UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

Form 10-Q

 

(Mark One)

(Mark One)
 
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
  
 For the quarterly period ended December 31, 2018June 30, 2019
  
[  ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

 

For the period from ______________ to_______________

 

Commission file number: 333-201719

 

BIOTRICITY INC.

(Exact name of registrant in its charter)

 

Nevada 47-254827330-0983531
State or Other Jurisdiction of
Incorporation or Organization)
 

(I.R.S. Employer

Identification No.)

 

275 Shoreline Drive, Suite 150

Redwood City, California 94065

(Address of principal executive offices)

Redwood City, California 94065

(Address of principal executive offices)

 

(650) 832-1626

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None.

 

Indicate by check whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] 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 (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [  ]

 

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

 

Large accelerated filer [  ]Accelerated filer [  ]
Non-accelerated filer [X]Smaller reporting company [X]
Emerging growth company [X] 

 

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

 

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

Yes [  ] No [X]

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 30,127,17631,539,475 shares of Common Stock, $0.001 par value, at February 18,August 14, 2019. As at that same date, the Company also has 4,868,4844,313,085 Exchangeable Shares outstanding that convert directly into common shares, which when combined with its Common Stock produce an amount equivalent to 34,995,66035,852,560 outstanding voting securities.

 

 

 

 
 

 

BIOTRICITY INC.

 

Part I – Financial Information
  
Item 1 – Condensed Consolidated Financial Statements3
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations2625
Item 3 – Quantitative and Qualitative Disclosures About Market Risk3433
Item 4 – Controls and Procedures3433
Part II – Other Information
Item 1 – Legal Proceedings3534
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds3534
Item 3 – Defaults Upon Senior Securities3534
Item 4 – Mine Safety Disclosures3534
Item 5 – Other Information3534
Item 6 – Exhibits34
Signatures35
Signatures36

2

PART 1

FINANCIAL INFORMATION

 

Item 1 – Condensed Consolidated Financial Statements

 

Condensed Consolidated Balance Sheets at December 31, 2018June 30, 2019(unaudited)and March 31, 20182019(audited)4
  
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended December 31,June 30, 2019 and 2018 and 2017(unaudited)5
  
Condensed Consolidated Statements of Stockholders’ Deficiency for the three months ended June 30, 2019 and 2018(unaudited)6
Condensed Consolidated Statements of Cash Flows for the ninethree months ended December 31,June 30, 2019 and 2018 and 2017(unaudited)67
  
Notes to the Condensed Consolidated Financial Statements7

 38

BIOTRICITY INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS AT DECEMBER 31, 2018JUNE 30, 2019 (unaudited) and MARCH 31, 20182019 (audited)

(Expressed in US Dollars)

 

 

As at

December 31, 2018

 

As at

March 31, 2018

 
 (unaudited) (audited)  

As at
June 30, 2019

(unaudited)

 

As at
March 31, 2019

(audited)

 
 $  $  $ $ 
CURRENT ASSETS             
Cash  25,738   843,643   47,750   63,647 
Accounts receivable, no allowance  123,837   - 
Accounts receivable, net 386,629 208,099 
Inventory, net  126,092   -  39,617 24,604 
Harmonized sales tax recoverable  55,862   35,737  63,521 59,925 
Deposits and other receivables  108,569   17,046   63,181  101,385 
Total current assets  440,098   896,426  600,698 457,660 
             
NON-CURRENT ASSETS     
Deposits and other receivables  33,000   33,000  33,000 33,000 
Right-of-use asset[Note 9]  413,236  - 
TOTAL ASSETS  473,098   929,426   1,046,934  490,660 
             
CURRENT LIABILITIES             
Bank indebtedness  18,152   - 
Accounts payable and accrued liabilities[Note 4]  1,305,677   756,179  1,715,596 1,400,642 
Convertible promissory notes and short term loans[Note 5] 2,183,498 867,699 
Lease obligation, current[Note 9]  193,295  - 
Total current liabilities 4,092,389 2,268,341 
       
NON CURRENT LIABILITIES       
Lease obligation, long term[Note 9]  219,941  - 
TOTAL LIABILITIES  1,323,829   756,179   4,312,330  2,268,341 
             
STOCKHOLDERS’ (DEFICIENCY) EQUITY        
Preferred stock, $0.001 par value, 10,000,000 authorized as at December 31, 2018 and March 31, 2018, respectively, 1 share issued and outstanding as at December 31, 2018 and March 31, 2018, respectively[Note 7]  1   1 
Common stock, $0.001 par value, 125,000,000 authorized as at December 31, 2018 and March 31, 2018, respectively.
Issued and outstanding common shares: 29,534,343 as at December 31, 2018 and 23,713,602 as at March 31, 2018, respectively, and exchangeable shares of 4,868,464 and 8,143,937 outstanding as at December 31, 2018 and March 31, 2018, respectively [Note 7]
  34,403   31,858 
Shares to be issued[Note 7]  147,350   69,963 
STOCKHOLDERS’ DEFICIENCY     
Preferred stock, $0.001 par value, 10,000,000 authorized as at June 30 and March 31, 2019, respectively, 1 share issued and outstanding as at June 30 and March 31, 2019, respectively[Note 7] 1 1 
Common stock, $0.001 par value, 125,000,000 authorized as at June 30 and March 31, 2019, respectively.
Issued and outstanding common shares: 31,101,975 and 31,048,571 as at June 30 and March 31, 2019, respectively, and exchangeable shares of 4,313,085 as at June 30 and March 31, 2019[Note 7]
 35,415 35,362 
Shares to be issued (412,500 and 62,085 shares of common stock as at June 30 and March 31, 2019, respectively)[Note 7] 309,375 91,498 
Additional paid-in-capital  32,595,145   27,161,984  34,296,458 33,889,916 
Accumulated other comprehensive loss  (410,695)  (643,129) (777,549) (754,963)
Accumulated deficit  (33,216,935)  (26,447,430)  (37,129,096)  (35,039,495)
Total stockholders’ (deficiency) equity  (850,731)  173,247 
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIENCY) EQUITY  473,098   929,426 
        
Commitments and contingencies[Note 9]        
        
Subsequent Events[Note 10]        
TOTAL STOCKHOLDERS’ DEFICIENCY  (3,265,396)  (1,777,681)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY  1,046,934  490,660 

Commitments and Contingencies [Note 10]

Subsequent events [Note 11]

 

See accompanying notes to condensed consolidated interim financial statements

4

BIOTRICITY INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31,JUNE 30, 2019 AND 2018 AND 2017

(Expressed in US Dollars)

 

  

Three Months Ended

December 31, 2018

  

Three Months Ended

December 31, 2017

  

Nine Months

Ended

December 31, 2018

  

Nine Months

Ended

December 31, 2017

 
  (unaudited)  (unaudited)  (unaudited)  (unaudited) 
  $  $  $  $ 
             
REVENUE  117,640   -   220,060   - 
Cost of revenue  27,504   -   84,422   - 
NET REVENUE  90,136   -   135,638   - 
                 
EXPENSES                
General and administrative expenses[Notes 7, 8 and 9]  1,861,113   1,717,666   6,015,942   3,825,602 
Research and development expenses  401,271   377,924   889,201   1,106,658 
TOTAL OPERATING EXPENSES  2,262,384   2,095,590   6,905,143   4,932,260 
                 
Accretion expense[Note 5]  -   -   -   879,416 
Change in fair value of derivative liabilities[Note 6]  -   -   -   20,588 
NET LOSS BEFORE INCOME TAXES   (2,172,248)   (2,095,590)  (6,769,505)  (5,832,264)
                 
Income taxes  -   -   -   - 
NET LOSS  (2,172,248)   (2,095,590)  (6,769,505)  (5,832,264)
                 
Translation adjustment  222,217   (23,424)  232,434   (193,771)
                 
COMPREHENSIVE LOSS  (1,950,031)  (2,119,014)  (6,537,071)  (6,026,035)
                 
LOSS PER SHARE, BASIC AND DILUTED  (0.064)  (0.068)  (0.206)  (0.186)
                 
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING  33,892,765   30,799,342   32,884,003   31,374,911 

  

Three Months Ended

June 30, 2019

  

Three Months Ended

June 30, 2018

 
  (unaudited)  (unaudited) 
  $  $ 
       
REVENUE  327,000   17,660 
Cost of revenue  112,086   - 
NET REVENUE  214,914   17,660 
         
EXPENSES        
General and administrative expenses[Notes 7, 8 and 9]  2,091,019   2,128,305 
Research and development expenses  213,496   309,871 
TOTAL OPERATING EXPENSES  2,304,515   2,438,176 
         
NET LOSS BEFORE INCOME TAXES  (2,089,601)  (2,420,516)
         
Income taxes  -   - 
NET LOSS  (2,089,601)  (2,420,516)
         
Translation adjustment  (22,586)  (102,649)
         
COMPREHENSIVE LOSS  (2,112,187)  (2,523,165)
         
LOSS PER SHARE, BASIC AND DILUTED  (0.060)  (0.076)
         
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING  35,397,458   31,945,349 

 

See accompanying notes to unaudited condensed consolidated interim financial statements

 

5
 

 

BIOTRICITY INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY

FOR THE THREE MONTHS ENDED JUNE 30, 2019 AND 2018 (UNAUDITED)

  Preferred stock  Common stock and exchangeable common shares  Shares to be Issued  Additional paid in capital  Accumulated other comprehensive (loss) income  Accumulated deficit  Total 
  Shares  $  Shares  $  Shares  $  $  $  $  $ 
March 31, 2019  1   1   35,361,656   35,362   62,085   91,498   33,889,916   (754,963)  (35,039,495)  (1,777,681)
                                         
Issuance of shares for private placement [Note 7]  -   -   22,585   23   -   -   13,980   -   -   14,003 
                                         
Issuance of shares for services [Note 7]  -   -   30,835   31   350,415   217,878   350,415   -   -   251,625 
                                         
Issuance of warrants for services [Note 7]  -   -   -   -   -   -   19,955   -   -   19,955 
                                         
Stock based compensation - ESOP [Note 7]  -   -   -   -   -   -   338,889   -   -   338,889 
                                         
Translation adjustment  -   -   -   -   -   -   -   (22,586)   -   (22,586) 
                                         
Net loss for the period  -   -   -   -   -   -   -   -   (2,089,601)   (2,089,601) 
                                         
June 30, 2019  1   1   35,415,060   35,415   412,500   309,375   34,296,458   (777,549)   (37,129,096)   (3,265,396) 
                                         

  Preferred stock  Common stock and exchangeable common shares  Shares to be Issued  Additional paid in capital  Accumulated other comprehensive (loss) income  Accumulated deficit  Total 
  Shares  $  Shares  $  Shares  $  $  $  $  $ 
March 31, 2018  1   1   31,857,546   31,858   20,250   69,963   27,161,984   (643,129)  (26,447,430)  173,247 
                                         
Issuance of shares for private placement  -   -   250,094   250   -   -   514,750   -   -   515,000 
                                         
Issuance of shares for services  -   -   141,500   142   68,250   106,609   520,784   -   -   627,535 
                                         
Exercise of warrants for cash  -   -   62,838   63   -   -   50,772   -   -   50,835 
Issuance of warrants for services  -   -   -   -   -   -   96,509   -   -   96,509 
                                         
Stock based compensation - ESOP [Note 7]  -   -   -   -   -   -   355,231   -   -   355,231 

 

Issuance cost

  -   -   -   -   -   -   (15,000)   -   -   (15,000) 
                                         
Translation adjustment  -   -   -   -   -   -   -   (102,649)   -   (102,649) 
                                         
Net loss for the period  -   -   -   -   -   -   -   -   (2,420,516)   (2,420,516) 
                                         
June 30, 2018  1   1   32,311,978   32,312   88,500   176,572   28,685,030   (745,778)   (28,867,946)   (719,808) 
                                         

 

BIOTRICITY INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINETHREE MONTHS ENDED DECEMBER 31,JUNE 30, 2019 AND 2018 and 2017

(Expressed in US Dollars)

 

 

Nine Months

Ended

December 31, 2018

 

Nine Months

Ended

December 31, 2017

  

Three Months

Ended

June 30, 2019

 

Three Months

Ended

June 30, 2018

 
 (unaudited) (unaudited)  (unaudited) (unaudited) 
 $  $  $  $ 
          
CASH FLOWS FROM OPERATING ACTIVITIES                
Net loss  (6,769,505)  (5,832,264)  (2,089,601)  (2,420,516)
Adjustments to reconcile net loss to net cash used in operations                
Stock based compensation  1,100,686   646,970   338,889   355,231 
Issuance of shares for services  1,025,958   1,325,128   251,625   627,535 
Issuance of warrants for services, at fair value  376,136   272,630   19,955   96,509 
Accretion expense  -   879,416 
Change in fair value of derivative liabilities  -   20,588 
Fair value of warrants issued  -   - 
                
Changes in operating assets and liabilities:                
Accounts receivable  (123,836)  -   (178,530)  (4,800)
Inventory  (126,092)  -   (15,013)  - 
Harmonized sales tax recoverable  (20,125)  (27,052)  (2,282)  (6,103)
Deposits and other receivables  (91,524)  (14,977)  38,203   (3,993)
Accounts payable and accrued liabilities  564,927   (507,365)  308,379   146,588 
Net cash used in operating activities  (4,063,375)  (3,236,926)  (1,328,375)  (1,209,549)
                
CASH FLOWS FROM FINANCING ACTIVITIES                
Issuance of shares, net  2,959,480   4,860,970   14,003   500,000 
Proceeds from exercise of warrants  50,835   428,311   -   50,835 
Bank indebtedness  18,723   - 
Issuance of convertible promissory notes and short term loans  1,315,799   - 
Net cash provided by financing activities  3,029,038   5,289,281   1,329,802   550,835 
                
Effect of foreign currency translation  216,432   5,039   (17,324)  17,724 
                
Net (decrease) increase in cash during the period  (1,034,337)  2,052,355 
Net increase (decrease) in cash during the period  1,427   (658,714)
                
Cash, beginning of period  843,643   424,868   63,647   843,643 
                
Cash, end of period  25,738   2,482,262   47,750   202,653 

 

See accompanying notes to unaudited condensed consolidated interim financial statements

6

BIOTRICITY INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2018June 30, 2019 (Unaudited)

(Expressed in US dollars)

 

1. NATURE OF OPERATIONS

 

Biotricity Inc. (formerly MetaSolutions, Inc.) (the “Company”) was incorporated under the laws of the State of Nevada on August 29, 2012.

 

iMedical Innovations Inc. (“iMedical”), a wholly-owned subsidiary of the Company, was incorporated on July 3, 2014 under the laws of the Province of Ontario, Canada.

 

TheBoth the Company through its wholly-owned subsidiaryand iMedical isare engaged in research and development activities within the remote monitoring segment of preventative care. OurThey are focused on a realizable healthcare business model that has an existing market and commercialization pathway. As such, its efforts to date have been devoted in building technology that enables access to this market through the development of a tangible product.

 

On February 2, 2016, the Company entered into an exchange agreement with 1061806 BC LTD. (“Callco”), a British Columbia corporation and wholly owned subsidiary (incorporated on February 2, 2016), 1062024 B.C. LTD., a company existing under the laws of the Province of British Columbia (“Exchangeco”), iMedical, and the former shareholders of iMedical (the “Exchange Agreement”), whereby Exchangeco acquired 100% of the outstanding common shares of iMedical, taking into account certain shares pursuant to the Exchange Agreement.Agreement as further explained in Note 9 to the consolidated financial statements. These subsidiaries were solely used for the issuance of exchangeable shares in the reverse takeover transaction and have no other transactions or balances. After giving effect to this transaction, the Company acquired all of iMedical’s assets and liabilities and commenced operations through iMedical.

 

As a result of the Share Exchange, iMedical is now a wholly-owned subsidiary of the Company. This transaction has been accounted for as a reverse merger. Consequently, the assets and liabilities and the historical operations reflected in the consolidated financial statements for the periods prior to February 2, 2016 are those of iMedical and are recorded at the historical cost basis. After February 2, 2016, the Company’s consolidated financial statements include the assets and liabilities of both iMedical and the Company and the historical operations of both after that date as one entity.

 

2. BASIS OF PRESENTATION, MEASUREMENT AND CONSOLIDATION

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) for interim financial information and the Securities and Exchange Commission (“SEC”) instructions to Form 10-Q and Article 8 of SEC Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with Biotricity’s audited financial statements for the years ended March 31, 20182019 and 20172018 and their accompanying notes.

 

The accompanying unaudited condensed consolidated financial statements are expressed in United States dollars (“USD”). In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of financial position and results of operations for the interim periods presented have been reflected herein. Operating results for the ninethree months ended December 31, 2018June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending March 31, 2019. The Company’s fiscal year-end is March 31.

 

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Significant intercompany accounts and transactions have been eliminated.

7

Liquidity and Basis of Presentation

 

The Company is an emerging growth entity that is in the early stages of commercializing its first product and is concurrently in development mode, operating a research and development program in order to develop, obtain regulatory approval for, and commercialize other proposed products. The Company has incurred recurring losses from operations, and as at December 31, 2018,June 30, 2019, has an accumulated deficit of $33,216,935$37,129,096 and a working capital deficitdeficiency of $883,731.$3,491,691. During the nine monthsyear ended DecemberMarch 31, 2018,2019, the Company launched its first commercial sales program, having already hiredusing an experienced professional in-house sales team. Management anticipates the Company will improve its liquidity through continued business development and additional equity or debt capitalization. The Company has developed and continues to pursue sources of funding that management believes if successful would be sufficient to support the Company’s operating plan and alleviate any substantial doubt as to its ability to meet its obligations at least for one year from the date these condensed consolidated financial statements are issued. As an example of this, the Company filed a shelf registration statement under whichhas raised $3,638,010 in funding from an agreement it conducted its first registered direct sale of shares during December 2017, which raised gross proceeds of $2,475,901. In June 2018, the Company conducted a further registered direct sale of shares which raised gross proceeds of $500,000. The investor,has with a private equity fund, also entered into agreements within which the Company to commit themselvesfund has committed to purchase up to $25 million in additional shares of the Company at the direction and sole discretion of the Company subject to certainthe Company’s compliance with any funding conditions, (see Note 7 –Stockholders’ Equity (Deficiency)).including there being an effective registration statement registering the shares of common stock issuable under the equity line. Currently, there is no effective registration registering the equity line shares; if the Company wishes to continue to draw from the from this line in the future, it will have to file a registration statement. The Company had issued promissory note and other short term funding of $2,183,498 as at June 30, 2019 and raised a further $1,514,115 subsequently, it also has a written commitment for an additional $5 million in debt financing from a private debt fund.

 

The Company’s operating plan is predicated on a variety of assumptions including, but not limited to, the level of product demand, cost estimates, its ability to continue to raise additional debt and equity financing the planned repayment dates of outstanding operating liabilities, and the state of the general economic environment in which the Company operates. There can be no assurance that these assumptions will prove to be accurate in all material respects, or that the Company will be able to successfully execute its operating plan. In the absence of additional appropriate financing, the Company may have to modify its operating plan toor slow down the pace forof development and commercialization of its proposed products.

 

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Revenue Recognition

The Company has adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 606.

The Bioflux mobile cardiac telemetry device, a wearable device, is worn by patients for a monitoring period up to 30 days. The cardiac data that the device monitors and collects is curated and analyzed by the Company’s proprietary algorithms and then securely communicated to a remote monitoring facility for electronic reporting and conveyance to the patient’s prescribing physician or other certified cardiac medical professional. Revenues earned with respect to this device are comprised of device sales revenues and technology fee revenues (software as a service). The device, together with its licensed software, is available for sale to the medical center or physician, who is responsible for the delivery of clinical diagnosis and therapy. The remote monitoring, data collection and reporting services performed by the technology culminate in a patient study that is generally billable when it is complete and is issued to the physician. In order to recognize revenue, management considers whether or not the following criteria are met: persuasive evidence of a commercial arrangement exists, and delivery has occurred or services have been rendered. For sales of devices, which are invoiced directly, additional revenue recognition criteria include that the price is fixed and determinable and collectability is reasonably assured; for revenue that is earned based on customer usage of the proprietary software to render a patient’s cardiac study, the Company recognizes revenue when the study ends based on a fixed billing rate. Costs associated with providing the services are recorded as the service is provided regardless of whether or when revenue is recognized.

8

Inventory

Inventory is stated at the lower of cost or net realizable value, cost being determined on a weighted average cost basis, and market being determined as the lower of cost or net realizable value. The Company records write-downs of inventory that is obsolete or in excess of anticipated demand or market value based on consideration of product lifecycle stage, technology trends, product development plans and assumptions about future demand and market conditions. Actual demand may differ from forecasted demand, and such differences may have a material effect on recorded inventory values. Inventory write-downs are charged to cost of revenue and establish a new cost basis for the inventory.

Use of Estimates

 

The preparation of the condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Areas involving significant estimates and assumptions include: allowance for doubtful accounts, valuation of inventory, deferred income tax assets and related valuation allowance, accruals and valuation of derivatives, convertible promissory notes, stock options, and warrants, as well as assumptions used by management in its assessment of liquidity.the going concern assessment. Actual results could differ from those estimates. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the period in which they become known.

 

Earnings (Loss) Per Share

 

The Company has adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 260-10 which provides for calculation of “basic” and “diluted” earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income or loss available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. Diluted earnings per share exclude all potentially dilutive shares if their effect is anti-dilutive. There were no potentially dilutive shares outstanding as at December 31, 2018June 30, 2019 and 2017.

Cash

Cash includes cash on hand and balances with banks. As at December 31, 2018, bank indebtedness represented outstanding cheques.

Foreign Currency Translation

The functional currency of the Company’s Canadian-based subsidiary is the Canadian dollar and the US-based parent is the U.S. dollar. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities are translated using the historical rate on the date of the transaction. All exchange gains or losses arising from translation of these foreign currency transactions are included in net income (loss) for the period. In translating the financial statements of the Company’s Canadian subsidiaries from their functional currency into the Company’s reporting currency of United States dollars, balance sheet accounts are translated using the closing exchange rate in effect at the balance sheet date and income and expense accounts are translated using an average exchange rate prevailing during the reporting period. Adjustments resulting from the translation, if any, are included in cumulative other comprehensive income (loss) in stockholders’ equity. The Company has not, to the date of these consolidated financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

9

Accounts Receivable

Accounts receivable consists of amounts due to the Company from medical facilities, which receive reimbursement from institutions and third-party government and commercial payors and their related patients, as a result of the Company’s normal business activities. Accounts receivable is reported on the balance sheets net of an estimated allowance for doubtful accounts. The Company establishes an allowance for doubtful accounts for estimated uncollectible receivables based on historical experience, assessment of specific risk, review of outstanding invoices, and various assumptions and estimates that are believed to be reasonable under the circumstances, and recognizes the provision as a component of selling, general and administrative expenses. Uncollectible accounts are written off against the allowance after appropriate collection efforts have been exhausted and when it is deemed that a balance is uncollectible.2018.

 

Fair Value of Financial Instruments

 

ASC 820 defines fair value, establishes a framework for measuring fair value and expands required disclosure about fair value measurements of assets and liabilities. ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

 

Level 1 – Valuation based on quoted market prices in active markets for identical assets or liabilities.
Level 2 – Valuation based on quoted market prices for similar assets and liabilities in active markets.
Level 3 – Valuation based on unobservable inputs that are supported by little or no market activity, therefore requiring management’s best estimate of what market participants would use as fair value.

● Level 1 – Valuation based on quoted market prices in active markets for identical assets or liabilities.

● Level 2 – Valuation based on quoted market prices for similar assets and liabilities in active markets.

● Level 3 – Valuation based on unobservable inputs that are supported by little or no market activity, therefore requiring management’s best estimate of what market participants would use as fair value.

 

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

 

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments or interest rates that are comparable to market rates. These financial instruments include cash, due to stockholders, accounts receivable, deposits and other receivables, convertible promissory notes, derivative liabilities, and accounts payable.payable and accrued liabilities. The Company’s cash and derivative liabilities, which are carried at fair value,values, are classified as a Level 1 financial instruments.and Level 2, respectively. The Company’s bank accounts are maintained with financial institutions of reputable credit, therefore, bear minimal credit risk.

 

Operating Leases

On April 1, 2019, the Company adopted Accounting Standards Codification Topic 842, “Leases” (“ASC 842”) to replace existing lease accounting guidance. This pronouncement is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet for most leases. Expenses associated with leases will continue to be recognized in a manner similar to previous accounting guidance. The Company adopted ASC 842 utilizing the transition practical expedient added by the Financial Accounting Standards Board (“FASB”), which eliminates the requirement that entities apply the new lease standard to the comparative periods presented in the year of adoption.

 

The Company is the lessee in a lease contract when the Company obtains the right to use the asset. Operating leases office spaceare included in the line items right-of-use asset, lease obligation, current, and certain office equipment under operating lease agreements. Theobligation, long-term in the consolidated balance sheet. Right-of-use (“ROU”) asset represents the Company’s right to use an underlying asset for the lease term beginsand lease obligations represent the Company’s obligations to make lease payments arising from the lease, both of which are recognized based on the date of initial possessionpresent value of the leased property for purposesfuture minimum lease payments over the lease term at the commencement date. Leases with a lease term of recognizing lease expense12 months or less at inception are not recorded on the consolidated balance sheet and are expensed on a straight-line basis over the lease term in our consolidated statement of the lease. Lease renewal periods are considered on a lease-by-lease basis and are generally not included in the initial lease term.

10

Income Taxes

income. The Company accounts for income taxes in accordancedetermines the lease term by agreement with ASC 740. The Company provides for federal and provincial income taxes payable, as well as for those deferred because of the timing differences between reporting income and expenses for financial statement purposes versus tax purposes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recoverable or settled. The effect of a change in tax rates is recognized as income or expense in the period of the change. A valuation allowance is established, when necessary, to reduce deferred income tax assets to the amount that is more likely thanlessor. As our lease do not to be realized.

Research and Development

Research and development costs, which relate primarily to product and software development, are charged to operations as incurred. Under certain research and development arrangements with third parties,provide an implicit interest rate, the Company may be required to make payments that are contingentuses the Company’s incremental borrowing rate based on the achievement of specific developmental, regulatory and/or commercial milestones. Before a product receives regulatory approval, milestone payments made to third parties are expensed wheninformation available at commencement date in determining the milestone is achieved.Milestone payments made to third parties after regulatory approval is received are capitalized and amortized over the estimated useful life of the approved product.

Stock Based Compensation

The Company accounts for share-based payments in accordance with the provision of ASC 718, which requires that all share-based payments issued to acquire goods or services, including grants of employee stock options, be recognized in the statement of operations based on their fair values, net of estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Compensation expense related to share-based awards is recognized over the requisite service period, which is generally the vesting period.

The Company accounts for stock based compensation awards issued to non-employees for services, as prescribed by ASC 718-10, at either the fairpresent value of the services rendered or the instruments issued in exchangefuture payments. Refer to Note 9 for such services, whichever is more readily determinable, using the guidelines in ASC 505-50. The Company issues compensatory shares for services including, but not limited to, executive, management, accounting, operations, corporate communication, financial and administrative consulting services.further discussion.

 

1011
 

 

Convertible Notes Payable and Derivative InstrumentsRecently Issued Accounting Pronouncements

 

In August 2018, the FASB issued ASU 2018-13, “Changes to Disclosure Requirements for Fair Value Measurements”, which will improve the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements, and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company haswill be evaluating the impact this standard will have on the Company’s financial statements.

In June 2018, the FASB issued an accounting pronouncement (FASB ASU 2018-07) to expand the scope of ASC Topic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company is currently in the process of evaluating the effects of this pronouncement on the consolidated financial statements, including potential early adoption.

On April 1, 2018, the Company adopted the provisionsaccounting pronouncement issued by the FASB to clarify how entities should present restricted cash and restricted cash equivalents in the statement of cash flows. This guidance requires entities to show changes in the total of cash, cash equivalents and restricted cash in the combined statement of cash flows. This guidance was adopted on a retrospective basis, and such adoption did not have a material impact on combined financial position and/or results of operations.

On January 1, 2018, the Company adopted the accounting pronouncement issued by the FASB to clarify how entities should present restricted cash and restricted cash equivalents in the statement of cash flows. This guidance requires entities to show changes in the total of cash, cash equivalents and restricted cash in the combined statement of cash flows. This guidance was adopted on a retrospective basis, and such adoption did not have a material impact on combined financial position and/or results of operations.

In July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2017-11 (“ASU 2017-11,2017-11”), which addresses theaddressed accounting for (I) certain financial instruments with down round features and (II) replacement of the indefinite deferral for mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable non-controlling interests with a scope exception. The main provisions of Part I of ASU 2017-11 “change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS.” Under previous US GAAP, warrants with a down round feature are not being considered indexed to the entity’s own stock, which results in classification of the warrant as a derivative liability. Under ASU 2017-11, the down round feature qualifies for a scope exception from derivative treatment. ASU 2017-11 is effective for public companies as of December 15, 2018 and interim periods within that fiscal year. Early adoption is permitted, including adoption in an interim period, with adjustments reflected as of the beginning of the fiscal year. The Company has issued financial instruments with down round features. The Company opted to adopt ASU 2017-11 in its three-month interim period ended December 31,September 30, 2017, which is effective from April 1, 2017, with adjustments reflected in the accumulated deficit of stockholders’ deficiency as of April 1, 2017. Please refer to Note 6.

 

Recently Issued Accounting Pronouncements

In August 2018,The amendments in this Update require that a statement of cash flows explain the FASB issued ASU 2018-13, “Changes to Disclosure Requirementschange during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this Update do not provide a definition of restricted cash or restricted cash equivalents. The amendments in this Update are effective for Fair Value Measurements”, which will improvepublic business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements, and isamendments are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company willamendments in this Update should be evaluating theapplied using a retrospective transition method to each period presented. Management does not expect to have a significant impact of this standard will haveASU on the Company’s unaudited interim condensed consolidated financial statements.

 

In June 2018, the FASB issuedMay 2017, an accounting pronouncement (FASBwas issued by the Financial Accounting Standards Board (“FASB”) ASU 2018-07) to expand the scope of ASC Topic 718, Compensation2017-09, “Compensation - Stock Compensation,Compensation: Scope of Modification Accounting.” ASU 2017-09 provides guidance about which changes to includethe terms or conditions of a share-based payment transactions for acquiring goods and services from nonemployees.award require an entity to apply modification accounting. The pronouncementupdated guidance is effective for fiscal years,interim and for interimannual periods within those fiscal years, beginning after December 15, 2018, with2017, and early adoption is permitted. The Company is currently in the process of evaluating the effectsadoption of this pronouncement is not expected to have a material impact on the unaudited interim condensed consolidated financial statements, including potential early adoption.position and/or results of operations.

 

On April 1, 2018,2017, the Company adopted the accounting pronouncement issued by the Financial Accounting Standards Board (“FASB”) to clarify existing guidancesimplify the presentation of deferred income taxes within the balance sheet. This pronouncement eliminates the requirement that deferred tax assets and liabilities are presented as current or noncurrent based on revenue recognition. This guidance includes the required steps to achievenature of the core principleunderlying assets and liabilities. Instead, the pronouncement requires that a company should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects toall deferred tax assets and liabilities, including valuation allowances, be entitled in exchange for those goods or services. The Companyclassified as noncurrent. We adopted this pronouncement on a modified retrospective basis.

On January 1, 2018, the Company adopted the accounting pronouncement issued by the FASB to clarify how entities should present restricted cash and restricted cash equivalents in the statement The adoption of cash flows. Thisthis guidance requires entities to show changes in the total of cash, cash equivalents and restricted cash in the combined statement of cash flows. This guidance was adopted on a retrospective basis, and such adoption did not have a material impact on combinedthe Company’s unaudited interim condensed consolidated financial position and/or results of operations.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This guidance revises the accounting related to leases by requiring lessees to recognize a lease liability and a right-of-use asset for all leases. The new lease guidance also simplifies the accounting for sale and leaseback transactions. This ASU is effective for annual reporting periods beginning after December 15, 2018 and early adoption is permitted. The Company does not believe the guidance will have a material impact on its consolidated financial statements.

12

4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

 

  

As at

December 31, 2018

  

As at

March 31, 2018

 
  $  $ 
Accounts payable                         971,719   547,858 
Accrued liabilities  333,958   208,321 
   1,305,677   756,179 

  As at
June 30, 2019
$
  As at
March 31, 2019
$
 
Accounts payable  957,360   878,453 
Accrued liabilities  758,236   522,189 
   1,715,596   1,400,642 

 

Accounts payable as at December 31, 2018,June 30, 2019, and March 31, 20182019 include $306,568233,989 and $161,481,277,278, respectively, due to a shareholder and executive of the Company, primarily owing as a result of that individual’s capacityrole as an employee. These amounts are unsecured, non-interest bearing and payable on demand.

 

5. CONVERTIBLE PROMISSORY NOTES

 

Prior to April 1, 2016, pursuant to a term sheet offering of up to $2,000,000, the Company issued convertible promissory notes to various accredited investors amounting to $1,368,978 in face value. These notes had a maturity date of 24 months and carried an annual interest rate of 11%. The note holders had the right to convert any outstanding and unpaid principal portion of the note, and accrued interest, into fully paid and non-assessable shares of common stock any time until the note was fully paid. The notes had a conversion price initially set at $1.78. Upon any future financings completed by the Company, the conversion price was to reset to 75% of the future financing pricing. These notes did not contain prepayment penalties upon redemption. These notes were secured by all of the present and after acquired property of the Company. However, the Company could force conversion of these notes, if during the term of the agreement, the Company completed a public listing and the common share price exceeded the conversion price for at least 20 consecutive trading days. At the closing of the notes, the Company paid cash (7%) and issued warrants (7% of the number of common shares into which the notes may be converted) to a broker. The broker received 3% in cash and warrants for those investors introduced by the Company. The warrants had a term of 24 months and a similar reset provision based on future financings.

 

Pursuant to the conversion provisions in promissory notes existing at that time, in August 2016, promissory notes in the aggregate face value of $1,368,978 were converted into 912,652 shares of common stock as detailed below. The fair value of the common shares was $2,907,912 and $1,538,934 was allocated to the related derivative liabilities (see note 6) and the balance to the carrying value of the notes.

 

  $ 
Accreted value of convertible promissory notes as at December 31, 2015  783,778 
Face value of convertible promissory notes issued during March 2016  175,000 
Discount recognized at issuance due to embedded derivatives  (74,855)
Accretion expense for three months March 31, 2016  73,572 
Accreted value of convertible promissory notes as at March 31, 2016  957,495 
Accretion expense - including loss on conversion of $88,530  411,483 
Conversion of the notes transferred to equity  (1,368,978)
Accreted value of earlier convertible promissory notes at December 31, 2018 andJune 30, 2019 (as well as March 31, 20182019)  - 

13

In March 2016, the Company commenced a bridge offering of up to an aggregate of $2,500,000 of convertible promissory notes. Up to March 31, 2017, the Company issued, to various investors, a new series of convertible notes (“Bridge Notes”) in the aggregate face value of $2,455,000 (December 31, 2016 – $2,230,000). The Bridge Notes had a maturity date of 12 months from issuance and carried an annual interest rate of 10%. The Bridge Notes principal and all outstanding accrued interest were convertible into common stock based on the average of the lowest 3 trading days volume weighted average price over the last 10 trading days plus an embedded warrant at maturity. However, all the outstanding principal and accrued interest would convert into units/securities upon the consummation of a qualified financing, based upon the lesser of: (i) $1.65 per units/securities and (ii) the quotient obtained by dividing (x) the balance on the forced conversion date multiplied by 1.20 by (y) the actual price per unit/security in the qualified financing. Upon the maturity date of the notes, the Company also has an obligation to issue warrants exercisable into a number of shares of the Company securities equal to (i) in the case of a qualified financing, the number of shares issued upon conversion of the note and (ii) in all other cases, the number of shares of the Company’s common stock equal to the quotient obtained by dividing the outstanding balance by 2.00.

 

In connection with the Bridge Notes offering, the accreted value of this offering was as follows as at March 31, 2017:

 

As at March 31, 2017 $ 
Face value of Bridge Notes issued  2,455,000 
Day one derivative loss recognized during the year  35,249 
Discount recognized at issuance due to embedded derivatives  (1,389,256)
Cash financing costs  (174,800)
Accretion expense  630,797 
Accreted value of Bridge Notes  1,556,990 

 

On May 31, 2017, all Bridge Notes, having a face value of $2,436,406, were converted into Units of a private placement offering of the Company’s common stock:

 

  $ 
Accreted value of Bridge Note as of March 31, 2017  1,556,990 
Accretion expense  879,416 
Conversion of Bridge Notes transferred to equity (Note 7, c)  (2,436,406)
Face value of Bridge Notes as of December 31, 2018June 30, 2019 and March 31, 20182019  - 

 

The embedded conversion features and reset feature in the notes and broker warrants were initially accounted for as a derivative liability based on FASB guidance that was current at that time (see Note 6).

 

14

During the three months ended June 30, 2019, the Company borrowed $774,433 in promissory notes from certain of its accredited investors, in addition to $867,699 borrowed during the fiscal year ended March 31, 2019. These notes are generally for a 1-year term at interest rates of between 10%, and 12% with allowance for the Company to repay early, and the possibility to convert into equity on the basis of mutual consent. Management has evaluated the terms of these notes in accordance with the guidance provided by ASC 470 and ASC 815 and concluded that there is no derivative or beneficial conversion feature attached to these notes. On June 30, 2019, the Company has also borrowed $541,365 from certain of its investors on a short term basis pending issuance of additional convertible promissory notes, doing so without interest in the interim.

 

General and administrative expenses include interest expense on the above notes of $30,052 and nil for the three months ended June 30, 2019, respectively.

6. DERIVATIVE LIABILITIES

 

TheAccounting PronouncementsASU 2017-11 provided a change to the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. During the quarter ended December 31, 2017, the Company adopted the provisions of ASU 2017-11 to account for the down round features of its warrants issued with its private placements effective April 1, 2017. The Company used a modified retrospective approach to adoption, which does not restate its financial statements as at the prior year end, March 31, 2017. Adoption is effective as of April 1, 2017, the beginning of the Company’s current fiscal year. The cumulative effect of this accounting standard update adjusted accumulated deficit as of April 1, 2017 by $483,524, with a corresponding adjustment to derivative liabilities:

 

Balance Sheet Impacts Under ASU 2017-11 As of April 1, 2017 
Accumulated Deficit $483,524 
Derivative Liabilities  (483,524)

 

The impact on the unaudited June 30, 2017 Balance Sheet and Statement of Operations is as follows:

 

Balance Sheet Impacts Under ASU 2017-11 As of June 30, 2017 
Derivative Liabilities $(4,074,312)
Additional Paid in Capital  3,569,248 
Accumulated Deficit  483,524 

 

Income Statement Impacts Under ASU 2017-11 As of June 30, 2017 
Reversal of change in fair value of derivative liabilities $21,540 

 

In connection with the sale of debt or equity instruments, the Company may sell options or warrants to purchase its common stock. In certain circumstances, these options or warrants have previously been classified as derivative liabilities, rather than as equity. Additionally, the debt or equity instruments may contain embedded derivative instruments, which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative instrument liability.

 

Previously, the Company’s derivative instrument liabilities were re-valued at the end of each reporting period, with changes in the fair value of the derivative liability recorded as charges or credits to income in the period in which the changes occurred. For options, warrants and bifurcated embedded derivative features that were accounted for as derivative instrument liabilities, the Company estimated fair value using either quoted market prices of financial instruments with similar characteristics or other valuation techniques. The valuation techniques require assumptions related to the remaining term of the instruments and risk-free rates of return, our current common stock price and expected dividend yield, and the expected volatility of our common stock price over the life of the option. The details of derivative liabilities (pre and post adoption of ASU 2017-11) were as follows:

15

  Total 
  $ 
Derivative liabilities as at March 31, 2017  2,163,884 
Derivative fair value at issuance  3,569,249 
Transferred to equity upon conversion of notes (Notes 5 and 7)  (1,700,949)
Change in fair value of derivatives  42,128 
Derivative liabilities as at June 30, 2017 (pre-adoption)  4,074,312 
Adjustments relating to adoption of ASU 2017-11    
Reversal of fair value  (21,540)
Transferred to accumulated deficit  (483,524)
Transferred to additional paid-in-capital  (3,569,248)
Derivative liabilities as at December 31, 2018June 30, 2019 and March 31, 20182019 (post adoption)  - 

 

The lattice methodology was used to value the derivative components, using the following assumptions:

 

  Assumptions 
Dividend yield  0.00%
Risk-free rate for term  0.62% – 1.14%
Volatility  103% – 118%
Remaining terms (Years)  0.01 – 1.0 
Stock price ($ per share) $2.50 and $2.70 

 

The projected annual volatility curve for valuation at issuance and period end was based on the comparable company’s annual volatility. The Company used market trade stock prices at issuance and period end date.

 

7. STOCKHOLDERS’ EQUITY (DEFICIENCY)DEFICIENCY

 

a) Authorized stock

 

As at December 31, 2018,June 30, 2019, the Company is authorized to issue 125,000,000 (March 31, 20182019 – 125,000,000) shares of common stock ($0.001 par value) and 10,000,000 (March 31, 20182019 – 10,000,000) shares of preferred stock ($0.001 par value).

 

At December 31, 2018,June 30, 2019, there were 29,534,34331,101,975 (March 31, 2018201923,713,602)31,048,571) shares of common stock issued and outstanding. Additionally, at December 31, 2018,June 30, 2019, there were 4,868,4644,313,085 (March 31, 201820198,143,937)4,313,085) outstanding exchangeable shares. There is currently one share of the Special Voting Preferred Stock issued and outstanding held by one holder of record, which is the Trustee in accordance with the terms of the Trust Agreement.

16

b) Exchange Agreement

 

As initially described in Note 1 above, on February 2, 2016:

 

The Company issued approximately 1.197 shares of its common stock in exchange for each common share of iMedical held by the iMedical shareholders who in general terms, are not residents of Canada (for the purposes of the Income Tax Act (Canada). Accordingly, the Company issued 13,376,947 shares;
Shareholders of iMedical who in general terms, are Canadian residents (for the purposes of the Income Tax Act (Canada)) received approximately 1.197 Exchangeable Shares in the capital of Exchangeco in exchange for each common share of iMedical held. Accordingly, the Company issued 9,123,031 Exchangeable Shares;
Each outstanding option to purchase common shares in iMedical (whether vested or unvested) was exchanged, without any further action or consideration on the part of the holder of such option, for approximately 1.197 economically equivalent replacement options with an inverse adjustment to the exercise price of the replacement option to reflect the exchange ratio of approximately 1.197:1;
Each outstanding warrant to purchase common shares in iMedical was adjusted, in accordance with the terms thereof, such that it entitles the holder to receive approximately 1.197 shares of the common stock of the Company for each warrant, with an inverse adjustment to the exercise price of the warrants to reflect the exchange ratio of approximately 1.197:1
Each outstanding advisor warrant to purchase common shares in iMedical was adjusted, in accordance with the terms thereof, such that it entitles the holder to receive approximately 1.197 shares of the common stock of the Company for each advisor warrant, with an inverse adjustment to the exercise price of the Advisor Warrants to reflect the exchange ratio of approximately 1.197:1; and
The outstanding 11% secured convertible promissory notes of iMedical were adjusted, in accordance with the adjustment provisions thereof, as and from closing, so as to permit the holders to convert (and in some circumstances permit the Company to force the conversion of) the convertible promissory notes into shares of the common stock of the Company at a 25% discount to purchase price per share in Biotricity’s next offering.

Issuance of common stock, exchangeable shares and cancellation of shares in connection with the reverse takeover transaction as explained above represents recapitalization of capital retroactively adjusting the accounting acquirer’s legal capital to reflect the legal capital of the accounting acquiree.

 

During the nine months ended December 31, 2018, shareholders holding 3,275,478 exchangeable shares with voting rights and other attributes corresponding to the Company’s common stock (but with the additional right to cashlessly exchange on a one-for-one basis into common stock) retracted and exchanged their exchangeable shares for the corresponding number of shares of common stock.

c) Share issuances

 

Share issuances during the year ended March 31, 20182019

 

During the year ended March 31, 2018,2019, the Company sold to accredited investorsissued common shares as part of series of closings under a further total of 1,282,767 Units, (each Unit consisting of one share of common stock one-half of one warrant to purchase a share of common stock) forregistered offering, which raised gross proceeds of $2,244,845 (net proceeds$3,718,010 through the issuance of $1,926,780).

17

During the year ended March 31, 2018, prior2,635,353 common shares. Issuance costs pursuant to closing its private placementthis offering on or about July 31, 2017, the Company soldamounted to accredited investors a further total of 263,188 Units for gross proceeds of $460,579 (net proceeds of $413,629). Cash issuance costs of $46,950 have been adjusted against additional paid in capital. In connection with this private placement, the Company also issued 21,055 broker warrants and 131,594 warrants to investors (refer to warrant issuances).$80,000.

 

During the year ended March 31, 2018,2019, the Company completed a registered offering, which raised net proceeds of $2,520,561 million through the issuance of 450,164 common shares.

Cash issuance costs of $320,355 relating to the above private placements have been adjusted against additional paid in capital. In connection with the above private placements and conversion of notes as detailed in Note 5, the Company issued broker warrants and warrants to investors having fair values of $385,635 and $3,183,614, respectively, which were initially classified as derivative liabilities with corresponding debit to additional paid in capital.

The raising of a total of $3,000,000 in aggregate proceeds from the common share offering would qualify that offering as a Qualified Financing that would allow the Company, at its discretion, to convert the principal amount of the Bridge Notes (discussed in Note 5), along with accrued interest thereon, into units of the common share offering. Conversion would be based upon the price that is the lesser of: (i) $1.60 per share and (ii) the quotient obtained by dividing (x) the Outstanding Balance on the conversion date multiplied by 1.20 by (y) the actual price per share in the Qualified Financing. The notes and the warrants were further subject to a “most-favored nation” clause in the event the Company, prior to maturity of the notes, consummates a financing that is not a Qualified Financing. Upon completion of a Qualified Financing, in connection with the conversion of the Bridge Notes, the Company would also pay the Placement Agent up to 8% in cashless broker warrants with an exercise price of $3.00 and an expiry date of two years from the date of issuance. Based on achieving this milestone, on May 31, 2017, the Company converted Bridge Notes with the aggregate principal amount of $2,455,000 plus accrued interest thereon, into a further 1,823,020 Units of its common share offering (each of which corresponded to one share and half of one warrant).

During the year ended March 31, 2018, the Company issued an aggregate of 527,941 shares of641,329 common stock and has recognized its obligation to issue a further 20,25041,835 shares of common stock (see paragraph d, below), to various consultants. The fair value of these shares determined by using the market price of the common stock as at the date of issuance amounted to $1,908,481$1,145,455 were recognized as general and administrative and research and development expenses, as applicable, in the statement of operations, with a corresponding credit to common shares, shares to be issued and additional paid-in-capital.paid-in-capital, respectively.

 

During the year ended March 31, 2018,2019, the Company also issued an aggregate of 252,798227,428 shares of its common stock upon exercise of warrantsemployee stock options and warrants; it received $428,311$50,835 of exercise cash proceeds. In addition, during this year, the Company issued 58,795 shares of common stock to brokers who opted to perform cashless exercise of their 108,799 warrants. See paragraph e, below

18

Share issuances during the ninethree months ended December 31, 2018June 30, 2019

 

During the ninethree months ended December 31, 2018,June 30, 2019, the Company entered into an agreement with a private equity investment fund (the “Investor”) to establish a committed equity purchase facility, which allows the Company, at its sole option, subject to certain conditions, to direct the Investor to make multipleissued common share purchases that in aggregate can be up to $25 million (the “Aggregate Amount”) during the term of the facility, which will be up to 36 months. Asshares as part of the initial closinga series of this transaction, the Investor purchased 128,750 shares of common stock of the Company, atclosings under a price of $4,00 per share,registered offering, for gross proceeds of $515,000 and paid$14,003 through the Investor $15,000 in issuance costs. As compensation for providing this equity purchase facility,of 22,585 common shares.

During the three months ended June 30, 2019, the Company also issued to the Investor an additional 121,344 shares (representing a dollar value equal to 1.6% of the aggregate amount, or $400,000, at a price per share that was equal to the average of the closing sale prices of the common shares for the ten (10) consecutive business days prior to the closing date of the transaction). The size and purchase price for each future drawdown under this agreement is governed by the purchase facilities agreement and is predicated on trading volumes as well as the average trading and closing prices of the common stock on the day of drawdown and the prior ten (10) trading days, such that the purchase price is always fixed and know at the time the Company elects to sell shares to the Investor. During the nine months ended December 31, 2018, the Company sold a further 1,694,760 shares under this facility and raised aggregate gross proceeds of $2,524,480.

During the nine months ended December 31, 2018, the Company issued an aggregate of 372,999 shares of common stock to various advisors, contractors and consultants, including 62,500 shares of common stock to non-executive directors of its Board as part of their annual compensation program. Not including 14,000 shares, that were accounted for as common shares to be issued in relation to issuance obligations as at March 31, 2018, the fair value of the remaining 358,999 shares amounted to $875,879 and has been expensed to general and administrative expenses in the condensed consolidated statement of operations, with a corresponding credit to additional paid-in-capital.

During the nine months ended December 31, 2018, the Company issued 164,574 shares of common stock upon the exercise of options of its legacy 2015 equity incentive plan; during the same period the Company also issued 62,83830,835 shares of its common stock upon exercisepursuant to obligations to issue these are compensation to a consultant that existed as at June 30, 2019, the fair value of warrants and received $50,835 of exercise cash proceeds.which was recognized in the period then ended.

 

d) Shares to be issued

 

Common stockDuring the three months ended June 30, 2019, the Company recognized its obligation to be issuedissue a total of 211,666375,000 shares ($147,350) is comprised of:

152,916 shares of common stock issued to consultants in connection with services rendered during the quarter with a fair value of $73,400 and 40,000 shares of common stock issued to non-executive directors of the Company with a fair value of $19,200; and
18,750 shares of common stock to be issued to a consultant, which represents an obligation recognized in prior periods, with a fair value of $54,750.

to directors and 6,250 shares to consultants and advisors. The fair value of these shares amounted to$251,625 and has been expensed to general and administrative and research and development expenses in the consolidated statement of operations, with a corresponding credit to additional paid-in-capital. The fair value of these shares was determined by using the market price of the common stock as at the date of issuance obligation.issuance. As disclosed in Note 10of June 30, 2019, the Company had recognized its contractual obligations to the interim condensed consolidated financial statements, 186,666issue a total of the 211,666412,500 shares were subsequently issued.of common stock, that also included a further obligation to issue 37,500 to consultants, advisors and other service providers, that had previously recognized as at March 31, 2019.

18
 19

 

e) Warrant issuances and exercises

 

Warrant issuances during the year ended March 31, 2018

During December 2017, 112,798 broker warrants were exercised at exercises price of between $1.04 and $1.49, such that the Company received cash proceeds of $124,718. Also during December 2017, 140,000 consultant warrants were exercised at exercise prices between $2.00 and 2.58, for cash proceeds to the Company of $303,200.

During March 2018, 108,799 broker warrants were exercised into 58,795 common shares through the cashless exercise. The holder may, in its sole discretion, exercise all or any part of this warrant in a “cashless” or “net-issue” (or cashless) exercise and receive a number of shares calculated by using the following formula: X = Y (A - B)/A with: X = the number of shares to be issued to the holder Y = the number of shares with respect to which the warrant is being exercised A = the fair value per share of common stock on the date of exercise of the warrant B = the then-current exercise price of the warrant.

Warrant issuances during the nine months ended December 31, 20182019

 

During the nine monthsyear ended DecemberMarch 31, 2018,2019, the Company issued 508,333849,601 warrants as compensation for advisor and consultant services, which were fair valued at $376,136$467,411 and expensed in general and administrative expenses, with a corresponding credit to additional paid in capital. Their fair value has been estimated using a multi-nominal lattice model with an expected life of 2 to 3 years, a risk free rate ranging from 2.13% to 2.81%, stock price of $0.48 to $4.15 and expected volatility of 97.8% to 141.1%.

Warrant issuances during the three months ended June 30, 2019

During the three months ended June 30, 2019, the Company issued 83,750 warrants as compensation for advisor and consultant services, which were fair valued at $19,955 and expensed in general and administrative expenses, with a corresponding credit to additional paid in capital. Their fair value has been estimated using a multi-nomial lattice model with an expected life of 3 years, a risk free rate ranging from 2.13% to 2.81%1.71%, stock price of $0.48 to $4.15$0.66 and expected volatility of 97.8% to 138.27%116.95%.

 

20

Warrant exercises during the year ended March 31, 2019

 

During the year ended March 31, 2019, 62,838 warrants issued to consultants and advisors were exercised at an average exercise price of $0.81, such that the Company received cash proceeds of $50,835.

Warrant exercises during the three months ended June 30, 2019

No warrants were exercised during the three months ended June 30, 2019.

Warrant issuances, exercises and expirations or cancellations during the three months ended December 31, 2018June 30, 2019 and preceding periods resulted in warrants outstanding at the end of those respective periods as follows:

 

 Broker Warrants  Consultant Warrants  Warrants Issued on Conversion of Convertible Notes  Private Placement Warrants  Total  Broker
Warrants
 Consultant
Warrants
 Warrants Issued on
Conversion of
Convertible Notes
 Private
Placement
Warrants
 Total 
As at March 31, 2017  380,682   916,466   -   390,744   1,687,892 
Less: Exercised  (222,690)  (140,000)  -   -   (362,690)
Less: Expired/cancelled  (19,935)  (380,300)  -   -   (400,235)
Add: Issued  246,095   273,806   2,734,530   772,978   4,027,409 
As at March 31, 2018  384,152   669,972*  2,734,530   1,163,722   4,952,376   384,152   669,972*  2,734,530   1,163,722   4,952,376 
                                        
Less: Exercised  (62,838)  -   -   -   (62,838)  (62,838)  -   -   -   (62,838)
Less: Expired/cancelled  -   (31,250)  -   -   (31,250)  -   (31,250)  -   -   (31,250)
Add: Issued  -   65,000   -   -   65,000   -   65,000   -   -   65,000 
As at June 30, 2018  321,314   703,722*  2,734,530   1,163,722   4,923,288   321,314   703,722*  2,734,530   1,163,722   4,923,288 
                                        
Less: Exercised  -   -   -   -   -   -   -   -   -   - 
Less: Expired/cancelled  -   -   -   -       -   -   -   -     
Add: Issued  -   393,333   -   -   393,333   -   393,333   -   -   393,333 
As at September 30 2018  321,314   1,097,055*  2,734,530   1,163,722   5,316,621   321,314   1,097,055*  2,734,530   1,163,722   5,316,621 
                                        
Less: Exercised  -   -   -   -   -   -   -   -   -   - 
Less: Expired/cancelled  -   (126,250)**  -   -   (126,250)  -   (126,250)**  -   -   (126,250)
Add: Issued  -   50,000         -   -   50,000   -   50,000   -   -   50,000 
As at December 31, 2018  321,314   1,020,805*  2,734,530   1,163,722   5,240,371   321,314   1,020,805*  2,734,530   1,163,722   5,240,371 
                                        
Less: Exercised  -   -   -   -   - 
Less: Expired/cancelled  -   (184,916)**  -   -   (184,916)
Add: Issued  -   341,268   -   -   341,268 
As at March 31, 2019  321,314   1,177,157*  2,734,530   1,163,722   5,396,723 
                    
Less: Exercised  -   -   -   -   - 
Less: Expired/cancelled  -   (5,000)  -   -   (5,000)
Add: Issued  -   83,750   -   -   83,750 
As at June 30, 2019  321,314   1,255,907*  2,734,530   1,163,722   5,475,473 
                    
Exercise Price $

0.78-$3.00

  $

0.48-$7.59

   2.00   3.00      $0.78-$3.00  $0.48-$7.59   2.00   3.00     
Expiration Date  

October 2019 to July

2022

   February 2019 to September 2021   March 2020 to November 2022   

April 2020

to July

2020

       March 2022 to July 2022   September 2019 to June 2022   March 2020 to November 2022   April 2020 to July 2020     

 

*Consultant Warrants asinclude warrants issued to directors and officers of the Company who were not members of the Company’s options plan at December 31, 2018the time of issuance. As at June 30, 2019, Consultant Warrants include an aggregate of 238,806438,806 warrants provided to an officer of the Company as compensation while he was not a member of any Company options plan.

 

** Subsequent to December 31, 2018, 84,166 consultantJune 30, 2019, 80,000 warrants issued to directors expired unexercised.

f) Warrant exercises

During the nine months ended December 31, 2018, 62,838 warrants were exercised at an average exercise price of approximately $0.7839. The Company received $50,835 of cash proceeds.

21

g)f) Stock-based compensation

 

2015 Equity Incentive Plan

 

On March 30, 2015, iMedical approved its Directors, Officers and Employees Stock Option Plan, under which it authorized and issued 3,000,000 options. This plan was established to enable the iMedicalCompany to attract and retain the services of highly qualified and experience directors, officers, employees and consultants and to give such person an interest in the success of the Company. This is a legacy option plan established and utilized prior to the Company’s reorganization (see note7b) Exchange Agreement, above). No other grants will be made under this plan. As of March 31, 2018, and March 31, 2017, there were no outstanding vested options and 137,500 unvested options at an exercise price of $.0001 under this plan. These legacy options representednow represent the right to purchase shares of the Company’s common stock using the same exchange ratio of approximately 1.1969:1;1, thus there were 164,590 (35,907 had been cancelled) adjusted unvested options as at March 31, 2018. During the nine-month period ended December 31, 2018 theThese remaining 164,590 outstanding options vested and were exercised.exercised during the year ended March 31, 2019. No other grants will be made under this plan.

 

The following table summarizes the stock option activities of the Company:

 

 

Number of

options

 

Weighted

average exercise price ($)

  

Number of

options

 

Weighted

average exercise price ($)

 
Granted  3,591,000   0.0001   3,591,000   0.0001 
Exercised  (3,390,503)  0.0001   (3,390,503)  0.0001 
Outstanding as of December 31, 2015  200,497   0.0001   200,497   0.0001 
Cancelled during 2016  (35,907)  0.0001   (35,907)  0.0001 
Outstanding as of March 31, 2018  164,590   0.0001   164,590   0.0001 
Exercised  (164,590)  0.0001   (164,590)  0.0001 
Outstanding as of December 31, 2018  -     
Outstanding as of March 31, 2019  -     

 

The fair value of options at the issuance date were determined at $2,257,953 which were fully expensed during the twelve months ended December 31, 2015 based on vesting period and were included in general and administrative expenses with corresponding credit to additional paid-in-capital. During the twelve months ended December 31, 2015, 3,390,503 (2,832,500 Pre-exchange Agreement) options were exercised by those employees who met the vesting conditions; 50% of the grants either vest immediately or at the time of U.S. Food and Drug Administration (FDA) filing date and 50% will vest upon Liquidity Trigger. Liquidity Trigger means the day on which the board of directors resolve in favor of i) the Company is able to raise a certain level of financing; ii) a reverse takeover transaction that results in the Company being a reporting issuer, and iii) initial public offering that results in the Company being a reporting issuer.

 

2016 Equity Incentive Plan

 

On February 2, 2016, the Board of Directors of the Company approved 2016 Equity Incentive Plan (the “Plan”). The purpose of the Plan is to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Company and by motivating such persons to contribute to the growth and profitability of the Company. The Plan seeks to achieve this purpose by providing for awards in the form of options, stock appreciation rights, restricted stock purchase rights, restricted stock bonuses, restricted stock units, performance shares, performance units and other stock-based awards.

22

The Plan shall continue in effect until its termination by the board of directors or committee formed by the board; provided, however, that all awards shall be granted, if at all, on or before the day immediately preceding the tenth (10th) anniversary of the effective date. The maximum number of shares of stock that may be issued under the Plan shall be equal to 3,750,000 shares; provided that the maximum number of shares of stock that may be issued under the Plan pursuant to awards shall automatically and without any further Company or shareholder approval, increase on January 1 of each year for not more than 10 years from the effective date, so the number of shares that may be issued is an amount no greater than 15% of the Company’s outstanding shares of stock and shares of stock underlying any outstanding exchangeable shares as of such January 1; provided further that no such increase shall be effective if it would violate any applicable law or stock exchange rule or regulation, or result in adverse tax consequences to the Company or any participant that would not otherwise result but for the increase.

 

During July 2016, the Company granted an officer options to purchase an aggregate of 2,499,998 shares of common stock at an exercise price of $2.20 subject to a 3 year vesting period, with the fair value of the options being expensed over a 3 year period. Two additional employees were also granted 175,000 options to purchase shares of common stock at an exercise price of $2.24 with a 1 year vesting period, with the fair value of the options being expensed over a 1 year period. One additional employee was also granted 35,000 options to purchase shares of common stock at an exercise price of $2.24 with a 2 year vesting period, with the fair value of the options expensed over a 2 year period.

 

During the year ended March 31, 2018,2019, an additional 1,437,500 stock options were granted with a weighted average remaining contractual life from 2.76 to 9.51 years.

 

During the nineyear ended March 31, 2019, an additional 270,521 stock options were granted with a weighted average remaining contractual life from 2.76 to 9.51 years. During the year ended March 31, 2019, the Company recorded stock based compensation of $1,451,261 in connection with ESOP 2016 Plan (March 31, 2018 - $1,002,201) under general and administrative expenses with corresponding credit to additional paid in capital.

No new options were granted during the three months ended December 31, 2018, as part of their approved compensation, the Company granted its non-executive directors options to purchase an aggregate of 62,500 shares of common stock at an exercise price of $2.00, with an aggregate fair value of $31,959, subject to a 1-year vesting period. Six employees were also granted 95,000 options to purchase shares of common stock at exercise prices ranging from $1.40 to $1.84 per share, subject to a 3 year graded vesting period, with fair value of the options of $41,825 being expensed over that respective period. The Company also issued an additional 100,000 options, with a fair value of $81,688, to an employee to purchase shares of common stock at an exercise price of $1.75 with a 1-year vesting period, with the fair value of the options being expensed over a 1-year period.June 30, 2019.

 

As of December 31, 2018, the cumulative grant-date fair value of the options granted under the Plan was $3,945,501 (December 31, 2017 - $2,439,493). The following table summarizes the stock option activities of the Company:

 

 

Number of

options

  

Weighted

average exercise price ($)

  

Number of

options

 

Weighted

average exercise price ($)

 
Granted  4,147,498   3.2306   4,147,498   3.2306 
Exercised  -   -   -   - 
Outstanding as of June 30 and March 31, 2018  4,147,498   3.2306   4,147,498   3.2306 
Granted  257,500   1.8000   270,521   1.8096 
Exercised  -   -   -   - 
Outstanding as of December 31, 2018  4,404,998   3.1470 
Outstanding as of June 30 and March 31, 2019  4,418,019   3.1436 

 

During the three and nine months ended December 31, 2018,June 30, 2019, the Company recorded stock-based compensation of $372,523 and $1,100,686, respectively,$338,889, in connection with the 2016 equity incentive plan (December 31, 2017(June 30, 2018$204,815 and $646,971, respectively)$355,231) under general and administrative expenses with a corresponding credit to additional paid in capital.

23

 

The fair value of each option granted is estimated at the time of grant using multi-nomial lattice model using the following assumptions:

 

  2017-2018  2016-2017  2015-2016 
Exercise price ($)  1.24-7.59   2.00 – 2.58   0.0001 
Risk free interest rate (%)  1.98-2.81   0.45 - 1.47   0.04 - 1.07 
Expected term (Years)  3.0   1.0 - 3.0   10.0 
Expected volatility (%)  97.8-145.99   101 – 105   94 
Expected dividend yield (%)  0.00   0.00   0.00 
Fair value of option ($)  0.60   0.88   0.74 
Expected forfeiture (attrition) rate (%)  0.00   0.00 – 5.00   5.00 - 20.00 

  2019  2017-2018  2016-2017  2015-2016 
Exercise price ($)  2.00   1.24-7.59   2.00 – 2.58   0.0001 
Risk free interest rate (%)  2.27 to 2.54   1.98-2.81   0.45 - 1.47   0.04 - 1.07 
Expected term (Years)  3   3   1 - 3   10 
Expected volatility (%)  112.5 -141.10   97.8-145.99   101 – 105   94 
Expected dividend yield (%)  0   0   0   0 
Fair value of option ($)  0.28   0.6   0.88   0.74 
Expected forfeiture (attrition) rate (%)  0.00   0.00   0.00 – 5.00   5.00 - 20.00 

8. RELATED PARTY TRANSACTIONS AND BALANCES

 

The Company’s transactions with related parties were carried out on normal commercial terms and in the course of the Company’s business. Other than those disclosed elsewhere in the financial statements, related party transactions are as follows:

 

 

Three Months Ended

December 31, 2018

 

Three Months Ended

December 31, 2017

 

Nine Months Ended

December 31, 2018

 

Nine Months Ended

December 31, 2017

  

Three Months
Ended

June 30, 2019

 

Three Months
Ended

June 30, 2018

 
 $ $ $ $  $  $ 
Salary and allowance*  180,333  165,052  544,106  435,156   135,052   180,052 
Stock based compensation**  316,544  183,981  1,060,712  558,453   308,755   389,064 
Total  496,877  349,033  1,604,818  993,609   443,807   569,116 

 

The above expenses were recorded under general and administrative expenses.

 

* Salary and allowance include salary, car allowance, vacation pay, bonus and other allowances paid or payable to key management of the Company.

** Stock based compensation represent the fair value of the options, warrants and equity incentive plan for directors and key management of the Company.

 

9. COMMITMENTS AND CONTINGENCIESLEASE

 

On January 8, 2016,The Company has one operating lease primarily for office and administration.

  June 30, 
  2019 
Right-of-use asset $413,236 
Current portion of lease obligation $193,295 
Noncurrent portion of lease obligation  219,941 
Total lease obligations $413,236 

When measuring the lease obligations, the Company entered into a 40-monthdiscounted lease agreementpayments using its incremental borrowing rate at April 1, 2019. The weighted-average-rate applied is 10%.

Operating lease expense during the three months period ended June 30, 2019 was $56,106.

The following table represents the contractual undiscounted cash flows for its office premises in California, USA. The monthly rent from the date of commencement to the 12th month is $16,530, from the 13th to the 24th month is $17,026, from the 25th to the 36th month is $17,536, whereas the final 3 months is $18,062.lease obligations as at June 30, 2019.

$
Less than one year223,416
Beyond one year230,118
Total undiscounted lease obligations453,534

10.CONTINGENCIES

 

There are no claims against the company that were assessed as significant, which were outstanding as at December 31, 2018June 30, 2019 and, consequently, no provision for such has been recognized in the consolidated financial statements.

24

10. 11.SUBSEQUENT EVENTS

 

The Company’s management has evaluated subsequent events up to February 19,August 14, 2019, the date the condensed consolidated financial statements were issued, pursuant to the requirements of ASC 855 and has determined the following material subsequent events:

 

On January 9,July 2, 2019, pursuant to two purchase agreements,obligations to issue shares disclosed in Note 7 d), the Company sold to two accredited investors a totalissued 412,500 shares of $400,000 in principal amount of notes. The notes are non- convertible, bear an interest rate of 10% per year and mature on January 9, 2020.its common stock.

 

DuringOn July 16, pursuant to its ability to draw down on its registered private placement, the periodCompany also issued 25,000 shares of January 1, 2019 through February 18,its common stock and raised $14,563 in cash proceeds.

From July 10 to August 14, 2019, the Company issued an aggregate of 324,500 common shares under its common share finance facility with a private equity firm (the “Investor”). The size and purchase priceconvertible promissory notes, or received cash for each drawdown is governed by the purchase facilities agreement and is predicated on trading volumes as well as the average trading and closing prices of the common stock on the day of drawdown and the prior ten (10) trading days, such that the purchase price is always fixed and known at the time the Company elects to sell shares to the Investor. On January 23, 2019, the Company issued 186,666 shares to partially satisfy its obligationswhich it intends to issue a convertible note, in the shares that were classified as shares to be issued as at December 31, 2018. On February 18, 2019, the Company also a further issued 41,667 shares as compensation to an officeramount of the Company and 40,000 as compensation to a consultant.$1,514,115 from several investors.

25

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Except for historical information contained herein, this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements. Important assumptions and other factors that could cause actual results to differ materially from those in the forward-looking statements, include but are not limited to: (a) any fluctuations in sales and operating results; (b) risks associated with international operations; (c) regulatory, competitive and contractual risks; (d) development risks; (e) the ability to achieve strategic initiatives, including but not limited to the ability to achieve sales growth across the business segments through a combination of enhanced sales force, new products, and customer service; (f) competition in the Company’s existing and potential future product lines of business; (g) the Company’s ability to obtain financing on acceptable terms if and when needed; (h) uncertainty as to the Company’s future profitability; (i) uncertainty as to the future profitability of acquired businesses or product lines; and (j) uncertainty as to any future expansion of the Company. Other factors and assumptions not identified above were also involved in the derivation of these forward-looking statements and the failure of such assumptions to be realized as well as other factors may also cause actual results to differ materially from those projected. The Company assumes no obligation to update these forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements, except as may be required under applicable law. Past results are no guaranty of future performance. You should not place undue reliance on any forward-looking statements, which speak only as of the dates they are made. When used in this Report, the words “believes,” “anticipates,” “expects,” “estimates,” “plans,” “intends,” “will” and similar expressions are intended to identify forward-looking statements.

 

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the financial statements and footnotes thereto included in this Quarterly Report on Form 10-Q (the “Financial Statements”).

 

Company Overview

 

Biotricity Inc. (“Company”, “Biotricity”, “we”, “us” or “our ”)“our”)

 

We areBiotricity Inc. (the “Company”, “Biotricity”, “we”, “us”, “our”) is a medical technology company focused on biometric data monitoring solutions. Our aim is to deliver innovative, remote monitoring solutions to the medical, healthcare, and consumer markets, with a focus on diagnostic and post-diagnostic solutions for lifestyle and chronic illnesses. We approach the diagnostic side of remote patient monitoring by applying innovation within existing business models where reimbursement is established. We believe this approach reduces the risk associated with traditional medical device development and accelerates the path to revenue. In post-diagnostic markets, we intend to apply medical grade biometrics to enable consumers to self-manage, thereby driving patient compliance and reducing healthcare costs. We areintend to first focusingfocus on a segment of the multi-billion-dollar diagnostic mobile cardiac telemetry market, otherwise known as MCT.

 

To date, weWe have developed our Bioflux MCT technology, which is comprised of a monitoring device and software component, verified our business model, and built strategic partnerships to accelerate ouris currently commercialized and available in the market strategy and growth. We started commercial sale of our technology to customers insince April 6, 2018. Starting with a small sales force to assist in establishingThe twelve months following launch was a limited market review with key anchor customers in 6 key cardiac markets acrossrelease where the United States has allowedcompany focused on the sales and market dynamics. As of April 1, 2019, the Company has completed its limited market release and is now focused on sales growth and expansion. Currently, we are experiencing double digit growth through new sales and an above 80% re-order rate. In April 2019, we expanded our sales efforts to place 244 of its devices11 key states, with intention to expand further and compete in the field as at December 31, 2018.broader US market using an insourcing business model. This business model is applicable to a large portion of the total available market, which can include hospitals, physicians’ offices and other IDTFs. We believe our solution’s insourcing model, which empowers physicians with state of the art technology and charges technology service fees for its use, has the benefit of a reduced operating overhead for the Company, and enables a more efficient market penetration and distribution strategy. This, combined with the value the Company’s solution brings in the diagnosis of cardiac arrhythmias, enhancement of patient outcomes, improved patient compliance, with a corresponding reduction of healthcare costs, is driving growth and increasing revenues. The Company plans to grow its sales force in order to address new markets and achieve sales penetration in the markets currently served. The Company is also developing several other ancillary technologies, which will require application for further FDA clearances, which the Company anticipates applying for during 2019.

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We have established a research partnership with the University of Calgary to determine the predictive value of electrocardiogram (ECG) readings in preventative healthcare applications. The study is designed to identify novel patterns in ECG readings that may be translated into probability models for use in the development of proprietary algorithms for diagnostic applications, and to determine if ECG readings have predictive value for use in preventative healthcare applications, such as self-managed care. The research is partly funded by the National Research Council of Canada. As part of the collaboration, we have the right to license any intellectual property discovered, created or reduced to practice in the performance of the collaboration that was created solely by the University’s personnel. Otherwise, we own all intellectual property resulting from the collaboration. The term of the collaboration is until December 31, 2020.

 

We were incorporated on August 29, 2012 in the State of Nevada under the name Metasolutions, Inc. Effective as of February 1, 2016, we changed our name to Biotricity Inc. On February 2, 2016, we acquired iMedical Innovation Inc., a company existing under the laws of Canada, through our indirect subsidiary 1062024 B.C. LTD., a company existing under the laws of the Province of British Columbia. Immediately prior to the closing of the acquisition, we transferred all of the then-existing business, properties, assets, operations, liabilities and goodwill of the Company, to W270 SA, a Costa Rican corporation. Accordingly, as of immediately prior to the closing of the acquisition, we had no assets or liabilities, and subsequent to the closing wecommenced operations through iMedical. As a result, we treated the acquisition as a reverse merger and recapitalization for accounting purposes, with iMedical as the acquirer for accounting purposes.

 

Critical Accounting Policies

 

The Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and are expressed in United States Dollars. Significant accounting policies are summarized below:

Revenue Recognition

The Company has adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 606.

Our Bioflux mobile cardiac telemetry device, a wearable device, is worn by patients for a monitoring period up to 30 days. The cardiac data that the device monitors and collects is curated and analyzed by our proprietary algorithms and then securely communicated to a remote monitoring facility for electronic reporting and conveyance to the patient’s prescribing physician or other certified cardiac medical professional. Revenues earned with respect to this device are comprised of device sales revenues and technology fee revenues (software as a service). The device, together with its embedded licensed software, is available for sale to the medical center or physician, who is responsible for the delivery of clinical diagnosis and therapy. The remote monitoring, data collection and reporting services performed by our technology culminate in a patient study that is generally billable when it is complete and is issued to the physician. In order to recognize revenue, we consider whether or not the following criteria are met: persuasive evidence of a commercial arrangement exists, and delivery has occurred, or services have been rendered. For sales of devices, which we invoice directly, additional revenue recognition criteria include that the price is fixed and determinable and collectability is reasonably assured; for revenue that is earned based on customer usage of our proprietary software to render a patient’s cardiac study, we recognize revenue based on a fixed billing rate. If all revenue recognition criteria are met, revenue is recognized upon delivery of the patient study, on an accrual basis. Costs associated with providing our services are recorded as the service is provided regardless of whether or when revenue is recognized.

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Use of Estimates

 

The preparation of the financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Areas involving significant estimates and assumptions include: deferred income tax assets and related valuation allowance, accruals and valuation of derivatives, convertible promissory notes, stock options and warrants, as well as assumptions used by management in its assessment of liquidity. Actual results could differ from those estimates. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the period in which they become known.

 

Earnings (Loss) Per Share

 

We have adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 260-10 which provides for calculation of “basic” and “diluted” earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income or loss available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity. Diluted earnings per share exclude all potentially dilutive shares if their effect is anti-dilutive. There were no potentially dilutive shares outstanding as at December 31, 2018.

Cash

Cash includes cash on hand and balances with banks. As at December 31, 2018, bank indebtedness represented outstanding cheques.

Accounts Receivable, net

Accounts receivable consists of amounts due to the Company from medical facilities, which receive reimbursement from institutions and third-party government and commercial payors and their related patients, as a result of the Company’s normal business activities. Accounts receivable is reported on the balance sheets net of an estimated allowance for doubtful accounts. The Company establishes an allowance for doubtful accounts for estimated uncollectible receivables based on historical experience, assessment of specific risk, review of outstanding invoices, and various assumptions and estimates that are believed to be reasonable under the circumstances, and recognizes the provision as a component of selling, general and administrative expenses. Uncollectible accounts are written off against the allowance after appropriate collection efforts have been exhausted and when it is deemed that a balance is uncollectible.

Foreign Currency Translation

The functional currency of the US-based company is the US dollar and the Canadian-based company is the Canadian dollar. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities are translated using the historical rate on the date of the transaction. All exchange gains or losses arising from translation of these foreign currency transactions are included in net income (loss) for the year. In translating the financial statements of the Company’s Canadian subsidiaries from their functional currency into the Company’s reporting currency of US dollars, balance sheet accounts are translated using the closing exchange rate in effect at the balance sheet date and income and expense accounts are translated using an average exchange rate prevailing during the reporting period. Adjustments resulting from the translation, if any, are included in cumulative other comprehensive income (loss) in stockholders’ equity. The Company has not, to the date of these consolidated financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

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June 30, 2019.

Fair Value of Financial Instruments

 

Accounting Standards Codification TopicASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”) defines fair value, establishes a framework for measuring fair value and expands required disclosure about fair value measurements of assets and liabilities. ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

 

Level 1 – Valuation based on quoted market prices in active markets for identical assets or liabilities.
Level 2 – Valuation based on quoted market prices for similar assets and liabilities in active markets.
Level 3 – Valuation based on unobservable inputs that are supported by little or no market activity, therefore requiring management’s best estimate of what market participants would use as fair value.

● Level 1 – Valuation based on quoted market prices in active markets for identical assets or liabilities.

● Level 2 – Valuation based on quoted market prices for similar assets and liabilities in active markets.

● Level 3 – Valuation based on unobservable inputs that are supported by little or no market activity, therefore requiring management’s best estimate of what market participants would use as fair value.

 

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. OurThe Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

 

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments or interest rates that are comparable to market rates. These financial instruments include cash, accounts receivable, deposits and other receivables, convertible promissory notes, and accounts payable. Ourpayable and accrued liabilities. The Company’s cash and derivative liabilities, which isare carried at fair value, isvalues, are classified as a Level 1 financial instrument. Ourand Level 2, respectively. The Company’s bank accounts are maintained with financial institutions of reputable credit, therefore, bear minimal credit risk.

Income TaxesLeases

 

We account for income taxes in accordance with

On April 1, 2019, the Company adopted Accounting Standards Codification Topic 842, “Leases” (“ASC 740. We842”) to replace existing lease accounting guidance. This pronouncement is intended to provide for federalenhanced transparency and provincial income taxes payable, as well as for those deferred because of the timing differences between reporting income and expenses for financial statement purposes versus tax purposes. Deferred taxcomparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet for most leases. Expenses associated with leases will continue to be recognized in a manner similar to previous accounting guidance. The Company adopted ASC 842 utilizing the transition practical expedient added by the Financial Accounting Standards Board (“FASB”), which eliminates the requirement that entities apply the new lease standard to the comparative periods presented in the year of adoption.

The Company is the lessee in a lease contract when the Company obtains the right to use the asset. Operating leases are recognizedincluded in the line items right-of-use asset, lease obligation, current, and lease obligation, long-term in the consolidated balance sheet. Right-of-use (“ROU”) asset represents the Company’s right to use an underlying asset for the future tax consequences attributable to differences betweenlease term and lease obligations represent the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recoverable or settled. The effect of a change in tax rates is recognized as income or expense in the period of the change. A valuation allowance is established, when necessary, to reduce deferred income tax assets to the amount that is more likely than not to be realized.

Inventory

Inventory is stated at the lower of cost or net realizable value, cost being determined on a weighted average cost basis, and market being determined as the lower of cost or net realizable value. The Company records write-downs of inventory that is obsolete or in excess of anticipated demand or market value based on consideration of product lifecycle stage, technology trends, product development plans and assumptions about future demand and market conditions. Actual demand may differ from forecasted demand, and such differences may have a material effect on recorded inventory values. Inventory write-downs are charged to cost of revenue and establish a new cost basis for the inventory.

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Research and Development

We are engaged in research and development work. Research and development costs, which relate primarily to software development, are charged to operations as incurred. Under certain research and development arrangements with third parties, we may be requiredCompany’s obligations to make lease payments that are contingent on the achievement of specific developmental, regulatory and/or commercial milestones. Before a product receives regulatory approval, milestone payments made to third parties are expensed when the milestone is achieved. Milestone payments made to third parties after regulatory approval is received are capitalized and amortized over the estimated useful life of the approved product. Research and development costs were $401,271 for the three months ended December 31, 2018, compared to $377,924 for the corresponding periods ended December 31, 2017.

Impairment of Long-Lived Assets

In accordance with ASC Topic 360-10, we review the carrying amount of long-lived assets for the existence of facts or circumstances, both internally and externally, that suggest impairment. We determine if the carrying amount of a long-lived asset is impaired based on anticipated undiscounted cash flows, before interest,arising from the uselease, both of the asset. In the event of impairment, a loss iswhich are recognized based on the amount by which the carrying amount exceeds the fairpresent value of the asset. Fair value is determined based on appraised value offuture minimum lease payments over the assets or the anticipated cash flows from the use of the asset or asset group, discounted at a rate commensurate with the risk involved.

Stock Based Compensation

We account for share-based payments in accordance with the provision of ASC 718, which requires that all share-based payments issued to acquire goods or services, including grants of employee stock options, be recognized in the statement of operations based on their fair values, net of estimated forfeitures. ASC 718 requires forfeitures to be estimatedlease term at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Compensation expense related to share-based awards is recognized over the requisite service period, which is generally the vesting period.

We account for stock based compensation awards issued to non-employees for services, as prescribed by ASC 718-10, at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the guidelines in ASC 505-50. We issue compensatory shares for services including, but not limited to, executive, management, accounting, operations, corporate communication, financial and administrative consulting services.

Operatingcommencement date. Leases

We lease office space and certain office equipment under operating lease agreements. The with a lease term beginsof 12 months or less at inception are not recorded on the date of initial possession of the leased property for purposes of recognizing lease expenseconsolidated balance sheet and are expensed on a straight-line basis over the lease term in our consolidated statement of income. The Company determines the lease. Lease renewal periods are consideredlease term by agreement with lessor. As our lease do not provide an implicit interest rate, the Company uses the Company’s incremental borrowing rate based on a lease-by-lease basis and are generally not includedthe information available at commencement date in determining the initial lease term.

Convertible Notes Payable and Derivative Instruments

We account for conversion options embedded in convertible notes in accordance with ASC 815. ASC 815 generally requires companies to bifurcate conversion options embedded in convertible notes from their host instruments and to account for them as free-standing derivative financial instruments. ASC 815 provides for an exception to this rule when convertible notes, as host instruments, are deemed to be conventional, as defined by ASC 815-40.

We account for convertible notes deemed conventional and conversion options embedded in non-conventional convertible notes which qualify as equity under ASC 815, in accordance with the provisions of ASC 470-20, which provides guidance on accounting for convertible securities with beneficial conversion features. Accordingly, we record, as a discount to convertible notes, the intrinsicpresent value of such conversion options based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt.

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future payments.

Recently Issued Accounting Pronouncements

 

In August 2018, the FASB issued ASU 2018-13, “Changes to Disclosure Requirements for Fair Value Measurements”, which will improve the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements, and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company will be evaluating the impact this standard will have on the Company’s financial statements.

 

In June 2018, the FASB issued an accounting pronouncement (FASB ASU 2018-07) to expand the scope of ASC Topic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. We areThe Company is currently in the process of evaluating the effects of this pronouncement on ourthe consolidated financial statements, including potential early adoption.

 

On April 1, 2018, the Company adopted the accounting pronouncement issued by the Financial Accounting Standards Board (“FASB”)FASB to clarify existing guidance on revenue recognition.how entities should present restricted cash and restricted cash equivalents in the statement of cash flows. This guidance includesrequires entities to show changes in the required steps to achievetotal of cash, cash equivalents and restricted cash in the core principle that a company should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Companycombined statement of cash flows. This guidance was adopted this pronouncement on a modified retrospective basis, and such adoption did not have a material impact on ourcombined financial position and/or results of operations.

 

On January 1, 2018, the Company adopted the accounting pronouncement issued by the FASB to clarify how entities should present restricted cash and restricted cash equivalents in the statement of cash flows. This guidance requires entities to show changes in the total of cash, cash equivalents and restricted cash in the combined statement of cash flows. This guidance was adopted on a retrospective basis, and such adoption did not have a material impact on combined financial position and/or results of operations.

 

In February 2016,July 2017, the FASBFinancial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2017-11 (“ASU No. 2016-02, Leases (Topic 842). This guidance revises2017-11”), which addressed accounting for (I) certain financial instruments with down round features and (II) replacement of the accounting relatedindefinite deferral for mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable non-controlling interests with a scope exception. The main provisions of Part I of ASU 2017-11 “change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to leases by requiring lesseesan entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) to recognize the effect of the down round feature when it is triggered. That effect is treated as a lease liabilitydividend and as a right-of-use assetreduction of income available to common shareholders in basic EPS.” Under previous US GAAP, warrants with a down round feature are not being considered indexed to the entity’s own stock, which results in classification of the warrant as a derivative liability. Under ASU 2017-11, the down round feature qualifies for all leases. The new lease guidance also simplifies the accounting for sale and leaseback transactions. Thisa scope exception from derivative treatment. ASU 2017-11 is effective for annual reportingpublic companies as of December 15, 2018 and interim periods within that fiscal year. Early adoption is permitted, including adoption in an interim period, with adjustments reflected as of the beginning of the fiscal year. The Company has issued financial instruments with down round features. The Company opted to adopt ASU 2017-11 in its three-month interim period ended September 30, 2017, which is effective from April 1, 2017, with adjustments reflected in the accumulated deficit of stockholders’ deficiency as of April 1, 2017. Please refer to Note 6.

The amendments in this Update require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this Update do not provide a definition of restricted cash or restricted cash equivalents. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments in this Update should be applied using a retrospective transition method to each period presented. Management does not expect to have a significant impact of this ASU on the Company’s unaudited interim condensed consolidated financial statements.

In May 2017, an accounting pronouncement was issued by the Financial Accounting Standards Board (“FASB”) ASU 2017-09, “Compensation - Stock Compensation: Scope of Modification Accounting.” ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The updated guidance is effective for interim and annual periods beginning after December 15, 2017, and early adoption is permitted. The Company doesadoption of this pronouncement is not believe the guidance willexpected to have a material impact on itsthe unaudited interim condensed consolidated financial statements.position and/or results of operations.

On April 1, 2017, the Company adopted the accounting pronouncement issued by the Financial Accounting Standards Board (“FASB”) to simplify the presentation of deferred income taxes within the balance sheet. This pronouncement eliminates the requirement that deferred tax assets and liabilities are presented as current or noncurrent based on the nature of the underlying assets and liabilities. Instead, the pronouncement requires that all deferred tax assets and liabilities, including valuation allowances, be classified as noncurrent. We adopted this pronouncement on a retrospective basis. The adoption of this guidance did not have a material impact on the Company’s unaudited interim condensed consolidated financial position and/or results of operations.

 

Results of Operations

 

As disclosed atThe fiscal year ended March 31, 2019 was the timefirst year of commercialization of the Bioflux MCT device, which was launched in April 2018, after receiving the recentits second and final Food and Drug Administrationrequired FDA clearance Biotricity immediately commenced the third-party manufacture of devicesin December 2017. To commence commercialization, we ordered device inventory from our FDA-approved manufacturer and hired its initial go-to-marketa small, captive sales force, choosing to launchwith deep experience in cardiac technology sales. We then commenced a limited market reviewsrelease of its deviceour product by identifying potential anchor clients who could be early adopters of our technology. We physically located our sales persons at those medical offices to ensure successful launch of our services and the workflows associated with doctorimplementation of proper workflow. During the first year of this limited market release, by March 31, 2019, we sold approximately 300 devices, which were used to perform MCT studies on patents, such that the Company earned combined device sales and patient use, including the operationstechnology fee income totally $398,200. Based on our success, in April 2019, we decided to expand sales of the monitoring centersproduct beyond limited release by doubling the size of our salesforce and our geographic footprint to 11 US states, and the sales pipeline of our product has begun to grow.

In line with its strategy, during the three months ended June 30, 2019, Biotricity more than doubled its total devices sold in the previous 12 months, such that Biotricity had deployed more than 650 devices as at June 30, 2019, to earn a combined device sales and technology fee income totally $327,000 for the three month period then ended. During this workflow entails. Though they can entail small amountssame period, Biotricity incurred a net loss of revenue, the primary focus$2,089,601 (loss per share of these limited market reviews is the development of key opinion leaders0.060 cents), such that will work withfrom its inception in 2009 to this date, the Company to improve the usehas generated an accumulated deficit of $37,129,096. During this period of initial commercialization of the deviceBioflux, we devoted, and all of the associated workflows in orderexpect to enhance commercialization and sales penetrationcontinue to devote, significant resources in the areas we have chosen for initial launch.

From its inception in July 2009 through to December 31, December 31, 3018, Biotricity has generated a deficit of $33,216,935.capital expenditures and research and development costs. We also expect to incur additional operating losses, principally because ofwe build the anticipated initial limitedinfrastructure required to support higher sales we expect to be associated with a measured and well-executed commercialization path for Bioflux, our planned first product, as well as anticipated costs of continued research and development associated with product improvement and new product development. As we approach final stages of the commercialization, we also expect to devote significant resources towards capital expenditures in order to install an adequate operating infrastructure that can provide excellent customer service and sales support.

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volume.

Three and Nine Months Ended December 31,June 30, 2019 and June 30, 2018 and December 31, 2017

 

Operating Revenues and Expenses

 

TheThe Company commenced commercialization of its first product on April 1, 2018, rolling out a limited market review to carefully rollout of its sales program to identified anchor customers in targeted areas of the U.S. During this period, the Company has used intelligence gained from its anchor clients to enhance its workflow, its monitoring and reporting capabilities, as well as its infrastructure, to expand the capabilities of its device. This device is a true four-in-one device, offering the ability to not only perform MCT studies, but to also outperform much of its competition by also providing Holter, Event Loop and Extended Holter reporting. Based on these customer facing enhancements that improve customer service and its success with its initial limited market review, the Company is now in a position to expand commercialization of its first product beyond the initial limited launch.

Revenues that have been earned are comprised of device sales revenues and technology fee revenues (software as a service). The device, together with its embedded licensed software, is available for sale to the medical center or physician, who is responsible for the delivery of clinical diagnosis and therapy. The remote monitoring, data collection and reporting services performed by our technology culminate in a patient study that is generally billable when it is complete and is issued to the physician. Recurring software service fee revenues are earned on each patient study conducted and these recurring revenues are expected to grow based on the number of devices sold. In this initial nine-month period,

During the three months ended June 30, 2019, the Company has earned total gross revenues of $220,060, comprised$327,000, compared to gross revenue of device sales revenues of $86,800 and software technology service fees of $133,260, respectively. Recurring revenues from this latter category have grown a little over 200% during$178,140 recognized in the immediately preceding three months ended DecemberMarch 31, 2018, when compared to2019, and $17,660 recognized in the three month period of June 30, 2018. Gross revenues have consistently reflected quarter over quarter increases, culminating an 83.6% increase from the immediately preceding three month period.

Gross profit margins Also reflective of this growth is the fact that gross revenues for the three and nine months ended DecemberJune 30, 2019 corresponded to 82.1% of gross revenues for the entire 12 previous months in the year ended March 31, 2018 were 76.6% and 61.6% respectively.2019. Gross profit margin for the three months ended June 30, 2019 was 65.7%.

 

Total operating expenses for the three and nine month periods ended December 31, 2018June 30, 2019 were $2,262,384 and $6,905,143,$2,304,515, compared to $2,095,590 and 4,932,260, respectively,$2,438,176, for the three and nine month periodsperiod ended December 31, 2017,June 30, 2018, as further described below.

 

For the three and nine month period ended December 31, 2018,June 30, 2019, we incurred general and administrative expenses of $1,868,113 and $6,015,942$2,091,019 compared to $1,717,666 and $3,825,602,$2,128,305, respectively for the three and nine month periods ended December 31,June 30, 2018. The increases were primarily due to increased payroll and compensation-related expenses associated with commercialization, including the building of a new sales force, as well as administrative and engineering staff to support customer deployment and further development of our products and processes; the increase was also due to professional fees, product marketing and promotion and other operating infrastructure required for the launch of a developed product.

 

For the three and nine month periods ended December 31, 2018,June 30, 2019, we incurred research and development expenses of $401,271 and $889,201,$213,496, compared to research and development expenses of $377,924 and $1,106,658$309,871 for the three and nine month periodsperiod ended December 31, 2017.June 30, 2018. These expenses vary based on efforts to improve the Bioflux and pursue development of future products and other product enhancements.

 

Net Loss

 

Net loss for the three and nine months ended December 31, 2018June 30, 2019 was $2,172,248 and $6,769,505$2,089,601 compared to a net loss of $2,095,590 and $5,832,264,$2,420,516, during the three and nine months ended December 31, 2018,June 30, 2019, resulting in a loss per share of $0.064 and $0.206, respectively,$0.060, for the three and nine month periodsperiod ended December 31,June 30, 2019 (June 30, 2018 (December 31, 2017 - $0.068 and $0.186)$0.076).

 

Translation Adjustment

 

Translation adjustment for the three and nine month periodsperiod ended December 31, 2018June 30, 2019 was a gainloss of $222,217 and a gain of $232,434 respectively,$22,586, as compared to lossesa loss of $23,424 and $193,771, respectively,$102,649, for the three and nine months ended December 31, 2017.June 30, 2018. This translation adjustment represents gains/losses that resulted from the translation of currency in the financial statements, from our functional currency of Canadian dollars to the reporting currency in U.S. dollars.

Liquidity and Capital Resources

 

The Company is in commercialization mode, while continuing to pursue the development mode, operating a research and development program to develop, obtain regulatory approval for, and commercializeof its proposed products.next generation MCT product as well as new products that are being developed.

 

We generally require cash to:

 

 purchase devices that will be placed in the field for pilot projects and to produce revenue,
launch sales initiatives,
fund our operations and working capital requirements,
 develop and execute our product development and market introduction plans,
 
fund research and development efforts, and
 
pay any debtexpense obligations as they come due.

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As a result of its being in development-mode and now early commercialization, the Company has incurred recurring losses from operations, and as at December 31, 2018,June 30, 2019, has an accumulated deficit of $33,216,935.$37,129,096. Management anticipates the Company will improve its liquidity through continued business development and additional debt or equity investment in the Company. To do this, the Company has developed and continues to pursue sources of funding, including but not limited to those described below.

 

DuringThe Company has developed and continues to pursue sources of funding that management believes if successful would be sufficient to support the nine months ended December 31, 2018,Company’s operating plan and alleviate any substantial doubt as to its ability to meet its obligations at least for one year from the date these consolidated financial statements are issued. As an example of this, the Company entered intohas raised $3,638,010 in funding from an arrangementagreement it has with a private equity firm,fund, in which the fund has committed to establish facility that allows it to raisepurchase up to $25 million in additional capital through salesshares of common stock,the Company at itsthe direction and sole discretion of the Company subject to certain conditions. During the nine months ended December 31, 2018,Company’s compliance with any funding conditions, including there being an effective registration statement registering the Company raised $3,039,480 in gross proceeds through sales of shares under this facility. Measured, discretionary use of this facility and any additional equity financing that the Company may undertake will be dilutive to existing stockholders.

In order to conserve its cash resources, the Company issues shares as compensation of some of its consultants. During the nine months ended December 31, 2018, the Company issued 508,333 shares of common stock issuable under the equity line. Currently, there is no effective registration registering the equity line shares; if the Company wishes to continue to draw from the from this line in the future, it will have to file a registration statement. The Company has raised promissory note funding from accredited individuals, totaling $2,183,498 as compensation to consultants that provide contractual services.at June 30, 2019, and raised a further $1,514,115 subsequently; it has a written commitment for an additional $5 million in debt financing from a private debt fund, but is also pursuing other potential sources of capital.

 

As we proceed with the commercialization of the Bioflux product development, we have devoted and expect to continue to devote significant resources in the areas ofon capital expenditures, andas well as research and development costs and operations, marketing and sales expenditures.

We expect to require additional funds to further develop our business plan, including the continuedanticipated commercialization of the Bioflux and the later introduction of Biolife products. Based on our current operating plans, we will require approximately $4 million ($7 million in order to accelerate commercialization) to grow our sales team and prudently establish further supporting infrastructure, as well as order devices that will be placed in the field to produce revenue ($7 million, if we were to further accelerate our commercialization plans).revenue. A portion of these funds will also go towards the further development of Bioflux in its next generation, in addition to including the marketing, sales, regulatory and the gathering of clinical intelligence that will provide leverage in introducingcosts to better introduce the product and providing high quality service tointo the market place. We expect to require an additional approximately $4 million to also complete the development of our Biolife product and increase penetration in new and existing markets and expand our intellectual property platform, which we anticipate would lead to profitability. Since it is impossible to predict with certainty the timing and amount of funds required to launch the Bioflux and Biolife product into new geographies andin any other markets or any of our other proposed products, we anticipate that we will need to raise additional funds through equity or debt offerings. Funds will also be requiredofferings or otherwise in order to develop and commercialize our other proposed products and to meet our expected future liquidity requirements.

 

Based on the above facts and assumptions, we believe our existing sources of cash and cash equivalents, along with other anticipated near-term equity financings, will be sufficient to meet our needs for the next twelve months from the filing date of this QuarterlyAnnual Report on Form 10-Q. We10-K. However, we will nonetheless need to issueseek additional debt or equity capital to respond to business opportunities and challenges, including our ongoing operating expenses, the protection ofprotecting our intellectual property, the commercial pursuit of developing or acquiring new lines of business and the enhancement ofenhancing our operating infrastructure. The terms of our future financings may be dilutive to, or otherwise adversely affect, holders of our common stock. We may also seek additional funds through arrangements with collaborators or other third parties. There can be no assurance we will continue to meet the conditions required to be able to sell shares under our current equity facility or that we will be able to raise this additional capital on acceptable terms, or at all. If we are unable to obtain additional funding on a timely basis, we may be required to modify our operating plan and otherwise curtail or slow the pace of development and commercialization.commercialization of our proposed product lines.

 

Net Cash Used in Operating Activities

 

During the ninethree months ended December 31, 2018,June 30, 2019, we used cash in operating activities of $4,063,375$1,328,375 compared to $3,236,926$1,209,549 for the ninethree months ended December 31, 2017.June 30, 2018. These activities involved expenditures undertaken on business development, marketing and operating activities, as well as continued research and product development.

 

Net Cash from Financing Activities

 

Net cash provided by financing activities was $3,029,038$1,329,802 for the ninethree months ended December 31, 2018June 30, 2019 compared to $5,289,281$550,835 for the ninethree months ended December 31, 2017. Financing activities during the nine months ended December 31, 2018 primarily related to the establishment of the Company’s committed facility discussed above, whereas activities of the corresponding prior year period related to funds that were previously raised through a private placement offering of equity to accredited investors.

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June 30, 2018.

Net Cash Used in Investing Activities

 

The Company did not use any net cash in investing activities in the ninethree month periods ended December 31, 2018June 30, 2019 and 2017.2018.

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Not required for a smaller reporting company.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 13a-15(e). The Company’s disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching the Company’s desired disclosure control objectives. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The Company’s certifying officers have concluded that the Company’s disclosure controls and procedures are effective in reaching that level of assurance. Internal control systems, no matter how well designed and operated, have inherent limitations. Therefore, even a system which is determined to be effective cannot provide absolute assurance that all control issues have been detected or prevented. Our systems of internal controls are designed to provide reasonable assurance with respect to financial statement preparation and presentation.

 

At the end of the period being reported upon, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to ensure that the material information required to be included in our Securities and Exchange Commission reports is accumulated and communicated to our management, including our principal executive and financial officer, as well as recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms relating to the Company.

 

Changes in Internal Controls

 

There were no changes in the Company’s internal controls over financial reporting that occurred during the three-month period ended December 31, 2018June 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II

OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

None.

 

Item 1A. Risk Factors

 

Not required for smaller reporting companies.

 

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

 

None.From August 9 to August 12, 2019, the Company issued promissory notes in the amount of $249,454 to two investors. The Notes mature due one year from the date of issue. Interest on the notes is 12% and is payable quarterly and at maturity of the note. At the discretion of the holder of the note and the approval of the Company, payment of the note together with accrued interest thereon may be made using equity of the Company at a prescribed discount, or otherwise in cash. The notes will entitle the two holders to warrants allowing them to purchase a total of 37,500 shares of the Company’s common stock at $1.50 per share for three years from the date the notes were issued.

On August 14, 2019, the Company received 1,000,000 from an investor. The Company and the investor have not yet finalized terms of this investment but the Company expects to issue the investor a note and expects the terms to be the similar to the terms of the notes described in the first paragraph of this Item 2.

The securities were offered and sold pursuant to an exemption from the registration requirements under Section 4(a)(2) of the Securities Act since, among other things, the transactions did not involve a public offering.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits

 

10.1 Form of Promissory Note

31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.1 XBRL Instance.

101.SCH XBRL Taxonomy Extension Schema.

101.CAL XBRL Taxonomy Extension Calculation.

101.DEF XBRL Taxonomy Extension Definition.

101.LAB XBRL Taxonomy Extension Labels.

101.PREXBRL Taxonomy Extension Presentation.

 

3435
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, this 1914th day of FebruaryAugust 2019.

 

BIOTRICITY INC.

 

By:/s/ Waqaas Al-Siddiq 
Name:Waqaas Al-Siddiq 
Title:Chief Executive Officer 
 (principal executive officer) 

 

By:/s/ John Ayanoglou 
Name:John Ayanoglou 
Title:Chief Financial Officer 
 (principal financial and accounting officer) 

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