NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September
30, 2019 (Unaudited)
(Expressed
in US dollars)
1.
NATURE OF OPERATIONS
Biotricity
Inc. (formerly MetaSolutions, Inc.) (the “Company”) was incorporated under the laws of the State of Nevada on August
29, 2012.
We
are engaged in research and development activities within the
remote monitoring segment of preventative care. We are focused on a realizable healthcare business model that has an existing
market and commercialization pathway. As such, our efforts to date have been devoted in building technology that enables
access to this market through the development of a tangible product.
On February
2, 2016, the Company entered into an exchange agreement with 1061806 BC LTD. (“Callco”), a British Columbia corporation
and wholly owned subsidiary (incorporated on February 2, 2016), 1062024 B.C. LTD., a company existing under the laws of the Province
of British Columbia (“Exchangeco”), iMedical, and the former shareholders of iMedical Innovations, Inc. (“iMedical”)
(the “Exchange Agreement”), whereby Exchangeco acquired 100% of the outstanding common shares of iMedical, taking
into account certain shares pursuant to the Exchange Agreement as further explained in Note 9 to the consolidated financial statements.
These subsidiaries were solely used for the issuance of exchangeable shares in the reverse takeover transaction and have no other
transactions or balances. After giving effect to this transaction, the Company acquired all of iMedical’s assets and liabilities
and commenced operations through iMedical.
As a result of the Share Exchange, iMedical
became a wholly-owned subsidiary of the Company. This transaction has been accounted for as a reverse merger. Consequently,
the assets and liabilities and the historical operations reflected in the consolidated financial statements for the periods prior
to February 2, 2016 are those of iMedical and are recorded at the historical cost basis. After February 2, 2016, the Company’s
consolidated financial statements include the assets and liabilities of both iMedical and the Company and the historical operations
of both after that date as one entity.
iMedical Innovations Inc. (“iMedical”) was incorporated on July 3, 2014
under the laws of the Province of Ontario, Canada.
2.
BASIS OF PRESENTATION, MEASUREMENT AND CONSOLIDATION
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States (“US GAAP”) for interim financial information and the Securities and Exchange
Commission (“SEC”) instructions to Form 10-Q and Article 8 of SEC Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted accounting principles for complete financial statements and
should be read in conjunction with Biotricity’s audited financial statements for the years ended March 31, 2019 and 2018
and their accompanying notes.
The
accompanying unaudited condensed consolidated financial statements are expressed in United States dollars (“USD”).
In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation
of financial position and results of operations for the interim periods presented have been reflected herein. Operating results
for the six months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the
year ending March 31, 2020. The Company’s fiscal year-end is March 31.
The
unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Significant
intercompany accounts and transactions have been eliminated.
Liquidity
and Basis of Presentation
The
Company is an emerging growth entity that is in the early stages of commercializing its first product and is concurrently in development
mode, operating a research and development program in order to develop, obtain regulatory approval for, and commercialize other
proposed products. The Company has incurred recurring losses from operations, and as at September 30, 2019, has an accumulated
deficit of $39,137,210 and a working capital deficiency of $5,127,731. During the year ended March 31, 2019, the Company
launched its first commercial sales program, using an experienced professional in-house sales team. The Company has developed
and continues to pursue sources of funding that management believes if successful would be sufficient to support the Company’s
operating plan and alleviate any substantial doubt as to its ability to meet its obligations at least for one year from the date
these consolidated financial statements are issued. As an example of this, the Company has raised $3,746,575 in funding from an
agreement with a private equity fund, in which the fund committed to purchase up to $25 million in additional shares of the Company
at the direction and sole discretion of the Company subject to the Company’s compliance with any funding conditions, including
there being an effective registration statement registering the shares of common stock issuable under the equity line. Currently,
there is no effective registration registering the equity line shares; if the Company wishes to continue to draw from the from
this line in the future, it will have to file a registration statement, which registration statement would then have to be
declared effective by the Securities and Exchange Commission. The Company had issued promissory note and other short-term
funding of $3,643,274 as at September 30, 2019 and raised a further $870,000 subsequently; it also has a written commitment for
an additional $5 million in debt financing from a private debt fund.
The
Company’s operating plan is predicated on a variety of assumptions including, but not limited to, the level of product demand,
cost estimates, its ability to continue to raise additional financing and the state of the general economic environment in which
the Company operates. There can be no assurance that these assumptions will prove to be accurate in all material respects, or
that the Company will be able to successfully execute its operating plan. In the absence of additional appropriate financing,
the Company may have to modify its operating plan or slow down the pace of development and commercialization of its proposed products.
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use
of Estimates
The
preparation of the consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses during the reporting period. Areas involving significant
estimates and assumptions include: deferred income tax assets and related valuation allowance, accruals and valuation of derivatives,
convertible promissory notes, stock options, and assumptions used in the going concern assessment. Actual results could differ
from those estimates. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings
in the period in which they become known.
Earnings
(Loss) Per Share
The
Company has adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”)
Topic 260-10 which provides for calculation of “basic” and “diluted” earnings per share. Basic earnings
per share includes no dilution and is computed by dividing net income or loss available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities
that could share in the earnings of an entity. Diluted earnings per share exclude all potentially dilutive shares if their effect
is anti-dilutive. There were no potentially dilutive shares outstanding as at September 30, 2019 and 2018.
Fair
Value of Financial Instruments
ASC
820 defines fair value, establishes a framework for measuring fair value and expands required disclosure about fair value measurements
of assets and liabilities. ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction
between market participants on the measurement date. ASC 820-10 also establishes a fair value hierarchy, which requires an entity
to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes
three levels of inputs that may be used to measure fair value:
●
Level 1 – Valuation based on quoted market prices in active markets for identical assets or liabilities.
●
Level 2 – Valuation based on quoted market prices for similar assets and liabilities in active markets.
●
Level 3 – Valuation based on unobservable inputs that are supported by little or no market activity, therefore requiring
management’s best estimate of what market participants would use as fair value.
In
instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy,
the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input
that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular
input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
Fair
value estimates discussed herein are based upon certain market assumptions and pertinent information available to management.
The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term
nature of these instruments or interest rates that are comparable to market rates. These financial instruments include cash, accounts
receivable, deposits and other receivables, convertible promissory notes, and accounts payable and accrued liabilities. The Company’s
cash and derivative liabilities, which are carried at fair values, are classified as a Level 1 and Level 2, respectively. The
Company’s bank accounts are maintained with financial institutions of reputable credit, therefore, bear minimal credit risk.
Leases
On
April 1, 2019, the Company adopted Accounting Standards Codification Topic 842, “Leases” (“ASC 842”) to
replace existing lease accounting guidance. This pronouncement is intended to provide enhanced transparency and comparability
by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet for most leases. Expenses
associated with leases will continue to be recognized in a manner similar to previous accounting guidance. The Company adopted
ASC 842 utilizing the transition practical expedient added by the Financial Accounting Standards Board (“FASB”), which
eliminates the requirement that entities apply the new lease standard to the comparative periods presented in the year of adoption.
The
Company is the lessee in a lease contract when the Company obtains the right to use the asset. Operating leases are included in
the line items right-of-use asset, lease obligation, current, and lease obligation, long-term in the consolidated balance sheet.
Right-of-use (“ROU”) asset represents the Company’s right to use an underlying asset for the lease term and
lease obligations represent the Company’s obligations to make lease payments arising from the lease, both of which are recognized
based on the present value of the future minimum lease payments over the lease term at the commencement date. Leases with a lease
term of 12 months or less at inception are not recorded on the consolidated balance sheet and are expensed on a straight-line
basis over the lease term in our consolidated statement of income. The Company determines the lease term by agreement with lessor.
As our lease do not provide an implicit interest rate, the Company uses the Company’s incremental borrowing rate based on
the information available at commencement date in determining the present value of future payments. Refer to Note 9 for further
discussion.
Recently
Issued Accounting Pronouncements
In
August 2018, the FASB issued ASU 2018-13, “Changes to Disclosure Requirements for Fair Value Measurements”, which
will improve the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard
removes, modifies, and adds certain disclosure requirements, and is effective for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2019. The Company will be evaluating the impact this standard will have on the Company’s
financial statements.
In
June 2018, the FASB issued an accounting pronouncement (FASB ASU 2018-07) to expand the scope of ASC Topic 718, Compensation -
Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. The pronouncement
is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018, with early
adoption permitted. The Company is currently in the process of evaluating the effects of this pronouncement on the consolidated
financial statements, including potential early adoption.
On
April 1, 2018, the Company adopted the accounting pronouncement issued by the FASB to clarify how entities should present restricted
cash and restricted cash equivalents in the statement of cash flows. This guidance requires entities to show changes in the total
of cash, cash equivalents and restricted cash in the combined statement of cash flows. This guidance was adopted on a retrospective
basis, and such adoption did not have a material impact on combined financial position and/or results of operations.
On
January 1, 2018, the Company adopted the accounting pronouncement issued by the FASB to clarify how entities should present restricted
cash and restricted cash equivalents in the statement of cash flows. This guidance requires entities to show changes in the total
of cash, cash equivalents and restricted cash in the combined statement of cash flows. This guidance was adopted on a retrospective
basis, and such adoption did not have a material impact on combined financial position and/or results of operations.
In
July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2017-11 (“ASU
2017-11”), which addressed accounting for (I) certain financial instruments with down round features and (II) replacement
of the indefinite deferral for mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily
redeemable non-controlling interests with a scope exception. The main provisions of Part I of ASU 2017-11 “change the classification
analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether
certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes
equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify
existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument
(or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence
of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present
earnings per share (EPS) to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend
and as a reduction of income available to common shareholders in basic EPS.” Under previous US GAAP, warrants with a down
round feature are not being considered indexed to the entity’s own stock, which results in classification of the warrant
as a derivative liability. Under ASU 2017-11, the down round feature qualifies for a scope exception from derivative treatment.
ASU 2017-11 is effective for public companies as of December 15, 2018 and interim periods within that fiscal year. Early adoption
is permitted, including adoption in an interim period, with adjustments reflected as of the beginning of the fiscal year. The
Company has issued financial instruments with down round features. The Company opted to adopt ASU 2017-11 in its three-month interim
period ended September 30, 2017, which is effective from April 1, 2017, with adjustments reflected in the accumulated deficit
of stockholders’ deficiency as of April 1, 2017. Please refer to Note 6.
The
amendments in this Update require that a statement of cash flows explain the change during the period in the total of cash, cash
equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described
as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period
and end-of-period total amounts shown on the statement of cash flows. The amendments in this Update do not provide a definition
of restricted cash or restricted cash equivalents. The amendments in this Update are effective for public business entities for
fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments
are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December
15, 2019. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an
interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period.
The amendments in this Update should be applied using a retrospective transition method to each period presented. Management does
not expect to have a significant impact of this ASU on the Company’s unaudited interim condensed consolidated financial
statements.
In
May 2017, an accounting pronouncement was issued by the Financial Accounting Standards Board (“FASB”) ASU 2017-09,
“Compensation - Stock Compensation: Scope of Modification Accounting.” ASU 2017-09 provides guidance about which changes
to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The updated guidance
is effective for interim and annual periods beginning after December 15, 2017, and early adoption is permitted. The adoption of
this pronouncement is not expected to have a material impact on the unaudited interim condensed consolidated financial position
and/or results of operations.
On
April 1, 2017, the Company adopted the accounting pronouncement issued by the Financial Accounting Standards Board (“FASB”)
to simplify the presentation of deferred income taxes within the balance sheet. This pronouncement eliminates the requirement
that deferred tax assets and liabilities are presented as current or noncurrent based on the nature of the underlying assets and
liabilities. Instead, the pronouncement requires that all deferred tax assets and liabilities, including valuation allowances,
be classified as noncurrent. We adopted this pronouncement on a retrospective basis. The adoption of this guidance did not have
a material impact on the Company’s unaudited interim condensed consolidated financial position and/or results of operations.
4.
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
|
|
|
As
at
September 30, 2019
$
|
|
|
As
at
March 31, 2019
$
|
|
|
Accounts payable
|
|
|
1,216,480
|
|
|
|
878,453
|
|
|
Accrued liabilities
|
|
|
729,380
|
|
|
|
522,189
|
|
|
|
|
|
1,945,860
|
|
|
|
1,400,642
|
|
Accounts
payable as at September 30, 2019, and March 31, 2019 include 261,284 and 277,278, respectively, due to a shareholder and executive
of the Company, primarily as a result of that individual’s role as an employee. These amounts are unsecured, non-interest
bearing and payable on demand.
5.
CONVERTIBLE PROMISSORY NOTES
Prior
to April 1, 2016, pursuant to a term sheet offering of up to $2,000,000, the Company issued convertible promissory notes to various
accredited investors amounting to $1,368,978 in face value. These notes had a maturity date of 24 months and carried an annual
interest rate of 11%. The note holders had the right to convert any outstanding and unpaid principal portion of the note, and
accrued interest, into fully paid and non-assessable shares of common stock any time until the note was fully paid. The notes
had a conversion price initially set at $1.78. Upon any future financings completed by the Company, the conversion price was to
reset to 75% of the future financing pricing. These notes did not contain prepayment penalties upon redemption. These notes were
secured by all of the present and after acquired property of the Company. However, the Company could force conversion of these
notes, if during the term of the agreement, the Company completed a public listing and the common share price exceeded the conversion
price for at least 20 consecutive trading days. At the closing of the notes, the Company paid cash (7%) and issued warrants (7%
of the number of common shares into which the notes may be converted) to a broker. The broker received 3% in cash and warrants
for those investors introduced by the Company. The warrants had a term of 24 months and a similar reset provision based on future
financings.
Pursuant
to the conversion provisions in promissory notes existing at that time, in August 2016, promissory notes in the aggregate face
value of $1,368,978 were converted into 912,652 shares of common stock as detailed below. The fair value of the common shares
was $2,907,912 and $1,538,934 was allocated to the related derivative liabilities (see note 6) and the balance to the carrying
value of the notes.
|
|
|
$
|
|
|
Accreted value of convertible promissory notes
as at December 31, 2015
|
|
|
783,778
|
|
|
Face value of convertible promissory
notes issued during March 2016
|
|
|
175,000
|
|
|
Discount recognized at issuance due
to embedded derivatives
|
|
|
(74,855
|
)
|
|
Accretion expense for three months
March 31, 2016
|
|
|
73,572
|
|
|
Accreted value of convertible promissory
notes as at March 31, 2016
|
|
|
957,495
|
|
|
Accretion expense - including loss on
conversion of $88,530
|
|
|
411,483
|
|
|
Conversion of
the notes transferred to equity
|
|
|
(1,368,978
|
)
|
|
Accreted
value of earlier convertible promissory notes at September 30 and March 31, 2019
|
|
|
-
|
|
In
March 2016, the Company commenced a bridge offering of up to an aggregate of $2,500,000 of convertible promissory notes. Up to
March 31, 2017, the Company issued, to various investors, a new series of convertible notes (“Bridge Notes”) in the
aggregate face value of $2,455,000 (December 31, 2016 – $2,230,000). The Bridge Notes had a maturity date of 12 months from
issuance and carried an annual interest rate of 10%. The Bridge Notes principal and all outstanding accrued interest were convertible
into common stock based on the average of the lowest 3 trading days volume weighted average price over the last 10 trading days
plus an embedded warrant at maturity. However, all the outstanding principal and accrued interest would convert into units/securities
upon the consummation of a qualified financing, based upon the lesser of: (i) $1.65 per units/securities and (ii) the quotient
obtained by dividing (x) the balance on the forced conversion date multiplied by 1.20 by (y) the actual price per unit/security
in the qualified financing. Upon the maturity date of the notes, the Company also has an obligation to issue warrants exercisable
into a number of shares of the Company securities equal to (i) in the case of a qualified financing, the number of shares issued
upon conversion of the note and (ii) in all other cases, the number of shares of the Company’s common stock equal to the
quotient obtained by dividing the outstanding balance by 2.00.
In
connection with the Bridge Notes offering, the accreted value of this offering was as follows as at March 31, 2017:
|
As
at March 31, 2017
|
|
$
|
|
|
Face value of Bridge Notes
issued
|
|
|
2,455,000
|
|
|
Day one derivative loss recognized during
the year
|
|
|
35,249
|
|
|
Discount recognized at issuance due
to embedded derivatives
|
|
|
(1,389,256
|
)
|
|
Cash financing costs
|
|
|
(174,800
|
)
|
|
Accretion expense
|
|
|
630,797
|
|
|
Accreted value
of Bridge Notes
|
|
|
1,556,990
|
|
On
May 31, 2017, all Bridge Notes, having a face value of $2,436,406, were converted into Units of a private placement offering of
the Company’s common stock:
|
|
|
$
|
|
|
Accreted value of Bridge Note as of March
31, 2017
|
|
|
1,556,990
|
|
|
Accretion expense
|
|
|
879,416
|
|
|
Conversion of
Bridge Notes transferred to equity (Note 7, c)
|
|
|
(2,436,406
|
)
|
|
Face value of
Bridge Notes as of September 30, 2019 and March 31, 2019
|
|
|
-
|
|
The
embedded conversion features and reset feature in the notes and broker warrants were initially accounted for as a derivative liability
based on FASB guidance that was current at that time (see Note 6).
During
the six months ended September 30, 2019, the Company borrowed $1,231,652, in promissory notes from certain of its
accredited investors, in addition to $867,699 borrowed during the fiscal year ended March 31, 2019. These notes are generally
for a 1-year term at interest rates of between 10%, and 12% with allowance for the Company to repay early, and the possibility
to convert into equity on the basis of mutual consent. Management has evaluated the terms of these notes in accordance with the
guidance provided by ASC 470 and ASC 815 and concluded that there is no derivative or beneficial conversion feature attached to
these notes. On September 30, 2019, the Company has also borrowed $1,543,923 from certain of its investors on a short-term basis
pending issuance of additional convertible promissory notes, doing so at interest rates between zero and 10%.
General
and administrative expenses include interest expense on the above notes of $66,044 and $96,095, respectively, for the three and
six months ended September 30, 2019 (nil for the corresponding periods of 2018).
6.
DERIVATIVE LIABILITIES
The
Accounting Pronouncements ASU 2017-11 provided a change to the classification analysis of certain equity-linked financial
instruments (or embedded features) with down round features. When determining whether certain financial instruments should be
classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing
whether the instrument is indexed to an entity’s own stock. During the quarter ended December 31, 2017, the Company adopted
the provisions of ASU 2017-11 to account for the down round features of its warrants issued with its private placements effective
April 1, 2017. The Company used a modified retrospective approach to adoption, which does not restate its financial statements
as at the prior year end, March 31, 2017. Adoption is effective as of April 1, 2017, the beginning of the Company’s current
fiscal year. The cumulative effect of this accounting standard update adjusted accumulated deficit as of April 1, 2017 by $483,524,
with a corresponding adjustment to derivative liabilities:
|
Balance
Sheet Impacts Under ASU 2017-11
|
|
As
of April 1, 2017
|
|
|
Accumulated Deficit
|
|
$
|
483,524
|
|
|
Derivative Liabilities
|
|
|
(483,524
|
)
|
The
impact on the unaudited June 30, 2017 Balance Sheet and Statement of Operations is as follows:
|
Balance
Sheet Impacts Under ASU 2017-11
|
|
As
of June 30, 2017
|
|
|
Derivative Liabilities
|
|
$
|
(4,074,312
|
)
|
|
Additional Paid in Capital
|
|
|
3,569,248
|
|
|
Accumulated Deficit
|
|
|
483,524
|
|
|
Income
Statement Impacts Under ASU 2017-11
|
|
As
of June 30, 2017
|
|
|
Reversal
of change in fair value of derivative liabilities
|
|
$
|
21,540
|
|
In
connection with the sale of debt or equity instruments, the Company may sell options or warrants to purchase its common stock.
In certain circumstances, these options or warrants have previously been classified as derivative liabilities, rather than as
equity. Additionally, the debt or equity instruments may contain embedded derivative instruments, which in certain circumstances
may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative instrument liability.
Previously,
the Company’s derivative instrument liabilities were re-valued at the end of each reporting period, with changes in the
fair value of the derivative liability recorded as charges or credits to income in the period in which the changes occurred. For
options, warrants and bifurcated embedded derivative features that were accounted for as derivative instrument liabilities, the
Company estimated fair value using either quoted market prices of financial instruments with similar characteristics or other
valuation techniques. The valuation techniques require assumptions related to the remaining term of the instruments and risk-free
rates of return, our current common stock price and expected dividend yield, and the expected volatility of our common stock price
over the life of the option. The details of derivative liabilities (pre and post adoption of ASU 2017-11) were as follows:
|
|
|
Total
|
|
|
|
|
$
|
|
|
Derivative liabilities
as at March 31, 2017
|
|
|
2,163,884
|
|
|
Derivative fair value at issuance
|
|
|
3,569,249
|
|
|
Transferred to equity upon conversion
of notes (Notes 5 and 7)
|
|
|
(1,700,949
|
)
|
|
Change in fair
value of derivatives
|
|
|
42,128
|
|
|
Derivative liabilities as at June 30,
2017 (pre-adoption)
|
|
|
4,074,312
|
|
|
Adjustments relating
to adoption of ASU 2017-11
|
|
|
|
|
|
Reversal of fair value
|
|
|
(21,540
|
)
|
|
Transferred to accumulated deficit
|
|
|
(483,524
|
)
|
|
Transferred to
additional paid-in-capital
|
|
|
(3,569,248
|
)
|
|
Derivative liabilities
as at September 30, 2019 and March 31, 2019 (post adoption)
|
|
|
-
|
|
The
lattice methodology was used to value the derivative components, using the following assumptions:
|
|
|
Assumptions
|
|
|
Dividend yield
|
|
|
0.00
|
%
|
|
Risk-free rate for term
|
|
|
0.62%
– 1.14
|
%
|
|
Volatility
|
|
|
103%
– 118
|
%
|
|
Remaining terms (Years)
|
|
|
0.01
– 1.0
|
|
|
Stock price ($ per share)
|
|
$
|
2.50
and $2.70
|
|
The
projected annual volatility curve for valuation at issuance and period end was based on the comparable company’s annual
volatility. The Company used market trade stock prices at issuance and period end date.
7.
STOCKHOLDERS’ DEFICIENCY
a)
Authorized stock
As
at September 30, 2019, the Company is authorized to issue 125,000,000 (March 31, 2019 – 125,000,000) shares of common stock
($0.001 par value) and 10,000,000 (March 31, 2019 – 10,000,000) shares of preferred stock ($0.001 par value).
At
September 30, 2019, there were 31,910,330 (March 31, 2019 – 31,048,571) shares of common stock issued and outstanding.
Additionally, at September 30, 2019, there were 4,181,423 (March 31, 2019 – 4,313,085) outstanding exchangeable shares.
There is currently one share of the Special Voting Preferred Stock issued and outstanding held by one holder of record, which
is the Trustee in accordance with the terms of the Trust Agreement.
b)
Exchange Agreement
As
initially described in Note 1 above, on February 2, 2016:
|
|
●
|
The
Company issued approximately 1.197 shares of its common stock in exchange for each common share of iMedical held by the iMedical
shareholders who in general terms, are not residents of Canada (for the purposes of the Income Tax Act (Canada). Accordingly,
the Company issued 13,376,947 shares;
|
|
|
●
|
Shareholders
of iMedical who in general terms, are Canadian residents (for the purposes of the Income Tax Act (Canada)) received approximately
1.197 Exchangeable Shares in the capital of Exchangeco in exchange for each common share of iMedical held. Accordingly, the
Company issued 9,123,031 Exchangeable Shares;
|
|
|
●
|
Each
outstanding option to purchase common shares in iMedical (whether vested or unvested) was exchanged, without any further action
or consideration on the part of the holder of such option, for approximately 1.197 economically equivalent replacement options
with an inverse adjustment to the exercise price of the replacement option to reflect the exchange ratio of approximately
1.197:1;
|
|
|
●
|
Each
outstanding warrant to purchase common shares in iMedical was adjusted, in accordance with the terms thereof, such that it
entitles the holder to receive approximately 1.197 shares of the common stock of the Company for each warrant, with an inverse
adjustment to the exercise price of the warrants to reflect the exchange ratio of approximately 1.197:1
|
|
|
●
|
Each
outstanding advisor warrant to purchase common shares in iMedical was adjusted, in accordance with the terms thereof, such
that it entitles the holder to receive approximately 1.197 shares of the common stock of the Company for each advisor warrant,
with an inverse adjustment to the exercise price of the Advisor Warrants to reflect the exchange ratio of approximately 1.197:1;
and
|
|
|
●
|
The
outstanding 11% secured convertible promissory notes of iMedical were adjusted, in accordance with the adjustment provisions
thereof, as and from closing, so as to permit the holders to convert (and in some circumstances permit the Company to force
the conversion of) the convertible promissory notes into shares of the common stock of the Company at a 25% discount to purchase
price per share in Biotricity’s next offering.
|
Issuance
of common stock, exchangeable shares and cancellation of shares in connection with the reverse takeover transaction as explained
above represents recapitalization of capital retroactively adjusting the accounting acquirer’s legal capital to reflect
the legal capital of the accounting acquiree.
c)
Share issuances
Share
issuances during the year ended March 31, 2019
During
the year ended March 31, 2019, the Company issued common shares as part of series of closings under a registered offering, which
raised gross proceeds of $3,718,010 through the issuance of 2,635,353 common shares. Issuance costs pursuant to this offering
amounted to $80,000.
During
the year ended March 31, 2019, the Company also issued an aggregate of 641,329 common stock and has recognized its obligation
to issue a further 41,835 shares of common stock (see paragraph d, below), to various consultants. The fair value of these shares
determined by using the market price of the common stock as at the date of issuance amounted to $1,145,455 were recognized as
general and administrative and research and development expenses, as applicable, in the statement of operations, with corresponding
credit to common shares, shares to be issued and additional paid-in-capital, respectively.
During
the year ended March 31, 2019, the Company also issued an aggregate of 227,428 shares of its common stock upon exercise of employee
stock options and warrants; it received $50,835 of exercise cash proceeds.
Share
issuances during the three and six months ended September 30, 2019
During
the three and six months ended September 30, 2019, the Company issued common shares as part of a series of closings under a registered
offering, for gross proceeds of $14,563 and $28,565, respectively, through the issuance of 25,000 and 47,585 common
shares during those respective periods.
During
the three and six months ended September 30, 2019, the Company also issued an aggregate of 651,677 and 682,512 shares of its common
stock, respectively, pursuant to obligations to issue these as compensation, the fair value of these shares was determined
by using the market price of the common stock as at the date of issuance. The Company has recognized the expenses with a
corresponding credit to additional paid-in-capital.
d)
Shares to be issued
At
September 30, 2019, the Company had recognized its obligation to issue a total of 6,250 shares of its common stock to a consultants
and advisor. The fair value of these shares amounted to $3,625 and has been expensed to research and development expenses in the
consolidated statement of operations, with a corresponding credit to additional paid-in-capital. The fair value of these shares
was determined by using the market price of the common stock as at the date of issuance.
e)
Warrant issuances and exercises
Warrant
issuances during the year ended March 31, 2019
During
the year ended March 31, 2019, the Company issued 849,601 warrants as compensation for advisor and consultant services, which
were fair valued at $467,411 and expensed in general and administrative expenses, with a corresponding credit to additional paid
in capital. Their fair value has been estimated using a multi-nominal lattice model with an expected life of 2 to 3 years, a risk
free rate ranging from 2.13% to 2.81%, stock price of $0.48 to $4.15 and expected volatility of 97.8% to 141.1%.
Warrant
issuances during the three and six months ended September 30, 2019
During
the three and six months ended September 30, 2019, the Company issued 311,350 and 395,100 warrants, respectively, as compensation
for advisor and consultant services, which were fair valued at $79,669 and $99,624, respectively, and expensed in
general and administrative expenses, with a corresponding credit to additional paid in capital. Their fair value has been estimated
using a multi-nomial lattice model with an expected life of 3 years, a risk free rate of 1.63%, stock price of $0.52 to $0.66
and expected volatility of 114.3% to 129.2%.
Warrant
exercises during the year ended March 31, 2019
During
the year ended March 31, 2019, 62,838 warrants issued to consultants and advisors were exercised at an average exercise price
of $0.81, such that the Company received cash proceeds of $50,835.
Warrant
exercises during the three and six months ended September 30, 2019
No
warrants were exercised during the three and six months ended September 30, 2019.
Warrant
issuances, exercises and expirations or cancellations during the three months ended June 30, 2019 and preceding periods resulted
in warrants outstanding at the end of those respective periods as follows:
|
|
|
Broker
Warrants
|
|
|
Consultant
Warrants
|
|
|
Warrants
Issued on
Conversion of
Convertible
Notes
|
|
|
Private
Placement
Warrants
|
|
|
Total
|
|
|
As
at March 31, 2018
|
|
|
384,152
|
|
|
|
669,972
|
*
|
|
|
2,734,530
|
|
|
|
1,163,722
|
|
|
|
4,952,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Exercised
|
|
|
(62,838
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(62,838
|
)
|
|
Less:
Expired/cancelled
|
|
|
-
|
|
|
|
(31,250
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(31,250
|
)
|
|
Add:
Issued
|
|
|
-
|
|
|
|
65,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
65,000
|
|
|
As
at June 30, 2018
|
|
|
321,314
|
|
|
|
703,722
|
*
|
|
|
2,734,530
|
|
|
|
1,163,722
|
|
|
|
4,923,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Less:
Expired/cancelled
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
Add:
Issued
|
|
|
-
|
|
|
|
393,333
|
|
|
|
-
|
|
|
|
-
|
|
|
|
393,333
|
|
|
As
at September 30 2018
|
|
|
321,314
|
|
|
|
1,097,055
|
*
|
|
|
2,734,530
|
|
|
|
1,163,722
|
|
|
|
5,316,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Less:
Expired/cancelled
|
|
|
-
|
|
|
|
(126,250
|
)**
|
|
|
-
|
|
|
|
-
|
|
|
|
(126,250
|
)
|
|
Add:
Issued
|
|
|
-
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50,000
|
|
|
As
at December 31, 2018
|
|
|
321,314
|
|
|
|
1,020,805
|
*
|
|
|
2,734,530
|
|
|
|
1,163,722
|
|
|
|
5,240,371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Less:
Expired/cancelled
|
|
|
-
|
|
|
|
(184,916
|
)**
|
|
|
-
|
|
|
|
-
|
|
|
|
(184,916
|
)
|
|
Add:
Issued
|
|
|
-
|
|
|
|
341,268
|
|
|
|
-
|
|
|
|
-
|
|
|
|
341,268
|
|
|
As
at March 31, 2019
|
|
|
321,314
|
|
|
|
1,177,157
|
*
|
|
|
2,734,530
|
|
|
|
1,163,722
|
|
|
|
5,396,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Less:
Expired/cancelled
|
|
|
-
|
|
|
|
(5,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,000
|
)
|
|
Add:
Issued
|
|
|
-
|
|
|
|
83,750
|
|
|
|
-
|
|
|
|
-
|
|
|
|
83,750
|
|
|
As
at June 30, 2019
|
|
|
321,314
|
|
|
|
1,255,907
|
*
|
|
|
2,734,530
|
|
|
|
1,163,722
|
|
|
|
5,475,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Less:
Expired/cancelled
|
|
|
-
|
|
|
|
(10,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(10,000
|
)
|
|
Add:
Issued
|
|
|
-
|
|
|
|
311,350
|
|
|
|
-
|
|
|
|
-
|
|
|
|
311,350
|
|
|
As
at September 30, 2019
|
|
|
321,314
|
|
|
|
1,557,257
|
*
|
|
|
2,734,530
|
|
|
|
1,163,722
|
|
|
|
5,776,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
Price
|
|
$
|
0.78-$3.00
|
|
|
$
|
0.48-$7.59
|
|
|
|
2.00
|
|
|
|
3.00
|
|
|
|
|
|
|
Expiration
Date
|
|
|
March
2022 to July 2022
|
|
|
|
September
2019 to June 2022
|
|
|
|
March
2020 to November 2022
|
|
|
|
April
2020 to July 2020
|
|
|
|
|
|
*Consultant
Warrants include warrants issued to directors and officers of the Company who were not members of the Company’s options
plan at the time of issuance. As at September 30, 2019, Consultant Warrants include an aggregate of 488,806 warrants provided
to an officer of the Company as compensation while he was not a member of any Company options plan.
**
Subsequent to September 30, 2019, 149,626 warrants issued to brokers expired unexercised.
f)
Stock-based compensation
2015
Equity Incentive Plan
On
March 30, 2015, iMedical approved a Directors, Officers and Employees Stock Option Plan, under which it authorized and
issued 3,000,000 options. This plan was established to enable the Company to attract and retain the services of highly qualified
and experience directors, officers, employees and consultants and to give such person an interest in the success of the Company.
As of March 31, 2018, and March 31, 2017, there were no outstanding vested options and 137,500 unvested options at an exercise
price of $.0001 under this plan. These options now represent the right to purchase shares of the Company’s common stock
using the same exchange ratio of approximately 1.1969:1, thus there were 164,590 (35,907 had been cancelled) adjusted unvested
options as at March 31, 2018. These remaining 164,590 options were exercised during the year ended March 31, 2019. No other grants
will be made under this plan.
The
following table summarizes the stock option activities of the Company:
|
|
|
Number
of
options
|
|
|
Weighted
average
exercise price ($)
|
|
|
Granted
|
|
|
3,591,000
|
|
|
|
0.0001
|
|
|
Exercised
|
|
|
(3,390,503
|
)
|
|
|
0.0001
|
|
|
Outstanding as of December 31, 2015
|
|
|
200,497
|
|
|
|
0.0001
|
|
|
Cancelled during
2016
|
|
|
(35,907
|
)
|
|
|
0.0001
|
|
|
Outstanding as of March 31, 2018
|
|
|
164,590
|
|
|
|
0.0001
|
|
|
Exercised
|
|
|
(164,590
|
)
|
|
|
0.0001
|
|
|
Outstanding as of September 30 and March 31, 2019
|
|
|
-
|
|
|
|
|
|
The
fair value of options at the issuance date were determined at $2,257,953 which were fully expensed during the twelve months ended
December 31, 2015 based on vesting period and were included in general and administrative expenses with corresponding credit to
additional paid-in-capital. During the twelve months ended December 31, 2015, 3,390,503 (2,832,500 Pre-exchange Agreement) options
were exercised by those employees who met the vesting conditions; 50% of the grants either vest immediately or at the time of
U.S. Food and Drug Administration (FDA) filing date and 50% will vest upon Liquidity Trigger. Liquidity Trigger means the day
on which the board of directors resolve in favor of i) the Company is able to raise a certain level of financing; ii) a reverse
takeover transaction that results in the Company being a reporting issuer, and iii) initial public offering that results in the
Company being a reporting issuer.
2016
Equity Incentive Plan
On
February 2, 2016, the Board of Directors of the Company approved 2016 Equity Incentive Plan (the “Plan”). The purpose
of the Plan is to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward
persons performing services for the Company and by motivating such persons to contribute to the growth and profitability of the
Company. The Plan seeks to achieve this purpose by providing for awards in the form of options, stock appreciation rights, restricted
stock purchase rights, restricted stock bonuses, restricted stock units, performance shares, performance units and other stock-based
awards.
The
Plan shall continue in effect until its termination by the board of directors or committee formed by the board; provided, however,
that all awards shall be granted, if at all, on or before the day immediately preceding the tenth (10th) anniversary of the effective
date. The maximum number of shares of stock that may be issued under the Plan shall be equal to 3,750,000 shares; provided that
the maximum number of shares of stock that may be issued under the Plan pursuant to awards shall automatically and without any
further Company or shareholder approval, increase on January 1 of each year for not more than 10 years from the effective date,
so the number of shares that may be issued is an amount no greater than 15% of the Company’s outstanding shares of stock
and shares of stock underlying any outstanding exchangeable shares as of such January 1; provided further that no such increase
shall be effective if it would violate any applicable law or stock exchange rule or regulation, or result in adverse tax consequences
to the Company or any participant that would not otherwise result but for the increase.
During
July 2016, the Company granted an officer options to purchase an aggregate of 2,499,998 shares of common stock at an exercise
price of $2.20 subject to a 3 year vesting period, with the fair value of the options being expensed over a 3 year period. Two
additional employees were also granted 175,000 options to purchase shares of common stock at an exercise price of $2.24 with a
1 year vesting period, with the fair value of the options being expensed over a 1 year period. One additional employee was also
granted 35,000 options to purchase shares of common stock at an exercise price of $2.24 with a 2 year vesting period, with the
fair value of the options expensed over a 2 year period.
During
the year ended March 31, 2019, an additional 1,437,500 stock options were granted with a weighted average remaining contractual
life from 2.76 to 9.51 years.
During
the year ended March 31, 2019, an additional 270,521 stock options were granted with a weighted average remaining contractual
life from 2.76 to 9.51 years. During the year ended March 31, 2019, the Company recorded stock based compensation of $1,451,261
in connection with ESOP 2016 Plan (March 31, 2018 - $1,002,201) under general and administrative expenses with corresponding credit
to additional paid in capital.
During
the three and six months ended September 30, 2019, the Company granted 5,000 options to an employee, as performance-based compensation.
The
following table summarizes the stock option activities of the Company:
|
|
|
Number
of
options
|
|
|
Weighted
average
exercise price ($)
|
|
|
Granted
|
|
|
4,418,019
|
|
|
|
3.1436
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding
as of June 30and March 31, 2019
|
|
|
4,418,019
|
|
|
|
3.1436
|
|
|
Granted
|
|
|
5,000
|
|
|
|
1.2500
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding
as of September 30, 2019
|
|
|
4,423,019
|
|
|
|
3.1414
|
|
During
the three and six months ended September 30, 2019, the Company recorded stock-based compensation of $154,996 and $493,885, respectively,
in connection with the 2016 equity incentive plan ($372,932 and $728,163 for the three and six months ended September 30, 2018)
under general and administrative expenses with a corresponding credit to additional paid in capital.
The
fair value of each option granted is estimated at the time of grant using multi-nomial lattice model using the following assumptions:
|
|
|
2019
|
|
|
2017-2018
|
|
|
2016-2017
|
|
|
2015-2016
|
|
|
Exercise price ($)
|
|
|
0.58
|
|
|
|
1.24-7.59
|
|
|
|
2.00
– 2.58
|
|
|
|
0.0001
|
|
|
Risk free interest rate (%)
|
|
|
1.63-2.5
|
|
|
|
1.98-2.81
|
|
|
|
0.45
- 1.47
|
|
|
|
0.04
- 1.07
|
|
|
Expected term (Years)
|
|
|
3
|
|
|
|
3
|
|
|
|
1
- 3
|
|
|
|
10
|
|
|
Expected volatility (%)
|
|
|
114.3
to 129.2
|
|
|
|
97.8-145.99
|
|
|
|
101
– 105
|
|
|
|
94
|
|
|
Expected dividend yield (%)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Fair value of option ($)
|
|
|
0.212
|
|
|
|
0.6
|
|
|
|
0.88
|
|
|
|
0.74
|
|
|
Expected forfeiture (attrition) rate
(%)
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
– 5.00
|
|
|
|
5.00
- 20.00
|
|
8.
RELATED PARTY TRANSACTIONS AND BALANCES
The
Company’s transactions with related parties were carried out on normal commercial terms and in the course of the Company’s
business. Other than those disclosed elsewhere in the financial statements, related party transactions are as follows:
|
|
|
Three
Months Ended September 30, 2019
|
|
|
Three
Months Ended September 30, 2018
|
|
|
Six
Months Ended September 30, 2019
|
|
|
Six
Months Ended September 30, 2018
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Salary
and allowance*
|
|
|
144,139
|
|
|
|
181,887
|
|
|
|
279,191
|
|
|
|
363,773
|
|
|
Stock based
compensation**
|
|
|
124,774
|
|
|
|
421,028
|
|
|
|
433,529
|
|
|
|
744,168
|
|
|
Total
|
|
|
268,913
|
|
|
|
602,915
|
|
|
|
712,720
|
|
|
|
1,107,941
|
|
The
above expenses were recorded under general and administrative expenses.
*
Salary and allowance include salary, car allowance, vacation pay, bonus, allowances and other compensation paid
or payable to a key executive and shareholder of the Company.
** Stock based compensation
represent the fair value of the options, warrants and equity incentive plans for a key executive and shareholder
of the Company.
9. RIGHT-OF-USE ASSETS AND LEASE OBLIGATIONS
The
Company has one operating lease primarily for office and administration.
The
Company adopted ASC 842 – Leases using the modified retrospective cumulative catch-up approach beginning on April 1, 2019.
Under this approach, the Company did not restate its comparative amounts and recognized a right-of-use asset equal to the present
value of the future lease payments. The Company elected to apply the practical expedient to only transition contracts which were
previously identified as leases, and also elected to not recognize right-of-use assets and lease obligations for leases of low
value assets.
When
measuring the lease obligations, the Company discounted lease payments using its incremental borrowing rate at April 1, 2019.
The weighted-average-rate applied is 10%.
|
|
|
$
|
|
|
Right-of-use asset - initial recognition
|
|
|
413,236
|
|
|
Depreciation for the period
|
|
|
(49,588
|
)
|
|
Balance as of September 30, 2019
|
|
|
363,648
|
|
|
|
|
|
|
|
|
Lease obligation - initial recognition
|
|
|
413,236
|
|
|
repayment
|
|
|
(55,854
|
)
|
|
Interest accretion
|
|
|
9,320
|
|
|
Balance as of September 30, 2019
|
|
|
366,702
|
|
|
|
|
|
|
|
|
Current portion of operating lease liability
|
|
|
199,710
|
|
|
Noncurrent portion of operating lease liability
|
|
|
166,992
|
|
The
following table represents the contractual undiscounted cash flows for lease obligations as at September 30, 2019.
|
|
|
$
|
|
|
Less than one year
|
|
|
225,092
|
|
|
Beyond one year
|
|
|
172,589
|
|
|
Total undiscounted
lease obligations
|
|
|
397,681
|
|
10.
CONTINGENCIES
There
are no claims against the company that were assessed as significant, which were outstanding as at September 30, 2019 and, consequently,
no provision for such has been recognized in the consolidated financial statements.
11.
SUBSEQUENT EVENTS
The
Company’s management has evaluated subsequent events up to November13, 2019, the date the condensed consolidated financial
statements were issued, pursuant to the requirements of ASC 855 and has determined the following material subsequent events:
From
October 3 to November 12, 2019, the Company issued promissory notes, or received cash for which it intends to issue a promissory
note, in the amount of $867,699 from several investors.