Bionik Laboratories Corp.
Condensed Consolidated Interim Balance Sheets (unaudited)
(Amounts expressed in US Dollars)
|
|
As at
|
|
|
As at
|
|
|
|
June 30,
2020
|
|
|
March 31,
2020
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
(Audited)
|
|
Assets
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
2,403,037
|
|
|
|
2,269,747
|
|
Accounts receivable, net of allowance for doubtful accounts of $Nil (March 31, 2020 - $167,500)
|
|
|
975,272
|
|
|
|
846,964
|
|
Prepaid expenses and other receivables (Note 5)
|
|
|
1,723,353
|
|
|
|
1,632,555
|
|
Inventories (Note 6)
|
|
|
944,990
|
|
|
|
1,059,462
|
|
Due from related parties (Note 9(a))
|
|
|
18,657
|
|
|
|
17,840
|
|
Total Current Assets
|
|
|
6,065,309
|
|
|
|
5,826,568
|
|
Equipment (Note 7)
|
|
|
136,032
|
|
|
|
154,144
|
|
Technology and other assets (Note 4)
|
|
|
1,426,420
|
|
|
|
1,449,924
|
|
Goodwill
|
|
|
11,085,984
|
|
|
|
11,085,984
|
|
Total Assets
|
|
|
18,713,745
|
|
|
|
18,516,620
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders' Equity
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
Accounts Payable (Notes 9(b))
|
|
|
443,874
|
|
|
|
857,093
|
|
Accrued liabilities (Notes 8 and 9(b))
|
|
|
2,057,784
|
|
|
|
1,647,656
|
|
PPP Loan (Note 8 (c))
|
|
|
459,912
|
|
|
|
-
|
|
Convertible Loans (Note 8(a) (b))
|
|
|
3,452,680
|
|
|
|
2,078,833
|
|
Deferred revenue - Contract Liabilities
|
|
|
582,281
|
|
|
|
616,063
|
|
Total Current Liabilities
|
|
|
6,996,531
|
|
|
|
5,199,645
|
|
Shareholders' Equity
|
|
|
|
|
|
|
|
|
Preferred Stock, par value $0.001; Authorized 10,000,000 Special Voting Preferred Stock, par value $0.001; Authorized; Issued and outstanding - 1 (March 31, 2020 – 1)
|
|
|
-
|
|
|
|
-
|
|
Common Shares, par value $0.001; Authorized - 500,000,000; Issued and outstanding 5,009,151 and 117,683 Exchangeable Shares (March 31, 2020 5,009,151 and 117,683 Exchangeable Shares)
|
|
|
5,126
|
|
|
|
5,126
|
|
Additional paid in capital
|
|
|
85,050,885
|
|
|
|
84,643,570
|
|
Deficit
|
|
|
(73,380,946
|
)
|
|
|
(71,373,870
|
)
|
Accumulated other comprehensive income
|
|
|
42,149
|
|
|
|
42,149
|
|
Total Shareholders' Equity
|
|
|
11,717,214
|
|
|
|
13,316,975
|
|
Total Liabilities and Shareholders' Equity
|
|
|
18,713,745
|
|
|
|
18,516,620
|
|
Commitments
and Contingencies (Note 13)
Subsequent
Events (Note 14)
The accompanying notes
are an integral part of these condensed consolidated interim financial statements.
Bionik Laboratories Corp.
Condensed Consolidated Interim Statements of Operations and Comprehensive Loss
For the three month periods ended
June 30, 2020 and 2019 (unaudited)
(Amounts expressed in U.S. Dollars)
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|
Three months
ended
|
|
|
Three months
ended
|
|
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
|
|
$
|
|
|
$
|
|
Sales
|
|
|
257,908
|
|
|
|
790,379
|
|
Cost of Sales
|
|
|
62,555
|
|
|
|
336,085
|
|
Gross Margin
|
|
|
195,353
|
|
|
|
454,294
|
|
|
|
|
|
|
|
|
|
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Operating expenses
|
|
|
|
|
|
|
|
|
Sales and marketing
|
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|
223,185
|
|
|
|
583,732
|
|
Research and development
|
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|
353,263
|
|
|
|
816,523
|
|
General and administrative
|
|
|
1,128,510
|
|
|
|
841,693
|
|
Share-based compensation expense (Notes 11)
|
|
|
407,315
|
|
|
|
287,757
|
|
Amortization (Note 4)
|
|
|
23,504
|
|
|
|
69,314
|
|
Depreciation (Note 7)
|
|
|
18,112
|
|
|
|
23,970
|
|
Total operating expenses
|
|
|
2,153,889
|
|
|
|
2,622,989
|
|
|
|
|
|
|
|
|
|
|
Other (income) expenses
|
|
|
|
|
|
|
|
|
Other expense
|
|
|
74,975
|
|
|
|
14,296
|
|
Other income
|
|
|
(37,612
|
)
|
|
|
-
|
|
Foreign exchange
|
|
|
11,177
|
|
|
|
(62,347
|
)
|
Total other income (expenses)
|
|
|
48,540
|
|
|
|
(48,051
|
)
|
Net loss and comprehensive loss for the period
|
|
|
(2,007,076
|
)
|
|
|
(2,120,644
|
)
|
|
|
|
|
|
|
|
|
|
Loss per share - basic and diluted
|
|
|
(0.39
|
)
|
|
|
(0.55
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding – basic and diluted
|
|
|
5,126,834
|
|
|
|
3,858,637
|
|
The accompanying
notes are an integral part of these condensed consolidated interim financial statements.
Bionik Laboratories Corp.
Condensed Consolidated Interim Statements of Changes in Shareholders' Equity
For the three month periods ended
June 30, 2020 and June 30, 2019 (unaudited)
(Amounts
expressed in U.S. Dollars)
|
|
Special Voting
|
|
|
Common Shares
|
|
|
Additional
Paid
|
|
|
|
|
|
Comprehensive
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
in Capital
|
|
|
Deficit
|
|
|
Income
|
|
|
Total
|
|
|
|
|
|
|
$
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Balance, March 31, 2019
|
|
|
1
|
|
|
|
-
|
|
|
|
3,858,637
|
|
|
|
3,858
|
|
|
|
73,719,299
|
|
|
|
(46,357,373
|
)
|
|
|
42,149
|
|
|
|
27,407,933
|
|
Share compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
287,757
|
|
|
|
|
|
|
|
|
|
|
|
287,757
|
|
Net loss for the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,120,644
|
)
|
|
|
|
|
|
|
(2,120,644
|
)
|
Balance, June 30, 2019
|
|
|
1
|
|
|
|
-
|
|
|
|
3,838,637
|
|
|
|
3,858
|
|
|
|
74,007,056
|
|
|
|
(48,478,017
|
)
|
|
|
42,149
|
|
|
|
25,575,046
|
|
Share compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,493,855
|
|
|
|
|
|
|
|
|
|
|
|
1,493,855
|
|
Conversion of Promissory Note
|
|
|
|
|
|
|
|
|
|
|
1,268,191
|
|
|
|
1,268
|
|
|
|
9,142,659
|
|
|
|
|
|
|
|
|
|
|
|
9,143,927
|
|
Net loss for the Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22,895,853
|
)
|
|
|
|
|
|
|
(22,895,853)
|
|
Adjustment due to 1:150 share adjustment consolidation round up
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2020
|
|
|
1
|
|
|
|
-
|
|
|
|
5,126,834
|
|
|
|
5,126
|
|
|
|
84,643,570
|
|
|
|
(71,373,870
|
)
|
|
|
42,149
|
|
|
|
13,316,975
|
|
Share compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
407,315
|
|
|
|
|
|
|
|
|
|
|
|
407,315
|
|
Net loss for the period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,007,076
|
)
|
|
|
|
|
|
|
(2,007,076
|
)
|
Balance June 30, 2020
|
|
|
1
|
|
|
|
-
|
|
|
|
5,126,834
|
|
|
|
5,126
|
|
|
|
85,050,885
|
|
|
|
(73,380,946
|
)
|
|
|
42,149
|
|
|
|
11,717,214
|
|
The Accompanying notes are an integral
part of these condensed consolidated interim financial statements.
Condensed Consolidated Interim Statements of Cash Flows
For the three month
periods ended June 30, 2020 and 2019 (unaudited)
(Amounts expressed in U.S. Dollars)
|
|
Three months
ended
|
|
|
Three months
ended
|
|
|
|
June 30, 2020
$
|
|
|
June 30, 2019
$
|
|
Operating activities
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
|
(2,007,076
|
)
|
|
|
(2,120,644
|
)
|
Adjustment for items not affecting cash
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
18,112
|
|
|
|
23,970
|
|
Amortization
|
|
|
23,504
|
|
|
|
69,314
|
|
Interest expense
|
|
|
74,975
|
|
|
|
13,283
|
|
Share based compensation expense
|
|
|
407,315
|
|
|
|
287,757
|
|
|
|
|
(1,483,170
|
)
|
|
|
(1,726,320
|
)
|
Changes in non-cash working capital items
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(128,308
|
)
|
|
|
496,181
|
|
Prepaid expenses and other receivables
|
|
|
(90,798
|
)
|
|
|
160,305
|
|
Due from related parties
|
|
|
(817
|
)
|
|
|
(483
|
)
|
Inventories
|
|
|
114,472
|
|
|
|
(176,376
|
)
|
Accounts payable
|
|
|
(413,219
|
)
|
|
|
(93,835
|
)
|
Accrued liabilities
|
|
|
406,425
|
|
|
|
(41,434
|
)
|
Deferred revenue
|
|
|
(33,782
|
)
|
|
|
58,016
|
|
Net cash (used in) operating activities
|
|
|
(1,629,197
|
)
|
|
|
(1,323,946
|
)
|
Investing activities
|
|
|
|
|
|
|
|
|
Acquisition of equipment
|
|
|
-
|
|
|
|
(42,802
|
)
|
Net cash (used in) investing activities
|
|
|
-
|
|
|
|
(42,802
|
)
|
Financing activities
|
|
|
|
|
|
|
|
|
Proceeds from convertible loans
|
|
|
1,302,575
|
|
|
|
950,000
|
|
Proceeds from PPP Loan
|
|
|
459,912
|
|
|
|
-
|
|
Proceeds from term loan
|
|
|
-
|
|
|
|
500,000
|
|
Net cash provided by financing activities
|
|
|
1,762,487
|
|
|
|
1,450,000
|
|
Net increase in cash and cash equivalents for the period
|
|
|
133,290
|
|
|
|
83,252
|
|
Cash and cash equivalents, beginning of the period
|
|
|
2,269,747
|
|
|
|
446,779
|
|
Cash and cash equivalents, end of the period
|
|
|
2,403,037
|
|
|
|
530,031
|
|
The accompanying notes
are an integral part of these condensed consolidated interim financial statements.
BIONIK LABORATORIES
CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three month periods ended June 30, 2020 and 2019
(Amounts
expressed in U.S. Dollars) (unaudited)
|
1.
|
NATURE OF OPERATIONS AND GOING CONCERN
|
The Company and its Operations
Bionik Laboratories Corp.
(the “Company” or “Bionik”) was incorporated on January 8, 2010 in the State of Colorado as Strategic Dental
Management Corp. On July 16, 2013, the Company changed its name to Drywave Technologies Inc. (“Drywave”) and its state
of incorporation from Colorado to Delaware. Effective February 13, 2015, the Company changed its name to Bionik Laboratories Corp.
and reduced the authorized number of shares of common stock from 200,000,000 to 150,000,000. Concurrently, the Company implemented
a 1-for-0.831105 reverse stock split of the common stock, which had previously been approved on September 24, 2014. On October
29, 2018, the Company implemented at 1 for 150 reverse stock-split of the common and exchangeable shares.
On February 26, 2015, the
Company entered into a Share Exchange Agreement and related transactions whereby it acquired Bionik Laboratories Inc., a Canadian
Corporation (“Bionik Canada”) and Bionik Canada issued 333,334 Exchangeable Shares, representing a 3.14 exchange ratio,
for 100% of the then outstanding common shares of Bionik Canada (the “Merger”). The Exchangeable Shares are exchangeable
at the option of the holder, each into one share of the common stock of the Company. In addition, the Company issued one Special
Preferred Voting Share (the “Special Preferred Share”) (Note 10).
On
April 21, 2016, the Company acquired all of the outstanding shares and, accordingly, all assets and liabilities of Interactive
Motion Technologies, Inc. (IMT), a Boston, Massachusetts-based global pioneer and leader in providing effective robotic products
for neurorehabilitation, pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) dated March 1, 2016,
with IMT, Hermano Igo Krebs, and Bionik Mergerco Inc., a Massachusetts corporation and the Company’s wholly owned subsidiary
(Bionik Mergerco). The merger agreement provided for the merger of Bionik Mergerco with and into IMT, with IMT surviving the merger
as the Company’s wholly owned subsidiary. In return for acquiring IMT, IMT shareholders received an aggregate of 157,667
shares of the Company’s common stock (Note 4).
On November 6, 2017, the
Company approved an increase in its authorized shares of common stock to 250,000,000 from 150,000,000, and on June 12, 2018, the
Company approved an increase in its authorized shares of common stock to 500,000,000 from 250,000,000.
References to the Company refer to the Company and
its wholly owned subsidiaries, Bionik Inc., Bionik Acquisition Inc. and Bionik Canada.
The Company is a global
pioneering robotics company focused on providing rehabilitation solutions to individuals with neurological disorders, specializing
in designing, developing and commercializing cost-effective physical rehabilitation technologies, prosthetics, and assisted robotic
products. The Company strives to innovate and build devices that can rehabilitate and improve an individual’s health, comfort,
accessibility and quality of life through the use of advanced algorithms and sensing technologies that anticipate a user’s
every move.
These unaudited condensed
consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the
United States of America (“US GAAP”), which contemplates continuation of the Company as a going concern, which assumes
the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.
The Company’s principal
offices are located at 483 Bay Street, N105, Toronto, Ontario, Canada M5G 2C9 and its U.S. address is 80 Coolidge Hill Road, Watertown,
MA 02472.
Going Concern
As at June 30, 2020, the
Company had a working capital deficit of $931,222 (March 31, 2020 - working capital of $626,923) and an accumulated deficit
of $73,380,946 (March 31, 2020 - $71,373,870) and the Company incurred a net loss and comprehensive loss of $(2,007,076) for
the three month period ended June 30, 2020 (June 30, 2019 - $(2,120,644).
There is no certainty that the
Company will be successful in generating sufficient cash flow from operations or achieving and maintaining profitable operations
in the future to enable it to meet its obligations as they come due and consequently continue as a going concern.
BIONIK LABORATORIES
CORP.
NOTES TO CONDENSED
CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three
month periods ended June 30, 2020 and 2019
(Amounts expressed
in U.S. Dollars) (unaudited)
|
1.
|
NATURE OF OPERATIONS AND GOING CONCERN – Continued
|
The Company will require
additional financing to fund its operations and it is currently working on securing this funding through corporate collaborations,
public or private equity offerings or debt financings. Sales of additional equity securities by the Company would result in the
dilution of the interests of existing stockholders. There can be no assurance that financing will be available when required. In
the event that the necessary additional financing is not obtained, the Company would reduce its discretionary overhead costs substantially
or otherwise curtail operations. The Company expects to raise additional funds to meet the Company’s anticipated cash requirements
for the next 12 months; however, these conditions raise substantial doubt about the Company’s ability to continue as a going
concern. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects
on recoverability and reclassification of assets or the amounts and classification of liabilities that may result from the outcome
of this uncertainty.
All adjustments, consisting
only of normal recurring items, considered necessary for fair presentation have been included in these consolidated financial statements.
During the 2019 fiscal year,
holders of the common stock and exchangeable shares of the Company approved, through a majority shareholder vote, an amendment
to the Company’s Amended and Restated Certificate of Incorporation authorizing the Board of Directors to effect a reverse
stock split of Bionik’s common stock and exchangeable shares at a ratio up to one-to-one hundred and fifty.
The preparation of these consolidated financial statements in
accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ materially from those estimates. The Company assessed certain accounting matters that generally require
consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown
future impacts of COVID-19 as of June 30, 2020 and through the date of this report filing.
|
3.
|
SIGNIFICANT ACCOUNTING POLICIES
|
Unaudited Condensed Consolidated
Interim Financial Statements
These unaudited condensed
consolidated interim financial statements have been prepared on the same basis as the annual audited financial statements of the
Company and should be read in conjunction with those annual audited financial statements filed on Form 10-K for the year ended
March 31, 2020. The interim disclosures generally do not repeat those in the annual statements. In the opinion of management, these
unaudited condensed consolidated interim financial statements reflect all adjustments necessary to present fairly the Company’s
financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are
not necessarily indicative of the results expected for a full year or for any future period.
The changes in accounting
policies in the Company’s unaudited condensed consolidated interim financial statements from the March 31, 2020 audited financial
statements are described below.
BIONIK LABORATORIES
CORP.
NOTES TO CONDENSED
CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three
month periods ended June 30, 2020 and 2019
(Amounts expressed
in U.S. Dollars) (unaudited)
|
3.
|
SIGNIFICANT ACCOUNTING POLICIES
- Continued
|
Newly Adopted and Recently Issued Accounting
Pronouncements
Newly Adopted
In January 2017, the FASB
issued ASU 2017-01, “Business Combinations: Clarifying the definition of a Business” which amends the current definition
of a business. Under ASU 2017-01, to be considered a business, an acquisition would have to include an input and a substantive
process that together significantly contributes to the ability to create outputs. ASU 2017-01 further states that when substantially
all of the fair value of gross assets acquired is concentrated in a single asset (or a group of similar assets), the assets acquired
would not represent a business. The new guidance also narrows the definition of the term “outputs” to be consistent
with how it is described in Topic 606, Revenue from Contracts with Customers. The changes to the definition of a business will
likely result in more acquisitions being accounted for as asset acquisitions. ASU 2017-01 is effective for acquisitions commencing
on or after December 31, 2019, with early adoption permitted. Adoption of this guidance will be applied prospectively on or after
the effective date and the Company does not expect this policy will have a material effect on the consolidated balance sheet or
consolidated statement of cash flows.
BIONIK LABORATORIES
CORP.
NOTES TO CONDENSED
CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three
month periods ended June 30, 2020 and 2019
(Amounts expressed
in U.S. Dollars) (unaudited)
|
3.
|
SIGNIFICANT ACCOUNTING POLICIES
- Continued
|
In January 2017, the
FASB issued ASU 2017-04, “Intangibles – Goodwill and Other” ASU 2017-04 simplifies the accounting for
goodwill impairment by eliminating Step 2 of the current goodwill impairment test, which required a hypothetical purchase
price allocation.
Goodwill impairment will
now be the amount by which the reporting unit’s carrying value exceeds its fair value, limited to the carrying value of the
goodwill. ASU 2017-04 is effective for financial statements issued for fiscal years, and interim periods beginning after December
15, 2019. The Company has adopted ASU 2017-04 and it did not have a material
effect on the consolidated balance sheet and consolidated statement of operations.
In June 2016, the FASB
issued ASU 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses of Financial
Instruments, which introduces an expected credit loss methodology for the impairment of financial assets measured at
amortized cost basis. The methodology replaces the probable, incurred loss model for those assets. The update if effective
for fiscal years beginning after December 15, 2019. The Company has adopted ASU 2016-13 and it did not have a material effect
on the consolidated balance sheet and consolidated statement of operations.
Recently issued
Accounting Standards Update
2020-06—Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in
Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity:
simplifies accounting for convertible instruments by removing major separation models required under current Generally Accepted
Accounting Principles (GAAP). Consequently, more convertible debt instruments will be reported as a single liability instrument
and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features.
The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception,
which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted earnings per share (EPS) calculation
in certain areas. The amendments in this Update are effective for public business entities that meet the definition of a Securities
and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal
years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments
are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption
is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal
years. The Company is assessing the impact that the adoption of ASU 2020-06 will have on the consolidated balance sheet and consolidated
statement of operations.
Canada Emergency Wage Subsidy
(CEWS)
CEWS is recognized as other
income in the consolidated statement of operations in the period in which the Company recognizes expenses for which CEWS is intended
to compensate.
Warranty Reserve and Deferred
Warranty Revenue
The Company provides a one-year warranty as part of its normal
sales offering. When products are sold, the Company provides warranty reserves, which, based on the historical experience of the
Company are sufficient to cover warranty claims. Accrued warranty reserves are included in accrued liabilities on the condensed
consolidated interim balance sheets and amounted to $81,225 at June 30, 2020 (March 31, 2020 - $162,449). The Company also sells
extended warranties for additional periods beyond the standard warranty. Extended warranty revenue is deferred and recognized as
revenue over the extended warranty period. The Company recognized $Nil of expenses related to warranty expenses. Additionally,
the Company reversed $81,224 of its warranty provision due to low warranty claims and recorded this expense and reversal in cost
of goods sold for the three-month period ended June 30, 2020 (June 30, 2019 - $26,911).
|
4.
|
TECHNOLOGY AND OTHER ASSETS
|
The schedule below reflects the intangible assets
acquired in the IMT acquisition and the assets amortization period and expense for the three months ended June 30, 2020, and the
year ended March 31, 2020:
|
|
Amortization
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
Value
at
|
|
|
Expenses
|
|
|
Value
at
|
|
|
|
period
|
|
|
Value
|
|
|
|
|
|
March
31,
|
|
|
March
31,
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
(years)
|
|
|
acquired
|
|
|
Impairment
|
|
|
2020
|
|
|
2020
|
|
|
2020
|
|
|
2020
|
|
Intangible
assets acquired
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Patents and
exclusive License Agreement
|
|
|
9.74
|
|
|
|
1,306,031
|
|
|
|
307,388
|
|
|
|
134,090
|
|
|
|
469,962
|
|
|
|
20,277
|
|
|
|
449,685
|
|
Trademark
|
|
|
Indefinite
|
|
|
|
2,505,907
|
|
|
|
1,605,907
|
|
|
|
-
|
|
|
|
900,000
|
|
|
|
-
|
|
|
|
900,000
|
|
Customer relationships
|
|
|
10
|
|
|
|
1,431,680
|
|
|
|
787,245
|
|
|
|
143,168
|
|
|
|
79,962
|
|
|
|
3,227
|
|
|
|
76,735
|
|
Non compete agreement
|
|
|
2
|
|
|
|
61,366
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Assembled
workforce
|
|
|
1
|
|
|
|
275,720
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
5,580,704
|
|
|
|
2,700,540
|
|
|
|
277,258
|
|
|
|
1,449,924
|
|
|
|
23,504
|
|
|
|
1,426,420
|
|
The cumulative amortization
for the technology and other assets was $1,453,744 at June 30, 2020 (March 31, 2020- $1,430,240).
|
5.
|
PREPAID EXPENSES AND OTHER RECEIVABLES
|
|
|
June 30,
2020
|
|
|
March 31
2020
|
|
|
|
$
|
|
|
$
|
|
Prepaid expenses and other receivables
|
|
|
34,272
|
|
|
|
78,816
|
|
Prepaid inventory
|
|
|
1,499,042
|
|
|
|
1,450,024
|
|
Prepaid insurance
|
|
|
176,928
|
|
|
|
57,226
|
|
Sales taxes receivable (i)
|
|
|
13,111
|
|
|
|
46,489
|
|
|
|
|
1,723,353
|
|
|
|
1,632,555
|
|
|
i)
|
Sales tax receivable represents net harmonized sales taxes (HST) input tax credits receivable from the Government of Canada.
|
BIONIK LABORATORIES
CORP.
NOTES TO CONDENSED
CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three
month periods ended June 30, 2020 and 2019
(Amounts expressed
in U.S. Dollars) (unaudited)
|
|
June 30,
2020
$
|
|
|
March 31
2020
$
|
|
Finished Goods
|
|
|
944,990
|
|
|
|
1,059,462
|
|
During the three-month period ended June 30, 2020, the Company
expensed $143,810 in inventory as cost of goods sold (June 30, 2019 - $299,795) offset by a warranty adjustment of $81,224. The
Company no longer maintains a raw materials inventory as it has outsourced its manufacturing to a third party.
Equipment consisted of the following as at June 30,
2020 and March 31, 2020:
|
|
June 30, 2020
|
|
|
March 31, 2020
|
|
|
|
Cost
|
|
|
Accumulated
Depreciation
|
|
|
Net
|
|
|
Cost
|
|
|
Accumulated
Depreciation
|
|
|
Net
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Computers and electronics
|
|
|
303,337
|
|
|
|
269,174
|
|
|
|
34,163
|
|
|
|
303,337
|
|
|
|
264,520
|
|
|
|
38,817
|
|
Furniture and fixtures
|
|
|
36,795
|
|
|
|
31,240
|
|
|
|
5,555
|
|
|
|
36,795
|
|
|
|
30,953
|
|
|
|
5,842
|
|
Demonstration equipment
|
|
|
135,543
|
|
|
|
49,395
|
|
|
|
86,148
|
|
|
|
135,543
|
|
|
|
37,662
|
|
|
|
97,881
|
|
Manufacturing equipment
|
|
|
88,742
|
|
|
|
86,789
|
|
|
|
1,953
|
|
|
|
88,742
|
|
|
|
86,688
|
|
|
|
2,054
|
|
Tools and parts
|
|
|
11,422
|
|
|
|
7,813
|
|
|
|
3,609
|
|
|
|
11,422
|
|
|
|
7,627
|
|
|
|
3,795
|
|
Assets under capital lease
|
|
|
23,019
|
|
|
|
18,415
|
|
|
|
4,604
|
|
|
|
23,019
|
|
|
|
17,264
|
|
|
|
5,755
|
|
|
|
|
598,858
|
|
|
|
462,826
|
|
|
|
136,032
|
|
|
|
598,858
|
|
|
|
444,714
|
|
|
|
154,144
|
|
Equipment is recorded at cost less accumulated depreciation.
Depreciation expense during the three-month period ended June 30, 2020 was $18,112 (June 30, 2019 - $23,970).
|
(a)
|
Convertible Loans Payable
|
During the quarter ended June 30, 2020, the Company received
$1,302,575, in addition to $70,000 previously loaned to the Company, pursuant to a $3,000,000 (later increased to $7,000,000) convertible
note offering. The convertible notes bear interest at a fixed rate at 1% per month. The convertible loans will
be convertible into equity of the Company upon the following events on the following terms:
|
(i)
|
On the Maturity Date, the outstanding principal and accrued and unpaid interest
under the convertible note will be converted into shares of common stock at a conversion price of $8.55 per shares in the event
of an investment on or prior to December 31, 2019, and $9.50 per share in the event of an investment after December 31, 2019 (the
“Conversion Price”).
|
|
(ii)
|
Upon a change of control transaction prior to the Maturity Date, the outstanding
principal and accrued and unpaid interest under the convertible notes would, at the election of the holders of a majority of the
outstanding principal of the loans under the offering, be either (i) payable upon demand as of the closing of such change of control
transaction or (ii) convertible into shares of the Company’s common stock immediately prior to such change of control transaction
at a price per share equal to the lesser of (x) the Conversion Price or (y) the per share consideration to be received by the holders
of the common stock in such change of control transaction.
|
In the event the Company raises
capital through the sale of Common Stock for cash during the period ending on the three year anniversary of the issuance date of
the convertible notes, and the price per share thereof (the “Offering Price”) minus 20% is less than the original
Conversion Price, then in such event the Company shall issue to all convertible loan holder at, at no further cost, additional
shares of common stock equal to the number of conversion shares the holders would have received upon conversion if the Conversion
Price equaled to a 20% discount to the Offering Price, less the number of shares of conversion shares actually issued on or as
of the Maturity Date. Since the Company has early adopted ASU 2017-11, the anti-dilution protection clause does not contribute
to the conversion feature to be a derivative liability.
The interest accrued on these
convertible loans for the period ended June 30, 2020 was $15,588 (March 31, 2020- $4,317).
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three month periods ended June 30, 2020 and 2019
(Amounts expressed in U.S. Dollars) (unaudited)
|
8.
|
NOTES PAYABLE – Continued
|
On March 23, 2020, the Company received a $2,000,000 loan from
an existing shareholder. The promissory note bears interest at a fixed rate of 1% per month and has a maturity date of the earlier
of (i) March 31, 2022 and (ii) the date of receipt of a minimum of US$5,000,000 from a “Subsequent Financing.” The
accrued interest shall be payable one-half at the maturity date, and one-half on a quarterly basis as follows: (a) the quarterly
interest payments shall be payable in cash commencing on the six month anniversary of the issue date (or the nine month anniversary
of the issue date if as of such six month anniversary the World Health Organization (or a corresponding government or government
agency) still categorizes or deems COVID-19 or the novel corona virus as a pandemic or outbreak) (the “First Interest Payment
Date”), with the quarterly payments accruing for the first (or first two, as the case may be) interest payment dates nevertheless
being payable, without further interest thereon, pro rata from the First Interest Payment Date through the maturity date. The loan
is repayable or convertible to common shares at the loan holder’s option. Interest accrued on this loan at June 30, 2020
is $64,516 (March 31, 2020 –
$4,516).
On May 1, 2020, the Company
signed a Promissory Note for $459,912 pursuant to the federal Paycheck Protection Program under the Coronavirus Aid, Relief and
Economic Security Act, which is administered by the U.S. Small Business Administration. The loan is unsecured, bears interest of
1% per annum and a deferment period of 6 months. The loan is to be used primarily for payroll related costs, lease, and utility
payments. The Company intends to apply for forgiveness for all or a portion of the loans in accordance with applicable law. If
the loan is not forgiven, the Company will be obligated to repay the loan during the period of 2 years.
|
9.
|
RELATED PARTY TRANSACTIONS AND BALANCES
|
|
(a)
|
Due from related parties
|
At June 30, 2020 there was an
outstanding loan to the Chief Technology Officer (“CTO”) of the Company of $18,657 (March 31, 2020 - $17,840). The
loan has an Interest rate of 2% based on the Canada Revenue Agency’s prescribed rate for such advances and is denominated
in Canadian dollars. During the period ended June 30, 2020, the Company accrued interest receivable in the amount of $90 (March
31, 2020 – $472); the remaining fluctuation in the balance from the prior year is due to changes in foreign exchange.
|
(b)
|
Accounts
payable and accrued liabilities
|
As at June 30, 2020, $193,285
(March 31, 2020 - $30,866) was owing to the CEO of the Company; $57,246 (March 31, 2020 – $9,464) was owing to the Chief
Technology Officer; $70,963 (March 31, 2020 - $1,827) was owing to the Chief Financial Officer (“CFO”), $32,472 (March
31, 2020 - $Nil) was owing to the Chief Commercial Officer (“CCO”), all related to bonuses and business
expenses.
|
|
June 30, 2020
|
|
|
March 31, 2020
|
|
|
|
Number of shares
|
|
|
$
|
|
|
Number of shares
|
|
|
$
|
|
Exchangeable Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance beginning of period
|
|
|
117,683
|
|
|
|
118
|
|
|
|
196,799
|
|
|
|
197
|
|
Converted into common shares (a)
|
|
|
-
|
|
|
|
-
|
|
|
|
(79,116
|
)
|
|
|
(79
|
)
|
Balance at end of period
|
|
|
117,683
|
|
|
|
118
|
|
|
|
117,683
|
|
|
|
118
|
|
Common Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of the period
|
|
|
5,009,151
|
|
|
|
5,008
|
|
|
|
3,661,838
|
|
|
|
3,661
|
|
Shares issued to exchangeable shareholders (a)
|
|
|
-
|
|
|
|
-
|
|
|
|
79,116
|
|
|
|
79
|
|
Shares issued on conversion of loans
|
|
|
-
|
|
|
|
-
|
|
|
|
1,268,191
|
|
|
|
1,268
|
|
Share consolidation rounding adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
6
|
|
|
|
-
|
|
Balance at end of the period
|
|
|
5,009,151
|
|
|
|
5,008
|
|
|
|
5,009,151
|
|
|
|
5,008
|
|
TOTAL SHARES
|
|
|
5,126,834
|
|
|
|
5,126
|
|
|
|
5,126,834
|
|
|
|
5,126
|
|
|
(a)
|
During the quarter ended June 30, 2020, Nil exchangeable shares
were exchanged for common shares on a 1 for 1 basis in accordance with their terms (March 31, 2020 – 79,116 shares).
|
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three month periods ended June 30, 2020 and 2019
(Amounts expressed in U.S. Dollars) (unaudited)
|
10.
|
SHARE CAPITAL – Continued
|
Special Voting Preferred Share
In connection with the Merger (Note 1), on February
26, 2015, the Company entered into a voting and exchange trust agreement (the “Trust Agreement”). Pursuant to the Trust
Agreement, the Company issued one Special Voting Preferred Share to the Trustee, and the parties created a trust for the Trustee
to hold the Special Voting Preferred Share for the benefit of the holders of the Exchangeable Shares (the “Beneficiaries”).
Pursuant to the Trust Agreement, the Beneficiaries will have voting rights in the Company equivalent to what they would have had,
had they received shares of common stock in the same amount as the Exchangeable Shares held by the Beneficiaries. In connection
with the Merger and the Trust Agreement, effective February 20, 2015, the Company filed a certificate of designation of the Special
Voting Preferred Share (the “Special Voting Certificate of Designation”) with the Delaware Secretary of State. Pursuant
to the Special Voting Certificate of Designation, one share of the Company’s blank check preferred stock was designated as
Special Voting Preferred Share. The Special Voting Preferred Share entitles the Trustee to exercise the number of votes equal to
the number of Exchangeable Shares outstanding on a one-for-one basis during the term of the Trust Agreement. The Special Voting
Preferred Share is not entitled to receive any dividends or to receive any assets of the Company upon liquidation and is not convertible
into shares of common stock of the Company. The voting rights of the Special Voting Preferred Share will terminate pursuant to
and in accordance with the Trust Agreement and the Special Voting Preferred Share will be automatically cancelled.
The purpose of the Company’s
equity incentive plan, is to attract, retain and motivate persons of training, experience and leadership to the Company, including
their directors, officers and employees, and to advance the interests of the Company by providing such persons with the opportunity,
through share options, to acquire an increased proprietary interest in the Company.
On September 1, 2017, the
Company granted 81,436 options at $24.15 per share equally to an executive officer and a consultant, who is now the Chairman of
the Company. 27,148 options have vested and 50% of the remaining options vest on performance being met and 50% vest annually over
5 years for the CEO, for our Chairman the options vest over 5 years. The grant date fair value was $1,832,304 and $57,259 is the
current expense for the quarter ended June 30, 2020 (June 30, 2019 - $57,259).
On January 24, 2018, the Company granted 24,267 options at $23.25
per share to employees that vest equally on January 24, 2019, 2020 and 2021. 7,334 options were cancelled for the year ended March
31, 2019 and 266 for the three-month period ended June 30, 2020. The grant fair value was $491,036 and $28,554 is the current stock
compensation expense for the quarter ended June 30, 2020 (June 30, 2019 - $28,554).
On May 31, 2019 169,882 options
were issued to employees and directors of the Company with an exercise price of $3.16 per share that vest over 1 year and 6 months,
of which one-third immediately vest and one-third vest over each of the next two 6-month periods. The options expire in 7 years.
The options were valued using the Black Scholes model and the following inputs were used: expected life of 7 years, expected volatility
of 114% and a risk-free rate of 1.59%. The grant fair value was $453,585 and $50,755 of stock compensation was recognized for the
quarter ended June 30, 2020.
On July 26, 2019, 484,612
options were granted to employees and consultants at an exercise price of $3.595. The options were using the Black Scholes model
and the following inputs were used: expected life of 7 years, expected volatility of 114% and a risk-free rate of 1.59%. The grant
fair value was $1,525,525. 11,461 options were cancelled for the year ended March 31, 2020 and 1,286 were canceled and stock compensation
of $269,579 was recognized in the quarter ended June 30, 2020.
On September 3, 2019, 5,000 options were granted to an employee
at an exercise price of $3.20 which will vest over three years starting September 3, 2020. The options were valued using the Black
Scholes model and the following inputs were used: expected life of 7 years, expected volatility of 114% and a risk-free rate of
1.59%. The grant fair value was $14,010 and $1,168 of stock compensation expense was recognized in the quarter ended June 30, 2020.
During the quarter ended June
30, 2020, the Company recorded $407,315 in share-based compensation related to the vesting of stock options (June 30, 2019 - $287,757).
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three month periods ended June 30, 2020 and 2019
(Amounts expressed in U.S. Dollars) (unaudited)
|
11.
|
STOCK OPTIONS – Continued
|
The following is a summary of stock options outstanding
and exercisable as of June 30, 2020:
Exercise Price ($)
|
|
Number of Options
|
|
|
Expiry Date
|
|
Exercisable Options
|
|
34.500
|
|
|
630
|
|
|
20-Jun-21
|
|
|
630
|
|
34.500
|
|
|
13,212
|
|
|
01-Jul-21
|
|
|
13,212
|
|
34.500
|
|
|
944
|
|
|
17-Feb-22
|
|
|
944
|
|
183.000
|
|
|
2,667
|
|
|
24-Nov-22
|
|
|
2,667
|
|
150.000
|
|
|
11,400
|
|
|
14-Dec-22
|
|
|
11,400
|
|
142.500
|
|
|
359
|
|
|
28-Mar-23
|
|
|
359
|
|
157.500
|
|
|
1,387
|
|
|
28-Mar-23
|
|
|
1,387
|
|
105.000
|
|
|
2,667
|
|
|
06-Feb-24
|
|
|
2,667
|
|
102.000
|
|
|
1,667
|
|
|
13-Feb-24
|
|
|
1,667
|
|
142.500
|
|
|
106
|
|
|
03-Mar-24
|
|
|
106
|
|
157.500
|
|
|
408
|
|
|
03-Mar-24
|
|
|
408
|
|
142.500
|
|
|
43
|
|
|
14-Mar-24
|
|
|
43
|
|
157.500
|
|
|
164
|
|
|
14-Mar-24
|
|
|
164
|
|
142.500
|
|
|
327
|
|
|
30-Sep-24
|
|
|
327
|
|
157.500
|
|
|
1,264
|
|
|
30-Sep-24
|
|
|
1,264
|
|
24.150
|
|
|
81,436
|
|
|
01-Sep-27
|
|
|
40,722
|
|
23.250
|
|
|
13,064
|
|
|
24-Jan-25
|
|
|
9,132
|
|
9.735
|
|
|
40,000
|
|
|
19-Apr-28
|
|
|
40,000
|
|
3.16
|
|
|
168,283
|
|
|
31-May-26
|
|
|
168,283
|
|
3.595
|
|
|
473,151
|
|
|
26-July-26
|
|
|
56,417
|
|
3.20
|
|
|
5,000
|
|
|
03-Sep-26
|
|
|
-
|
|
|
|
|
818,179
|
|
|
|
|
|
351,798
|
|
The weighted-average remaining contractual term of the outstanding
options is 6.02 years (March 31, 2020 – 6.28 years) and for the options that are exercisable the weighted average is 5.84
years (March 31, 2020 – 6.12 years).
The following is a continuity schedule of the Company’s common share purchase warrants:
|
|
Number of
|
|
|
Weighted Average Exercise Price
|
|
|
|
Warrants
|
|
|
($)
|
|
Outstanding and exercisable, March 31, 2019
|
|
|
288,517
|
|
|
|
40.27
|
|
Expired
|
|
|
(163,483
|
)
|
|
|
(38.91
|
)
|
Outstanding and exercisable, March 31, 2020
|
|
|
125,034
|
|
|
|
20.07
|
|
Expired
|
|
|
(2,667
|
)
|
|
|
(37.50
|
)
|
Outstanding and exercisable June 30, 2020
|
|
|
122,367
|
|
|
|
19.69
|
|
During the quarter ended June 30, 2020, 2,667
warrants expired in accordance with their terms.
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three month periods ended June 30, 2020 and 2019
(Amounts expressed in U.S. Dollars) (unaudited)
Common share purchase warrants
The following is a summary of common share purchase
warrants outstanding as of June 30, 2020.
Exercise
Price ($)
|
|
Number of
Warrants
|
|
|
Expiry Date
|
|
90.00
|
|
|
15,658
|
|
|
|
March 31, 2023
|
|
9.375
|
|
|
64,025
|
|
|
|
August 14, 2022
|
|
9.375
|
|
|
42,684
|
|
|
|
March 31, 2022
|
|
|
|
|
122,367
|
|
|
|
|
|
The weighted-average remaining contractual term of
the outstanding warrants was 2.07.
|
13.
|
COMMITMENTS AND CONTINGENCIES
|
Contingencies
From time to time, the Company
may be involved in a variety of claims, suits, investigations and proceedings arising in the ordinary course of our business, collections
claims, breach of contract claims, labor and employment claims, tax and other matters. Although claims, suits, investigations and
proceedings are inherently uncertain and their results cannot be predicted with certainty, the Company believes that the resolution
of current pending matters will not have a material adverse effect on its business, financial position, results of operations or
cash flow. Regardless of the outcome, litigation can have an adverse impact on the Company because of legal costs, diversion of
management resources and other factors.
Commitments
|
(a)
|
On February 25, 2015, 1,753 common shares were issued to two former lenders
connected with a $241,185 loan received and repaid during fiscal 2013. The common shares were valued at $210,323 based on the value
of the concurrent private placement and recorded in stock-based compensation on the consolidated statement of operations and comprehensive
loss. As part of the consideration for the initial loan, the Company’s then-CTO and COO had transferred 2,098 common shares
to the lenders. For contributing the common shares to the lenders, the Company intends to reimburse the former CTO and COO 2,134
common shares. As at June 30, 2020 these shares have not yet been issued.
|
|
(b)
|
On May 17, 2017, the Company entered into a Co-operative Joint
Venture Contract (the “JV Contract”) with Ginger Capital Investment Holding, Ltd. (the “JV Partner”) to
form China Bionik Medical Rehabilitation Technology Ltd. (“China JV”), pursuant to which, among other things, the Company
was to have a 25% interest and the JV Partner a 75% interest. The Company applied the equity method of accounting to the joint
venture.
|
The Company gave notice on May 18, 2020 to the JV Partner of
the termination of the China JV as well as terminating the Licensing and Distribution agreements with the China JV. As a result
of the termination of the China JV and related commercial agreements, the Company has been communicating with its counterparts
regarding such termination.
|
(c)
|
In connection with the acquisition of IMT, the Company acquired a license
agreement dated June 8, 2009, with a former director as a co- licenser, pursuant to which the Company pays the director and the
co-licenser an aggregate royalty of 1% of sales based on patent #8,613,691. No sales have been made, as the technology under this
patent has not been commercialized.
|
|
(a)
|
Subsequent to June 30, 2020, the Company received an additional
$200,000 from lenders under the terms of the convertible loans described in Note 8 (a).
|
ITEM 2. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
This
Quarterly Report on Form 10-Q contains statements reflecting assumptions, expectations, projections, intentions, or beliefs about
future events that are intended as “forward-looking statements”. All statements included or incorporated by reference
in this Quarterly Report on Form 10-Q, other than statements of historical fact, that address activities, events or developments
that we expect, believe or anticipate will or may occur in the future are forward- looking statements. These statements appear
in several places, including, but not limited to in this “Management’s Discussion and Analysis of Financial Condition
and Results of Operations.” These statements represent our reasonable judgment of the future based on various factors and
using numerous assumptions and are subject to known and unknown risks, uncertainties and other factors that could cause our actual
results and financial position to differ materially from those contemplated by the statements. You can identify these statements
by the fact that they do not relate strictly to historical or current facts, and use words such as “anticipate,” “believe,”
“estimate,” “expect,” “forecast,” “may,” “will”, “should,”
“plan,” “project” and other words of similar meaning. In particular, these include, but are not limited
to, statements relating to the following:
·
|
projected operating or financial results, including anticipated cash flows used in operations.
|
·
|
expectations regarding capital expenditures; and
|
·
|
our beliefs and assumptions relating to our liquidity position, including our ability to obtain additional financing.
|
Any or all of our
forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown
risks, uncertainties and other factors including, among others:
·
|
the loss of key management personnel on whom we depend.
|
·
|
our ability to operate our business efficiently, manage capital expenditures and costs (including
general and administrative expenses) and obtain financing when required; and
|
·
|
our expectations with respect to our acquisition activity.
|
In addition,
there may be other factors that could cause our actual results to be materially different from the results referenced in the forward-looking
statements, some of which are included in this Quarterly Report on Form 10-Q, including in this “Management’s Discussion
and Analysis of Financial Condition and Results of Operations.” Many of these factors will be important in determining our
actual future results. Consequently, no forward-looking statement can be guaranteed. Our actual future results may vary materially
from those expressed or implied in any forward-looking statements. All forward- looking statements contained in this Quarterly
Report on Form 10-Q are qualified in their entirety by this cautionary statement. Forward-looking statements speak only as of the
date they are made, and we disclaim any obligation to update any forward-looking statements to reflect events or circumstances
after the date of this Quarterly Report on Form 10-Q, except as otherwise required by applicable law.
This discussion
and analysis should be read in conjunction with the accompanying condensed consolidated interim financial statements and related
notes, and the Company’s Annual Report on Form 10-K for the year ended March 31, 2020 as filed with the Securities and Exchange
Commission.
The
discussion and analysis of the financial condition and results of operations are based upon the financial statements, which have
been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation
of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosure of any contingent liabilities at the financial statement date and reported amounts of revenue
and expenses during the reporting period. On an on-going basis we review our estimates and assumptions. The estimates were based
on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results are likely
to differ from those estimates under different assumptions or conditions, but we do not believe such differences will materially
affect our financial position or results of operations.
In light
of these risks and uncertainties, and especially given the nature of our existing and proposed business, there can be no assurance
that the forward-looking statements contained in this section and elsewhere in this Quarterly Report on Form 10-Q will in fact
occur. Potential investors should not place undue reliance on any forward- looking statements. Except as expressly required by
the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a
result of new information, future events, changed circumstances or any other reason.
The discussion
and analysis of the financial condition and results of operations are based upon the financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States. The preparation of consolidated financial statements
in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of any contingent liabilities at the financial statement
date and reported amounts of revenue and expenses during the reporting period. On an on-going basis we review our estimates and
assumptions. The estimates were based on historical experience and other assumptions that we believe to be reasonable under the
circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions, but we do not
believe such differences will materially affect our financial position or results of operations.
Company Overview
Bionik Laboratories Corp. is a healthcare company
focused on improving the quality of life of millions of people with neurological or mobility impairments by combining artificial
intelligence and innovative robotics technology and data solutions to help individuals from hospital to home to regain mobility,
enhance autonomy, and regain self-esteem.
The Company uses artificial intelligence and
machine learning technologies to make rehabilitation methods and processes smarter and more intuitive to deliver greater recovery
for patients with neurological or mobility impairments. These technologies allow large amounts of data to be collected and processed
in real-time, enabling appropriately challenging and individualized therapy during every treatment session. This is the foundation
of the InMotion® therapy. The Company’s rehabilitation therapy robots are built on an artificial intelligence platform,
measuring the position, the speed and the acceleration of the patients’ arm 200 times per second. The artificial intelligence
platform is designed to adapt in real time to the patient’s needs and progress while providing quantifiable feedback of a
patient’s progress and performance, in a way that the Company believes a trained clinician cannot.
Based on this foundational work, the Company
has a portfolio of products and solutions focused on upper and lower extremity rehabilitation for stroke and other mobility-impaired
individuals, including three InMotion® robots currently in the market and two products in varying stages of development.
COVID-19
As a result of extended shutdowns of businesses around the world
due to the COVID-19 pandemic, we have seen a slowdown in our business as most of the capital expenditure programs of the healthcare
facilities that make up our customer base have been put on hold or has been significantly curtailed. This, along with our typically
long sales cycle, has affected our ability to generate revenues in recent months. As a result, we have taken steps to address the
decrease in revenue, as follows:
|
·
|
Effective April 1, 2020, we furloughed three employees in the
United States and temporarily laid-off one employee in Canada. Additionally, our senior management agreed to a salary deferral
of between 30-50%. Our remaining employees in the U.S. received base salary reductions of between 30%-50%. In Canada, our remaining
employees received a reduction in base salary and hours of 45%. As a result of obtaining the U.S. and Canadian government’s
programs described below, U.S. employees with salaries less than $100,000 annually were returned to full salary and with salaries
exceeding $100,000 annually were increased to 75% of their normal base salary. Most of the Company’s Canadian and US employees
have returned to their normal base salary. Senior management are continuing with the previously established salary deferrals.
|
|
·
|
On May 6, 2020, our U.S. subsidiary received funding in the original principal amount of $459,912
pursuant to the federal Paycheck Protection Program under the Coronavirus Aid, Relief and Economic Security Act, which is administered
by the U.S. Small Business Administration. We are using the proceeds from this funding for eligible purposes, including to retain
workers and maintain payroll or make mortgage interest payments, lease payments, and utility payments. The loan was funded by Bank
of America, N.A. pursuant to the terms of a Promissory Note dated as of May 1, 2020. We intend to apply for forgiveness for all
or a portion of the loans in accordance with applicable law.
|
|
·
|
Our Canada operations secured $37,612 of government financial relief under the Canadian Emergency
Wage Subsidy, which is available monthly until December 2020 which was used to return the salaries of many of our Canadian employees
back to their full amount.
|
|
·
|
The Company
has reduced working on its research and development projects to focus only on the development
of InMotion ConnectTM, to provide the ability for hospital management to access
remotely to management dashboards presenting the utilization data of each of their InMotion®
robotic devices and their InMotion® robotic devices productivity.
|
Recent Developments
On May 18, 2020, we terminated
our Distribution Agreement dated May 17, 2017 with China Bionik Medical Rehabilitation Technology Ltd., and the related License
Agreement dated May 17, 2017. The Distribution Agreement and the License Agreement were originally entered into as part of the
Company’s cooperative joint venture in China evidenced by that Co-operative Joint Venture Contract dated May 17, 2017, as
amended, made between the Company and Ginger Capital Investment Holding, Ltd. As a result of the termination of the Distribution
Agreement and the License Agreement, we further gave notice to Ginger Capital that we were terminating the Co-operative Joint Venture
Contract in accordance with its terms.
In September 2019,
we commenced an up to $3 million convertible note offering (subsequently increased to $7,000,000), of which $1,302,575 was raised
through June 30, 2020 and an additional approximately $200,000 was raised in July 2020. In addition, on March 23, 2020, we borrowed
$2,000,000 evidenced by a term promissory note from an existing stockholder and lender of the Company.
History
Bionik Laboratories Corp.
was incorporated on January 8, 2010 in the State of Colorado. At the time of our incorporation the name of our company was Strategic
Dental Management Corp. On July 16, 2013, we changed our name from Strategic Dental Management Corp. to Drywave Technologies, Inc.
and changed our state of incorporation from Colorado to Delaware. Effective February 13, 2015, we changed our name to Bionik Laboratories
Corp.
Bionik Laboratories Inc. was incorporated on March
24, 2011 under the Canada Business Corporations Act.
On February 26, 2015, we
entered into an Investment Agreement with Bionik Acquisition Inc., a company existing under the laws of Canada and our wholly owned
subsidiary, and Bionik Canada whereby we acquired 100 Class 1 common shares of Bionik Canada representing 100% of the outstanding
Class 1 common shares of Bionik Canada. After giving effect to this and related transactions, we commenced operations through Bionik
Canada. Subsequently, on April 21, 2016, we acquired Interactive Motion Technologies, Inc., or IMT, a Boston, Massachusetts-based
provider of effective robotic products for neurorehabilitation, including all its owned and licensed products both commercialized
and in development.
Corporate Information
Our principal executive office is located at 483 Bay Street,
N105, Toronto, ON, Canada M5G 2C9 and our main corporate telephone number is (416) 640-7887 x 508. Our principal US office is located
at 80 Coolidge Hill Road, Watertown, MA, USA 02472, telephone number 617-926-4800. Our website is www.bioniklabs.com. Information
on our website does not constitute a part of this Quarterly Report on Form 10-Q.
Our Business
The InMotion® therapy
uses the Company’s robots to assist patients to rewire a segment of their brains after injury, also known as neuroplasticity.
The InMotion® Robots - the InMotion® ARM, InMotion® WRIST and the InMotion® ARM/HAND – are designed to provide
intelligent, adaptive therapy in a manner that has been clinically shown to maximize neurorecovery.
The Company
commenced developing a next generation home version of the InMotion® upper-body rehabilitation technology, and may
develop a lower-body wearable assistive product which is in technical development and based on the Company’s existing
ARKE lower body exoskeleton technology, which could allow certain mobility impaired individuals to walk better. The Company
intends to continue development of these new products as and when the Company has sufficient funds and resources. We may in
the future further augment our product portfolio through technology acquisition opportunities should they become available
and if we are sufficiently capitalized to undertake these investments.
The InMotion® ARM, InMotion®
ARM/HAND, and InMotion® WRIST are robotic therapies for the upper limbs. InMotion® robotic therapies have been characterized
as Class II medical devices by the U.S. Food and Drug Administration, or FDA, and are listed with the FDA to market and sell in
the United States. More than 280 of our clinical robotic products for stroke rehabilitation have been sold in over 15 countries,
including the United States. In addition to these fully developed, clinical rehabilitation solutions, we are also developing “InMotion
HomeTM”, which is an upper extremity product that allows the patient to extend their therapy for as long as needed while
rehabilitating at home. This rehabilitation solution is being developed on the same design platform as the InMotion® clinical
products.
We believe recent payment
changes in the U.S. marketplace proposed and finalized by the Centers for Medicare and Medicaid Services will create a favorable
environment for greater clinical adoption of our robotic technology. For instance, the Improving Medicare Post-Acute Care Transformation
Act of 2014, or the Impact Act of 2014, began the shift toward standardizing patient assessment data for quality measures. The
updated Prospective Payment System (PPS), SNF QRP (Quality Reporting Program) and SNF VBP (Value Based Purchasing) programs have
further shifted reimbursement toward the needs of the patient and away from volume of services provided in the skilled nursing
setting. Other programs have caused a similar shift in the Inpatient Rehabilitation Facility setting, as well, resulting in such
providers being publicly ranked, as well as financially rewarded, for quality reporting and better outcomes.
We have a growing body of
clinical data for our products. More than 1,500 patients participated in trials using our InMotion® robots, the results of
which have been published in peer-reviewed medical journals (including the New England Journal of Medicine and Stroke).
An earlier model of InMotion®
robots were used in a multicenter randomized controlled phase III interventional trial, funded by the National Institute for Health
Research Health Technology Assessment Program (RATULS) in the United Kingdom. The study was completed in 2018, included the enrollment
of 770 stroke patients in a multi-center randomized controlled research trial to evaluate the clinical and cost effectiveness of
robot-assisted training in post-stoke care. The RATULS trial confirmed the finding of previous research studies which demonstrated
that robot assisted therapy improved upper limb impairment when compared with conventional care of stroke victims.
The primary outcome for
upper limb success was determined by an Action Research Arm Test (ARAT), with four distinct success criteria that varied according
to baseline severity. This test with these success criteria was developed by the RATULS trial team for this study and has not been
used previously in clinical trials. The findings of this major research trial demonstrated that robot assisted therapy improved
upper limb impairment, however, using this ARAT measurement, the trial was unable to conclude that robot assisted therapy or enhance
upper limb therapy resulted in improved upper limb functionality after stroke compared with usual care provided to patients with
stroke related upper limb functional limitation. The study findings also showed that the attrition rate was drastically reduced
in the patient population following either robotic therapy or enhanced upper limb therapy versus usual care only. Most of the withdrawals
from the study were before 3 months of usual care due to the disappointment with the treatment allocation.
We collaborated with Intelliware
Development, a leading custom software solutions company based in Toronto, to customize and deploy a new software platform, InMotion
ConnectTM. InMotion ConnectTM , launched in June 2020, is designed to target the critical need to link patient
centric rehabilitation results to patient management portals. InMotion ConnectTM is providing the ability for hospital
management to access remotely to management dashboards presenting the utilization data of each of their InMotion® robotic devices
and their robotic devices’ productivity. Customized reporting capabilities in the platform focus on facility and organization
measurement dashboards to support effective decision making for clinicians and for hospital management. Through further customization
with each hospital system, patients progress during the therapy sessions and patient’s evaluation will be made available
and ultimately feed electronic medical records (EMR) at any hospital or rehabilitation facility. We believe that leveraging Intelliware’s
healthcare software development expertise will ensure the HL7 compliant InMotion Connect™ will seamlessly feed data through
existing various hospital protocols, providing practitioners protected patient data and treatment results.
On December 14, 2018, we
entered into a Sale of Goods Agreement (the “Agreement”) with CHC Management Services, LLC, or Kindred, pursuant to
which, among other things, Kindred agreed to purchase from us in a first phase a minimum of 21 of the Company’s InMotion®
ARM Interactive Therapy Systems – a minimum of one for each of Kindred’s existing and soon-to-open affiliated inpatient
rehabilitation hospitals and similar facilities described in the Agreement, and in a second phase a minimum of one InMotion®
ARM Interactive Therapy System for each future facilities of Kindred, during the four-year minimum term of the Agreement. 21 InMotion®
robots were sold in total to Kindred by March 31, 2019.
We have also entered into
an agreement with Cogmedix Inc., a wholly owned subsidiary of Coghlin Companies, a medical device development and manufacturing
company located in West Boylston, MA, to produce InMotion® robots. The initial agreement is for turnkey, compliant manufacturing
with the capability of scaling faster production to meet increased volume as the Company grows. In addition, our Massachusetts-based
manufacturing facility is compliant with ISO- 13485 and FDA regulations.
We
currently hold an intellectual property portfolio that includes 5 U.S. patents and 1 U.S. pending patent, 5 of which are
pending internationally, as well as other patents under development. We may file provisional patents from time to time, which
may expire if we do not pursue full patents within 12 months of the filing date. Two provisional patents have recently been filed,
pertaining to BIONIK’s InMotion HomeTM development and recently launched InMotion ConnectTM platform,
each of which the Company plans to file as a full patent prior to the 12-month deadline. The provisional patents may not be filed
as full patents and new provisional patents may be filed as the technology changes. Additionally, we hold exclusive licenses to
three additional patents of which one is currently being used for the InMotion® Wrist and is licensed to us from the Massachusetts
Institute of Technology.
We have filed trademarks
in the U.S. and European Union for InMotion®, InMotion Home™, InMotion Connect™, InMotion Pulse™, and InMotion
Insights™; the trademark for InMotion® is registered in the European Union and in the U.S., the trademark for InMotion
Connect is registered in the European Union and pending in the US, while InMotion Home™, InMotion Pulse™, and InMotion
Insights™ are pending in both jurisdictions.
We currently sell our products
directly or can introduce customers to a third-party finance company to lease at a monthly fee over the term or other fee structure
for our products to hospitals, clinics, distribution companies and/or buying groups that supply those rehabilitation facilities.
We introduced our new enhanced commercial version of the InMotion®
product line starting with the InMotion® ARM in December 2017 and then the InMotion® ARM/HAND in January 2019. We sold
11 InMotion® robots in the fiscal year ended March 31, 2018, 33 InMotion® robots in the fiscal year ended March 31, 2019,
17 InMotion® robots for the fiscal year ended March 31, 2020, and 2 robots in the three months ended June 30, 2020.
We had $257,908 of
revenue for the first quarter ended June 30, 2020 compared to $790,379 for the first quarter ended June 30, 2019.
Significant Accounting Policies
and Estimates
The discussion
and analysis of the financial condition and results of operations are based upon the financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States. The preparation of consolidated financial statements
in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of any contingent liabilities at the financial statement
date and reported amounts of revenue and expenses during the reporting period. On an on-going basis we review our estimates and
assumptions. The estimates were based on historical experience and other assumptions that we believe to be reasonable under the
circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions, but we do not
believe such differences will materially affect our financial position or results of operations.
Results of Operations
From the inception
of Bionik Canada on March 24, 2011 through June 30, 2020 we have generated a deficit of $73,380,946.
We
expect to incur additional operating losses through the fiscal year ending March 31, 2021 and beyond, principally as a result of
our continuing research and development, building the sales and marketing team, long sales cycles and general and administrative
costs predominantly associated with being a public company.
For the Quarter ended June 30, 2020
compared to the Quarter ended June 30, 2019
Sales
Sales were $257,908
for the quarter ended June 30, 2020 (June 30, 2019 - $790,379). The revenues for the quarter ended June 30, 2020 are comprised
of sales of 2 (June 30, 2019 – 8) InMotion™ robots, as well as service, and warranty income. The decrease in the number
of InMotion™ robots sold is related to delays that impact on our business from the COVID-19 pandemic.
Cost of Sales and Gross Margin
Cost of sales was $62,555
for the quarter ended June 30, 2020 (June 30, 2019- $336,085). Gross margin increased to 75.7% for the quarter ended June 30, 2020
(June 30, 2019 – 57.5%) due to the reversal of an overstated warranty reserve of $81,224, and was 57.6% without the effects
of the warranty adjustment.
Operating Expenses
Total operating expenses for the quarter ended June 30, 2020
were $2,153,889 compared to $2,622,989 for the quarter ended June 30, 2019, as further described below.
For the quarter ended
June 30, 2020, the Company incurred $223,185 in sales and marketing expenses, compared to $583,732 for the quarter ended June 30,
2019. The decrease in these expenses is that due to the COVID-19 pandemic, the sales team has not been able to travel or go to
conferences.
For
the quarter ended June 30, 2020, the Company incurred research and development expenses of $353,263 (June 30, 2019– $816,523).
The decrease in research and development expenses relates to a reduction in the employees in this department and the completion
of the development of our InMotion Connect product.
The Company incurred
general and administrative expenses of $1,128,510 for the quarter ended June 30, 2020, compared to $841,693 for the quarter ended
June 30, 2019. The increase in general and administrative expenses in 2020 over 2019 resulted from legal fees and other public
company related costs.
Stock
compensation expense was $407,315 for the quarter ended June 30, 2020, compared to $287,757 for the quarter ended June 30, 2019,
due to increased option grant expense in the period ended June 30, 2020 compared to the period ended June 30, 2019.
Amortization
of technology and other assets allocated from the purchase of IMT was $23,504 for the quarter ended June 30, 2020 (June 30, 2019
– $69,314). The amortization has decreased as certain assets acquired have been fully amortized. Assets acquired were workforce
and non-compete agreements which is now fully amortized. Customer relationships is amortized over 10 years, patents and our exclusive
license agreements over their lifetime and trademarks are indefinite and therefore are not amortized.
Depreciation amounted to $18,112 for the quarter
ended June 30, 2020 (June 30, 2019 -$23,970).
Other Expenses (Income)
For the quarter ended
June 30, 2020, we incurred other expense of $74,975 (June 30, 2019 – $14,296). The increase in other expenses relates to
higher interest expense in connection with higher indebtedness in the period ended June 30, 2020 compared to the period ended June
30, 2019.
For the quarter ended June 30, 2020, we received other income
of $37,612 (June 30, 2019 - $Nil) from Canadian government grants relating to the COVID-19 pandemic, used for payroll in Canada
(CEWS). CEWS is recognized as other income in the consolidated statement of operations in the period in which the Company recognizes
expenses for which CEWS is intended to compensate.
For the quarter ended
June 30, 2020, we incurred a foreign exchange loss of $11,177 (June 30, 2019 – ($62,357)). On April 1, 2015, our subsidiaries
changed their functional currency from the Canadian Dollar to the U.S. Dollar. This reflects the fact that most of the Company’s
business is influenced by an economic environment denominated in U.S. currency as well as that the Company anticipates revenues
to be earned in U.S. dollars.
Comprehensive loss
for the quarter ended June 30, 2020 was $(2,007,076), resulting in loss per share of $(0.39), and for the quarter ended June 30,
2019 the comprehensive loss was $(2,120,644), resulting in loss per share of ($0.55).
Liquidity and Capital Resources
We have funded operations
through the issuance of capital stock, loans, grants, and investment tax credits received from the Government of Canada. Since
2015, we have raised an aggregate of $11,341,397 from the sale of our stock, incurred an aggregate of $27,613,608 in loans that
were subsequently converted into our common stock, and incurred an aggregate of $400,000 in loans that were repaid in accordance
with their terms. Additionally, in May 2020 we received funding of $459,912 pursuant to the federal Paycheck Protection Program
under the Coronavirus Aid, Relief and Economic Security Act. The loan is unsecured, bears interest of 1% per annum and a deferment
period of 6 months. The loan is to be used primarily for payroll related costs, lease, and utility payments. The Company intends
to apply for forgiveness for all or a portion of the loans in accordance with applicable law. If the loan is not forgiven, the
Company will be obligated to repay the loan during the period of 2 years.
In June 2020, the Company
has received additional convertible loans of $1,302,575. At June 30, 2020, the Company had outstanding loans in the aggregate principal
amount of $3,912,592.
Based on our current burn
rate, we need to raise additional capital in the short term to fund operations and meet expected future liquidity requirements,
as well as to repay our remaining existing indebtedness (including our funding from the CARES Act, if and to the extent the loan
is not forgiven), or we will be required to curtail or terminate some or all of our product lines or our operations. We are continuously
in discussions to raise additional capital, which may include or be a combination of convertible or term loans and equity which,
if successful, will enable us to continue operations based on our current burn rate, for the next 12 months; however, we cannot
give any assurance at this time that we will successfully raise all or some of such capital or any other capital. Furthermore,
we do not have an established source of funds sufficient to cover operating costs after December 2020 at this time.
There can be no assurance
that necessary debt or equity financing will be available, or will be available on terms acceptable to us, in which case we may
be unable to meet our obligations or fully implement our business plan, if at all. These conditions raise substantial doubt about
the Company's ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include
any adjustments to reflect the possible future effects on recoverability and reclassification of assets or the amounts and classification
of liabilities that may result from the outcome of this uncertainty.
Additionally, we will need
additional funds to respond to business opportunities including potential acquisitions of complementary technologies, protect our
intellectual property, develop new lines of business, and enhance our operating infrastructure. While we may need to seek additional
funding for any such purposes, we may not be able to obtain financing on acceptable terms, or at all. In addition, the terms of
our financings may be dilutive to, or otherwise adversely affect, holders of our common stock. We will also seek additional funds
through arrangements with collaborators or other third parties. However, the recent COVID-19 pandemic has presented unprecedented
challenges to businesses and the investing landscape around the world. Therefore, there can be no assurance that management’s
plans will be successful. We may not be able to negotiate any such arrangements on acceptable terms, if at all. If we are unable
to obtain additional funding on a timely basis, we may be required to curtail or terminate some or all of our product lines or
our operations.
As a result of the COVID-19
pandemic and actions taken to slow its spread, the global credit and financial markets have experienced extreme volatility, including
diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment
rates and uncertainty about economic stability. There can be no assurance that further deterioration in credit and financial markets
and confidence in economic conditions will not occur. If equity and credit markets deteriorate, it may make any necessary debt
or equity financing more difficult to obtain, more costly and/or more dilutive. Any of these actions could materially harm our
business, results of operations and future prospects.
Net Cash Used in Operating Activities
During quarter ended
June 30, 2020, we used cash in operating activities of $(1,629,197). The increased use of cash in the quarter ended June 30, 2020,
compared to a use of $(1,323,946) for the quarter ended June 30, 2019, is mainly attributable to the working capital changes in
the quarter ended June 30, 2020.
Net Cash Used in Investing
Activities
During the quarter ended June 30, 2020, net cash
used in investing activities was $(Nil), compared to $(42,802) for the quarter ended June 30, 2019.
Net cash
used in investing activities in the quarter ended June 30, 2019 was used for the acquisition of equipment related to the Company’s
purchase of additional computer equipment due to the increase in engineers, equipment to help with the development of our technology
and demo units to assist in the sales process.
Net Cash Provided by Financing
Activities
Net cash provided by financing activities was $1,762,487 for
the quarter ended June 30, 2020, compared to $1,450,000 for the quarter ended June 30, 2019. The increase in the quarter ended
June 30, 2020 was due to more capital raised and PPP loan.
Newly Adopted and Recently
Issued Accounting Pronouncements
In
January 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and Other”. ASU 2017-04 simplifies the accounting
for goodwill impairment by eliminating Step 2 of the current goodwill impairment test, which required a hypothetical purchase price
allocation.
Goodwill
impairment will now be the amount by which the reporting unit’s carrying value exceeds its fair value, limited to the carrying
value of the goodwill. ASU 2017-04 is effective for financial statements issued for fiscal years, and interim periods beginning
after December 15, 2019. The Company has adopted ASU 2017-04 and it did not have a material effect on the consolidated balance
sheet and consolidated statement of operations.
In June
2016, the FASB issued ASU 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses of Financial
Instruments, which introduces an expected credit loss methodology for the impairment of financial assets measured at amortized
cost basis. The methodology replaces the probable, incurred loss model for those assets. The update if effective for fiscal years
beginning after December 15, 2019. The Company has adopted ASU 2016-13 and it did not have a material effect on the consolidated
balance sheet and consolidated statement of operations.
Recently issued
Accounting
Standards Update 2020-06—Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts
in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity:
simplifies accounting for convertible instruments by removing major separation models required under current Generally Accepted
Accounting Principles (GAAP). Consequently, more convertible debt instruments will be reported as a single liability instrument
and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features.
The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception,
which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted earnings per share (EPS) calculation
in certain areas. The amendments in this Update are effective for public business entities that meet the definition of a Securities
and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal
years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments
are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption
is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal
years. The Company is assessing the impact that the adoption of ASU 2020-06 will have on the consolidated balance sheet and consolidated
statement of operations.
Management does not believe that any other recently
issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying condensed
consolidated interim financial statements.
Off-Balance Sheet Arrangements
We had 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.