UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
Form 10-Q10-Q/A
(Amendment No. 1)
(Mark One)
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| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF |
For the quarterly period ended | |
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF |
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For the period from ______________ to_______________
Commission file number: 333-201719000-56074
BIOTRICITY INC.
(NameExact name of Registrantregistrant as specified in Its Charter)its charter)
Nevada | 30-0983531 | |
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State or of | (I.R.S. Employer Identification No.) | |
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(800) 590-4155
275 Shoreline Drive, Suite 150
Redwood City, California94065
(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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes [X] No[ ] ☒ 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”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act).
Large accelerated filer ☐ | Accelerated filer ☐ |
Non-accelerated filer ☒ | Smaller reporting company ☒ |
Emerging growth company ☐ |
Large accelerated filer [ ]
Accelerated filer [ ]
Non-accelerated filer [ ]
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: 23,268,659 shares of Common Stock, $0.001 par value, at February 12, 2018. TheAugust 16, 2021. As at that same date, the Company also has 8,443,1721,466,718 Exchangeable Shares outstanding as of February 12, 2018, that convert directly into common shares, which when combined with its Common Stock produce an amount equivalent to 31,711,83142,154,296 outstanding voting securities.
BIOTRICITY INC.
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EXPLANATORY NOTE
This Amendment No. 1 (the “Amendment”) to the Quarterly Report on Form 10-Q of Botricity Inc. (the “Company”) for the quarter ended June 30, 2021, originally filed with the Securities and exchange Commission on August 17, 2021 (the “Original Form 10-Q”) is being filed to complete the filing by tagging the Original Form 10-Q for XBRL which not originally included as a result of technical difficulties.
This Amendment contains new certifications by the Company’s principal executive officer and principal financial officer which are being filed as exhibits to the Amendment.
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PART 1
FINANCIAL INFORMATION
Item 1 – Condensed Consolidated Financial Statements |
BIOTRICITY INC. CONDENSED CONSOLIDATED BALANCE SHEETS AS AT JUNE 30, 2021 (unaudited) and MARCH 31,
See accompanying notes to unaudited condensed consolidated interim financial statements
BIOTRICITY INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND 2020 (Expressed in US Dollars)
See accompanying notes to unaudited condensed consolidated interim financial statements
BIOTRICITY INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND 2020 (UNAUDITED)
See accompanying notes to unaudited condensed consolidated interim financial statements
BIOTRICITY INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND 2020 (Expressed in US Dollars)
See accompanying notes to unaudited condensed consolidated interim financial statements
BIOTRICITY INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2021 (Unaudited) (Expressed in US dollars) 1. NATURE OF OPERATIONS Biotricity Inc. (formerly MetaSolutions, Inc.) (the “Company”) was incorporated under the laws of the State of Nevada on August 29, 2012. iMedical Innovations Inc. (“iMedical”) was incorporated on July 3, 2014 under the laws of the Province of Ontario, Canada and became a wholly-owned subsidiary of Biotricity through reverse take-over. Both the Company and iMedical are engaged in research and development activities within the remote monitoring segment of preventative care. They are focused on a realizable healthcare business model that has an existing market and commercialization pathway. As such, its efforts to date have been devoted in building technology that enables access to this market through the development of a tangible product. 2. BASIS OF PRESENTATION, MEASUREMENT AND CONSOLIDATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) for interim financial information and the Securities and Exchange Commission (“SEC”) instructions to Form 10-Q and Article 8 of SEC Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with Biotricity’s audited consolidated financial statements for the years ended March 31, |
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The accompanying unaudited condensed consolidated financial statements are expressed in United States dollars (“USD”). In the opinion of |
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The unaudited condensed consolidated financial statements include the accounts of the Company and |
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Liquidity and Basis of Presentation The Company is in the early stages of commercializing its first product. It is concurrently in development mode, operating a research and development program in order to develop an ecosystem of medical technologies, and, where required or deemed advisable, obtain regulatory approvals for, and commercialize other proposed products. The Company has incurred recurring losses from operations, and as at June 30, 2021, has an accumulated deficit of $68,715,051 and a working capital deficiency of $9,545,069. The Company launched its first commercial sales program as part of a limited market release, during the year ended March 31, 2019, using an experienced professional in-house sales team. A full market release ensued during the year ended March 31, 2020. Management anticipates the Company will continue on its revenue growth trajectory and improve its liquidity through continued business development and after additional equity or debt capitalization of the Company. The Company has developed and continues to pursue sources of funding that management believes if successful would be sufficient to support the Company’s operating plan and alleviate any substantial doubt as to its ability to meet its obligations at least for a period of one year from the date of these consolidated financial statements. During the fiscal year ended March 31, 2021, the Company closed a number of private placements offering of convertible notes, which have raised net cash proceeds of $11,375,690. During the fiscal quarter ended June 30, 2021, $1,157,500 of convertible notes issued during last year was converted into common shares. During the fiscal quarter ended June 30, 2021, the Company raised an additional $499,900 through government EIDL loan, and $250,000 through short term loans.
The Company’s operating plan is predicated on a variety of assumptions including, but not limited to, the level of product demand, cost estimates, its ability to continue to raise additional financing and the state of the general economic environment in which the Company operates. There can be no assurance that these assumptions will prove to be accurate in all material respects, or that the Company will be able to successfully execute its operating plan. In the absence of additional appropriate financing, the Company may have to modify its operating plan or slow down the pace of development and commercialization of its proposed products. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain restrictions on our operations, in the case of debt financing or cause substantial dilution for our stockholders, in case of equity financing. Due to the disruption of the COVID-19 crisis, the Company’s business activities might be subject to certain level of adverse impact. To the date of the issuance of these financial statements, the Company is still assessing the impact on its business, results of operations, financial position and cash flows, which will be accounted for when the reliable estimates will become available. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates The preparation of the consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Areas involving significant estimates and assumptions include: deferred income tax assets and related valuation allowance, accruals and valuation of derivatives, convertible promissory notes, stock options, and assumptions used in the going concern assessment. Actual results could differ from those estimates. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the period in which they become known. The Company has adopted the Financial |
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BIOTRICITY INC. |
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CONDENSED CONSOLIDATED BALANCE SHEETS |
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(Expressed in US Dollars) |
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| As at December 31, 2017 | As at March 31, 2017 |
| (unaudited) | (audited) |
| $ | $ |
CURRENT ASSETS |
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Cash | 2,482,262 | 424,868 |
Harmonized sales tax recoverable | 27,991 | 939 |
Deposits and other receivables | 29,682 | 14,705 |
Total current assets | 2,539,935 | 440,512 |
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Deposits and other receivables | 33,000 | 33,000 |
TOTAL ASSETS | 2,572,935 | 473,512 |
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CURRENT LIABILITIES |
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Accounts payable and accrued liabilities[Note 4] | 630,089 | 1,137,454 |
Convertible promissory notes[Note 5] | - | 1,556,990 |
Derivative liabilities[Note 6] | - | 2,163,884 |
TOTAL LIABILITIES | 630,089 | 4,858,328 |
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STOCKHOLDERS' EQUITY (DEFICIENCY) |
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Preferred stock, $0.001 par value, 10,000,000 authorized as at December 31, 2017 and March 31, 2017, respectively, 1 share issued and outstanding as at December 31, 2017 and March 31, 2017, respectively[Note 7] | 1 | 1 |
Common stock, $0.001 par value, 125,000,000 authorized as at December 31, 2017 and March 31, 2017, respectively. | 31,531 | 27,199 |
Shares to be issued[Note 7] | 601,729 | - |
Additional paid-in-capital | 25,594,234 | 14,308,583 |
Accumulated other comprehensive loss | (628,694) | (413,384) |
Accumulated deficit | (23,655,955) | (18,307,215) |
Total stockholders' equity (deficiency) | 1,942,846 | (4,384,816) |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) | 2,572,935 | 473,512 |
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Commitments [Note 9] |
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Subsequent Events [Note 10] |
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See accompanying notes to condensed consolidated interim financial statements |
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BIOTRICITY INC. |
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS |
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FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2017 AND 2016 |
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(Expressed in US Dollars) |
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| Three Months Ended December 31, 2017 | Three Months Ended December 31, 2016 | Nine Months Ended December 31, 2017 | Nine Months Ended December 31, 2016 |
| (unaudited) | (unaudited) | (unaudited) | (unaudited) |
| $ | $ | $ | $ |
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REVENUE | - | - | - | - |
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EXPENSES |
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General and administrative expenses[Notes 7, 8 and 9] | 1,717,666 | 1,858,536 | 3,825,602 | 3,547,990 |
Research and development expenses | 377,924 | 333,565 | 1,106,658 | 847,938 |
TOTAL OPERATING EXPENSES | 2,095,590 | 2,192,101 | 4,932,260 | 4,395,928 |
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Accretion expense including day one derivative loss[Note 5] | - | 307,216 | 879,416 | 901,299 |
Change in fair value of derivative liabilities[Note 6] | - | 125,353 | 20,588 | 714,453 |
NET LOSS BEFORE INCOME TAXES | (2,095,590) | (2,624,670) | (5,832,264) | (6,011,680) |
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Income taxes | - | - | - | - |
NET LOSS | (2,095,590) | (2,624,670) | (5,832,264) | (6,011,680) |
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Translation adjustment | (23,424) | 24,635 | (193,771) | (185,057) |
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COMPREHENSIVE LOSS | (2,119,014) | (2,600,035) | (6,026,035) | (6,196,737) |
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LOSS PER SHARE, BASIC AND DILUTED | (0.068) | (0.100) | (0.186) | (0.236) |
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WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | 30,799,342 | 26,162,293 | 31,374,911 | 25,427,620 |
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See accompanying notes to the condensed consolidated interim financial statements |
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3
BIOTRICITY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED DECEMBER 31, 2017 AND 2016
(Expressed in US Dollars)
| Nine Months Ended December 31, 2017 | Nine Months Ended December 31, 2016 |
| (unaudited) | (unaudited) |
| $ | $ |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net loss | (5,832,264) | (6,011,680) |
Adjustments to reconcile net loss to net cash used in operations |
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Stock based compensation | 646,970 | 405,058 |
Issuance of shares for services | 1,325,128 | 805,329 |
Issuance of warrants for services, at fair value | 272,630 | 474,232 |
Accretion expense, including day one derivative loss | 879,416 | 901,296 |
Change in fair value of derivative liabilities | 20,588 | 714,454 |
Fair value of warrants issued | - | - |
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Changes in operating assets and liabilities: |
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Harmonized sales tax recoverable | (27,052) | 18,358 |
Deposits and other receivables | (14,977) | 838,492 |
Accounts payable and accrued liabilities | (507,365) | 16,613 |
Net cash used in operating activities | (3,236,926) | (1,837,848) |
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Issuance of shares, net | 4,860,970 | - |
Proceeds from exercise of warrants | 428,311 | 105,500 |
Issuance of convertible debentures, net | - | 1,899,700 |
Proceeds from issuance of stock options | - | - |
Due to shareholders | - | (50,724) |
Net cash provided by financing activities | 5,289,281 | 1,954,476 |
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Effect of foreign currency translation | 5,039 | (149,612) |
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Net increase in cash during the period | 2,052,355 | 116,628 |
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Cash, beginning of period | 424,868 | 53,643 |
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Cash, end of period | 2,482,262 | 20,659 |
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See accompanying notes to condensed consolidated interim financial statements |
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BIOTRICITY, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 3, 2017 (Unaudited)
(Expressed in US dollars)
1. NATURE OF OPERATIONS
Biotricity Inc. (formerly MetaSolutions, Inc.) (the “Company”) was incorporated under the laws of the State of Nevada on August 29, 2012.
iMedical Innovations Inc. (“iMedical”) was incorporated on July 3, 2014 under the laws of the Province of Ontario, Canada.
Both the Company and iMedical are engaged in research and development activities within the remote monitoring segment of preventative care. They are focused on a realizable healthcare business model that has an existing market and commercialization pathway. As such, its efforts to date have been devoted in building technology that enables access to this market through the development of a tangible product.
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 as further explained in Note 7 to the unaudited interim condensed 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 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 unaudited interim condensed 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 Exchange Commission (“SEC”) instructions to Form 10-Q and Article 8 of SEC Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with the Company’s audited financial statements for the three and twelve months ended March 31, 2017 and for the twelve months ended December 31, 2016 and December 31, 2015 and notes thereto included in the Form 10-KT filed with the SEC on June 29, 2017. 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 three and nine months ended December 31, 2017 are not necessarily indicative of the results that may be expected for the year ending March 31, 2018. The Company’s fiscal year-end is March 31.
The unaudited interim condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Significant intercompany accounts and transactions have been eliminated.
Liquidity and Basis of Presentation
The Company is in development mode, operating a research and development program to develop, obtain regulatory approval for, and commercialize its proposed products. The Company has incurred recurring losses from operations, and as at December 31, 2017, and has an accumulated deficit of $23,655,955. Management anticipates the Company will attain profitable status and improve its liquidity through continued business development and after additional debt or equity investment in the Company. The Company has developed and continues to pursue sources of funding that management believes if successful would be sufficient to support the Company’s operating plan and alleviate any substantial doubt as to its ability to meet its obligations at least for one year from the date these consolidated financial statements are issued. As an example of this, the Company filed a shelf prospectus under which it conducted a registered sale of shares during the three months ended December 31, 2017 that raised gross proceeds of $2,475,901.
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 financing, the Company may have to modify its operating plan to slow down the pace for development and commercialization of its proposed products.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of the unaudited interim 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: 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
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, 2017 and 2016.
Cash
Cash includes cash on hand and balances with banks.
6
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, the Company may be required to make 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.
Foreign Currency Translation
The functional currency of the Canadian based company is the Canadian dollar and the US based company is USD. 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 interim unaudited condensed consolidated 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’ deficit. The Company has not, to the date of these unaudited interim condensed consolidated financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
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:
Fair Value of Financial Instruments
ASC 820 defines fair value, establishes a framework for measuring fair value and expands required disclosure about fair value measurements of assets and liabilities. ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: ● | Level 1 – Valuation based on quoted market prices in active markets for identical assets or liabilities. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
● | Level 2 – Valuation based on quoted market prices for similar assets and liabilities in active markets. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
● | Level 3 – Valuation based on unobservable inputs that are supported by little or no market activity, therefore requiring management’s best estimate of what market participants would use as fair value. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments or interest rates that are comparable to market rates. These financial instruments include cash, accounts receivable, deposits and other receivables, convertible promissory notes, and accounts payable and accrued liabilities. The Company’s cash and derivative liabilities, which are carried at fair values, are classified as a Level 1 and Level 3, respectively. The Company’s bank accounts are maintained with financial institutions of reputable credit, therefore, bear minimal credit risk.
Leases The Company is the lessee in a lease contract when the Company obtains the right to use the asset. Operating leases are included in the line items right-of-use asset, lease obligation, current, and lease obligation, long-term in the consolidated balance sheet. Right-of-use (“ROU”) asset represents the Company’s right to use an underlying asset for the lease term and lease obligations represent the Company’s obligations to make lease payments arising from the lease, both of which are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Leases with a lease term of 12 months or less at inception are not recorded on the consolidated balance sheet and are expensed on a straight-line basis over the lease term in our consolidated statement of income. The Company determines the lease term by agreement with lessor. As our lease do not provide an implicit interest rate, the Company uses the Company’s incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. Government loan Loans that were received from the federal government, which contain certain operating conditions and with terms of over twelve months, are recorded by the Company as long-term liabilities. Convertible Promissory Notes Payable and Derivative Instruments The Company has adopted the provisions of ASU 2017-11 to account for the down round features of warrants issued with private placements effective as of April 1, 2017. In doing so, warrants with a down round feature previously treated as derivative liabilities in the consolidated balance sheet and measured at fair value are henceforth treated as equity, with no adjustment for changes in fair value at each reporting period. Previously, the Company accounted for conversion options embedded in convertible notes in accordance with ASC 815. ASC 815 generally requires companies to bifurcate conversion options embedded in convertible notes from their host instruments and to account for them as free-standing derivative financial instruments. ASC 815 provides for an exception to this rule when convertible notes, as host instruments, are deemed to be conventional, as defined by ASC 815-40. The Company accounts for convertible notes deemed conventional and conversion options embedded in non-conventional convertible notes which qualify as equity under ASC 815, in accordance with the provisions of ASC 470-20, which provides guidance on accounting for convertible securities with beneficial conversion features. Accordingly, the Company records, as a discount to convertible notes, the intrinsic value of such conversion options based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt. Recently Issued Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments.” This pronouncement, along with subsequent ASUs issued to clarify provisions of ASU 2016-13, changes the impairment model for most financial assets and will require the use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. In developing the estimate for lifetime expected credit loss, entities must incorporate historical experience, current conditions, and reasonable and supportable forecasts. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. On November 19, 2019, the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), finalized various effective date delays for private companies, not-for-profit organizations, and certain smaller reporting companies applying the credit losses (CECL), the revised effective date is January 2023.
In July 2019, the FASB issued ASU 2019-07, Codification Updates to SEC Sections. This ASU amends various SEC paragraphs pursuant to the issuance of SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company Reporting Modernization. One of the changes in the ASU requires a presentation of changes in stockholders’ equity in the form of a reconciliation, either as a separate financial statement or in the notes to the financial statements, for the current and comparative year-to-date interim periods. The Company presented changes in stockholders’ equity as separate financial statements for the current and comparative year-to-date interim periods beginning on April 1, 2019. The additional elements of the ASU did not have a material impact on the Company’s consolidated financial statements. In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company is currently evaluating the impacts of the provisions of ASU 2019-12 on its financial condition, results of operations, and cash flows. In March 2020, the FASB issued ASU No. 2030-20 Codification Improvements to Financial Instruments, An Amendment of the FASB Accounting Standards Codification: a) in ASU No. 2016-01, b) in Subtopic 820-10, c) for depository and lending institutions clarification in disclosure requirements, d) in Subtopic 470-50, e) in Subtopic 820-10, f) Interaction of Topic 842 and Topic 326, g) Interaction of the guidance in Topic 326 and Subtopic 860-20.The amendments in this Update represent changes to clarify or improve the Codification. The amendments make the Codification easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. For public business entities updates under the following paragraphs: a), b), d) and e) are effective upon issuance of this final update. The effective date for c) is for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company does not expect that the new guidance will significantly impact its consolidated financial statements. The Company continues to evaluate the impact of the new accounting pronouncement, including enhanced disclosure requirements, on our business processes, controls and systems.
4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable as at June 30, 2021, and March 31, 2021 include $177,840 and $182,995, respectively, due to a shareholder and executive of the Company, primarily as a result of that individual’s role as an employee. These amounts are unsecured, non-interest bearing and payable on demand. 5. CONVERTIBLE PROMISSORY NOTES AND SHORT TERM LOANS
During the year ended March 31, 2021, the Company raised additional $500,000 in promissory notes that were subject to the same terms of the notes previously issued. During the year ended March 31, 2021, the Company made repayment of the notes and short term loan in the amount of $908,082, and one noteholder further paid the Company $67,941 to exercise warrants related to shares of the Company’s common stock. During the year ended March 31, 2021, one noteholder converted a $100,000 note and $15,000 accrued interest into Series A preferred shares. During the three months ended June 30, 2021, the Company raised additional $250,000 in short-term loans, that was subject to the same terms of short-term loans previously issued. During the three months ended June 30, 2021, the Company made repayments of notes and short term loan in the amount of $110,220. As at June 30, 2021, the Company had a balance in promissory note of $550,000 (March 31, 2021 - $600,577). As at June 30, 2021, the Company had a balance in short term loan of $1,250,000 (March 31, 2021 – $1,059,643) General and administrative expenses included interest expense on the above notes of $56,220 and $37,456 for the three months ended June 30, 2021 and 2020, respectively.
For first series of Series A Notes, commencing six months following the Issuance Date, and at any time thereafter (provided the Holder has not received notice of the Company’s intent to prepay the note), at the sole election of the Holder, any amount of the outstanding principal and accrued interest of this note (the “Outstanding Balance”) may be converted into that number of shares of Common Stock equal to: (i) the Outstanding Balance divided by (ii) 75% of the volume weighted average price of the Common Stock for the 5 trading days prior to the Conversion Date (the conversion price). For the first series of Series A Notes, the notes will automatically convert into common stock (in each case, subject to the trading volume of the Company’s common stock being a minimum of $500,000 for each trading day in the 20 consecutive trading days immediately preceding the conversion date), upon the earlier to occur of (i) the Company’s common stock being listed on a national securities exchange, in which event the conversion price will be equal to 75% of the volume weighted average price of the common stock for the 20 trading days prior to the conversion date, or (ii) upon the closing of the Company’s next equity round of financing for gross proceeds of greater than $5,000,000, in which event the conversion price will be equal to 75% of the price per share of the common stock (or of the conversion price in the event of the sale of securities convertible into common stock) sold in such financing. The Company may, at its discretion redeem the notes for 115% of their face value plus accrued interest.
For second series of Series A Notes, the notes could be converted into shares of common stock, at the option of the holder, commencing six months from issuance, at a conversion price equal to the lower of $per share or 75% of the volume weighted average price of the common stock for the five trading days prior to the conversion date For the second series of Series A Notes, the notes will automatically convert into common stock (in each case, subject to the trading volume of the Company’s common stock being a minimum of $500,000 for each trading day in the 20 consecutive trading days immediately preceding the conversion date), upon the earlier to occur of (i) the Company’s common stock being listed on a national securities exchange, in which event the conversion price will be equal to the lower of $4.00 per share or 75% of the volume weighted average price of the common stock for the 20 trading days prior to the conversion date, or (ii) upon the closing of the Company’s next equity round of financing for gross proceeds of greater than $5,000,000, in which event the conversion price will be equal to the lower of $4.00 per share or 75% of the price per share of the common stock (or of the conversion price in the event of the sale of securities convertible into common stock) sold in such financing. The Company may, at its discretion redeem the notes for 115% of their face value plus accrued interest. The Company was obligated to issue warrants that accompany the convertible notes and provide 50% warrant coverage. The warrants have a 3-year term from date of issuance and an exercise price that is 120% of the 20-day volume weighted average price of the Company’s common shares at the time final closing. The Company was obligated to pay the placement agent of the first series of Series A Notes a 12% cash fee for $8,925,550 (face value) of the notes and 2.5% cash fee and other sundry expenses for the remaining $2,350,000 (face value) of the notes. Net proceeds to the Company from Series A Notes issuance up to March 31, 2021 amounted to $10,135,690 after payment of the relevant financing related fees. The Company was also obligated to issue warrants to the placement agent that have a 10-year term and cover 12% of funds raised for $8,925,550 (face value) of the notes (first series) and 2.5% of funds raised for the remaining $2,350,000 (face value) of notes (second series), with an exercise price that is 120% of the 20-day volume weighted average price of the Company’s common shares at the time final closing. On final closing, which occurred on January 8, 2021, the warrants’ exercise price was struck at $1.06 per share. Prior to January 8, 2021 (final closing date), the Company determined that the conversion and redemption features, investor warrants and placement agent warrants contained in those Notes represented a single compound derivative liability that meets the requirements for liability classification under ASC 815. The Company accounted for these obligations by determining the fair value of the related derivative liabilities associated with the embedded conversion and redemption features, as well as investor warrants and placement agent warrants. The initial fair value of the derivative liabilities generated as a result of issuing the Series A Notes was $6,932,194 (Note 7). Subsequently, the exercise price of all warrants was concluded and locked to $1.06 as of January 8, 2021. Since the exercise price was no longer a variable, the Company concluded that the noteholder and placement agent warrants should no longer be accounted for as a derivative liability in accordance with ASC 815 guidelines related to equity indexation and classification. The derivative liabilities related to those warrants were therefore marked to market as of January 8, 2021 and then transferred to equity (collectively, “End of warrants derivative treatment”) (Note 7 and Note 8). For the Series A Notes, The Company recognized debt issuance costs in the amount of $2,301,854 and treated these as a deduction from the convertible note liabilities directly, as a contra-liability, and amortized the debt issuance cost over the term of the Notes. The Company also recognized initial debt discount in the amount of $8,088,003 and accreted the interest over the remaining lives of those Notes. At March 31, 2021, the Company recorded $432,824 interest accruals for those notes’ balance. In connection with the foregoing, the Company relied upon the exemption from registration provided by Section 4(a)(2) under the Securities Act of 1933, as amended, for transactions not involving a public offering. During the year ended March 31, 2021, $739,000 (face value) of Series A Notes with unpaid interest were converted into common shares. At March 31, 2021, common shares were issued and an additional common shares were to be issued subsequent to year end. During the quarter ended June 30, 2021, the common shares were issued. At June 30, 2021, the Company recorded $656,902 interest accruals for the Series A Notes. In connection with the foregoing, the Company relied upon the exemption from registration provided by Section 4(a)(2) under the Securities Act of 1933, as amended, for transactions not involving a public offering. During the three months ended June 30, 2021, $1,157,500 (face value) of Series A Notes with unpaid interests were converted into common shares, out of which were common shares that would be issued subsequent to June 30, 2021.
In addition, during the year ended March 31, 2021, the Company also issued $1,312,500 (face value) of convertible promissory notes (“Series B Notes”) to various accredited investors. Commencing six months following the issuance date, and at any time thereafter, subject to the Company’s Conversion Buyout clause, at the sole election of the holder, any amount of the outstanding principal and accrued interest of the note (the “outstanding balance”) may be converted into that number of shares of Common Stock equal to: (i) the outstanding balance divided by (ii) the Conversion Price. Partial conversions of the note shall have the effect of lowering the outstanding principal amount of the note. The holder may exercise such conversion right by providing written notice to the Company of such exercise in a form reasonably acceptable to the Company (a “conversion notice”). Conversion price means (subject in all cases to proportionate adjustment for stock splits, stock dividends, and similar transactions), seventy-five percent (75%) multiplied by the average of the three (3) lowest closing prices during the previous ten (10) trading days prior to the receipt of the conversion notice. The Series B Notes will automatically convert into common stock upon a merger, consolidation, exchange of shares, recapitalization, reorganization, as a result of which the Company’s common stock shall be changed into another class or classes of stock of the Company or another entity, or in the case of the sale of all or substantially all of the assets of the Company other than a complete liquidation of the Company. Within the first 180 days after the issuance date, the Company may, at its discretion redeem the notes for 115% of their face value plus accrued interest. The Company is obligated to issue warrants that accompany the convertible notes and provide 50% warrant coverage. The warrants have a 3-year term from date of issuance and an exercise price that is $1.06 per share for 100,000 warrant shares and $1.5 per share for 212,500 warrant shares. Net proceeds to the Company from convertible note issuances to March 31, 2021 amounted to $1,240,000 after the original issuance discount as well as payment of the financing related fees. The Company determined that the conversion and redemption features contained in the Series B Notes represented a single compound derivative liability that meets the requirements for liability classification under ASC 815. The Company accounted for these obligations by determining the fair value of the related derivative liability associated with the embedded conversion and redemption features. The initial fair value of the derivative liabilities generated as a result of issuing the Series B Notes was $497,042 (Note 7). The Company recognized debt issuance costs in the amount of $10,000 and treated these as a deduction from the convertible note liabilities directly, as a contra-liability, and amortized the debt issuance cost over the term of the Series B Notes. The Company recognized initial debt discount in the amount of $1,312,500 and accreted the interest over the remaining lives of those notes. At March 31, 2021, the Company recorded $8,360 interest accruals for the Series B Notes. In connection with the foregoing, the Company relied upon the exemption from registration provided by Section 4(a)(2) under the Securities Act of 1933, as amended, for transactions not involving a public offering. At June 30, 2021, the Company recorded $24,722 interest accruals for the Series B Notes. In connection with the foregoing, the Company relied upon the exemption from registration provided by Section 4(a)(2) under the Securities Act of 1933, as amended, for transactions not involving a public offering.
SCHEDULE OF CONVERTIBLE PROMISSORY NOTES AND SHORT TERM LOANS
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
$ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Year ended March 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Face value of convertible notes issued | 12,588,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt discount | (9,400,503 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt issuance cost | (2,311,854 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Day 1 value of convertible notes issued | 875,643 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accretion of debt discount | 1,802,807 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of debt issuance cost | 678,348 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total accretion and amortization expenses | 2,481,155 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion to common shares (Note 8) | (739,000 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2021 | 2,617,798 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Three months ended June 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accretion of debt discount | 1,833,967 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amortization of debt issuance cost | 501,200 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total accretion and amortization expenses | 2,335,167 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion to common shares (Note 8) | (1,157,500 | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2021 | 3,795,465 |
General and administrative expenses include interest expense on the above debt instruments of $321,878 for the three months ended June 30, 2021 (June 30, 2020: $NIL).
6. FEDERALLY GUARANTEED LOANS
Economic Injury Disaster Loan (“EIDL”)
In April 2020, the Company received $370,900 from the U.S. Small Business Administration (SBA) under the captioned program. The loan has a term of 30 years and an interest rate of 3.75%, without the requirement for payment in its first 12 months. The Company may prepay the loan without penalty at will.
In May 2021, the Company received an additional $499,900 from the SBA under the same terms.
Payment Protection Program (“PPP”) Loan
In May 2020, Biotricity received loan proceeds of $1,200,000 (the “PPP Loan”) under the Paycheck Protection Program established by the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) administered by the U.S. Small Business Administration (“SBA”). The Company met the criteria for the loan forgiveness and applied for the loan forgiveness in March 2021. For the year ended March 31, 2021, the Company recognized the loan forgiveness as a reduction to payroll expense in the amount of $1,156,453 and a reduction to the rent expense of $43,547. The loan forgiveness was granted by the SBA in May 2021. As at June 30, 2021, the balance of outstanding PPP loan is NIL (March 31, 2021: NIL).
Operating Leases
16 |
7. DERIVATIVE LIABILITIES
On December 19, 2019 and January 9, 2020, the Company issued 6,000,000 and of these were issued on conversion of $ of promissory notes that had previously been issued for cash proceeds in October 2019. Series A preferred shares; of these were issued for cash proceeds of $
On May 22, 2020, another Series A preferred shares were issued as a result of a combined transaction that included the conversion of $100,000 in promissory notes (Note 5(a)) and $15,000 (Note 5(a)) in accrued interest for preferred shares, as well as a purchase of preferred shares for cash proceeds of $100,000.
The Company analyzed the compound features of variable conversion and redemption embedded in this instrument, for potential derivative accounting treatment on the basis of ASC 820 (Fair Value in Financial Instruments), ASC 815 (Accounting for Derivative Instruments and Hedging Activities), Emerging Issues Task Force (“EITF”) Issue No. 00–19 and EITF 07–05, and determined that the embedded derivatives should be bundled and valued as a single, compound embedded derivative, bifurcated from the underlying equity instrument, treated as a derivative liability, and measured at fair value.
SCHEDULE OF DERIVATIVE LIABILITIES
Total | ||||
$ | ||||
Derivative liabilities as at March 31, 2020 | 1,144,733 | |||
Derivative fair value at issuance during fiscal 2021 | 41,749 | |||
Change in fair value of derivatives | (776,440 | ) | ||
Derivative liabilities as at March 31, 2021 | 410,042 | |||
Change in fair value of derivatives during the period | (203,525 | ) | ||
Derivative liabilities as at June 30, 2021 | $ | 206,517 |
The lattice methodology was used to value the derivative components, using the following assumptions:
SCHEDULE OF DERIVATIVE COMPONENTS VALUATION ASSUMPTIONS
Assumptions | ||||
Dividend yield | 12 | % | ||
Risk-free rate for term | 0.26% – 1.7 | % | ||
Volatility | 111.7% - 121.5 | % | ||
Remaining terms (Years) | 2.50 to 5.03 | |||
Stock price ($ per share) | $ and $ |
In addition, the Company recorded derivative liabilities related to the conversion and redemption features of the convertible notes, as well as warrants that were issued in connection with the convertible notes, during the year ended March 31, 2021 (Note 5(b)). As the warrant exercise price became final and locked, the derivative liabilities related to those warrants were marked to market and transferred to equity (Note 5(b)). Any noteholder and placement agent warrants that were issued after the finalization of exercise price was accounted for as equity.
SCHEDULE OF DERIVATIVE LIABILITIES
The Company leases office space and certain office equipment under operating lease agreements. The lease term begins on the date of initial possession of the leased property for purposes of recognizing lease expense on a straight-line basis over the term of the lease. Lease renewal periods are considered on a lease-by-lease basis and are generally not included in the initial lease term.
Total | ||||
$ | ||||
For the year ended March 31, 2021 | ||||
Derivative fair value at issuance | ||||
Series A notes (Note 5(b)) | 6,932,194 | |||
Series B notes (Note 5(b)) | 497,042 | |||
7,429,236 | ||||
Fair value change upon end of warrants derivative treatment (Note 5(b)) | (82,444 | ) | ||
Carrying amount of warrants transferred equity upon end of warrants derivative treatment (Note 5(b)) | (3,937,664 | ) | ||
Conversion to common shares (Note 5(b)) | (225,284 | ) | ||
Change in fair value of derivative liabilities | 450,012 | |||
Balance at March 31, 2021 | 3,633,856 | |||
For the three months ended June 30, 2021 | ||||
Conversion to common shares (Note 5(b)) | (403,108 | ) | ||
Change in fair value of derivative liabilities | 502,508 | |||
Balance at June 30, 2021 | 3,733,256 |
The monte carlo methodology was used to value the convertible note and warrant derivative components, using the following assumptions:
SCHEDULE OF DERIVATIVE COMPONENTS VALUATION ASSUMPTIONS
Income Taxes
The Company accounts for income taxes in accordance 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 than not to be realized.
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 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. The Company issues compensatory shares for services including, but not limited to, executive, management, accounting, operations, corporate communication, financial and administrative consulting services.
Convertible Notes Payable and Derivative Instruments
The Company has adopted the provisions of ASU 2017-11 to account for the down round features of warrants issued with private placements effective as of April 1, 2017. In doing so, warrants with a down round feature previously treated as derivative liabilities in the consolidated balance sheet and measured at fair value are henceforth treated as equity, with no adjustment for changes in fair value at each reporting period. Previously, the Company accounted for conversion options embedded in convertible notes in accordance with ASC 815. ASC 815 generally requires companies to bifurcate conversion options embedded in convertible notes from their host instruments and to account for them as free-standing derivative financial instruments. ASC 815 provides for an exception to this rule when convertible notes, as host instruments, are deemed to be conventional, as defined by ASC 815-40. The Company accounts for convertible notes deemed conventional and conversion options embedded in non-conventional convertible notes which qualify as equity under ASC 815, in accordance with the provisions of ASC 470-20, which provides guidance on accounting for convertible securities with beneficial conversion features. Accordingly, the Company records, as a discount to convertible notes, the intrinsic value of such conversion options based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt.
8
Recently Issued Accounting Pronouncements
In July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2017-11 (“ASU 2017-11”), which addressed accounting for (I) certain financial instruments with down round features and (II) replacement of the indefinite deferral for mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable non-controlling interests with a scope exception. The main provisions of Part I of ASU 2017-11 “change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS.” Under previous US GAAP, warrants with a down round feature are not being considered indexed to the entity’s own stock, which results in classification of the warrant as a derivative liability. Under ASU 2017-11, the down round feature qualifies for a scope exception from derivative treatment. ASU 2017-11 is effective for public companies as of December 15, 2018 and interim periods within that fiscal year. Early adoption is permitted, including adoption in an interim period, with adjustments reflected as of the beginning of the fiscal year. The Company has issued financial instruments with down round features. The Company opted to adopt ASU 2017-11 in its three-month interim period ended September 30, 2017, which is effective from April 1, 2017, with adjustments reflected in the accumulated deficit of stockholders’ deficiency as of April 1, 2017. Please refer to Note 6.
The amendments in this Update require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this Update do not provide a definition of restricted cash or restricted cash equivalents. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments in this Update should be applied using a retrospective transition method to each period presented. Management does not expect to have a significant impact of this ASU on the Company’s unaudited interim condensed consolidated financial statements.
In May 2017, an accounting pronouncement was issued by the Financial Accounting Standards Board (“FASB”) ASU 2017-09, “Compensation - Stock Compensation: Scope of Modification Accounting.” ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The updated guidance is effective for interim and annual periods beginning after December 15, 2017, and early adoption is permitted. The adoption of this pronouncement is not expected to have a material impact on the unaudited interim condensed consolidated financial position and/or results of operations.
On January 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.
Conversion and redemption features | ||
Risk-free rate for term (%) | 0.10 - 0.19 | |
Volatility (%) | 89.2 – 116.5 | |
Remaining terms (Years) | 0.53 – 0.68 | |
Stock price ($ per share) | – |
On January 1, 2017, the Company adopted the accounting pronouncement issued by the FASB to simplify the accounting for goodwill impairment. This guidance eliminates the requirement that an entity calculate the implied fair value of goodwill when measuring an impairment charge. Instead, an entity would record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. The Company adopted this pronouncement on a prospective 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.
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8. STOCKHOLDERS’ DEFICIENCY
a) Authorized stock
As at June 30, 2021, the Company is authorized to issue (March 31, 2021 – ) shares of common stock ($par value) and (March 31, 2021 – ) shares of preferred stock ($par value), of which (March 31, 2021 – ) are designated shares of Series A preferred stock ($par value)
At June 30, 2021, common shares and shares directly exchangeable into equivalent common shares that were issued and outstanding totaled (March 31, 2021 – ); these were comprised of (March 31, 2021 – ) shares of common stock and (March 31, 2021 – ) exchangeable shares. There is currently one share of the Special Voting Preferred Stock issued and outstanding, held by one holder of record, which is the Trustee in accordance with the terms of the Trust Agreement. The Company has also issued a Series A preferred stock, $par value; shares have been designated as authorized (as at June 30 and March 31, 2021); preferred shares were issued and outstanding as at June 30 and March 31, 2021.
b) Exchange Agreement
On February 2, 2016, the Company was formed through reverse-take-over:
In February 2016, an accounting pronouncement was issued by the FASB 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 current accounting guidance. This pronouncement is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. The adoption is required to be applied on a modified retrospective basis for each prior reporting period presented. The Company has not yet determined the effect that the adoption of this pronouncement may have on its unaudited interim condensed consolidated financial position and/or results of operations.
4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
| As at December 31, 2017 | As at March 31, 2017 |
| $ | $ |
Accounts payable | 518,204 | 866,188 |
Accrued liabilities | 111,885 | 271,266 |
| 630,089 | 1,137,454 |
Accounts payable as at December 31, 2017, and March 31, 2017 include $191,173 and $195,081, respectively, due to a shareholder and executive of the Company, primarily as a result of bonus and allowance compensation payable in that individual’s capacity as an employee.
5. CONVERTIBLE PROMISSORY NOTES
Pursuant to the terms of an offering of up to $2,000,000, iMedical during the year ended December 31, 2015 issued convertible promissory notes to various accredited investors amounting to $1,368,978 in face value. These notes have a maturity date of 24 months and carry annual interest rate of 11%. The note holders have the right until any time until the note is fully paid, to convert any outstanding and unpaid principal portion of the note, and accrued interest, into fully paid and non-assessable shares of Common Stock. The note has a conversion price initially set at $1.78. Upon any future financings completed by the Company, the conversion price will reset to 75% of the future financing pricing. These notes do not contain prepayment penalties upon redemption. These notes were secured by all of the then present and after acquired property of the Company. However, the Company was entitled to 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 offering, the Company issued cash (7%) and 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 have a term of 24 months and a similar reset provision based on future financings.
● | The Company issued approximately (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 |
Pursuant to the conversion provisions, in August 2016, the Company converted the promissory notes, in the aggregate
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● | 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 . % discount to purchase price per share in Biotricity’s next offering |
Issuance of common stock, exchangeable shares and cancellation of shares in connection with the reverse takeover transaction as explained above represents recapitalization of capital retroactively adjusting the accounting acquirer’s legal capital to reflect the legal capital of the accounting acquiree.
c) Share issuances
Share issuances during the year ended March 31, 2021
During the year ended March 31, 2021, the Company recorded preferred stock dividends for the Series A preferred stock in amount of $962,148 (2020 - $257,927) and made a payment in the amount of $602,969 (2020 - $180,000).
During the year ended March 31, 2021, the Company issued value of $1,368,978, into 912,652 shares of common shares 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. common shares were issued in connection with conversion of convertible notes (Note 5(b)) with another that would be issued subsequent to year end. The total amounts of debts settled is in amount of $ that composed of face
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During the year ended March 31, 2021, the Company issued common shares for services provided and for warrants exercised. During the year ended March 31, 2021, the Company also issued an aggregate of |
| Share issuances during the three months ended June 30, 2021 | |
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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 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 and carried an annual interest rate of 10%. The Bridge Notes principal and all outstanding accrued interest were able to be converted into common stock basedother income 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 had an obligation to issue warrants exercisable into the number of shares of the Company securities that is 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.
On May 31, 2017, all Bridge Notes having a face value of $2,436,406, were converted into the Company’s common stock:
During the three months ended June 30, 2021, the Company also issued an aggregate of shares of its common stock to investors as part of |
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The embedded conversion features and reset feature in the notes and broker warrants were accounted for as a derivative liability based on FASB guidance (see Note 6).
6. DERIVATIVE LIABILITIES
As explained in Note 3 underNew Accounting PronouncementsASU 2017-11 provides 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 September 30, 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:
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The impact on the unaudited June 30, 2017 Balance Sheet and Statement of Operations is as follows:
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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
e) Warrant issuances and exercises
Warrant exercises and issuances during the year ended March 31, 2021
During the year ended March 31, 2021, 97,500 warrants were exercised (2020 – nil) pursuant to receipt of exercise proceeds of $67,941. (Note 5(a))
During the year ended March 31, 2021, the Company issued 788,806 warrants previously issued to an executive of the Company, in order to extend their term from to years in accord with the same term extension made to the options of all other Company employees in fiscal 2020. As part of this revision in terms, 288,806 of these same warrants, previously issued and expensed, were repriced to reflect current market conditions; the resulting increase 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: warrants as compensation for advisor and consultant services which were fair valued. The vested portion in current year and from previous year at $ and expensed in general and administrative expenses, with a corresponding credit to additional paid in capital. As of December 31, 2020, the Company extended the expiry dates of
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During the three months ended June 30, 2021, the Company issued warrants as compensation for advisor and consultant services, including warrants issued to an executive of the Company. The warrants expenses were fair valued at $151,897 and was recognized as general and administrative expenses, with a corresponding credit to additional paid-in capital. In addition, 100,236 of warrants previously issued on convertible notes were exercised for cash of $106,250, recognized as a credit to common stock and additional paid in capital respectively.
During the three months ended June 30, 2021, one warrant holder provided cash of $40,000 to exercise 37,736 warrants, which led to 37,736 shares to be issued as at June 30, |
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Warrant issuances, exercises and expirations or cancellations during the three months ended June 30, 2021 and preceding periods resulted in warrants outstanding at the end of | SCHEDULE OF WARRANTS OUTSTANDING | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
f) Stock-based compensation On February 2, 2016, the Board of |
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Based on the 2016 Option Plan, the Company is authorized to issue employee options with a -year term. On March 31, 2020, the Company’s Board of Directors approved the amendment of certain prior options grants, issued to current employees, previously issued with a -year term, such that the respective options issued under these agreements would have their term extended to years. The Company revalued these options using a lattice model with an expected life of years, risk free rates of % to %, stock price of $ and expected volatility of %, in order to recognize the additional expense associated with the longer term and recognized a one-time charge of $ in share-based compensation, with a corresponding adjustment to adjusted paid in capital. During the year ended March 31, 2021, the Company granted |
During the three months ended June 30, 2021, the Company granted of options with a weighted average remaining contractual life of years. The Company recorded stock-based compensation of $ in connection with ESOP 2016 Plan (June 30, 2020 - $232,519), under general and administrative expenses with corresponding credit to additional paid in capital. SCHEDULE OF STOCK OPTION ACTIVITIES
SCHEDULE OF FAIR VALUE OF OPTION GRANTED USING VALUATION ASSUMPTIONS
9. LEASE The Company has one operating lease primarily for office and administration. The Company adopted ASC 842 – Leases using the modified retrospective cumulative catch-up approach beginning on April 1, 2019. Under this approach, the Company did not restate its comparative amounts and recognized a right-of-use asset equal to the present value of the future lease payments. The Company elected to apply the practical expedient to only transition contracts which were previously identified as leases and elected to not recognize right-of-use assets and lease obligations for leases of low value assets. When measuring the lease obligations, the Company discounted lease payments using its incremental borrowing rate. The weighted-average-rate applied is 10%. SCHEDULE OF OPERATING LEASES OBLIGATIONS
The operating lease expense was $67,607 for the three months ended June 30, 2021, and was included in the general and administrative expenses. During June 2021, the Company entered into a short-term lease for the leased premise at monthly base rent of $19,177. The extended term is not to extend beyond Dec 31, 2021. 10. CONTINGENCIES There are no unrecognized claims against the company that were assessed as significant, which were outstanding as at |
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11. SUBSEQUENT EVENTS
The Company’s management has evaluated subsequent events up to August 16, 2021, the date the condensed consolidated financial statements were issued, pursuant to the requirements of ASC 855 and has determined the following material subsequent events:
On July 2, 2021, the Company issued 100,000.
preferred shares to an existing preferred shareholder for proceeds of $The lattice methodology was used to value the derivative components, using the following assumptions: