2024 | |||||||
| Lease Liability | $ | $ | ||||||
| Current portion of operating lease liability | ||||||||
| Noncurrent portion of operating lease liability | ||||||||
The
operating lease expense was $
The following table represents the contractual undiscounted cash flows for lease obligations as at June 30, 2024:
| Calendar year | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Total undiscounted lease liability | ||||
| Less imputed interest | ( | ) | ||
| Total | ||||
11. COMMITMENTS AND CONTINGENCIES
There are no claims against the Company that were assessed as significant, which were outstanding as at June 30, 2024 or March 31, 2024 and, consequently, no provision for such has been recognized in the condensed consolidated interim financial statements.
12. PROPERTY AND EQUIPMENT
During
the year-ended March 31, 2022, the Company purchased leasehold improvements of $
| Cost | Office equipment | Leasehold improvement | Total | |||||||||
| $ | $ | $ | ||||||||||
| Balance at March 31, 2024 | ||||||||||||
| Additions | ||||||||||||
| Disposals | ||||||||||||
| Balance at June 30, 2024 | ||||||||||||
| Accumulated depreciation | Office equipment | Leasehold improvement | Total | |||||||||
| $ | $ | $ | ||||||||||
| Balance at March 31, 2024 | ||||||||||||
| Depreciation for the period | ||||||||||||
| Disposals | ||||||||||||
| Balance at June 30, 2024 | ( | ) | ||||||||||
| Net book value | ||||||||||||
| Balance at March 31, 2024 | ||||||||||||
| Balance at June 30, 2024 | ||||||||||||
13. SUBSEQUENT EVENTS
The Company’s management has evaluated subsequent events during the period from July 1 to August 14, 2024, the date the condensed consolidated interim financial statements were issued, pursuant to the requirements of ASC 855, and has determined the following material subsequent events:
| ● | During July 2024, the Company issued common shares previously recorded as shares to be issued, relating to Series C convertible note conversions during the three month period ending June 30, 2024. | |
| ● | During July and August 2024, the Company issued common shares to Series B preferred shareholders for an additional request to convert Series B preferred shares. | |
| ● | On August 1, 2024, the Company received a notice from
Nasdaq Capital Markets stating that Nasdaq determined it would delist the Company’s shares of common stock effective August 5, 2024,
pursuant to Nasdaq Listing Rule 5550(b)(2), because the Company no longer complied with the minimum $ |
| 36 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Cautionary Note Regarding Forward-Looking Statements
Except for historical information contained herein, this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. These forward-looking statements are based on various factors and were derived utilizing numerous important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements. Important assumptions and other factors that could cause actual results to differ materially from those in the forward-looking statements, include but are not limited to: (a) any fluctuations in sales and operating results; (b) risks associated with international operations; (c) regulatory, competitive and contractual risks; (d) development risks; (e) the ability to achieve strategic initiatives, including but not limited to the ability to achieve sales growth across the business segments through a combination of enhanced sales force, new products, and customer service; (f) competition in the Company’s existing and potential future product lines of business; (g) the Company’s ability to obtain financing on acceptable terms if and when needed; (h) uncertainty as to the Company’s future profitability; (i) uncertainty as to the future profitability of acquired businesses or product lines; and (j) uncertainty as to any future expansion of the Company. Other factors and assumptions not identified above were also involved in the derivation of these forward-looking statements and the failure of such assumptions to be realized as well as other factors may also cause actual results to differ materially from those projected. The Company assumes no obligation to update these forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements, except as may be required under applicable law. Past results are no guaranty of future performance. Any such forward-looking statements speak only as of the dates they are made. When used in this Report, the words “believes,” “anticipates,” “expects,” “estimates,” “plans,” “intends,” “will” and similar expressions are intended to identify forward-looking statements.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the financial statements and footnotes thereto included in this Quarterly Report on Form 10-Q (the “Financial Statements”).
Company Overview
Biotricity Inc. (the “Company”, “Biotricity”, “we”, “us”, “our”) is a medical technology company focused on biometric data monitoring solutions. Our aim is to deliver innovative, remote monitoring solutions to the medical, healthcare, and consumer markets, with a focus on diagnostic and post-diagnostic solutions for lifestyle and chronic illnesses. We approach the diagnostic side of remote patient monitoring by applying innovation within existing business models where reimbursement is established. We believe this approach reduces the risk associated with traditional medical device development and accelerates the path to revenue. In post-diagnostic markets, we intend to apply medical grade biometrics to enable consumers to self-manage, thereby driving patient compliance and reducing healthcare costs. We intend to first focus on a segment of the diagnostic mobile cardiac telemetry market, otherwise known as COM, while providing our chosen markets with the capability to also perform other cardiac studies.
We developed our Bioflux® (“Bioflux”) COM technology, which has received clearance from the U.S. Food and Drug Administration (“FDA”), comprised of a monitoring device and software components, which we made available to the market under limited release on April 6, 2018, to assess, establish and develop sales processes and market dynamics. Full market release of the Bioflux device for commercialization occurred in April 2019. The fiscal year ended March 31, 2021 marked our first year of expanded commercialization efforts, focused on sales growth and expansion. In 2021, we commenced 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 our ecosystem, in 2022, we announced the launch of our Biocore Cardiac Monitoring Device (“Biocore”, previously branded as 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, and intend to expand further and compete in the broader US market using an insourcing business model. Our technology has a large potential total addressable market, which can include hospitals, clinics and physicians’ offices, as well as other Independent Diagnostic Testing Facilities (“IDTFs)”. We believe our technological and clinical advantage combined with our solution’s insourcing model, which empowers physicians with state-of-the-art technology and charges technology service fees for its use, has the benefit of a reduced operating overhead for us, and enables a more efficient market penetration and distribution strategy.
| 37 |
We are a technology company focused on earning utilization-based recurring technology fee revenue. The Company’s ability to grow this type of revenue is predicated on the size and quality of its sales force and their ability to penetrate the market and place devices with clinically focused, repeat users of its cardiac study technology. The Company plans to grow its sales force in order to address new markets and achieve sales penetration in the markets currently served.
Full market release of the Bioflux 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 technology. We then expanded our sales force and geographic footprint.
In 2021, we received a 510(k) clearance from the FDA for our Bioflux Software II System, engineered to improve workflows and reduce estimated review time from 5 minutes to 30 seconds. This improvement in review time reduces operational costs and allows us 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.
During 2021 and the early part of 2022, we also commercially launched our 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 our technology ecosystem, the Biosphere. In recognition of our product development, in November 2022, Bioheart received recognition as one of TIME’s Best Inventions of 2022.
The COVID-19 pandemic has highlighted the importance of telemedicine and remote patient monitoring technologies. We continue 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 our technology platform 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. We intend 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 cost savings to healthcare service providers and payers that reimburse. Our goal is to position ourselves as an all-in-one cardiac diagnostic and disease management solution. We continue to grow our data set of billions of patient heartbeats, allowing us to further develop our predictive capabilities relative to atrial fibrillation and arrythmias.
In January 2022, we received the 510(k) FDA clearance of our Biocore (previously named 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 us to be currently available in the market, for clinical and consumer patch solution applications. In October 2023, we launched the cellular version of this device, the Biocore Pro.
In October 2022, we launched Biocare, 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 us to transform and use our 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 to assist them in making effective treatment decisions quickly. During March 2023, we launched our patient-facing Biocare app on Android and Apple app stores. This further allows us to expand our footprint in providing full-cycle chronic care management solutions to our clinic and patient network. In January 2024, we 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 Biocare adoption to existing and new customers.
We are also developing several other ancillary technologies, which will require application for further FDA clearances, which we anticipate applying for within the next twelve months. Among these are:
| ● | advanced ECG algorithms and analysis software for further improvements in sensitivity and specificity to 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 Biocore® 2.0, which is the next generation of our award winning Biocore® |
We identified the importance of recent developments in accelerating our 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 us to sell into large hospital networks.
Additionally, in September 2022, we were 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 focuses on Bioflux-AI as an innovative system for real-time monitoring and prediction of stroke episodes in chronic kidney disease patients. We received $238,703 under this award in March 2023, which we used to defray research and development and other associated costs.
| 38 |
Our mission is to innovate and create transformative healthcare products while ensuring financial discipline, 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 our Bioflux and Biocore products, Biotricity has monitored well 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 are expanding our AI technology development in remote cardiac care, leveraging proprietary AI technology 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. We have 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 cardiac 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.
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.
Results of Operations
The following table sets forth our results of operations for the three months ended June 30, 2024 and 2023.
For the 3 months ended June 30, | ||||||||||||
| 2024 | 2023 | Period to Period Change | ||||||||||
| Revenue | $ | 3,201,743 | $ | 3,020,765 | $ | 180,978 | ||||||
| Cost of revenue | 838,575 | 1,104,061 | (265,486 | ) | ||||||||
| Gross profit | 2,363,168 | 1,916,704 | 446,464 | |||||||||
| Gross Margin | 73.8 | % | 63.5 | % | 10.4 | % | ||||||
| Operating expenses: | ||||||||||||
| Selling, general and administrative | 2,966,119 | 3,520,215 | (554,096 | ) | ||||||||
| Research and development | 513,895 | 712,975 | (199,080 | ) | ||||||||
| Total operating expenses | 3,480,014 | 4,233,190 | (753,176 | ) | ||||||||
| Loss from operations | (1,116,846 | ) | (2,316,486 | ) | 1,199,640 | |||||||
| Interest expense | (768,673 | ) | (660,512 | ) | (108,161 | ) | ||||||
| Accretion and amortization expenses | (1,144,728 | ) | (557,219 | ) | (587,509 | ) | ||||||
| Change in fair value of derivative liabilities | (306,862 | ) | 101,452 | (408,314 | ) | |||||||
| Gain (loss) upon convertible promissory note conversion and redemption | (127,611 | ) | 6,448 | (134,059 | ) | |||||||
| Other income | (229,800 | ) | 13,435 | (243,235 | ) | |||||||
| Net loss before income taxes | (3,694,520 | ) | (3,412,882 | ) | (281,638 | ) | ||||||
| Income taxes | — | — | — | |||||||||
| Net loss before dividends | $ | (3,694,520 | ) | $ | (3,412,882 | ) | $ | (281,638 | ) | |||
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Net loss before dividends for the three months ended June 30, 2024, 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.
During this same period, management focused its efforts on simplifying the Company balance sheet by converting preferred shares and convertible notes into common stock. During the three months ended June 30, 2024, $6,104,444 of Series A Preferred Stock (face value) and $1,071,542 in related accrued dividends were converted into 8,952,170 common shares. The conversion was accounted as an extinguishment and the difference between the total carrying value of the preferred shares converted, derivative liabilities derecognized and unpaid dividend at the time of conversion ($7,984,463), and the fair value of the common shares issued ($11,039,142), was $3,054,679. Recognizing this one-time, non-cash deemed dividend resulted in a net loss attributable to common shareholders of $6,948,292, or $0.49 in loss per common share (compared to $3,777,409 and a loss per common share of $0.411, respectively, in the corresponding prior year period. To remove the effect of this and other one-time, non-cash items when assessing operations, management uses non-GAAP measures such as those discussed below, under EBITDA and Adjusted EBITDA.
Revenue and cost of revenue
By increasing our sales force and geographic footprint, we are actively selling in 35 U.S. states as of June 30, 2024. The Company earned combined device sales and technology fee income totaling $3.2 million during the three months ended June 30, 2024 – 5.8% growth in revenue over the $3.0 million earned in the prior year comparable quarter.
Technology fee revenue increased to $3.0 million during the three months ended June 30, 2024, which is an 8.9% increase over the corresponding three-month period of the prior year. The majority of this revenue is recurring, and its 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 5.8% of our total revenue, or $185 thousand for the three-month period ended June 30, 2024. Gross profit percentage was 73.8% for the three months ended June 30, 2024, as compared to 63.5% in the corresponding prior year quarter. This increase in gross margin is a result of improved margins on technology fee revenue as well as significantly improved margin on device sales. Given consistent gross margin on technology fees of approximately 76%, and efficiencies gained in using AI in data processing 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 94% of total revenue for the three-month period ended June 30, 2024.
Operating Expenses
Total operating expenses for the three months ended June 30, 2024, were $3.5 million as compared to $4.2 million for the three months ended June 30, 2023. See further explanations below.
Selling, General and administrative expenses
Our selling, general and administrative expenses for the three months ended June 30, 2024 was $3.0 million, compared to approximately $3.5 million during the three months ended June 30, 2023 – a 15% reduction. The reduction was a result of increased monitoring of spending efficiency over our fixed general and administrative expenses in the current period.
Research and development expenses
For the three months ended June 30, 2024 we recorded research and development expenses of $0.5 million, compared to $0.7 million incurred for three months ended June 30, 2023. 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 June 30, 2024 and 2023, we incurred interest expenses of $0.8 million and $0.7 million, respectively. The increase in interest expense during the current period was the result of an increase in borrowings when compared to the prior year period.
Accretion and amortization expenses
For the three months ended June 30, 2024 and 2023, we incurred accretion expenses of $1.1 million and $0.6 million, respectively. The increase in the current period was a result of debt discount amortization related to convertible notes conversions during the current fiscal quarter.
Change in fair value of derivative liabilities
For the three months ended June 30, 2024 and 2023, we recognized a loss of $307 thousand versus a gain of $101 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 mezzanine equity, convertible notes and equity fair value.
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Loss upon convertible promissory notes conversion
During the three months ended June 30, 2024 and 2023, we recorded a loss of $128 thousand versus a gain of $6 thousand, respectively, related to the redemption and conversion of our convertible promissory notes. The change of loss upon conversion upon convertible notes conversion was largely the result of increased volumes of conversions in the current quarter as compared to comparable quarter in the prior year.
Other income (expense)
During the three months ended June 30, 2024, we recognized $230 thousand in net other expense, which consisted of loss on debt extinguishment as well as expenses attributed to the financing component provisions contained in our revenue contracts. During the three months ended June 30, 2023, we recognized $13 thousand in net other expense attributed to financing component provisions contained in our revenue contracts .
EBITDA and Adjusted EBITDA
Earnings before interest, taxes, depreciation and amortization expenses (EBITDA) and Adjusted EBITDA, which are presented below, are non-generally accepted accounting principles (non-GAAP) measures that we believe are useful to management, investors and other users of our financial information in evaluating operating profitability. EBITDA is calculated by adding back interest, taxes, depreciation and amortization expenses to net income.
Adjusted EBITDA is calculated by excluding from EBITDA the effect of the following non-operational items: equity in earnings and losses of unconsolidated businesses and other income and expense, net, as well as the effect of special items that related to one-time, non-recurring expenditures . We believe that this measure is useful to management, investors and other users of our financial information in evaluating the effectiveness of our operations and underlying business trends in a manner that is consistent with management’s evaluation of business performance. Further, the exclusion of non-operational items and special items enables comparability to prior period performance and trend analysis. See notes in the table below for additional information regarding special items.
We provide non-GAAP financial information to enhance the understanding of Biotricity’s GAAP financial information, and it should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. We believe that providing these non-GAAP measures in addition to the GAAP measures allows management, investors and other users of our financial information to more fully and accurately assess business performance. The non-GAAP financial information presented may be determined or calculated differently by other companies and may not be directly comparable to that of other companies.
Management considers the EBITDA and adjusted EBITDA measures for the three month period ended June 30, 2024, which improved by 18.9% and 49.8%, respectively, when compared to the corresponding prior year period, to be indicators of the Company’s progress towards breakeven profitability as well as improvement towards operating cash-flow break-even.
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EBITDA and Adjusted EBITDA
3 months ended June 30, 2024 | 3 months ended June 30, 2023 | |||||||
| $ | $ | |||||||
| Net loss attributable to common stockholders | (6,948,292 | ) | (3,601,579 | ) | ||||
| Add: | ||||||||
| Provision for income taxes | — | — | ||||||
| Interest expense | 768,673 | 660,512 | ||||||
| Accretion and amortization expenses | 1,144,728 | 557,219 | ||||||
| Depreciation | 1,488 | 1,488 | ||||||
| Preferred stock dividends (2) | 3,253,772 | 188,697 | ||||||
| EBITDA | (1,779,631 | ) | (2,193,663 | ) | ||||
| Add (Less) | ||||||||
| Share based compensation (1) | 58,978 | 211,180 | ||||||
| Other (income)/loss (3) | 229,800 | (13,435 | ) | |||||
| (Gain) loss upon convertible promissory notes conversion and redemption (3) | 127,611 | (6,448 | ) | |||||
| Fair value change on derivative liabilities (3) | 306,862 | (101,452 | ) | |||||
| Adjusted EBITDA | (1,056,380 | ) | (2,103,818 | ) | ||||
| Weighted average number of common shares outstanding | 14,169,441 | 8,752,510 | ||||||
| Adjusted Loss per Share, Basic and Diluted | (0.075 | ) | (0.240 | ) | ||||
(1) Share based compensation is a non-cash item therefore is removed from our adjusted EBITDA analysis
(2) Preferred stock dividend payment is at Company’s discretion and therefore is removed from our EBITDA analysis
(3) These items relate to financing transactions and therefore do not reflect the Company’s core operating activities
Translation Adjustment
Translation adjustment was a gain of $24 thousand versus a loss of $176 thousand for the three months ended June 30, 2024 and 2023, respectively. This translation adjustment represents gains and losses that result from the translation of currency in the financial statements from our functional currency of Canadian dollars to the reporting currency in U.S. dollars over the course of the reporting period.
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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, 2024 and 2023, 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.
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. |
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 approvals for, and commercialize other proposed products. The Company launched its first commercial sales program as part of a limited market release, during the year ended March 31, 2019, using an experienced professional in-house sales team. A full market release ensued during the year ended March 31, 2020. Management anticipates the Company will continue on its revenue growth trajectory and improve its liquidity through continued business development and after additional equity and debt capitalization of the Company. The Company has incurred recurring losses from operations, and as at June 30, 2024, has an accumulated deficit of $134,077,588. On August 30, 2021 the Company completed an underwritten public offering of its common stock that concurrently facilitated its listing on the Nasdaq Capital Market. On December 31, 2023, the Company had a working capital deficit of $14.69 million. On August 1, 2024, the Company received a notice from Nasdaq stating that Nasdaq has determined to delist the Company’s shares of common stock on The Nasdaq Capital Market, effective at the open of business on August 5, 2024. Nasdaq reached its decision pursuant to Nasdaq Listing Rule 5550(b)(2) because the Company no longer complied with the minimum $35 million market value of listed securities. Following the suspension of trading on The Nasdaq Capital Market, the Company’s shares of common stock were again listed on the OTCQB under the symbol “BTCY.”
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On June 30, 2024, we had cash deposits in the aggregate of approximately $0.1 million.
The Company has developed and continues to pursue sources of funding that management believes will be sufficient to support the Company’s operating plan and alleviate any substantial doubt as to its ability to meet its obligations at least for a period of one year from the date of these consolidated financial statements.
During the fiscal year ended March 31, 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 fiscal year ended March 31, 2024, the Company raised short-term loans and promissory notes, net of repayments of $853,030 and convertible notes, net of redemptions of $2,962,386 from various lenders. The Company sold 36,897 common shares through use of its registration statement, for gross proceeds of $123,347, raising a net amount of $119,285 after paying a 3% placement fee and other issuance expenses.
Additionally, on September 19, 2023, the Company entered into a security purchase agreement with an institutional investor for the issuance and sale of 220 shares of the Company’s newly designated Series B Convertible Preferred Stock, at a purchase price of $9,091 per share of Series B Preferred Stock (Note 9), or gross proceeds of $2,000,000. Net proceeds after issuance costs amounted to $1,900,000. During the three months ended March 31, 2024, 110 Series B preferred shares were issued for net proceeds of $925,000.
During the three months ended June 30, 2024, 165 Series B preferred shares were issued for net proceeds of $1,312,532. The Company also raised $300,000 from the issuance of convertible notes to a lender. Lastly, the Company sold 97,811 common shares through use of its registration statement, for net proceeds of $125,227.
As we proceed with the commercialization of the Bioflux, Biocore, 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.
The following is a summary of cash flows for each of the periods set forth below.
| For the Three Months Ended | ||||||||
| June 30, | ||||||||
| 2024 | 2023 | |||||||
| Net cash used in operating activities | $ | (1,494,240 | ) | $ | (1,832,118 | ) | ||
| Net cash used in investing activities | — | — | ||||||
| Net cash provided by financing activities | 868,180 | 1,329,145 | ||||||
| Net decrease in cash | $ | (626,060 | ) | $ | (502,973 | ) | ||
Net Cash Used in Operating Activities
During the three months ended June 30, 2024, we used cash in operating activities in the amount of $1.5 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.
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During the three months ended June 30, 2023, we used cash in operating activities of $1.8 million. These activities involved expenditures for sales, infrastructure and business development, as well as marketing and operating activities, and continued research and product development.
Net Cash Used in Investing Activities
Net cash used in investing activities was Nil during the three months ended June 30, 2024 and 2023.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was $0.9 million as compared to net cash used of $1.3 million during the three months ended June 30, 2024 and 2023, respectively.
For the three months ended June 30, 2024, the net cash provided by financing activities was primarily due to the issuance of Series B preferred stock in the amount of $1.3 million.
For the three months ended June 30, 2023, the net cash provided by financing activities related to net proceeds attributed to the issuance of additional convertible notes of $0.9 million, as well as net proceeds from issuance of short term loans and promissory notes in the amount of approximately $0.4 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 reported amounts of revenue and expense during the periods presented. We believe that the estimates and judgments upon which we 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.
During the three months ended June 30, 2024, 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 2024 Form 10-K filed on June 27, 2024.
Recent Accounting Pronouncements
Refer to Note 3— Summary of Significant Accounting Policies to our condensed consolidated financial statements included elsewhere in this report for a discussion of recently issued accounting pronouncements.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for a smaller reporting company.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 13a-15(e). The Company’s disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching the Company’s desired disclosure control objectives. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Therefore, even a system which is determined to be effective cannot provide absolute assurance that all control issues have been detected or prevented. Our systems of internal controls are designed to provide reasonable assurance with respect to financial statement preparation and presentation.
At the end of the period being reported upon, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to ensure that the material information required to be included in our Securities and Exchange Commission reports is accumulated and communicated to our management, including our principal executive and financial officer, as well as recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms relating to the Company.
Changes in Internal Controls
There were no changes in the Company’s internal controls over financial reporting that occurred during the three-month period ended June 30, 2024 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.
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 material legal proceedings. 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 required for smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
During the quarter ended June 30, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Item 6. Exhibits
| 31.1 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* | |
| 31.2 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* | |
| 32.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** | |
| 32.2 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** | |
| 101.INS | Inline XBRL Document Set for the financial statements and accompanying notes in Part I, Item 1, of this Quarterly Report on Form 10-Q. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
** Furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, this 19th day of August 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) |
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