NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2020 (Unaudited)
(Expressed
in US dollars)
1.
NATURE OF OPERATIONS
Biotricity
Inc. (formerly MetaSolutions, Inc.) (the “Company”) was incorporated under the laws of the State of Nevada on August
29, 2012. iMedical Innovations Inc. (“iMedical”) was incorporated on July 3, 2014 under the laws of the Province of
Ontario, Canada and became a wholly-owned subsidiary of Biotricity through reverse take-over.
Both
the Company and iMedical are engaged in research and development activities within the remote monitoring segment of preventative
care. They are focused on a realizable healthcare business model that has an existing market and commercialization pathway. As
such, its efforts to date have been devoted in building technology that enables access to this market through the development
of a tangible product.
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 consolidated financial statements for the years ended March 31,
2020 and 2019 and their accompanying notes.
The
accompanying unaudited condensed consolidated financial statements are expressed in United States dollars (“USD”).
In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation
of financial position and results of operations for the interim periods presented have been reflected herein. Operating results
for the interim periods presented herein are not necessarily indicative of the results that may be expected for the year ending
March 31, 2021. 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.
Certain
prior year amounts have been reclassified to conform to the current year’s presentation.
Liquidity
and Basis of Presentation
The
Company is an emerging growth firm, in the early stages of commercializing its first product. It is concurrently in development
mode, operating a research and development program in order to develop an ecosystem of medical technologies, and, where required
or deemed advisable, obtain regulatory approvals for, and commercialize other proposed products. The Company has incurred recurring
losses from operations, and as at December 31, 2020, has an accumulated deficit of $57,033,331 and a working capital deficiency
of $3,501,151. The Company launched its first commercial sales program as part of a limited market release, during the
year ended March 31, 2019, using an experienced professional in-house sales team. A full market release ensued during the year
ended March 31, 2020. Given the growth experienced in business volumes during the early stages of commercialization, management
anticipates that this first product will generate an increasing amount of revenue, allowing the Company to improve
its liquidity through continued business development, and issue additional equity or debt required to further capitalize
the Company. The Company has developed and continues to pursue sources of funding that management believes, if successful,
would be sufficient to support the Company’s operating plan and alleviate any substantial doubt as to its ability to meet
its obligations at least for a period of one year from the date of these consolidated financial statements. The Company raised
$3,030,620 in promissory notes and short term loans during the year ended March 31, 2020. From December 2019 to June 2020, the
Company also issued 8,045 Series A preferred shares, issuing 6,100 of these for cash proceeds of $6,100,000; an additional 1,945
of these preferred shares were issued on conversion of $1,945,000 of promissory notes and accrued interest. The Company has also
received a Coronavirus relief loan for economic support during COVID-19, including $1,570,900 received during the three months
ended June 30, 2020 (see Note 6 – Federally Guaranteed Loans), which management believes is ultimately forgivable.
In July 2020, the Company launched a further private placement offering of convertible notes, generating net cash proceeds
of $6,095,640 by December 31, 2020 (Note 5), not including funds raised as part of additional closings related to
this offering that occurred subsequent to December 31, 2020.
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 December 31, 2020 and 2019.
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 3, respectively. The
Company’s bank accounts are maintained with financial institutions of reputable credit, therefore, bear minimal credit risk.
Leases
The
Company is the lessee in a lease contract when the Company obtains the right to use the asset. Operating leases are included in
the line items right-of-use asset, lease obligation, current, and lease obligation, long-term in the consolidated balance sheet.
Right-of-use
(“ROU”) asset represents the Company’s right to use an underlying asset for the lease term and lease obligations
represent the Company’s obligations to make lease payments arising from the lease, both of which are recognized based on
the present value of the future minimum lease payments over the lease term at the commencement date. Leases with a lease term
of 12 months or less at inception are not recorded on the consolidated balance sheet and are expensed on a straight-line basis
over the lease term in 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 10 for further discussion.
Government
loan
Loans
that were received from the federal government, which contain certain operating conditions and with terms of over twelve months,
are recorded by the Company as long term liabilities.
Convertible
Promissory Notes Payable and Derivative Instruments
The
Company has adopted the provisions of ASU 2017-11 to account for the down round features of warrants issued with private placements
effective as of April 1, 2017. In doing so, warrants with a down round feature previously treated as derivative liabilities in
the consolidated balance sheet and measured at fair value are henceforth treated as equity, with no adjustment for changes in
fair value at each reporting period. Previously, the Company accounted for conversion options embedded in convertible notes in
accordance with ASC 815. ASC 815 generally requires companies to bifurcate conversion options embedded in convertible notes from
their host instruments and to account for them as free-standing derivative financial instruments. ASC 815 provides for an exception
to this rule when convertible notes, as host instruments, are deemed to be conventional, as defined by ASC 815-40. The Company
accounts for convertible notes deemed conventional and conversion options embedded in non-conventional convertible notes which
qualify as equity under ASC 815, in accordance with the provisions of ASC 470-20, which provides guidance on accounting for convertible
securities with beneficial conversion features. Accordingly, the Company records, as a discount to convertible notes, the intrinsic
value of such conversion options based upon the differences between the fair value of the underlying common stock at the commitment
date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements
are amortized over the term of the related debt.
Recently
Issued Accounting Pronouncements
In
June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses
on Financial Instruments.” This pronouncement, along with subsequent ASUs issued to clarify provisions of ASU 2016-13, changes
the impairment model for most financial assets and will require the use of an “expected loss” model for instruments
measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such
instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation
of the amount expected to be collected on the financial asset. In developing the estimate for lifetime expected credit loss, entities
must incorporate historical experience, current conditions, and reasonable and supportable forecasts. This pronouncement is effective
for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. On November 19, 2019,
the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), finalized various effective date delays
for private companies, not-for-profit organizations, and certain smaller reporting companies applying the credit losses (CECL),
the revised effective date is January 2023.
In
July 2019, the FASB issued ASU 2019-07, Codification Updates to SEC Sections. This ASU amends various SEC paragraphs pursuant
to the issuance of SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442,
Investment Company Reporting Modernization. One of the changes in the ASU requires a presentation of changes in stockholders’
equity in the form of a reconciliation, either as a separate financial statement or in the notes to the financial statements,
for the current and comparative year-to-date interim periods. The Company presented changes in stockholders’ equity as separate
financial statements for the current and comparative year-to-date interim periods beginning on April 1, 2019. The additional elements
of the ASU did not have a material impact on the Company’s consolidated financial statements.
In
December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which
simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain
aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for fiscal years beginning
after December 15, 2021. Most amendments within the standard are required to be applied on a prospective basis, while certain
amendments must be applied on a retrospective or modified retrospective basis. The Company is currently evaluating the impacts
of the provisions of ASU 2019-12 on its financial condition, results of operations, and cash flows.
In
March 2020, the FASB issued ASU No. 2030-20 Codification Improvements to Financial Instruments, An Amendment of the FASB Accounting
Standards Codification: a)in ASU No. 2016-01, b) in Subtopic 820-10, c) for depository and lending institutions clarification
in disclosure requirements, d) in Subtopic 470-50, e) in Subtopic 820-10, f) Interaction of Topic 842 and Topic 326, g) Interaction
of the guidance in Topic 326 and Subtopic 860-20.The amendments in this Update represent changes to clarify or improve the Codification.
The amendments make the Codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications.
For public business entities updates under the following paragraphs: a), b), d) and e) are effective upon issuance of this final
update. The effective date for c) is for fiscal years beginning after December 15, 2019, including interim periods within those
fiscal years. The Company does not expect that the new guidance will significantly impact its consolidated financial statements.
The
Company continues to evaluate the impact of the new accounting pronouncement, including enhanced disclosure requirements, on our
business processes, controls and systems.
4.
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
|
|
|
As
at
December 31, 2020
$
|
|
|
As
at
March 31, 2020
$
|
|
|
Accounts
payable
|
|
|
1,478,503
|
|
|
|
1,094,072
|
|
|
Accrued
liabilities
|
|
|
1,155,381
|
|
|
|
427,617
|
|
|
|
|
|
2,633,884
|
|
|
|
1,521,689
|
|
Accounts
payable as at December 31, 2020, and March 31, 2020 include 371,930 and 379,881, 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. As at December 31, 2020, included in accrued liabilities, dividends payable was $212,264
(March 31, 2020 - $77,927).
5.
CONVERTIBLE PROMISSORY NOTES AND SHORT TERM LOANS
During
the nine months ended December 31, 2020, the Company issued $7,040,500 (face value) in a series of convertible promissory
notes (the “Series A Notes”) sold under subscription agreements to accredited investors. The Notes mature one year
from the final closing date of the offering and accrue interest at 12% per annum. The Notes will automatically convert into common
stock (in each case, subject to the trading volume of the Company’s common stock being a minimum of $500,000 for each trading
day in the 20 consecutive trading days immediately preceding the conversion date), upon the earlier to occur of (i) the Company’s
common stock being listed on a national securities exchange, in which event the conversion price will be equal to 75% of the volume
weighted average price of the common stock for the 20 trading days prior to the conversion date, or (ii) upon the closing of the
Company’s next equity round of financing for gross proceeds of greater than $5,000,000, in which event the conversion price
will be equal to 75% of the price per share of the common stock (or of the conversion price in the event of the sale of securities
convertible into common stock) sold in such financing. The Company may, at its discretion redeem the notes for 115% of their face
value plus accrued interest. The Company is obligated to issue warrants that accompany the convertible notes and provide 50% warrant
coverage. The warrants have a 3-year term from date of issuance and an exercise price that is 120% of the 20-day volume weighted
average price of the Company’s common shares at the time final closing. The Company is obligated to pay the placement agent
of the Notes a 12% cash fee. Net proceeds to the Company from convertible note issuances to December 31, 2020 amounted to $6,095,640
after payment of the placement agent fee. The Company is also obligated to issue warrants to the placement agent that have
a 10-year term and cover 12% of funds raised, with an exercise price that is 120% of the 20-day volume weighted average price
of the Company’s common shares at the time final closing. Both the noteholder and placement agent warrants will not be issued
until final closing since their exercise price is variable and will not be struck until that date. The Company determined that
the conversion and redemption features, investor warrants and placement agent warrants contained in those Notes represented a
single compound derivative liability that meets the requirements for liability classification under ASC 815. The Company accounted
for these obligations by determining the fair value of the related derivative liability associated with the embedded conversion
and redemption features, as well as investor warrants and placement agent warrants. The initial fair value of the derivative liabilities
generated as a result of issuing the Series A Notes that were issued until December 31, 2020 was $5,429,803 (Note 7). The Company
recognized debt issuance costs in the amount of $1,676,198 and treated these as a deduction from the convertible
note liabilities directly, as a contra-liability, and amortized the debt issuance cost over the term of the Notes. The Company
recognized initial debt discount in the amount of $4,598,464 and accreted the interest over the remaining lives
of those Notes. For the nine months ended December 31, 2020, the Company recorded amortization of debt issuance cost in the amount
of $260,869, interest accretion for the debt discount in the amount of $461,926 as well as $160,958 interest accruals
for those Notes. In connection with the foregoing, the Company relied upon the exemption from registration provided by Section
4(a)(2) under the Securities Act of 1933, as amended, for transactions not involving a public offering.
|
|
|
Total
|
|
|
|
|
$
|
|
|
Face
value of convertible notes issued
|
|
|
7,040,500
|
|
|
Debt
discount
|
|
|
(4,598,464
|
)
|
|
Debt
issuance costs
|
|
|
(1,676,198
|
)
|
|
Day
1 value of convertible notes issued
|
|
|
765,838
|
|
|
|
|
|
|
|
|
Accretion
of debt discount during nine months ended December 31, 2020
|
|
|
461,926
|
|
|
Amortization
of debt issuance cost during nine months ended December 31, 2020
|
|
|
260,869
|
|
|
Total
accretion and amortization expenses
|
|
|
722,795
|
|
|
|
|
|
|
|
|
Balance
as at December 31, 2020
|
|
|
1,488,633
|
|
In
addition, as at December 31, 2020, the Company had promissory
notes outstanding of $450,065 (March 31, 2020 – $916,301). The promissory notes generally have a term of 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 issued in prior years 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.
As
at December 31, 2020, the Company also had short term loan outstanding of $1,556,896 (March 31, 2020 – $1,152,001)
and held funds in escrow for to be issued as convertible notes after December 31, 2020 in the amount of $2,200,000 (March 31,
2020 – nil)
General
and administrative expenses include interest expense on the above debt instruments of $109,699 and $37,456 for the nine months
ended December 31, 2020 and 2019, respectively.
6.
FEDERALLY GUARANTEED LOANS
Economic
Injury Disaster Loan (“EIDL”)
In
April 2020, the Company received $370,900 from the U.S. Small Business Administration (SBA) under the captioned program. The loan
has a term of 30 years and an interest rate of 3.75%, without the requirement for payment in its first 12 months. The Company
may prepay the loan without penalty at will.
Payment
Protection Program (“PPP”) Loan
In
May 2020, Biotricity received loan proceeds of $1.2 million (the “PPP Loan”) under the Paycheck Protection Program
established by the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) administered by the U.S. Small
Business Administration (“SBA”). The unsecured PPL Loan is evidenced by a promissory note (the “Note”),
between the Company and the lending financial institution (the “Lender”). The Note has a two-year term, bears interest
at the rate of 1.0% per annum, and may be prepaid at any time without payment of any premium. No payments of principal or interest
were originally due during the six-month period beginning on the date of the Note (the “Deferral Period”),
but the Payment Protection Flexibility Act of 2020 has effectively extended this period of no payments for the Company to the
earliest of loan forgiveness or August 2021. The principal and accrued interest under the Note is forgivable under certain
specified circumstances if the Company uses the PPP Loan proceeds for eligible purposes, including payroll, benefits, rent and
utilities, and otherwise complies with PPP requirements. In order to obtain forgiveness of the PPP Loan, the Company must submit
a request and provide satisfactory documentation regarding its compliance with applicable requirements. The Company must repay
any unforgiven principal amount of the Note, with interest, on a monthly basis following the Deferral Period. The Company is using
PPP Loan proceeds for qualifying expenses, though no assurance is provided that the Company will obtain forgiveness of the PPP
Loan in whole or in part.
7.
DERIVATIVE LIABILITIES
On
December 19, 2019 and January 9, 2020, the Company issued 7,830 Series A preferred shares; 6,000 of these were issued for cash
proceeds of $6,000,000 and 1,830 of these were issued on conversion of $1,830,000 of promissory notes that had previously been
issued for cash proceeds in October 2019. On May 22, 2020, another 215 Series A preferred shares were issued as a result of a
combined transaction that included the conversion of $100,000 in promissory notes, and $15,000 in accrued interest thereon,
for 115 preferred shares, as well as a purchase of 100 preferred shares for cash proceeds of $100,000. The Company therefore
had 8,045 Series A preferred shares issued and outstanding as at December 31, 2020.
The
Company analyzed the compound features of variable conversion and redemption embedded in the preferred shares, for potential derivative
accounting treatment on the basis of ASC 820 (Fair Value in Financial Instruments), ASC 815 (Accounting for Derivative Instruments
and Hedging Activities), Emerging Issues Task Force (“EITF”) Issue No. 00–19 and EITF 07–05, and determined
that the embedded derivatives should be bundled and valued as a single, compound embedded derivative, bifurcated from the underlying
equity instrument, treated as a derivative liability, and measured at fair value.
|
|
|
Total
|
|
|
|
|
$
|
|
|
Derivative
liabilities related to preferred shares as at March 31, 2019
|
|
|
-
|
|
|
Derivative
fair value at issuance
|
|
|
1,083,952
|
|
|
Change
in fair value of derivatives
|
|
|
60,781
|
|
|
As
at March 31, 2020
|
|
$
|
1,144,733
|
|
|
Derivative
fair value at issuance
|
|
|
41,749
|
|
|
Change in
fair value of derivatives for the three months ended June 30, 2020
|
|
|
(204,142
|
)
|
|
Change in
fair value of derivatives for the three months ended September 30, 2020
|
|
|
(178,988
|
)
|
|
Change
in fair value of derivatives for the three months ended December 31, 2020
|
|
|
(214,663
|
)
|
|
Derivative
liabilities related to preferred shares as at December 31, 2020
|
|
$
|
588,699
|
|
The
lattice methodology was used to value the derivative components embedded in the preferred shares, using the following assumptions:
|
|
|
Assumptions
|
|
|
Dividend
yield
|
|
|
12
|
%
|
|
Risk-free
rate for term
|
|
|
0.62%
– 1.14
|
%
|
|
Volatility
|
|
|
111.7%
– 113.4
|
%
|
|
Remaining
terms (Years)
|
|
|
0.01
– 1.0
|
|
|
Stock price
($ per share)
|
|
$
|
0.7383
|
|
For
the nine months ended December 31, 2020 , pursuant to issuing $7,040,500 in convertible notes (Note 5) that have embedded
conversion rights, redemption features and variable-priced investor warrants and placement agent warrants, the Company analyzed
the compound features of variable conversion and redemption embedded in the convertible notes, for potential derivative accounting
treatment on the basis of ASC 820 (Fair Value in Financial Instruments), ASC 815 (Accounting for Derivative Instruments and Hedging
Activities), Emerging Issues Task Force (“EITF”) Issue No. 00–19 and EITF 07–05, and determined that the
embedded derivatives should be bundled and valued as a single, compound embedded derivative, bifurcated from the underlying note,
treated as a derivative liability, and measured at fair value.
|
|
|
Total
|
|
|
|
|
$
|
|
|
Derivative
liabilities related to convertible notes as at March 31 and June 30, 2020
|
|
$
|
-
|
|
|
Derivative
fair value at issuance
|
|
|
2,590,317
|
|
|
Change
in fair value of derivatives for the three months ended September 30, 2020
|
|
|
(50,349
|
)
|
|
As
at September 30, 2020
|
|
$
|
2,539,968
|
|
|
Derivative
fair value at issuance
|
|
|
2.839.486
|
|
|
Change
in fair value of derivatives for the three months ended December 31, 2020
|
|
|
(135,051
|
)
|
|
Derivative
liabilities related to the convertible notes as at December 31, 2020
|
|
$
|
5,244,403
|
|
The
lattice methodology was used to value the derivative components embedded in the convertible notes, using the following range of
assumptions:
|
|
|
Assumptions
|
|
|
Dividend
yield
|
|
|
12
|
%
|
|
Risk-free
rate for term
|
|
|
0.62%
– 1.14
|
%
|
|
Volatility
|
|
|
98.5%
– 125.3
|
%
|
|
Remaining
terms (Years)
|
|
|
0.01
– 10.0
|
|
|
Stock price
($ per share)
|
|
$
|
0.7241
– $1.14
|
|
8.
STOCKHOLDERS’ DEFICIENCY
a)
Authorized stock
As
at December 31, 2020, the Company is authorized to issue 125,000,000 (March 31, 2020 – 125,000,000) shares of common stock
($0.001 par value) and 10,000,000 (March 31, 2020 – 10,000,000) shares of preferred stock ($0.001 par value).
At
December 31, 2020, there were 34,576,797 (March 31, 2020 – 32,593,769) shares of common stock issued and outstanding. Additionally,
at December 31, 2020, there were 3,219,518 (March 31, 2020 – 3,788,062) 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. The Company has also issued a Series A preferred stock, $0.001 par value; 20,000
shares have been designated as authorized (as at December 31 and March 31, 2020); 8,045 and 7,830 preferred shares were issued
and outstanding as at December 31 and March 31, 2020, respectively.
b)
Exchange Agreement
On
February 2, 2016, the Company was formed through reverse-take-over:
|
|
●
|
The
Company issued approximately 1.197 shares of its common stock in exchange for each common share of iMedical held by the iMedical
shareholders who in general terms, are not residents of Canada (for the purposes of the Income Tax Act (Canada). Accordingly,
the Company issued 13,376,947 shares;
|
|
|
●
|
Shareholders
of iMedical who in general terms, are Canadian residents (for the purposes of the Income Tax Act (Canada)) received approximately
1.197 Exchangeable Shares in the capital of Exchangeco in exchange for each common share of iMedical held. Accordingly, the
Company issued 9,123,031 Exchangeable Shares;
|
|
|
●
|
Each
outstanding option to purchase common shares in iMedical (whether vested or unvested) was exchanged, without any further action
or consideration on the part of the holder of such option, for approximately 1.197 economically equivalent replacement options
with an inverse adjustment to the exercise price of the replacement option to reflect the exchange ratio of approximately
1.197:1;
|
|
|
●
|
Each
outstanding warrant to purchase common shares in iMedical was adjusted, in accordance with the terms thereof, such that it
entitles the holder to receive approximately 1.197 shares of the common stock of the Company for each warrant, with an inverse
adjustment to the exercise price of the warrants to reflect the exchange ratio of approximately 1.197:1
|
|
|
●
|
Each
outstanding advisor warrant to purchase common shares in iMedical was adjusted, in accordance with the terms thereof, such
that it entitles the holder to receive approximately 1.197 shares of the common stock of the Company for each advisor warrant,
with an inverse adjustment to the exercise price of the Advisor Warrants to reflect the exchange ratio of approximately 1.197:1;
and
|
|
|
●
|
The
outstanding 11% secured convertible promissory notes of iMedical were adjusted, in accordance with the adjustment provisions
thereof, as and from closing, so as to permit the holders to convert (and in some circumstances permit the Company to force
the conversion of) the convertible promissory notes into shares of the common stock of the Company at a 25% 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, 2020
On
December 19, 2019, the Company issued 6,000 shares of Series A preferred stock in a private placement for gross proceeds of $6,000,000
(Note 7). The shares are convertible into common stock of the Company at a conversion price equal to the greater of $0.001 or
a 15% discount to the 5-day volume weighted price at the time of conversion. The conversion rights commence 24 months after issuance,
but conversion is limited to 5% of the aggregate purchase price of the holder on a monthly basis thereafter. Alternatively, the
shares are convertible into common stock at a 15% discount to any qualified future common stock financing conducted by the Company.
The Company may redeem the shares after 1 year for 110% of the purchase price plus accrued dividends. The preferred stock bears
a dividend rate of 12% per annum. On January 9, 2020, the Company issued a further 1,830 of Series A preferred stock with same
terms on conversion of $1,830,000 of promissory notes that had previously been issued for cash proceeds in 2019 (see Note 7).
During the year ended March 31, 2020, the Company accrued dividends in amount of $257,927 and made a payment in amount of $180,000.
In
May and July 2019, the Company issued 47,585 shares of common stock under a registered offering outstanding in the previous fiscal
year, which raised proceeds of $28,565.
During
the year ended March 31, 2019, the Company issued a total of 972,950 shares of common stock and recognized its obligations to
issue a total of 178,750 shares of common stock to various consultants and advisors, with a cumulative fair value of $666,129
and $169,490, respectively, or $835,619 in total; these costs were recognized as general and administrative and research and development
expenses, as applicable, in the statement of operations, with corresponding credit to common stock, shares to be issued, and additional
paid-in-capital, respectively.
During
the year ended March 31, 2020, the Company also issued an aggregate of 525,023 shares of its common stock to investors as part
of the one-for-one exchange of previously issued exchangeable shares into the Company’s Common Stock, which is a non-cash
transaction. No options or warrants were exercised during this period.
Share
issuances during the three and nine months ended December 31, 2020
During
the three months ended December 31, 2020, the Company issued an aggregate of 540,000 shares, pursuant to existing obligations
related to services rendered by consultants and advisors, including 290,000 that were to be issued as part of obligations in the
immediately preceding three-month period. Total fair value of these common shares, in the amount of $519,916, was determined by
using the market date price on the date of issuance, recorded in general and administrative expenses and research and development
expenses with corresponding credit to common stock and additional paid in capital.
During
the nine months ended December 31, 2020, the Company issued an aggregate of 1,414,500 shares, fair valued at $1,862,857.
d)
Shares to be issued
As
of December 31, 2020, the Company has recognized its contractual obligations to issue a total of 339,500 shares of common stock
to advisors. The fair value of these shares amounted to $250,715 and has been expensed to general and administrative and research
and development expenses in the consolidated statements of operations, with a corresponding credit to additional paid-in-capital.
Included in shares to be issued after December 31, 2020 were 97,500 shares to be issued in order to complete the exercise of shares
which was paid for in the preceding three month period ended September 30, 2020. The fair value of shares to be issued 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, 2020
During
the year ended March 31, 2020, the Company issued 1,021,430 warrants, respectively, as compensation for advisor and consultant
services and certain promissory noteholders, which were fair valued at $277,053. Warrants issued to advisors and consultants were
expensed in general and administrative expenses and amounted to $184,637, for the year ended March 31, 2020. Warrants issued to
promissory notes holders were credited to additional paid-in capital in amount of $92,416. Their fair value has been estimated
using a multinomial lattice model with an expected life of 2 to 3 years, risk free rates of 0.22% to 1.71%, stock price
of $0.52 to $0.974 and expected volatility of 114.3% to 132.2%.
Warrant
issuances during the three and nine months ended December 31, 2020
During
the three months ended December 31, 2020, the Company issued 226,667 warrants as compensation for advisor and consultant services,
which were fair valued at $73,729 and expensed in general and administrative expenses and research and development expenses,
with a corresponding credit to additional paid in capital. Their fair value has been estimated using a multinomial lattice
model with an expected life of 3 years, a risk free rate ranging from 0.198% to 0.783%, stock price of $0.7383
and expected volatility of 113.4% to 123.8%.
During
the nine months ended December 31, 2020, the Company issued 349,584 warrants as compensation for advisor and consultant services,
which were fair valued at $173,523 and expensed in general and administrative expenses and research and development expenses,
with a corresponding credit to additional paid in capital. Their fair value has been estimated using a multinomial lattice
model with an expected life up to 3 years, a risk free rate ranging from 0.167% to 0.783%, stock price in the
range of $0.7383 to $1.11 and expected volatility of 113.4% to 127.6%.
Warrant
exercises
No
warrants were exercised during the fiscal year ended March 31, 2020. During the three and nine months ended December 31, 2020,
97,500 warrants were exercised, with shares for this exercise accounted for as shares to be issued subsequent to December 31,
2020.
Warrant
issuances, exercises and expirations or cancellations during the three months ended December 31, 2020 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, 2019
|
|
|
321,314
|
|
|
|
1,177,157
|
*
|
|
|
2,734,530
|
|
|
|
1,163,722
|
|
|
|
5,396,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(458,196
|
)
|
|
|
(458,196
|
)
|
|
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
|
|
|
|
705,526
|
|
|
|
5,017,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
705,526
|
|
|
|
5,318,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Less:
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Less:
Expired/cancelled
|
|
|
-
|
|
|
|
(35,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(35,000
|
)
|
|
Add:
Issued
|
|
|
-
|
|
|
|
568,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
568,000
|
|
|
As
at December 31, 2019
|
|
|
321,314
|
|
|
|
2,090,257
|
*
|
|
|
2,734,530
|
|
|
|
705,526
|
|
|
|
5,851,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Less:
Expired/cancelled
|
|
|
-
|
|
|
|
(98,750
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(98,750
|
)
|
|
Add:
Issued
|
|
|
-
|
|
|
|
208,333
|
|
|
|
-
|
|
|
|
-
|
|
|
|
208,333
|
|
|
As
at March 31, 2020
|
|
|
321,314
|
|
|
|
2,199,840
|
*
|
|
|
2,734,530
|
|
|
|
705,526
|
|
|
|
5,961,209
|
|
|
Less:
Expired/cancelled
|
|
|
(128,676
|
)
|
|
|
(65,000
|
)
|
|
|
(911,510
|
)
|
|
|
(705,526
|
)
|
|
|
(1,810,712
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add:
Issued
|
|
|
-
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50,000
|
|
|
As
at June 30, 2020
|
|
|
192,638
|
|
|
|
2,184,840
|
*
|
|
|
1,823,020
|
|
|
|
-
|
|
|
|
4,200,497
|
|
|
Less:
Exercised
|
|
|
-
|
|
|
|
(97,500
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(97,500
|
)
|
|
Less:
Expired/cancelled
|
|
|
-
|
|
|
|
(205,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(205,000
|
)
|
|
Add:
Issued
|
|
|
-
|
|
|
|
72,917
|
|
|
|
-
|
|
|
|
-
|
|
|
|
72,917
|
|
|
As
at September 30, 2020
|
|
|
192,638
|
|
|
|
1,955,526
|
*
|
|
|
1,823,020
|
|
|
|
-
|
|
|
|
3,970,814
|
|
|
Less:
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Less:
Expired/cancelled
|
|
|
-
|
|
|
|
(36,250
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(36,250
|
)
|
|
Add:
Issued
|
|
|
-
|
|
|
|
226,667
|
|
|
|
-
|
|
|
|
-
|
|
|
|
226,667
|
|
|
As
at December 31, 2020
|
|
|
192,638
|
|
|
|
2,145,673
|
*
|
|
|
1,823,020
|
|
|
|
-
|
|
|
|
4,161,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise Price
|
|
$
|
0.78-$3.00
|
|
|
$
|
0.48-$3.69
|
|
|
|
2.00
|
|
|
|
3.00
|
|
|
|
|
|
|
Expiration
Date
|
|
|
December
2021 to
July 2022
|
|
|
|
October
2020 to
June 2030
|
|
|
|
March
2021 to
November 2022
|
|
|
|
not
applicable
|
|
|
|
|
|
*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 December 31, 2020, Consultant Warrants include an aggregate of 788,806 warrants provided to
an officer of the Company as compensation while not a member of any Company options plan.
f)
Stock-based compensation
On
February 2, 2016, the Board of Directors of the Company approved the Company’s 2016 Equity Incentive Plan (the “Plan”).
The purpose of the Plan is to advance the interests of the Company and its stockholders by providing an incentive to attract,
retain and reward persons performing services for the Company and by motivating such persons to contribute to the growth and profitability
of the Company. The Plan seeks to achieve this purpose by providing for awards in the form of options, stock appreciation rights,
restricted stock purchase rights, restricted stock bonuses, restricted stock units, performance shares, performance units and
other stock-based awards.
The
Plan shall continue in effect until its termination by the board of directors or committee formed by the board; provided, however,
that all awards shall be granted, if at all, on or before the day immediately preceding the tenth (10th) anniversary of the effective
date. The maximum number of shares of stock that may be issued under the Plan shall be equal to 3,750,000 shares; provided that
the maximum number of shares of stock that may be issued under the Plan pursuant to awards shall automatically and without any
further Company or shareholder approval, increase on January 1 of each year for not more than 10 years from the effective date,
so the number of shares that may be issued is an amount no greater than 20% of the Company’s outstanding shares of stock
and shares of stock underlying any outstanding exchangeable shares as of such January 1; provided further that no such increase
shall be effective if it would violate any applicable law or stock exchange rule or regulation, or result in adverse tax consequences
to the Company or any participant that would not otherwise result but for the increase.
Based
on the 2016 Option Plan, the Company is authorized to issue employee options with a 10-year term. On March 31, 2020, the Company’s
Board of Directors approved the amendment of certain prior options grants, issued to current employees, previously issued with
a 3-year term, such that the respective options issued under these agreements would have their term extended to 10 years. The
Company revalued these options using a lattice model with an expected life of 10 years, risk free rates of 0.46% to 0.75%,
stock price of $0.974 and expected volatility of 132.2%, in order to recognize the additional expense associated with the longer
term and recognized a one-time charge of $1,600,515 in share-based compensation, with a corresponding adjustment to adjusted paid
in capital.
During
the year ended March 31, 2020, an additional 88,100 stock options were granted with a weighted average remaining contractual life
from 2.76 to 9.51 years. The Company recorded stock-based compensation of $2,408,713 in connection with ESOP 2016 Plan under general
and administrative expenses with corresponding credit to additional paid in capital.
During
the three and nine months ended December 31, 2020, the Company granted 519,033 and 2,376,480 of options, respectively
(the latter included 1,400,000 options to an executive and director of the Company and an additional 367,647 options to another
director). Their fair value has been estimated using a multinomial lattice model with an expected life of up to 6.5
years, a risk free rate ranging from 0.198% to 0.7832%, stock price of $0.7383, and expected volatility of 113.4%
to 123.8%.
The
following table summarizes the stock option activities of the Company to December 31, 2020:
|
|
|
Number
of
options
|
|
|
Weighted
average
exercise price ($)
|
|
|
Granted
|
|
|
4,147,498
|
|
|
|
3.2306
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding
as of March 31, 2018
|
|
|
4,147,498
|
|
|
|
3.2306
|
|
|
Granted
|
|
|
270,521
|
|
|
|
1.8096
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding
as of March 31, 2019
|
|
|
4,418,019
|
|
|
|
3.1436
|
|
|
Granted
|
|
|
88,100
|
|
|
|
0.7763
|
|
|
Expired
|
|
|
(112,509
|
)
|
|
|
2.723
|
|
|
Outstanding
as of March 31, 2020
|
|
|
4,393,610
|
|
|
|
3.1069
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
2,376,480
|
|
|
|
0.9787
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding
as of December 31, 2020
|
|
|
6,770,089
|
|
|
|
2.3956
|
|
During
the three and nine months ended December 31, 2020, the Company recorded stock-based compensation of $13,871 and $482,175,
in connection with the 2016 equity incentive plan ($154,996 and $493,885 for the respective comparative periods ended December
31, 2019) under general and administrative expenses with a corresponding credit to additional paid in capital.
multinomial
9.
LEASE
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 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%.
|
|
|
$
|
|
|
Operating
lease right-of-use asset - initial recognition
|
|
|
413,236
|
|
|
Amortization
|
|
|
(297,528
|
)
|
|
Balance
at December 31, 2020
|
|
|
115,708
|
|
|
|
|
|
|
|
|
Operating
lease obligation - initial recognition
|
|
|
413,236
|
|
|
Repayment
and interest accretion
|
|
|
(299,326
|
)
|
|
Balance
at December 31, 2020
|
|
|
113,910
|
|
|
|
|
|
|
|
|
Current
portion of operating lease obligation
|
|
|
113,910
|
|
|
Noncurrent
portion of operating lease obligation
|
|
|
-
|
|
The
operating lease expense was $54,284 and $163,752, respectively for the three and nine months ended December 31,
2020, and was included in the general and administrative expenses.
The
following table represents the contractual undiscounted cash flows for lease obligations as at December 31, 2020.
|
|
|
$
|
|
|
Less
than one year
|
|
|
115,059
|
|
|
Beyond
one year
|
|
|
-
|
|
|
Total
undiscounted lease obligations
|
|
|
115,059
|
|
10.
CONTINGENCIES
There
are no unrecognized claims against the company that were assessed as significant, which were outstanding as at December
31, 2020 and, consequently, no additional provision for such has been recognized in the consolidated financial statements
during the three and nine months then ended.
11.
SUBSEQUENT EVENTS
The
Company’s management has evaluated subsequent events up to February 15, 2021, 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
January 1 to February 15, 2021, the Company entered into subscription agreements with accredited investors for the sale
to the investors of Notes in the aggregate principal amount of $4.58 million, in further closings of its 12% convertible
note offering to accredited investors.
In
January 2021, exchangeable shareholders holding 329,540 exchangeable shares exchanged these for an equivalent
number of common shares of the Company.
Also,
in January 2021, the Company issued 339,500 common shares as compensation for services provided by contractors,
in full satisfaction of its obligations of shares to be issued as recorded at December 31, 2020.
On
February 10, 2021, the Company issued 341,759 common shares to convertible noteholders on conversion of notes with a face value
of $289,000, together with accrued interest thereon.
On
February 11, 2021, the Company submitted its application for a 510(k) clearance from the FDA for its Biotres patch solution, which
will be a novel product in the field of Holter monitoring.
