UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

xQUARTERLY REPORT PURSUANT TO SECTIONQuarterly Report Pursuant to Section 13 ORor 15(d) OF THE SECURITIES EXCHANGE ACT OFof The Securities Exchange Act of 1934 for the Quarterly Period ended June 30, 2020

 

for the Quarterly Period ended December 31, 2019

orOr

 

¨TRANSITION REPORT PURSUANT TO SECTIONTransition Report Pursuant to Section 13 ORor 15(d) OF THE SECURITIES EXCHANGE ACT OFof The Securities Exchange Act of 1934 for the transition period

for the transition period from _____ to _____

 

Commission File Number: 000-54717

 

Bionik Laboratories Corp.

(Exact name of registrant as specified in its charter)

Delaware
Delaware27-1340346
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification No.)

483 Bay Street N105, Toronto, Ontario Canada M5G 2C9

(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including area code:(416) 640-7887 x 508

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class Trading Symbol(s) Name of Exchange on which registered
N/A N/A N/A

 

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx No¨

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yesx No¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer¨Accelerated filer¨
Non-accelerated filerxSmaller reporting companyx
  Emerging Growth Company¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to 13(a) of the Exchange Act.¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes¨ Nox

 

Indicate theThe number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date. As of February 13,August 12, 2020, 4,990,7415,009,151 shares of common stock, par value $0.001 per share were outstanding.

 

 

 

 

BIONIK LABORATORIES CORP.

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION 
Item 1. Interim Financial Statements 
Condensed Consolidated Interim Balance Sheets as at December 31, 2019June 30, 2020 (Unaudited) and March 31, 20192020 (Audited)3
Condensed Consolidated Interim Statements of Operations and Comprehensive Loss (Unaudited) for the three and nine month periods ended December 31, 2019June 30, 2020 and 2018 20194
Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity (Unaudited) for the ninethree month periods ended December 31,June 30, 2020 and 2019 and 20185
Condensed Consolidated Interim Statements of Cash Flows (Unaudited) for the ninethree month periods ended December 31,June 30, 2020 and 2019 and 20186
Notes to Condensed Consolidated Interim Financial Statements (Unaudited)(Unaudited)7
Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of OperationsOperations1716
Item 3. Quantitative and Qualitative Disclosures about Market Risk24
Item 4. Controls and Procedures24
PART II – OTHER INFORMATION2524
Item 1. Legal Proceedings2524
Item 1A. Risk Factors2524
Item 2. Unregistered Sales of Equity Securities andad Use of ProceedsProceeds2524
Item 3. Defaults Upon Senior Securities2524
Item 4. Mine Safety Disclosures2524
Item 5. Other Information2524
Item 6. Exhibits2625
SIGNATURES2726

 

 

 

Bionik Laboratories Corp.

Condensed Consolidated Interim Balance Sheets (unaudited)

(Amounts expressed in US Dollars)

 

 As at As at 
 As at
December 31,
 
2019
 As at
March 31,
2019
 
  June 30,
2020
 March 31,
2020
 
 $ $  $ $ 
   (Audited)    (Audited) 
Assets             
Current             
        
Cash and cash equivalents  1,893,517   446,779  2,403,037 2,269,747 
Accounts receivable, net of allowance for doubtful accounts of $167,500 (March 31, 2019 - $Nil)  298,129   1,523,193 
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)  1,729,834   1,355,032  1,723,353 1,632,555 
Inventories (Note 6)  1,435,421   405,682  944,990 1,059,462 
Due from related parties (Note 9(a))  19,394   18,585   18,657  17,840 
Total Current Assets  5,376,295   3,749,271  6,065,309 5,826,568 
Equipment (Note 7)  209,593   192,528  136,032 154,144 
Technology and other assets (Note 4)  4,219,779   4,427,722  1,426,420 1,449,924 
Goodwill  22,308,275   22,308,275   11,085,984  11,085,984 
Total Assets  32,113,942   30,677,796   18,713,745  18,516,620 
             
Liabilities and Shareholders' Equity     
Current             
Accounts Payable (Notes 9(b))  724,047   1,148,852  443,874 857,093 
Accrued liabilities (Notes 8 (and 9(b))  1,188,149   1,653,233 
Convertible Loans (Note 8(b))  72,217   - 
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  677,752   467,778   582,281  616,063 
Total Current Liabilities  2,662,165   3,269,863  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, 2019 – 1)      
Common Shares, par value $0.001; Authorized - 500,000,000 (March 31, 2019 – 500,000,000); Issued and outstanding 4,987,245 and 139,589 Exchangeable Shares (March 31, 2019 – 3,661,838 and 196,799 Exchangeable Shares)  5,126   3,858 
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  84,235,153   73,719,299  85,050,885 84,643,570 
Deficit  (54,830,651)  (46,357,373) (73,380,946) (71,373,870)
Accumulated other comprehensive income  42,149   42,149   42,149  42,149 
Total Shareholders' Equity  29,451,777   27,407,933   11,717,214  13,316,975 
Total Liabilities and Shareholders' Equity  32,113,942   30,677,796   18,713,745  18,516,620 
        
Commitments and Contingencies (Note 13)        
Subsequent Event (Note 14)        

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

  

The Condensed Consolidated Interim Financial Statements have been adjusted retroactively to reflect the 150 to 1 reverse stock split effected on October 29, 2018, as discussed in Note 2Commitments and Contingencies (Note 13)

3

Bionik Laboratories Corp.

Condensed Consolidated Interim Statements of Operations and Comprehensive (Loss)

For the three and nine month periods ended December 31, 2019 and 2018 (unaudited)

(Amounts expressed in U.S. Dollars)

  Three months
ended
December 31, 2019
  Nine months
ended
December 31, 2019
  Three months
ended
December 31, 2018
  Nine months
ended
December 31, 2018
 
   $   $   $   $ 
Sales  158,005   1,230,074   930,257   1,978,675 
Cost of Sales  143,595   562,887   450,304   1,087,540 
Gross Margin  14,410   667,187   479,953   891,135 
                 
Operating expenses                
Sales and marketing  480,834   1,649,340   515,439   1,485,423 
Research and development  1,021,418   2,724,000   779,283   2,135,075 
General and administrative  1,087,431   3,129,063   1,022,024   2,932,980 
Share-based compensation expense (Note 11)  447,219   1,373,195   191,634   1,226,374 
Amortization (Note 4)  69,314   207,943   69,314   209,682 
Depreciation (Note 7)  27,636   78,665   15,969   50,190 
Total operating expenses  3,133,852   9,162,206   2,593,663   8,039,724 
                 
Other (income) expenses                
Accretion expense  -   -   316,642   2,421,060 
Fair Value Adjustment  -   -   -   (337,923)
(Gain) on mark to market re-evaluation      -   -   (2,048,697)
Other income  (107,730)  (108,016)  -   - 
Other expense  11,798   197,119   1,520   61,652 
Foreign exchange  (53,561)  (110,844)  (47,709)  (116,715)
Total other expenses (income)  (149,493)  (21,741)  270,453   (20,623)
Net (loss) and comprehensive (loss) for the period  (2,969,949)  (8,473,278)  (2,384,163)  (7,127,966)
                 
Loss per share – basic and diluted  (0.58)  (1.99)  (0.91)  (3.14)
Weighted average number of shares outstanding – basic and diluted  5,126,834   4,264,723   2,611,538   2,267,906 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

The Condensed Consolidated Interim Financial Statements have been adjusted retroactively to reflect the 150 to 1 reverse stock split effected on October 29, 2018, as discussed in Note 2

4

Bionik Laboratories Corp.

Condensed Consolidated Interim Statements of Changes in Shareholders' Equity

For the nine month periods ended December 31, 2019 and 2018 (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, 2018  1   -   1,664,002   1,664   56,195,541   (35,776,340)  42,149   20,463,014 
Share compensation expense  -   -   -   -   1,226,374   -   -   1,226,374 
Conversion of European Promissory notes - 3rd tranche (remainder)  -   -   263,639   264   2,470,358   -   -   2,470,622 
Conversion of European Promissory notes - July 20, 2018  -   -   683,395   683   4,732,170   -   -   4,732,853 
Stock option and warrant reclassification  -   -   -   -   1,173,534   -   -   1,173,534 
Fair value of Anti-dilution feature  -   -   -   -   1,766,495   -   -   1,766,495 
Loss on warrant down round feature                  6,284   (6,284)      - 
Net loss for the year  -   -   -   -   -   (7,127,966)  -   (7,127,966)
Adjustment due to 1:150 share consolidation round-up  -       502   -   -   -   -   - 
Balance, December 31, 2018  1   -   2,611,538   2,611   67,570,756   (42,910,590)  42,149   24,704,926 
Share compensation expense  -   -   -   -   121,025           121,025 
Conversion of European Promissory notes - March 28, 2019  -   -   1,247,099   1,247   6,009,370   -   -   6,010,617 
Loss on warrant down round feature  -   -   -   -   18,148   (18,148)  -   - 
Net loss for the year  -   -   -   -   -   (3,428,635)  -   (3,428,635)
Balance, March 31, 2019  1   -   3,858,637   3,858   73,719,299   (46,357,373)  42,149   27,407,933 
Share compensation expense  -   -   -   -   1,373,195   -   -   1,373,195 
Conversion of Promissory Notes  -   -   1,268,191   1,268   9,142,659   -   -   9,143,927 
Net loss for the year  -   -   -   -   -   (8,473,278)  -   (8,473,278)
Adjustment due to 1:150 share consolidation round-up  -   -   6   -   -   -   -   - 
Balance, December 31, 2019  1   -   5,126,834   5,126   84,235,153   (54,830,651)  42,149   29,451,777 

Subsequent Events (Note 14)

 

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

 

The Condensed Consolidated Interim Financial Statements have been adjusted retroactively to reflect the 150 to 1 reverse stock split effected on October 29, 2018, as discussed in Note 2

 53 

 

 

Bionik Laboratories Corp.

Condensed Consolidated Interim Statements of Cash FlowsOperations and Comprehensive Loss

For the nine monthsthree month periods ended December 31,June 30, 2020 and 2019 and 2018 (unaudited)

(Amounts(Amounts expressed in U.S. Dollars)

 

  Nine months
ended
December 31, 2019
   Nine months
ended
December 31, 2018
 
  $  $ 

Operating activities

      
Net loss for the period  (8,473,278)  (7,127,966)
Adjustment for items not affecting cash:        
Depreciation  78,665   50,190 
Amortization  207,943   209,682 
Interest expense  146,144   129,933 
Share based compensation expense  1,373,195   1,226,374 
Accretion expense  -   2,421,060 
Fair value adjustment  -   (337,923)
Gain on mark to market re-evaluation  -   (2,048,697)
Allowance for doubtful accounts  167,500   6,001 
   (6,499,831)  (5,471,346)
Changes in non-cash working capital items:        
Accounts receivable  1,057,564   (1,314,380)
Prepaid expenses and other receivables  (374,802)  (1,398,301)
Due from related parties  (809)  908 
Inventories  (1,029,739)  (98,163)
Accounts payable  (424,805)  669,779 
Accrued liabilities  (465,084)  (429,935)
Customer advances  -   (800)
Deferred revenue  209,974   162,473 
Net cash (used in) operating activities  (7,527,532)  (7,879,765)
Investing activities        
Acquisition of equipment  (95,730)  (26,071)
Net cash (used in) investing activities  (95,730)  (26,071)
Financing activities        
Proceeds from convertible loans  9,070,000   7,826,633 
Repayment of demand notes principal  -   (50,000)
Repayment of demand notes interest  -   (2,975)
Proceeds from short term loan  500,000   - 
Repayment of short term loan  (500,000)  - 
Net cash provided by financing activities  9,070,000   7,773,658 
Net increase (decrease) in cash and cash equivalents for the period  1,446,738   (132,178)
Cash and cash equivalents, beginning of period  446,779   507,311 
Cash and cash equivalents, end of period  1,893,517   375,133 
  

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 
         
Operating expenses        
Sales and marketing  223,185   583,732 
Research and development  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.

 

The

4

Bionik Laboratories Corp.

Condensed Consolidated Interim Financial Statements have been adjusted retroactively to reflectof Changes in Shareholders' Equity

For the 150 to 1 reverse stock split effected on October 29, 2018, as discussedthree month periods ended June 30, 2020 and June 30, 2019 (unaudited)

(Amounts expressed in Note 2U.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.

5

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.

 

 6 

 

BIONIK LABORATORIES CORP.

Bionik Laboratories Corp.

Notes to the Financial StatementsNOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the three and nine monthsmonth periods ended December 31,June 30, 2020 and 2019

(Amounts expressed in US dollarsU.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”)(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”)(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 the authorizationan increase in its authorized shares of a capital share increasecommon stock to 250,000,000 from 150,000,000, and on June 12, 2018, the Company approved the authorizationan increase in its authorized shares of a capital share increasecommon 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 December 31, 2019,June 30, 2020, the Company had a working capital deficit of $2,714,130$931,222 (March 31, 20192020 - $479,408)working capital of $626,923) and an accumulated deficit of $(54,830,651)$73,380,946 (March 31, 20192020 - $(46,357,373))$71,373,870) and the Company incurred a net loss and comprehensive loss of $(8,473,278)$(2,007,076) for the ninethree month period ended December 31,June 30, 2020 (June 30, 2019 (December 31, 2018 - $(7,127,966))$(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.

7

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 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.

 

All adjustments, consisting only of normal recurring items, considered necessary for fair presentation have been included in these condensed interim consolidated financial statements.

7

Bionik Laboratories Corp.

Notes to the Financial Statements

For the three and nine months ended December 31, 2019

Amounts expressed in US dollars (unaudited)

2.BASIS OF PRESENTATION

 

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.

 

On October 29, 2018,The preparation of these consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the Company effected a reverse stock splitreported amounts of assets and thereafter Bionik’s common stock began trading onliabilities at the OTCQB market on a one-for-one hundred and fifty (1:150) split-adjusted basis. All ownersdate of record on October 29, 2018 received one issued and outstanding share of Bionik common stock or exchangeable share in exchange for one hundred and fifty issued and outstanding shares of Bionik common stock or Bionik exchangeable stock. No fractional shares were issued in connection with the reverse stock split. All fractional shares created by the one-for-one hundred and fifty reverse split were rounded up to the next whole share. The reverse stock split had no impact on the par value per share of Bionik common stock, which remains at $0.001. All current and prior period amounts related to shares, share prices and earnings per share, presented in the Company’s consolidated financial statements, and the accompanying Notes containedreported 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 Quarterly Report on Form 10–Q have been restated to give retrospective presentation for the reverse stock split.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, 2019.2020. 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, 20192020 audited financial statements are described below.

 

Newly Adopted and Recently Issued Accounting Pronouncements

Newly Adopted

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). The updated standard will replace most existing revenue recognition guidance in U.S. GAAP. The new standard introduces a five-step process to be followed in determining the amount and timing of revenue recognition. It also provides guidance on accounting for costs incurred to obtain or fulfill contracts with customers and establishes disclosure requirements which are more extensive than those required under existing U.S. GAAP. The FASB has issued numerous amendments to ASU 2014-09 from August 2015 through January 2018, which provide supplemental and clarifying guidance, as well as amend the effective date of the new standard. ASU 2014-09, as amended, is effective for the Company in the interim period ended December 31, 2019. The standard permits the use of either the retrospective or modified retrospective (cumulative effect) transition method. The Company adopted the new standard using the modified retrospective transition method. The Company has adopted ASU-2014-1 for the fiscal year ended March 31, 2019 and it did not have a material effect on the consolidated balance sheet and the consolidated results of operations.

In November 2015, the FASB issued ASU No. 2015-17, “Balance Sheet Classification of Deferred Taxes,” which require that deferred tax liabilities and assets be classified on our Consolidated Balance Sheets as noncurrent based on an analysis of each taxpaying component within a jurisdiction. ASU No. 2015-17 is effective for the fiscal year commencing after December 15, 2017. The Company has adopted ASU-2015-17 for the fiscal year ended March 31, 2019 and it did not have a material effect on the consolidated balance sheet or the consolidated results of operations.

In January 2016, the FASB issued ASU No. 2016-01 Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The updates make several modifications to Subtopic 825-10, including the elimination of the available-for-sale classification of equity investments, and it requires equity investments with readily determinable fair values to be measured at fair value with changes in fair value recognized in operations. The update is effective for fiscal years beginning after December 2017. The Company has adopted ASU 2016-01 for the year ended March 31, 2019 and it did not have a material effect on the consolidated balance sheet and the consolidated results of operations.

In February 2016, the FASB issued ASU 2016-02, Leases. This update requires organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The new guidance will also require additional disclosure about the amount, timing and uncertainty of cash flows arising from leases. The provisions of this update are effective for annual and interim periods beginning after December 15, 2018. The Company has adopted ASU 2016-02 and it did not have a material effect on the consolidated balance sheet and consolidated statement of operations.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments”. This ASU provides eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for the fiscal year commencing after December 15, 2017. The Company has adopted ASU 2016-15 for the fiscal year ended March 31, 2019 and it did not have material effect on the consolidated balance sheet or on the consolidated statement of cash flows.

 8 

 

Bionik Laboratories Corp.BIONIK LABORATORIES CORP.

Notes to the Financial StatementsNOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the three and nine monthsmonth periods ended December 31,June 30, 2020 and 2019

(Amounts expressed in US dollarsU.S. Dollars) (unaudited)

 

3.SIGNIFICANT ACCOUNTING POLICIES - Continued

 

In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of ModificationNewly Adopted and Recently Issued Accounting (ASU 2017-09). The FASB issued the update to provide clarity and reduce the cost and complexity when applying the guidance in Topic 718. The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The Company adopted ASU 2017-09 during the year ended March 31, 2019 and it did not have a material effect on the consolidated balance sheet and the consolidated results of operations.Pronouncements

 

Recently IssuedNewly 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 acquittedacquired 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.

 

9

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 is still assessing the impact that the adoption ofhas adopted ASU 2017-04 willand 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 stillpermitted, 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 2016-132020-06 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 $162,449$81,225 at December 31, 2019June 30, 2020 (March 31, 20192020 - $143,500)$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 $26,911$Nil of expenses related to warranty expensesexpenses. 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 nine monththree-month period ended December 31,June 30, 2020 (June 30, 2019 (December 31, 2018 – $35,618)- $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 ninethree months ended December 31, 2019,June 30, 2020, and the year ended March 31, 2019:2020:

 

 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 Amortization
period (years)
 Value
Acquired
 
 Amortization
March 31,
2019
 
 Value at
March 31,
2019  
 Amortization
December 31,
2019 
 Value at
December 31,
2019
     $  $  $  $  $  $ 
   $ $ $ $ $ 
Patents and exclusive License Agreement  9.74   1,306,031   134,090   911,440   100,566   810,874   9.74   1,306,031   307,388   134,090   469,962   20,277   449,685 
Trademark  Indefinite   2,505,907   -   2,505,907   -   2,505,907   Indefinite   2,505,907   1,605,907   -   900,000   -   900,000 
Customer relationships  10   1,431,680   143,168   1,010,375   107,377   902,998   10   1,431,680   787,245   143,168   79,962   3,227   76,735 
Non compete agreement  2   61,366   1,739   -   -   -   2   61,366   -   -   -   -   - 
Assembled workforce  1   275,720   -   -   -   -   1   275,720   -   -   -   -   - 
      5,580,704   278,997   4,427,722   207,943   4,219,779       5,580,704   2,700,540   277,258   1,449,924   23,504   1,426,420 

 

Amortization expenseThe cumulative amortization for the technology and other assets was $207,943 and $209,682 for the nine months ended December$1,453,744 at June 30, 2020 (March 31, 2019 and 2018, respectively. Amortization expensed for the technology and other assets was $69,314 and $69,314 for the three months ended December 31, 2019 and 2018, respectively.2020- $1,430,240).

 

9

Bionik Laboratories Corp.

Notes to the Financial Statements

For the three and nine months ended December 31, 2019

Amounts expressed in US dollars (unaudited)

5.PREPAID EXPENSES AND OTHER RECEIVABLES

 

 December 31, 2019 March 31, 2019  

June 30,

2020

 

March 31

2020

 
 $ $  $  $ 
Prepaid expenses and other receivables  72,351   92,170   34,272   78,816 
Prepaid inventory a)  1,506,197   1,144,392 
Prepaid inventory  1,499,042   1,450,024 
Prepaid insurance  118,243   66,320   176,928   57,226 
Sales taxes receivable b)  33,043   52,150 
Sales taxes receivable (i)  13,111   46,489 
  1,729,834   1,355,032   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.

 

10

a) The Company is committed to pay an additional $753,000 for completed robotsBIONIK LABORATORIES CORP.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the three month periods ended June 30, 2020 and 2019

(Amounts expressed in the next three to six months.

b) Sales tax receivable represents net harmonized sales taxes (HST) input tax credits receivable from the Government of Canada.U.S. Dollars) (unaudited)

 

6.6.INVENTORIES

 

  December 31, 2019  March 31, 2019 
Finished Goods $1,435,421  $405,682 

  

June 30,

2020

  

March 31

2020

 
Finished Goods  944,990   1,059,462 

 

During the three and nine monththree-month period ended December 31, 2019,June 30, 2020, the Company expensed $118,844 and $495,483$143,810 in inventory as cost of sales (December 31, 2018goods sold (June 30, 2019 - $392,190 and $986,362).$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.

 

7.EQUIPMENT

 

Equipment consisted of the following as at December 31, 2019June 30, 2020 and March 31, 2019:2020:

 

 December 31, 2019 March 31, 2019 
   Accumulated     Accumulated    June 30, 2020 March 31, 2020 
 Cost Depreciation Net Cost Depreciation Net  Cost 

Accumulated

Depreciation

 Net Cost 

Accumulated

Depreciation

 Net 
 $ $ $ $ $ $  $ $ $ $ $ $ 
Computers and electronics  301,506   259,314   42,192   286,855   243,346   43,509  303,337 269,174 34,163 303,337 264,520 38,817 
Furniture and fixtures  36,795   30,651   6,144   36,795   29,648   7,147  36,795 31,240 5,555 36,795 30,953 5,842 
Demonstration equipment  352,694   204,494   148,200   271,615   147,257   124,358  135,543 49,395 86,148 135,543 37,662 97,881 
Manufacturing equipment  88,742   86,582   2,160   88,742   86,230   2,512  88,742 86,789 1,953 88,742 86,688 2,054 
Tools and parts  11,422   7,431   3,991   11,422   6,779   4,643  11,422 7,813 3,609 11,422 7,627 3,795 
Assets under capital lease  23,019   16,113   6,906   23,019   12,660   10,359   23,019  18,415  4,604  23,019  17,264  5,755 
  814,178   604,585   209,593   718,448   525,920   192,528   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-and nine monththree-month period ended December 31,June 30, 2020 was $18,112 (June 30, 2019 was $27,636 and $78,665 (December 31, 2018 - $15,969 and $50,190, respectively)$23,970).

 

10

Bionik Laboratories Corp.

Notes to the Financial Statements

For the three and nine months ended December 31, 2019

Amounts expressed in US dollars (unaudited)

8.NOTES PAYABLE

 

(a)Convertible Loans Payable

 

During the nine monthsquarter ended December 31, 2019,June 30, 2020, the Company received loans from new and existing investors totaling $9,000,000$1,302,575, in addition to $70,000 previously loaned to the Company, pursuant to an upa $3,000,000 (later increased to $9,000,000$7,000,000) convertible note offering. This included the conversion and satisfaction of an existing $500,000 term loan at June 30, 2019. The convertible notes borebear interest at a fixed rate ofat 1% per month until September 30, 2019 and $6,070,000 of thesemonth. The convertible notes were convertedloans will be convertible into common sharesequity of the Company upon the following events on September 30, 2019 at a conversion price of $6.80 per share and $2,930,000 of these convertible notes were converted into common shares of the Company on September 30, 2019 at a conversion price of $8.265. The terms of the two tranches were identical outside of the conversion price.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”).

The interest accrued on these convertible loans for the three and nine months ended December 31, 2019 was $Nil and $143,927 respectively and the accrued interest was converted into shares at the respective conversion prices.

(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 earliest 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.

 

March 31, 2019  - 
Convertible loans issued $9,000,000 
Interest  143,927 
Convertible loans and interest converted in 1,268,191 shares  (9,143,927)
December 31, 2019 $- 

(b)Convertible Loans Payable

During the nine months ended December 31, 2019, the Company received $70,000 from an existing investor pursuant to a $3,000,000 (or up to $7,000,000 at the discretion of the Company) convertible note offering. The convertible notes bear interest at a fixed rate at 1% per month and will be payable, along with the principal amount on the earlier of (the “Maturity Date”); (a) March 20, 2020 and (b) the consummation of the offering provided that the Company raises in one or more tranches aggregate gross proceeds of no less than $3,000,000. 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.

The interest accrued on these convertible loans for the three and nine monthsperiod ended DecemberJune 30, 2020 was $15,588 (March 31, 2019 was $2,100 and $2,217.2020- $4,317).

 

 11 

 

Bionik Laboratories Corp.

Notes to the Financial StatementsBIONIK LABORATORIES CORP.

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the three and nine monthsmonth periods ended December 31,June 30, 2020 and 2019

(Amounts expressed in US dollarsU.S. Dollars) (unaudited)

 

8.NOTES PAYABLE – Continued

(b)Short term loan

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).

(c)PPP Loan

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 December 31, 2019,June 30, 2020 there was an outstanding loan to the Chief Technology Officer (“CTO”) of the Company of $19,394$18,657 (March 31, 2019 – $18,585)2020 - $17,840). The loan hadhas an interestInterest rate of 1% until June 30, 2018 and 2% after this date based on the Canada Revenue Agency’s prescribed rate for such advances and is denominated in Canadian dollars. During the nine month period ended December 31, 2019,June 30, 2020, the Company accrued interest receivable in the amount of $273(March$90 (March 31, 20192020$353)$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 December 31, 2019, $1,957June 30, 2020, $193,285 (March 31, 2019 – $229,473)2020 - $30,866) was owing to the CEO of the Company; $1,514$57,246 (March 31, 20192020$14,851)$9,464) was owing to the Chief Technology Officer; $1,670$70,963 (March 31, 2019 – $33,387)2020 - $1,827) was owing to the Chief Financial Officer (“CFO”), $Nil$32,472 (March 31, 2019 – $28,025)2020 - $Nil) was owing to the current and former Chief Commercial Officer (“CCO”), all related to bonuses and business expenses. All bonuses accrued at March 31, 2019 have been paid.

 

10.SHARE CAPITAL

 

 December 31, 2019  March 31, 2019  June 30, 2020 March 31, 2020 
 Number of shares  $  Number of shares  $  Number of shares  $  Number of shares  $ 
Exchangeable Shares                         
Balance beginning of period  196,799   197   295,146   295   117,683   118   196,799   197 
Converted into common shares (a)  (57,210)  (57)  (98,347)  (98)  -   -   (79,116)  (79)
Balance at end of period  139,589   140   196,799   197   117,683   118   117,683   118 
Common Shares                                
Balance at beginning of the period  3,661,838   3,661   1,368,856   1,369   5,009,151   5,008   3,661,838   3,661 
Shares issued to exchangeable shareholders (a)  57,210   57   98,347   98   -   -   79,116   79 
Shares issued on conversion of loans (b)  1,268,191   1,268   2,194,133   2,194   -   -   1,268,191   1,268 
Share consolidation rounding adjustment (c)  6   -   502   -   -   -   6   - 
Balance at end of the period  4,987,245   4,986   3,661,838   3,661   5,009,151   5,008   5,009,151   5,008 
TOTAL SHARES  5,126,834   5,126   3,858,637   3,858   5,126,834   5,126   5,126,834   5,126 

 

(a)During the nine monthsquarter ended December 31, 2019 57,210June 30, 2020, Nil exchangeable shares were exchanged for common shares on a 1 for 1 basis in accordance with their terms.terms (March 31, 2019202098,34779,116 shares).

12

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)

 

(b)On September 30, 2019 $9,143,927 of promissory notes and interest were converted into 1,268,191 common shares. These shareholders have price protection until June 10, 2022. During the year ended March 31, 2019, after the increase of the number of authorized shares to 500,000,000, the company issued the outstanding 263,639 common shares related to the March 31, 2018 promissory note conversion. In addition, there was a $2,048,697 gain recorded in the year connected to the difference of the market value of the shares, outstanding options and warrants at March 31, 2018 and their value at June 12, 2018, the time of the authorized share increase and share issuance. On July 20, 2018 the Company converted $4,708,306 of notes payable and interest into 683,395 common shares and on March 28, 2019 the Company converted $4,848,117 of notes payable and interest into 1,247,099 common shares.10.SHARE CAPITAL – Continued

(c)On October 29, 2018, the Company completed a one-for-one hundred and fifty (1:150) reverse stock consolidation that has been reflected in all shares and per share amounts, warrants and options.

 

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.

12

Bionik Laboratories Corp.

Notes to the Financial Statements

For the three and nine months ended December 31, 2019

Amounts expressed in US dollars (unaudited)

11.STOCK OPTIONS

 

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.

Options or other securities may be granted in respect of authorized and unissued shares, provided that the aggregate number of shares reserved for issuance upon the exercise of all options or other securities granted under the Plan shall not exceed 15% of the shares of common stock and Exchangeable Shares issued and outstanding (determined as of January 1 of each year). Optioned shares in respect of which options are not exercised shall be available for subsequent options.

On April 26, 2016, the Company issued 1,667 options to an employee with an exercise price of $150.00 per share that will vest over three years at the anniversary date. The grant fair value was $213,750. During the three and nine months ended December 31, 2019 $Nil and $3,431 (December 31, 2018 – $15,833 and $51,458) was recognized as stock compensation expense due to the employee leaving the Company.

On February 6, 2017, the Company issued 2,667 options to an employee with an exercise price of $105.00 per share that will vest over three years at the anniversary date. The grant fair value was $245,200. During the three and nine months ended December 31, 2019 $20,433 and $61,299 (December 31, 2018 – $20,433 and $61,300) of stock compensation expense was recognized.

 

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 and $248,124 is the current expense for the three and nine monthsquarter ended December 31,June 30, 2020 (June 30, 2019 (December 31, 2018 – $57,259 and $286,297)- $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 1,423 and 2,700266 for the three and nine monththree-month period ended December 31, 2019.June 30, 2020. The grant fair value was $491,036 and $26,357 and $81,216$28,554 is the current stock compensation expense for the three and nine monthsquarter ended December 31,June 30, 2020 (June 30, 2019 (December 31, 2018 – $34,643 and $111,611)- $28,554).

On April 30, 2018, the Company granted to an executive officer, 40,000 options with an exercise price of $9.74 that vest immediately with a 10-year expiry. These options were valued using the Black Scholes model and the following inputs were used: expected life 10 years, expected volatility 114% and a risk-free rate of 1.59%. As these options vested immediately as of the grant date and $363,714 of stock compensation expense was recorded for the year ended March 31, 2019.

On June 11, 2018, the Company granted to an executive officer, 5,000 options with an exercise price of $6.93 per share that vest over three years from the anniversary of the grant and 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 $30,341 and $Nil and $1,686 of stock compensation was recognized for three and nine months ended December 31, 2019 (December 31, 2018 $2,528 and $3,090). This executive left the Company and all 5,000 options were cancelled, as they had not vested.

 

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 181 year and 6 months, with one thirdof which one-third immediately vestingvest and one third vesting inone-third vest over each of the followingnext two 6-month periods andperiods. 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 1,546 options were cancelled and $78,114 and $339,109$50,755 of stock compensation was recognized for three and nine monthsthe quarter ended December 31, 2019.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, 9,299$1,525,525. 11,461 options were cancelled for the year ended March 31, 2020 and $263,8881,286 were canceled and $636,812 of stock compensation of $269,579 was recognized for three and nine monthsin the quarter ended December 31, 2019.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 and $1,518 of stock compensation expense was recognized forin the three and nine monthsquarter ended December 31, 2019June 30, 2020.

 

During the three and nine monthsquarter ended December 31, 2019,June 30, 2020, the Company recorded $447,219 and $1,373,195$407,315 in share-based compensation related to the vesting of stock options (December 31, 2018 – $191,634 and $1,226,374)(June 30, 2019 - $287,757).

 

 13 

 

Bionik Laboratories Corp.BIONIK LABORATORIES CORP.

Notes to the Financial StatementsNOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the three and nine monthsmonth periods ended December 31,June 30, 2020 and 2019

(Amounts expressed in US dollarsU.S. Dollars) (unaudited)

 

11.STOCK OPTIONS – Continued

 

The following is a summary of stock options outstanding and exercisable as of December 31, 2019:June 30, 2020:

 

Exercise Price ($) Number of Options Expiry Date Exercisable Options Number of Options Expiry Date Exercisable Options 
34.500 630 20-Jun-21 630 630 20-Jun-21 630  
34.500 13,212 01-Jul-21 13,212 13,212 01-Jul-21 13,212 
34.500 944 17-Feb-22 944 944 17-Feb-22 944 
183.000 2,667 24-Nov-22 2,667 2,667 24-Nov-22 2,667 
150.000 11,400 14-Dec-22 11,400 11,400 14-Dec-22 11,400 
142.500 359 28-Mar-23 359 359 28-Mar-23 359 
157.500 1,387 28-Mar-23 1,387 1,387 28-Mar-23 1,387 
105.000 2,667 06-Feb-24 1,778 2,667 06-Feb-24 2,667 
102.000 1,667 13-Feb-24 1,667 1,667 13-Feb-24 1,667 
142.500 106 03-Mar-24 106 106 03-Mar-24 106 
157.500 408 03-Mar-24 408 408 03-Mar-24 408 
142.500 43 14-Mar-24 43 43 14-Mar-24 43 
157.500 164 14-Mar-24 164 164 14-Mar-24 164 
142.500 327 30-Sep-24 327 327 30-Sep-24 327 
157.500 1,264 30-Sep-24 1,264 1,264 30-Sep-24 1,264 
24.150 81,436 01-Sep-27 40,722 81,436 01-Sep-27 40,722 
23.250 14,400 24-Jan-25 5,533 13,064 24-Jan-25 9,132 
9.735 40,000 19-Apr-28 40,000 40,000 19-Apr-28 40,000 
3.16 168,336 31-May-26 113,257 168,283 31-May-26 168,283 
3.595 475,373 26-Jul-26 58,639 473,151 26-July-26 56,417 
3.20 5,000 03-Sept-26 -  5,000 03-Sep-26  - 
 821,790  294,507  818,179  351,798 

  

The weighted-average remaining contractual term of the outstanding options is 6.536.02 years (March 31, 201920207.206.28 years) and for the options that are exercisable the weighted average is 6.385.84 years (March 31, 201920206.806.12 years).

12.WARRANTS

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.

 

 14 

 

BIONIK LABORATORIES CORP.

Bionik Laboratories Corp. NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Notes to the Financial Statements 

For the three month periods ended June 30, 2020 and nine months ended December 31, 2019

(Amounts expressed in US dollarsU.S. Dollars) (unaudited)

 

12.WARRANTS – Continued

   

The following is a continuity schedule of the Company’s common share purchase warrants:

  Number of
Warrants
  Weighted
Average Exercise
Price ($)
 
Outstanding and exercisable, March 31, 2018 and December 31, 2018  365,974   53.19 
Issued in connection with anti-dilution provision connected warrant transaction  67,952   55.71 
Issued in connection with anti-dilution provision connected warrant transaction  6,305   34.50 
Issued in connection with anti-dilution provision connected warrant transaction  52,590   38.91 
Expired  (204,304)  (51.85)
Outstanding and exercisable, March 31, 2019  288,517   40.27 
Expired  (163,483)  (38.91)
Outstanding and exercisable, December 31, 2019  125,034   20.07 

During the nine months ended December 31, 2019, 163,483 warrants expired in accordance with their terms (December 31, 2018 – Nil)

Common share purchase warrants

 

The following is a summary of common share purchase warrants outstanding as of December 31, 2019.June 30, 2020.

 

Exercise
Price ($)
 Number of
Warrants
  Expiry Date 

Number of

Warrants

  Expiry Date 
90.00  15,658  March 31, 2023  15,658   March 31, 2023 
37.50  2,667  June 27, 2020
9.375  64,025  August 14, 2022  64,025   August 14, 2022 
9.375  42,684  March 31, 2022  42,684   March 31, 2022 
  125,034    122,367     

 

The weighted-average remaining contractual term of the outstanding warrants was 2.53 years (March 31, 2019 – 1.51 years).

15

Bionik Laboratories Corp. 

Notes to the Financial Statements

For the three and nine months ended December 31, 2019

Amounts expressed in US dollars (unaudited)2.07.

 

13. COMMITMENTS AND CONTINGENCIES

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 current CTOCOO 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 current CTO collectively,COO 2,134 common shares. As at December 31, 2019June 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”), inpursuant to which, among other things, the Company willwas to have a 25% interest and the JV Partner 75%. The China JV was formally established on receiving a business license on May 22, 2018. Under the terms of the JV Contract, the JV Partner is required to contribute $290,000 within 30 days of the date of establishment, $435,000 12 months later and $725,000, 60 months after the date of establishment.75% interest. The Company is required to license certain intellectual property to the China JV. The Company is applyingapplied the equity method of accounting to the joint venture. As of December 31, 2019, the Company has provided certain technical information to the Chinese JV in order to obtain Chinese regulatory approvals. The Company is considering next steps with the Chinese JV due to its failure to pay $167,500 under the terms of the invoice. The Chinese JV is facing difficulties to import robots into China, under current circumstances.

 

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,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.

 

(d)14.In connection with a renegotiated contract entered into with a South Korean distributor, the Company must provide three robots to the distributor at no cost.SUBSEQUENT EVENTS

 

14. SUBSEQUENT EVENT

Subsequent of December 31, 2019, 3,496 common shares were issued in exchange for exchangeable shares on a 1 for 1 basis.

(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).

 

 1615 

 

 

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 a number ofseveral 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;
·projected operating or financial results, including anticipated cash flows used in operations.

 

expectations regarding capital expenditures; and
·expectations regarding capital expenditures; and

 

our beliefs and assumptions relating to our liquidity position, including our ability to obtain additional financing.
·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;
·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 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.
·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, 20192020 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.

 

 1716 

 

 

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 patientpatients’ 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.

17

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 may developcommenced developing a next generation/generation home version of the InMotion® upper-body rehabilitation technology, as well asand 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 launchcontinue development of these new products into the marketas 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 developundertake these products.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® Home”“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.

 

18

We believe recent payment changes in the USU.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. It iswell, resulting in IRFsuch providers being publicly ranked, on Medicare website, 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 Company is pleased that 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 maycollaborated 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 futureplatform focus on facility and organization measurement dashboards to support effective decision making for clinicians and for hospital management. Through further augment our product portfolio through technology acquisition opportunities should they comecustomization with each hospital system, patients progress during the therapy sessions and patient’s evaluation will be made available and if we are sufficiently capitalized to undertake these investments.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.

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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. Kindred entered into an initial purchase order for nine InMotion® ARM Interactive Therapy System that shipped before December 31, 2018, with further robots in the year ended March 31, 2019. 21 InMotion® robots were sold priorin total to the period ended DecemberKindred by March 31, 2019.

On January 23, 2019, we announced the commercial launch of our newest generation InMotion® ARM/HAND robotic system for clinical rehabilitation of stroke survivors and those with mobility impairments due to neurological conditions. The improved new generation InMotion® ARM/HAND was developed according to the same principals of motor learning and neuro plasticity that were incorporated into the original InMotion® ARM robotic system and utilizes artificial intelligence and data analysis to provide individualized therapy and reports that empower patients.

It includes the following new features:

Enhanced hand-rehabilitation technology: The updated hand robot provides therapy focused on hand opening and grasping for patients ready to retrain reach and grasp functional tasks.

InMotion® EVAL: The InMotion® ARM/HAND offers the ability to assess hand movements in a precise and objective manner, allowing the clinician to better measure and quantify a patient’s progress and response to therapy.

Improved, comprehensive reporting: Optimized report formats provide improved documentation of patient outcomes, improved ease of use and enhanced interpretation of evaluation results, allowing clearer indications of progress over their complete rehabilitation journey, all on one screen.

We are collaborating with Intelliware Development, a leading custom software solutions company based in Toronto to customize and deploy a new software platform, InMotion Connect™

InMotion Connect™is designed to target the critical need to link patient centric rehabilitation results to patient management portals. InMotion Connectreadily provides 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 systems, 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.

We have worked with industry leaders in manufacturing and design and have also expanded our development team through partnerships with researchers and academia.

In May 17, 2017, we entered into a Co-operative Joint Venture Contract with Ginger Capital Investment Holding Ltd., pursuant to which the Company has a 25% interest and Ginger Capital has a 75% interest. As of the date of this 10-Q, Ginger Capital is obligated to contribute $725,000 to the joint venture and is required to contribute an additional $725,000 by May 22, 2023. To date, the Chinese partners of the JV have contributed $1,100,000 to the JV. Three InMotion® robots have been delivered from us to the joint venture, which were used for product demonstration and for quality assessment by Chinese authorities. During the nine months ended December 31, 2019, due to regulatory restrictions only 3 new robots were shipped by Bionik to the Chinese JV according to contract terms. The Company is considering next steps with the Chinese JV due to its failure to pay $167,500 under the terms of the invoice. The Chinese JV is facing difficulties to import robots into China, under current circumstances.

On June 20, 2017, we entered into a joint development and manufacturing agreement with Wistron Medical Tech Holding Company of Taiwan to jointly develop a lower body assistive robotic product based on the ARKE technology for the consumer home market. As the lower body assistive robotic device is on an engineering hold due to prioritizing the development of the InMotion® Next generation platform/Home robotic device, no work has been done with Wistron recently.

 

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, for the production ofto 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 45 U.S. patents and 21 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. One newTwo provisional patent haspatents have recently been filed, pertaining to BIONIK’s InMotion®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 evolves or 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.

 

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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 Connect™Home™, InMotion Pulse™, and InMotion Insights™ are pending in both jurisdictions. These trademarks are to be used for the robots and software that Bionik develops and sells related to this product line.

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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® ArmARM in December 2017 and then the InMotion® Arm/HandARM/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 112 robots in the ninethree months ended December 31, 2019. On January 13, 2020, the Company received a purchase order for 6 InMotion® Arm/Hand robotic devices.June 30, 2020.

 

We had $158,005 and $1,230,074$257,908 of revenue for the three and nine monthsfirst quarter ended December 31, 2019 (December 31, 2018 – $930,257 and $1,978,675).

History; Recent Developments

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.June 30, 2020 compared 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., which we refer to in this Form 10-Q as Bionik Canada, 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 of its owned and licensed products both commercialized and in development.

We effected a one-for-one hundred fifty reverse stock split on October 29, 2018. As a result of the reverse stock split, each one hundred fifty shares of our common stock automatically combined into and became one share of our common stock. Accordingly, as of October 29, 2018, there were 2,337,964 shares of our common stock issued and outstanding. Any fractional shares which would otherwise be due as a result of the reverse stock split were rounded up to the nearest whole share. The reverse stock split automatically and proportionately adjusted, based on the one-for-one hundred fifty reverse stock split ratio, all issued and outstanding shares of our common stock and exchangeable shares, as well as common stock underlying stock options, warrants and other derivative securities outstanding at the time of the effectiveness of the reverse stock split. The exercise price on outstanding equity based-grants was proportionately increased, while the number of shares available under our equity-based plans was also proportionately reduced. Share and per share data (except par value)$790,379 for the periods presented reflect the effects of this reverse stock split. References to numbers of shares of common stock and per share data in the accompanying financial statements and notes thereto relating to dates prior to the reverse stock split have been adjusted to reflect the reverse stock split on a retroactive basis.

Fromfirst quarter ended June through September 2019, we issued convertible promissory notes in the aggregate principal amount of $9,000,000 to investors, which included an aggregate of $500,000 from an affiliate of Remi Gaston-Dreyfus, a director and major shareholder of the Company. Pursuant to the terms of such notes, on September 30, 2019, the principal amount and accrued interest of the notes converted in accordance under their terms into an aggregate of 1,268,191 shares of the Company’s common stock.

In October 2019, we commenced an up to $3 million convertible note offering (or up to $7,000,000 in the discretion of the Company), of which $70,000 has been raised through February 13, 2020.

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. Our website is www.bioniklabs.com. Information on our website does not constitute a part of this Quarterly Report on Form 10-Q.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.

 

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Results of Operations

 

From the inception of Bionik Canada on March 24, 2011 through December 31, 2019,June 30, 2020 we have generated a deficit of $54,830,651.$73,380,946.

 

We expect to incur additional operating losses through the fiscal year ending March 31, 20202021 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 three and nine monthsQuarter ended December 31, 2019June 30, 2020 compared to the three and nine monthsQuarter ended December 31, 2018June 30, 2019

Sales

 

Sales were $158,005 and $1,230,074$257,908 for the three and nine monthsquarter ended December 31,June 30, 2020 (June 30, 2019 (December 31, 2018 – $930,257 and $1,978,675)- $790,379). The revenues for the three and nine monthsquarter ended December 31, 2019June 30, 2020 are comprised of sales of 1 and 11 (December 31, 20182 (June 30, 20199 and 21)8) InMotion™ robots, as well as service, and warranty income. Sales decreasedThe decrease in the number of InMotion™ robots sold is related to delays that impact on our business from the prior three and nine month corresponding period of 2018 due to the Company’s long sales cycle, whereas in 2018 there was a large purchase of 21 robots by one hospital group.COVID-19 pandemic.

 

Cost of Sales and Gross Margin

Cost of sales was $143,595 and $562,887$62,555 for the three and nine monthsquarter ended December 31, 2019 (December 31, 2018 – $450,304 and $1,087,540)June 30, 2020 (June 30, 2019- $336,085). Gross margins were 9.1% and 54.2%margin increased to 75.7% for the three and nine monthsquarter ended December 31,June 30, 2020 (June 30, 2019 respectively (December 31, 2018 51.6% and 45%, respectively). The decrease in gross margins from the corresponding periods of 2018 is57.5%) due to 2 robots being provided as upgrades at no sales value, in connection with a commitment made by the Company.reversal of an overstated warranty reserve of $81,224, and was 57.6% without the effects of the warranty adjustment.

 

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Operating Expenses

 

Total operating expenses for the three and nine monthsquarter ended December 31, 2019June 30, 2020 were $3,133,852 and $9,162,206,$2,153,889 compared to $2,593,663 and $8,039,724$2,622,989 for the three and nine monthsquarter ended December 31, 2018,June 30, 2019, as further described below.

 

For the three and nine monthsquarter ended December 31, 2019,June 30, 2020, the Company incurred $480,834 and $1,649,340$223,185 in sales and marketing expenses, compared to $515,439 and $1,485,423$583,732 for the three and nine monthsquarter ended December 31, 2018.June 30, 2019. The increasedecrease in these expenses for the nine months is mainlythat due to the attendance at moreCOVID-19 pandemic, the sales conferences in fiscal 2020 over fiscal 2019.team has not been able to travel or go to conferences.

 

For the three and nine monthsquarter ended December 31, 2019,June 30, 2020, the Company incurred research and development expenses of $1,021,418 and $2,724,000 (December 31, 2018 – $779,283 and $2,135,075)$353,263 (June 30, 2019– $816,523). The increasedecrease in research and development expenses relates primarily to a reduction in the additional hires to strengthenemployees in this department and the completion of the development team to supportof our new development projects as well as material costs related to the projects being worked on.InMotion Connect product.

 

The Company incurred general and administrative expenses of $1,087,431 and $3,129,063$1,128,510 for the three and nine monthsquarter ended December 31, 2019,June 30, 2020, compared to $1,022,024 and $2,932,980$841,693 for the threequarter ended June 30, 2019. The increase in general and nine months ended December 31, 2018.administrative expenses in 2020 over 2019 resulted from legal fees and other public company related costs.

 

Stock compensation expense was $447,219 and $1,373,195$407,315 for the three and nine monthsquarter ended December 31, 2019,June 30, 2020, compared to $191,634 and $1,226,374$287,757 for the three and nine monthsquarter ended December 31, 2018,June 30, 2019, due to increased option vestinggrant expense in the quarterperiod ended December 31, 2019June 30, 2020 compared to the quarterperiod ended December 31, 2018.June 30, 2019.

 

Amortization of technology and other assets allocated from the purchase of IMT was $69,314 and $207,943$23,504 for the three and nine monthsquarter ended December 31,June 30, 2020 (June 30, 2019 (December 31, 2018 $69,314 and $209,682)$69,314). The amortization has decreased as certain assets acquired have been fully amortized. Assets acquired were workforce and non- competenon-compete agreements which areis now fully amortized. Customer relationships areis amortized over 10 years, patents and our exclusive license agreements over their lifetime and trademarks are indefinite and therefore are not amortized.

 

Depreciation on equipment amounted to $27,636 and $78,665$18,112 for the three and nine monthsquarter ended December 31,June 30, 2020 (June 30, 2019 (December 31, 2018 – $15,969 and $50,190)-$23,970).

 

Other Expenses (Income)

For the three and nine monthsquarter ended December 31, 2019, the Company recorded $Nil as accretion expense compared to $316,642 and $2,421,060 for the three and nine months ended December 31, 2018, due to the amortization of the fair value as well as the anti-dilution feature recorded in connection with convertible debt financing. Also connected to this transaction were fair value adjustment in the three and nine months ended December 31, 2018 – $Nil and $337,923.

For the three and nine months ended December 31, 2019, we had a gain of $Nil on the mark to market reevaluation of the shares to be issued. As of December 31, 2018, $2,048,697 was recorded as mark to market reevaluation for the nine months ended December 31, 2018 due of shares to be issued due to not having enough authorized shares to issue the shares of common stock upon conversion of our convertible promissory notes on March 31, 2018.

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For the three and nine months ended December 31, 2019,June 30, 2020, we incurred other expense of $11,798 and $197,119 (December 31, 2018$74,975 (June 30, 2019$1,520 and $60,152)$14,296). The increase in other expenses relates to higher interest expense in connection with higher indebtedness in the period ended December 31, 2019June 30, 2020 compared to the period ended December 31, 2018.June 30, 2019.

 

For the three and nine monthsquarter ended December 31,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)loss of $(53,561) and $(110,844) (December 31, 2018$11,177 (June 30, 2019 – ($47,709) and ($116,715)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 the majoritymost 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)

Comprehensive loss for the three and nine monthsquarter ended December 31, 2019June 30, 2020 was $(2,969,949) and $(8,473,278)$(2,007,076), resulting in a loss per share of $(0.58) and $(1.99)$(0.39), and for the three and nine monthsquarter ended December 31, 2018, after retroactive adoption of ASU 2017-11 noted above,June 30, 2019 the comprehensive loss was $(2,384,163) and $(7,127,966)$(2,120,644), resulting in a loss per share of ($0.91) and ($3.14)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 raisedintends to apply for forgiveness for all or a portion of the loans in its 2015 private offering net proceeds of $11,341,397. Since 2015,accordance with applicable law. If the loan is not forgiven, the Company also obtained funds throughwill be obligated to repay the loan during the period of 2 years.

In June 2020, the Company has received additional government tax credits, incurring new convertible indebtedness totaling $18,469,681 that has since been converted into equity, a short-term loanloans of $400,000 that was repaid, and raising $1,125,038 in$1,302,575. At June 2017 from its warrant solicitation. At December 31, 2019,30, 2020, the Company had cash and cash equivalentsoutstanding loans in the aggregate principal amount of $1,893,517. Between June 2019 and September 2019, the Company raised funds through the sale of convertible promissory notes totaling $9 million in principal, which principal and accrued interest converted into 1,268,191 of the Company’s common shares at an average price of $7.21.$3,912,592.

 

Based on our current burn rate, we expect to need to raise additional capital in the short term to fund operations and meet expected future liquidity requirements, as well as to satisfyrepay our planned liabilities,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 at least 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. WeFurthermore, we do not have an established source of funds sufficient to cover operating costs after February 28,December 2020 at this time and accordingly theretime.

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There can be no assurance that our recently launched $3,000,000 (or up to $7,000,000 in the discretion of the Company) convertible note financing round will be successful or other necessary debt or equity financing will be available, or will be available on terms acceptable to us, in which case we may not be ableunable to meet our obligations or fully implement our business plan, if at all. These conditions raise substantial doubt about the Company’sCompany's ability to continue as a going concern. The accompanying condensed consolidated interim 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 the nine monthsquarter ended December 31, 2019,June 30, 2020, we used cash in operating activities of $(7,527,532), compared to the$(1,629,197). The increased use of cash in operating activitiesthe 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 nine monthsquarter ended December 31, 2018 of $(7,879,765).June 30, 2020.

 

Net Cash Used in Investing Activities

 

During the nine monthsquarter ended December 31, 2019,June 30, 2020, net cash used in investing activities was $(95,730)$(Nil), compared to $(26,071)$(42,802) for the nine monthsquarter ended December 31, 2018. June 30, 2019.

Net cash used in investing activities in the nine monthsquarter ended December 31,June 30, 2019 and 2018 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 $9,070,000$1,762,487 for the nine monthsquarter ended December 31, 2019June 30, 2020, compared to $7,773,658$1,450,000 for the nine monthsquarter ended December 31, 2018.June 30, 2019. The increase in the nine monthsquarter ended December 31, 2019 isJune 30, 2020 was due to more capital raised in the fiscal 2020 period than the fiscal 2019 period.and PPP loan.

Newly Adopted and Recently Issued Accounting Pronouncements

 

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Newly Adopted and Recently Issued Accounting Pronouncements

Newly Adopted

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). The updated standard will replace most existing revenue recognition guidance in U.S. GAAP. The new standard introduces a five-step process to be followed in determining the amount and timing of revenue recognition. It also provides guidance on accounting for costs incurred to obtain or fulfill contracts with customers and establishes disclosure requirements which are more extensive than those required under existing U.S. GAAP. The FASB has issued numerous amendments to ASU 2014- 09 from August 2015 through January 2018, which provide supplemental and clarifying guidance, as well as amend the effective date of the new standard. ASU 2014-09, as amended, is effective for the Company in the interim period ended June 30, 2018. The standard permits the use of either the retrospective or modified retrospective (cumulative effect) transition method. The Company adopted the new standard using the modified retrospective transition method. The Company has adopted ASU-2014-1 for the fiscal year ended March 31, 2019 and it did not have a material effect on the consolidated balance sheet and the consolidated results of operations.

In November 2015, the FASB issued ASU No. 2015-17, “Balance Sheet Classification of Deferred Taxes,” which require that deferred tax liabilities and assets be classified on our Consolidated Balance Sheets as noncurrent based on an analysis of each taxpaying component within a jurisdiction. ASU No. 2015-17 is effective for the fiscal year commencing after December 15, 2017. The Company has adopted ASU-2015-17 for the fiscal year ended March 31, 2019 and it did not have a material effect on the consolidated balance sheet or the consolidated results of operations.

In January 2016, the FASB issued ASU No. 2016-01 Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The updates make several modifications to Subtopic 825-10, including the elimination of the available-for-sale classification of equity investments, and it requires equity investments with readily determinable fair values to be measured at fair value with changes in fair value recognized in operations. The update is effective for fiscal years beginning after December 2017. The Company has adopted ASU 2016-01 for the year ended March 31, 2019 and it did not have a material effect on the consolidated balance sheet and the consolidated results of operations.

In February 2016, the FASB issued ASU 2016-02, Leases. This update requires organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The new guidance will also require additional disclosure about the amount, timing and uncertainty of cash flows arising from leases. The provisions of this update are effective for quarterly and interim periods beginning after December 15, 2018. The Company adopted ASU 2016-02 and it did not have a material effect on the consolidated balance sheet and the consolidated results of operations.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments”. This ASU provides eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for the fiscal year commencing after December 15, 2017. The Company has adopted ASU 2016-15 for the fiscal year ended March 31, 2019 and it did not have material effect on the consolidated balance sheet or on the consolidated statement of cash flows.

In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting (ASU 2017-09). The FASB issued the update to provide clarity and reduce the cost and complexity when applying the guidance in Topic 718. The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The Company adopted ASU 2017-09 during the year ended March 31, 2019 and it did not have a material effect on the consolidated balance sheet and the consolidated results of operations.

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Recently Issued

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 acquitted 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 financial position or consolidated statement of cash flows.

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 is still assessing the impact that the adoption ofhas adopted ASU 2017-04 willand it did not have a material effect on the consolidated statement of financial positionbalance 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 stillpermitted, 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 2016-132020-06 will have on the consolidated statement of financial positionbalance 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.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable for smaller reporting companies.

 

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

 

We maintain “disclosure controls and procedures” as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

As of the end of the period covered by this Quarterly Report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(b) and 15d-15(b). Based upon this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures as of the end of the period covered by this Quarterly Report were effective.

 

Changes in Internal Control over Financial Reporting

 

During the three months ended December 31, 2019,June 30, 2020, there were no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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Part II- OTHER INFORMATION

 

Item 1. Legal Proceedings

 

None

 

Item 1A. Risk Factors

 

Not applicable for smaller reporting companies

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended December 31, 2019, an aggregate of 11,653 shares of our common stock were issued upon the exchange and redemption of outstanding Exchangeable Shares for shares of common stock. The securities were issued in private transactions in reliance upon exemptions from registration pursuant to Section 4(a)(2) of the Securities Act, as transactions not involving any public offering.

 

All other unregistered issuances of equity securities during the period covered by this quarterly report have been previously disclosed on our Current Reports on Form 8-K.

 

Item 3. Defaults Upon Senior Securities.

 

None

 

Item 4. Mine Safety Disclosures

 

Not applicable

 

Item 5. Other Information

 

None

 

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(b) Exhibits

 

The following exhibits, which are numbered in accordance with Item 601 of Regulation S-K, are filed herewith or, as noted, incorporated by reference herein.

 

Exhibit

Exhibit
NumberDescription of Exhibits

10.1Promissory Note, dated May 1, 2020 (Incorporated by reference to the Company’s Current Report on Form 8-K filed on May 12, 2020)
10.2Form of Subscription Agreement (Incorporated by reference to the Company’s Current Report on Form 8-K filed on June 9, 2020)
10.3Form of Promissory Note (Incorporated by reference to the Company’s Current Report on Form 8-K filed on June 9, 2020)
10.4Allonge to Convertible Promissory Note dated June 3, 2020 (Incorporated by reference to the Company’s Current Report on Form 8-K filed on June 9, 2020)

31.1Certificate of Chief Executive Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2Certificate of Chief Financial Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1Certification of Chief Executive Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2Certification of Chief Financial Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INSXBRL Instance Document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document

101.DEFXBRL Taxonomy Extension Definition Linkbase Document

101.LABXBRL Taxonomy Extension Label Linkbase Document

101.PREXBRL Taxonomy Extension Presentation Linkbase Document

 

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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: February 14,August 12, 2020

  

 

Bionik Laboratories Corp.

  
 
By:/s/ Eric Dusseux
  Eric Dusseux
  Chief Executive Officer
  (Principal Executive Officer)
 
 By:/s/ Leslie Markow
  By: /s/ Leslie Markow Leslie Markow
  Chief Financial Officer
  (Principal Financial and Accounting Officer)

 

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