UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For
the quarterly period ended | |
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the period from ______________ to_______________
Commission
file number:
(Exact name of registrant as specified in its charter)
State
or other jurisdiction of |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Registrant’s Telephone Number, Including Area Code)
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.
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).
Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act).
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller
reporting company | |
| Emerging
growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The
|
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: shares of Common Stock, $0.001 par value, at August 14, 2023. As at that same date, the Company also has 244,453 Exchangeable Shares outstanding that convert directly into common shares, which when combined with its Common Stock produce an amount equivalent to 8,565,795 outstanding voting securities.
BIOTRICITY INC.
| 2 |
PART 1
FINANCIAL INFORMATION
Item 1 – Condensed Consolidated Financial Statements
| 3 |
BIOTRICITY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS AT JUNE 30, 2023 (unaudited) AND MARCH 31, 2023 (audited)
(Expressed in US Dollars)
As at June 30, 2023 | As at March 31, 2023 | |||||||
| $ | $ | |||||||
| CURRENT ASSETS | ||||||||
| Cash | ||||||||
| Accounts receivable, net | ||||||||
| Inventories [Note 3] | ||||||||
| Deposits and other receivables | ||||||||
| Total current assets | ||||||||
| Deposits [Note 10] | ||||||||
| Long-term accounts receivable | ||||||||
| Property and equipment [Note 12] | ||||||||
| Operating right of use assets [Note 10] | ||||||||
| TOTAL ASSETS | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable and accrued liabilities [Note 4] | ||||||||
| Convertible promissory notes and short term loans [Note 5] | ||||||||
| Term loan, current [Note 6] | ||||||||
| Derivative liabilities [Note 8] | ||||||||
| Operating lease obligations, current [Note 10] | ||||||||
| Total current liabilities | ||||||||
| Federally guaranteed loans [Note 7] | ||||||||
| Term loan [Note 6] | ||||||||
| Derivative liabilities [Note 8] | ||||||||
| Operating lease obligations [Note 10] | ||||||||
| TOTAL LIABILITIES | ||||||||
| STOCKHOLDERS’ DEFICIENCY | ||||||||
| Preferred stock, $ par value, authorized as at June 30, 2023 and March 31, 2023, share issued and outstanding as at June 30, 2023 and March 31, 2023 [Note 9] | ||||||||
| Series A preferred stock, $ par value, authorized as at June 30, 2023 and March 31, 2023, preferred shares issued and outstanding as at June 30, 2023 and March 31, 2023 [Note 9] | ||||||||
| Common stock, $ par value, authorized as at June 30, 2023 and March 31, 2023. Issued and outstanding common shares: as at June 30, 2023 and March 31, 2023, and exchangeable shares of outstanding at June 30, 2023 and March 31, 2023 [Note 9] | ||||||||
| Shares to be issued, shares of common stock as at June 30, 2023 and March 31, 2023 [Note 9] | ||||||||
| Additional paid-in-capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ DEFICIENCY | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | ||||||||
Commitments and contingencies [Note 11]
Subsequent Events [Note 13]
See accompanying notes to unaudited condensed consolidated interim financial statements
| 4 |
BIOTRICITY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE THREE MONTHS ENDED JUNE 30, 2023 AND 2022 (unaudited)
(Expressed in US Dollars)
Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | |||||||
| $ | $ | |||||||
| REVENUE | ||||||||
| Cost of Revenue | ||||||||
| GROSS PROFIT | ||||||||
| OPERATING EXPENSES | ||||||||
| Selling, general and administrative expenses | ||||||||
| Research and development expenses | ||||||||
| TOTAL OPERATING EXPENSES | ||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ||||
| Interest expense | ( | ) | ( | ) | ||||
| Accretion and amortization expenses [Note 5,6] | ( | ) | ( | ) | ||||
| Change in fair value of derivative liabilities [Note 8] | ( | ) | ||||||
| Gain (loss) upon convertible promissory notes conversion and redemption [Note 9] | ( | ) | ||||||
| Other income | ||||||||
| NET LOSS BEFORE INCOME TAXES | ( | ) | ( | ) | ||||
| Income taxes [Note 3] | ||||||||
| NET LOSS BEFORE DIVIDENDS | ( | ) | ( | ) | ||||
| Adjustment: Preferred Stock Dividends | ( | ) | ( | ) | ||||
| NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS | ( | ) | ( | ) | ||||
| Translation adjustment | ( | ) | ||||||
| COMPREHENSIVE LOSS | ( | ) | ( | ) | ||||
| LOSS PER SHARE, BASIC AND DILUTED | ( | ) | ( | ) | ||||
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||||
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, 2023 AND 2022 (unaudited)
| Preferred stock | Common stock and exchangeable common shares | Shares to be Issued | Additional paid in capital | Accumulated other comprehensive loss | Accumulated deficit | Total | ||||||||||||||||||||||||||||||||||
| Shares | $ | Shares | $ | Shares | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
| Balance, March 31, 2023 (audited) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Stock based compensation - ESOP [Note 9] | — | — | — | |||||||||||||||||||||||||||||||||||||
| Translation adjustment | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Net loss before dividends for the period | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Preferred stock dividends | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance, June 30, 2023 (unaudited) | | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Preferred stock | Common stock and exchangeable common shares | Shares to be Issued | Additional paid in capital | Accumulated other comprehensive loss | Accumulated deficit | Total | ||||||||||||||||||||||||||||||||||
| Shares | $ | Shares | $ | Shares | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||
| Balance, March 31, 2022 (audited) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Conversion of convertible notes into common shares [Note 9] | — | — | ||||||||||||||||||||||||||||||||||||||
| Preferred stock purchased back via cash [Note 8] | ( | ) | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Issuance of shares for services [Note 9] | — | — | ||||||||||||||||||||||||||||||||||||||
| Exercise of warrants for cash [Note 9] | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Issuance of warrants for services [Note 9] | — | — | — | |||||||||||||||||||||||||||||||||||||
| Stock based compensation - ESOP [Note 9] | — | — | — | |||||||||||||||||||||||||||||||||||||
| Translation adjustment | — | — | — | |||||||||||||||||||||||||||||||||||||
| Net loss before dividends for the period | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Preferred stock dividends | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance, June 30, 2022 (unaudited) | | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated interim financial statements
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BIOTRICITY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 2023 AND 2022 (UNAUDITED)
(Expressed in US Dollars)
Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | |||||||
| $ | $ | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Adjustments to reconcile net loss to net cash used in operations: | ||||||||
| Stock based compensation | ||||||||
| Issuance of shares for services | ||||||||
| Issuance of warrants for services | ||||||||
| Accretion and amortization expenses | ||||||||
| Change in fair value of derivative liabilities | ( | ) | ||||||
| (Gain) loss upon convertible promissory notes conversion and redemption | ( | ) | ||||||
| Property and equipment depreciation | ||||||||
| Non-cash lease expense | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net | ( | ) | ||||||
| Inventory | ( | ) | ||||||
| Deposits and other receivables | ( | ) | ( | ) | ||||
| Accounts payable and accrued liabilities | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Redemption of preferred shares | ( | ) | ||||||
| Exercise of warrants for cash | ||||||||
| Proceeds from convertible notes, net | ||||||||
| Repayment of short term loans and promissory notes, net | ||||||||
| Preferred Stock Dividend | ( | ) | ( | ) | ||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Net decrease in cash during the period | ( | ) | ( | ) | ||||
| Effect of foreign currency translation | ( | ) | ||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | ||||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Interest paid | ||||||||
| Taxes | ||||||||
See accompanying notes to unaudited condensed consolidated interim financial statements
| 7 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023 (Unaudited)
(Expressed in US dollars)
1. NATURE OF OPERATIONS
Biotricity 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 on February 2, 2016.
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 to building and commercializing an ecosystem of technologies that enable access to this market.
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 consolidated financial statements and should be read in conjunction with Biotricity’s audited consolidated financial statements for the years ended March 31, 2023 and 2022 and their accompanying notes.
The accompanying unaudited condensed consolidated financial statements are expressed in United States dollars (“USD”). In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of financial position and results of operations for the interim periods presented have been reflected herein. Operating results for the interim periods presented herein are not necessarily indicative of the results that may be expected for the year ending March 31, 2024. 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 subsidiary. Significant intercompany accounts and transactions have been eliminated.
Reclassifications
Certain amounts presented in the prior year period have been reclassified to conform to current period condensed consolidated financial statement presentation. Interest expense related to debt principal, previously recorded as a selling, general and administrative expense in the condensed consolidated statements of operations and comprehensive loss in the prior year, was reclassified as a non-operating expense.
Going Concern, Liquidity and Basis of Presentation
The
accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
The Company 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 clearance for, and commercialize other proposed products. The Company
has incurred recurring losses from operations, and as of June 30, 2023, had an accumulated deficit of $
| 8 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023 (Unaudited)
(Expressed in US dollars)
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. On August 30, 2021, the Company completed an
underwritten public offering of its common stock that concurrently facilitated its listing on the Nasdaq Capital Market. Prior to
listing on the Nasdaq Capital Market, the Company had also filed a shelf Registration Statement on Form S-3 (No. 333-255544) with
the Securities and Exchange Commission on April 27, 2021, which was declared effective on May 4, 2021. This facilitates better
transactional preparedness when the Company seeks to issue equity or debt to potential investors, since it continues to allow the
Company to offer its shares to investors only by means of a prospectus, including a prospectus supplement, which forms part of an
effective registration statement. As such, the Company has developed and continues to pursue sources of funding that management
believes will 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 placement offerings of convertible notes, which raised net cash
proceeds of $
As we proceed with the commercialization of the Bioflux, Biotres, and Biocare product development, we expect to continue to devote significant resources on capital expenditures, as well as research and development costs and operations, marketing and sales expenditures.
Based on the above facts and assumptions, we believe our existing cash, along with anticipated near-term financings, will be sufficient to continue to meet our needs for the next twelve months from the filing date of this report. However, we will need to seek additional debt or equity capital to respond to business opportunities and challenges, including our ongoing operating expenses, protecting our intellectual property, developing or acquiring new lines of business and enhancing 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 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 of our proposed product lines.
In December 2019, a novel strain of coronavirus (COVID-19) emerged in Wuhan, Hubei Province, China and spread globally, causing significant disruption to the global and US economy. On March 20, 2020, the Company announced the precautionary measures taken as well as announcing the business impact related to the coronavirus (COVID-19) pandemic. Though its operations have since returned to a normal state, the extent to which the COVID-19 pandemic may continue to affect the economy and the Company’s operations may depend on future developments.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Company adopted Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers” (“ASC 606”) on April 1, 2018. In accordance with ASC 606, revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services by applying the core principles – (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to performance obligations in the contract, and (5) recognize revenue as performance obligations are satisfied.
| 9 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023 (Unaudited)
(Expressed in US dollars)
Both the Bioflux mobile cardiac telemetry device, and the Biotres device are wearable devices. The cardiac data that the devices monitor and collect 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 are comprised of device sales revenues and technology fee revenues (technology as a service). The devices, together with their licensed software, are 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 device sales contracts with terms of more than one year, the Company recognizes any significant financing component as revenue over the contractual period using the effective interest method, and the associated interest income is reflected accordingly on the statement of operations and included in other income; 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.
The Company may also earn service-related revenue from contracts with other counterparties with which it consults. This contract work is separate and distinct from services provided to clinical customers, but may be with a reseller or other counterparties that are working to establish their operations in foreign jurisdictions or ancillary products or market segments in which the Company has expertise and may eventually conduct business.
The Company recognized the following forms of revenue for the three months ending June 30, 2023 and 2022:
| 2023 | 2022 | |||||||
| $ | $ | |||||||
| Technology fees | ||||||||
| Device sales | ||||||||
Inventories
Inventory is stated at the lower of cost and market value, cost being determined on a weighted average cost basis. Market value of our finished goods inventory and raw material inventory is determined based on its estimated net realizable value, which is generally the selling price less normally predictable costs of disposal and transportation. 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.
| June 30, 2023 | March 31, 2023 | |||||||
| $ | $ | |||||||
| Raw material | ||||||||
| Finished goods | ||||||||
| 10 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023 (Unaudited)
(Expressed in US dollars)
Significant accounting estimates and assumptions
The preparation of the condensed consolidated financial statements requires the use of estimates and assumptions to be made in applying the accounting policies that affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities. The estimates and related assumptions are based on previous experiences and other factors considered reasonable under the circumstances, the results of which form the basis for making the assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
Significant accounts that require estimates as the basis for determining the stated amounts include share-based compensation, impairment analysis and fair value of warrants, promissory notes, convertible notes and derivative liabilities.
| ● | Fair value of stock options |
The Company measures the cost of equity-settled transactions with employees by reference to the fair value of equity instruments at the date at which they are granted. Estimating fair value for share-based payments requires determining the most appropriate valuation model for a grant of such instruments, which is dependent on the terms and conditions of the grant. The estimate also requires determining the most appropriate inputs to the Black-Scholes option pricing model, including the expected life of the instrument, risk-free rate, volatility, and dividend yield.
| ● | Fair value of warrants |
In determining the fair value of the warrant issued for services and issue pursuant to financing transactions, the Company used the Black-Scholes option pricing model with the following assumptions: volatility rate, risk-free rate, and the remaining expected life of the warrants that are classified under equity.
| ● | Fair value of derivative liabilities |
In determining the fair values of the derivative liabilities from the conversion and redemption features, the Company used Monte-Carlo and lattice models with the following assumptions: dividend yields, volatility, risk-free rate and the remaining expected life. Changes in those assumptions and inputs could in turn impact the fair value of the derivative liabilities and can have a material impact on the reported loss and comprehensive loss for the applicable reporting period.
| ● | Functional currency |
Determining the appropriate functional currencies for entities in the Company requires analysis of various factors, including the currencies and country-specific factors that mainly influence labor, materials, and other operating expenses.
| ● | Useful life of property and equipment |
The Company employs significant estimates to determine the estimated useful lives of property and equipment, considering industry trends such as technological advancements, past experience, expected use and review of asset useful lives. The Company makes estimates when determining depreciation methods, depreciation rates and asset useful lives, which requires considering industry trends and company-specific factors. The Company reviews depreciation methods, useful lives and residual values annually or when circumstances change and adjusts its depreciation methods and assumptions prospectively.
| 11 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023 (Unaudited)
(Expressed in US dollars)
| ● | Provisions |
Provisions are recognized when the Company has a present obligation, legal or constructive, as a result of a previous event, if it is probable that the Company will be required to settle the obligation and a reliable estimate can be made of the obligation. The amount recognized is the best estimate of the expenditure required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligations. Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate of the expected future cash flows.
| ● | Contingencies |
Contingencies can be either possible assets or possible liabilities arising from past events, which, by their nature, will be resolved only when one or more uncertain future events occur or fail to occur. The assessment of the existence and potential impact of contingencies inherently involves the exercise of significant judgment and the use of estimates regarding the outcome of future events.
| ● | Inventory obsolescence |
Inventories are stated at the lower of cost and market value. Market value of our inventory, which is all purchased finished goods, is determined based on its estimated net realizable value, which is generally the selling price less normally predictable costs of disposal and transportation. The Company estimates net realizable value as the amount at which inventories are expected to be sold, taking into consideration fluctuations in retail prices less estimated costs necessary to make the sale. Inventories are written down to net realizable value when the cost of inventories is estimated to be unrecoverable due to obsolescence, damage, or declining selling prices.
| ● | Income and other taxes |
The calculation of current and deferred income taxes requires the Company to make estimates and assumptions and to exercise judgment regarding the carrying values of assets and liabilities which are subject to accounting estimates inherent in those balances, the interpretation of income tax legislation across various jurisdictions, expectations about future operating results, the timing of reversal of temporary differences and possible audits of income tax filings by the tax authorities. In addition, when the Company incurs losses for income tax purposes, it assesses the probability of taxable income being available in the future based on its budgeted forecasts. These forecasts are adjusted to take into account certain non-taxable income and expenses and specific rules on the use of unused credits and tax losses.
When the forecasts indicate that sufficient future taxable income will be available to deduct the temporary differences, a deferred tax asset is recognized for all deductible temporary differences. Changes or differences in underlying estimates or assumptions may result in changes to the current or deferred income tax balances on the consolidated balance sheets, a charge or credit to income tax expense included as part of net income (loss) and may result in cash payments or receipts. Judgment includes consideration of the Company’s future cash requirements in its tax jurisdictions. All income, capital and commodity tax filings are subject to audits and reassessments. Changes in interpretations or judgments may result in a change in the Company’s income, capital, or commodity tax provisions in the future. The amount of such a change cannot be reasonably estimated.
| ● | Incremental borrowing rate for lease |
The determination of the Company’s lease obligation and right-of-use asset depends on certain assumptions, which include the selection of the discount rate. The discount rate is set by reference to the Company’s incremental borrowing rate. Significant assumptions are required to be made when determining which borrowing rates to apply in this determination. Changes in the assumptions used may have a significant effect on the Company’s consolidated financial statements.
| 12 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023 (Unaudited)
(Expressed in US dollars)
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 loss per share of common stock is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted earnings or loss per share of common stock is computed similarly to basic earnings or loss per share except the weighted average shares outstanding are increased to include additional shares from the assumed exercise of any common stock equivalents, if dilutive. The Company’s warrants, options, convertible promissory notes, convertible preferred stock, shares to be issued and restricted stock awards while outstanding are considered common stock equivalents for this purpose. Diluted earnings is computed utilizing the treasury method for the warrants, stock options, shares to be issued and restricted stock awards. Diluted earnings with respect to the convertible promissory notes and convertible preferred stock utilizing the if-converted method was not applicable during the periods presented as no conditions required for conversion had occurred. No incremental common stock equivalents were included in calculating diluted loss per share because such inclusion would be anti-dilutive given the net loss reported for the periods presented.
Cash
Cash includes cash on hand and balances with banks.
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 consolidated 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 United States dollars, consolidated 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 accumulated other comprehensive loss in stockholders’ deficiency. The Company has not, to the date of these consolidated financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
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 consolidated 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.
| 13 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023 (Unaudited)
(Expressed in US dollars)
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 short term loans, federally-guaranteed loans, term loans, accounts payable and accrued liabilities. The Company’s derivative liabilities are carried at fair values and are classified as Level 3 financial instruments. The Company’s bank accounts are maintained with financial institutions of reputable credit, therefore, bear minimal credit risk.
The fair value of financial instruments measured on a recurring basis is as follows:
| As of June 30, 2023 | ||||||||||||||||
| Description | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
| Liabilities: | ||||||||||||||||
| Derivative liabilities, short-term | $ | $ | $ | $ | ||||||||||||
| Derivative liabilities, long-term | ||||||||||||||||
| Total liabilities at fair value | $ | $ | $ | $ | ||||||||||||
| As of March 31, 2023 | ||||||||||||||||
| Description | Total | Level 1 | Level 2 | Level 3 | ||||||||||||
| Liabilities: | ||||||||||||||||
| Derivative liabilities, short-term | $ | $ | $ | $ | ||||||||||||
| Derivative liabilities, long-term | ||||||||||||||||
| Total liabilities at fair value | $ | $ | $ | $ | ||||||||||||
There were no transfers between fair value hierarchy levels during the three months ended June 30, 2023 and 2022.
| 14 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023 (Unaudited)
(Expressed in US dollars)
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful lives of the assets. Maintenance and repairs are charged to expense as incurred, and improvements and betterments are capitalized. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives as follow:
| Office equipment | |
| Leasehold improvement |
Impairment for Long-Lived Assets
The Company applies the provisions of ASC Topic 360, Property, Plant, and Equipment, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets, including right-of-use assets, used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal. Based on its review at June 30, 2023 and March 31, 2023, the Company believes there was no impairment of its long-lived assets.
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 liabilities, current, and lease liabilities, 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 sheets and are expensed on a straight-line basis over the lease term in the consolidated statements of operations and comprehensive loss. The Company determines the lease term by agreement with lessor. As the Company’s lease does not provide implicit interest rate, the Company uses the Company’s incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. Refer to Note 10 for further discussion.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740. The Company provides for Federal, State and Provincial income taxes payable, as well as for those deferred because of the timing differences between reporting income and expenses for consolidated 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.
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.
| 15 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023 (Unaudited)
(Expressed in US dollars)
Selling, General and Administrative
Selling, general and administrative expenses consist primarily of personnel-related costs including stock-based compensation for personnel in functions not directly associated with research and development activities. Other significant costs include sales and marketing costs, investor relation and legal costs relating to corporate matters, professional fees for consultants assisting with business development and financial matters, and office and administrative expenses.
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 consolidated statements of operations and comprehensive loss 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.
The Company accounted for preferred stock redemptions and conversions in accordance to ASU-260-10-S99. For preferred stock redemptions and conversion, the difference between the fair value of consideration transferred to the holders of the preferred stock and the carrying amount of the preferred stock is accounted as deemed dividend distribution and subtracted from net loss.
| 16 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023 (Unaudited)
(Expressed in US dollars)
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 for fiscal years beginning after December 15, 2022. The Company adopted this guidance on April 1, 2023 and it did not have a significant impact on the Company’s consolidated financial statements.
4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
As at June 30, 2023 | As at March 31, 2023 | |||||||
| $ | $ | |||||||
| Trade and other payables | ||||||||
| Accrued liabilities | ||||||||
| Total | ||||||||
Trade
and other payables and accrued liabilities as at June 30, 2023 and March 31, 2023 included $
| 17 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023 (Unaudited)
(Expressed in US dollars)
5. CONVERTIBLE PROMISSORY NOTES AND SHORT TERM LOANS
Series A Convertible Promissory Notes:
During
the year ended March 31, 2021, the Company issued $
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”) could be converted into that number of shares of
Common Stock equal to:
For
the first series of Series A Notes,
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 $
For
the second series of Series A Notes,
| 18 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023 (Unaudited)
(Expressed in US dollars)
Prior to January 8, 2021 (final closing date), the Company determined that the conversion and redemption features 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.
For
the Series A Notes, The Company recognized debt issuance costs in the amount of $
On
December 30, 2022, the Company exchanged $
During three months ended June 30, 2023, the Company recognized discount amortization of $
During three months ended June 30, 2023, the Company recognized interest expense of $
Series B Convertible Notes
In
addition, during the year ended March 31, 2021, the Company also issued $
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”)
could 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.
Net
proceeds to the Company from convertible note issuances to March 31, 2021 amounted to $
| 19 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023 (Unaudited)
(Expressed in US dollars)
The
Company recognized debt issuance costs in the amount of $
During
the three months ended June 30, 2023, the Company recognized $
During
the three months ended June 30, 2023, the Company redeemed $
In
total, as at June 30, 2023,the Company had
$
Series C Convertible Notes
During
the three months ended June 30, 2023, the Company issued $
The
Series C Notes were sold under subscription agreements to accredited investors. The Notes mature one year from the final closing date
of the offering and accrue interest at
For
Series C Notes, commencing six months following the Issuance Date, and at any time thereafter, at the sole election of the Holder, any
amount of the outstanding principal and accrued interest of this note (the “Conversion Amount”) could be converted into that
number of shares of Common Stock equal to: the Conversion Amount divided by the “Optional Conversion Price”, which is defined
as lower of
For
Series C Notes, “Mandatory Conversion” of
| 20 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023 (Unaudited)
(Expressed in US dollars)
As of June 30, 2023, the Company has not issued the investor warrants and placement agent warrants related to the Series C Notes. These warrants will be issued upon the final closing date of the Series C Notes.
Net
proceeds to the Company from Series C Notes issuance during the three months ended June 30, 2023 amounted to $
Prior to the final closing date, the Company determined that the conversion features contained in those Note, as well as the obligations to issue investor warrants and placement agent warrants 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 features, as well as the obligations related to investor warrant and placement agent warrant issuance.
For
the Series C Notes, the Company recognized debt issuance costs of $
During the three months ended June 30, 2023,
the Company recognized interest expense of $
During the three months ended June 30, 2023, the Company recognized discount amortization of $
Other Convertible Notes
On
January 23, 2023, the Company issued $
The conversion of the Other Convertible Notes is automatic upon a Qualified Financing which is in the control of the Company, or at maturity of the notes, upon mutual agreement by the note holder and the Company. Since the conversion is not in control of the holder of the note, the Company did not recognize a derivative liability in connection with the conversion option of the Other Convertible Notes.
During the three months ended June 30, 2023, the Company recognized discount amortization of $
Other Short-term loans, Promissory Notes and Financing Facilities
In
December 2022, the Company entered into a short-term bridge loan agreement with a collateralized merchant finance company that
advanced gross proceeds of $
| 21 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023 (Unaudited)
(Expressed in US dollars)
In
December 2022, the Company also entered into a short term collateralized bridge loan agreement with a finance company that advanced gross
proceeds of $
In
December 2022, the Company entered into a promissory note agreement with an individual investor that resulted in gross proceeds of
$
On
December 30, 2022, the Company extinguished
On
March 29, 2023, the Company entered into an additional collateralized bridge loan agreement with a finance company that advanced
gross proceeds of $
During
the three months ended June 30, 2023, the Company received and repaid various short-term promissory notes from individual lenders. As
at June 30, 2023, the Company had outstanding principal of $
In
June 2023, the Company entered into a secured revolving account purchase credit and inventory financing facility (the “Revolving
Facility”) with a revolving loan lender, pursuant to which the lender may from time to time purchase certain discrete account receivables
from the Company (with full recourse) or may make loans and provide other financial accommodations, the payment of which are guaranteed
and secured by certain assets of the Company.
Total interest expense on the above
convertible notes, short-term loan and promissory notes was $
| 22 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023 (Unaudited)
(Expressed in US dollars)
6. TERM LOAN AND CREDIT AGREEMENT
Term Loan
On
December 21, 2021, the Company entered into a Credit Agreement (“Credit Agreement”) with SWK Funding LLC (“Lender’);
as part of this, the Company has borrowed $
As
part of the loan transaction, the Company paid legal and professional costs directly in connection to the debt financing in the amount
of $
Total
costs directly in connection to the debt financing in the amount of $
The
Company also repaid $
Total
costs directly in connection to the loan and fair value of warrants was in the amount of $
Total
interest expense on the term loan for the three months ended June 30, 2023 and 2022 was $
The
Company had accrued interest payable of $
The Company and Lender also entered into a Guarantee and Collateral Agreement (“Collateral Agreement”) wherein the Company agreed to secure the Credit Agreement with all of the Company’s assets. The Company and Lender also entered into an Intellectual Property Security Agreement dated December 21, 2021 (the “IP Security Agreement”) wherein the Credit Agreement is also secured by the Company’s right title and interest in the Company’s Intellectual Property.
In
connection with the Credit Agreement, the Company issued
At June 30, 2023, the Company was not in compliance with certain covenants of the term loan, for which it sought and received relief from the term loan lender.
| 23 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023 (Unaudited)
(Expressed in US dollars)
7. FEDERALLY GUARANTEED LOAN
Economic Injury Disaster Loan (“EIDL”)
In
April 2020, the Company received $
In
May 2021, the Company received an additional $
As
of June 30, 2023, the Company recorded accrued interest of $
Interest
expense on the above loan was $
8. DERIVATIVE LIABILITIES
The Company analyzed the compound features of variable conversion and redemption embedded in the preferred shares 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. A roll-forward of activity is presented below for the three months ended June 30, 2023 and 2022:
| Fiscal Year 2024 | Fiscal Year 2023 | |||||||
| $ | $ | |||||||
| Derivative liabilities, beginning of period | ||||||||
| New issuance | ||||||||
| Change in fair value of derivatives during period | ( | ) | ||||||
| Reduction due to preferred shares redeemed | ( | ) | ||||||
| Derivative liabilities, end of period | ||||||||
The lattice methodology was used to value the derivative components, using the following assumptions during the three months ended June 30, 2023 and 2022:
| Fiscal Year 2024 | Fiscal Year 2023 | |||||||
| Dividend yield (%) | ||||||||
| Risk-free rate for term (%) | ||||||||
| Volatility (%) | ||||||||
| Remaining terms (Years) | ||||||||
| Stock price ($ per share) | ||||||||
| 24 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023 (Unaudited)
(Expressed in US dollars)
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 (Note 5). Any noteholder and placement agent warrants that were issued after the finalization of exercise price was accounted for as equity. A roll-forward of activity is presented below for the three months ended June 30, 2023 and 2022:
| Fiscal Year 2024 | Fiscal Year 2023 | |||||||
| $ | $ | |||||||
| Balance beginning of period – March 31 | ||||||||
| New Issuance | ||||||||
| Conversion to common shares | ( | ) | ||||||
| Change in fair value of derivative liabilities | ( | ) | ||||||
| Convertible note modification | ||||||||
| Convertible note redemption | ( | ) | ||||||
| Balance end of period – June 30 | ||||||||
The Monte-Carlo methodology was used to value the convertible note and warrant derivative components during the three months ended June 30, 2023 and 2022, using the following assumptions:
| Fiscal Year 2024 | Fiscal Year 2023 | |||||||
| Risk-free rate for term (%) | ||||||||
| Volatility (%) | ||||||||
| Remaining terms (Years) | ||||||||
| Stock price ($ per share) | ||||||||
9. STOCKHOLDERS’ DEFICIENCY
(a) Authorized and Issued Stock
As at June 30, 2023, the Company is authorized to issue (March 31, 2023 – ) shares of common stock ($ par value), and (March 31, 2023 – ) shares of preferred stock ($ par value), of which (March 31, 2023 – ) are designated shares of Series A preferred stock ($ par value)
At
June 30, 2023, common shares and shares directly exchangeable into equivalent common shares that were issued and outstanding totaled
(March 31, 2023 – ) shares; these were comprised of (March 31, 2023 – ) shares
of common stock and (March 31, 2023 – ) exchangeable shares. At June 30, 2023, there were Series A shares
of Preferred Stock that were issued and outstanding (March 31, 2023 – ).
(b) Series (A) Preferred Stock
The number of Series A Preferred Stock issued and outstanding as of June 30, 2023 and March 31, 2023 was .
The
Series A Preferred Stock is junior to the Company’s existing undesignated preferred stock, and unless otherwise set forth in the
applicable certificate of designations, shall be junior to any future issuance of preferred stock. The purchase price (the “Purchase
Price”) for the Series A Preferred Stock to date has been $
| 25 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023 (Unaudited)
(Expressed in US dollars)
Preferred Stock Dividends
Dividends
shall be paid at the rate of
Conversion
The
Series A Preferred Stock is convertible into shares of common stock commencing 24 months after the issuance date of the Series A Preferred
Stock. Upon which, on a monthly basis, up to
Other Adjustments and Rights
● The Conversion Rate (and shares issuable upon conversion of the Series A Preferred Stock) will be appropriately adjusted to reflect stock splits, stock dividends business combinations and similar recapitalization.
● The Holders shall be entitled to a proportionate share of certain qualifying distributions on the same basis as if they were holders of the Company’s common stock on an as converted basis.
Company Redemption
The
Company may redeem all or part of the outstanding Series A Preferred Stock after one year from the date of issuance by paying an amount
equal to the aggregate Purchase Price paid, adjusted for any reduction in Series A Preferred Stock holdings, multiplied by
(c) Share issuances
Share issuances during the three months ended June 30, 2023
None.
Share issuances during the three months ended June 30, 2022
During
the three months ended June 30, 2022, the Company issued common shares in connection with conversion of convertible notes (Note
5). The total amounts of debts settled is in amount of $
In
addition, during the three months ended June 30, 2022, the Company issued common shares for services received, with a fair value
of $
| 26 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023 (Unaudited)
(Expressed in US dollars)
(d) Shares to be issued
Activity during the three months ended June 30, 2023
None.
Activity during the three months ended June 30, 2022
During
the three months ended June 30, 2022, the Company removed of previously to be issued shares, in connection with cancellation of
warrant exercises from certain warrant holders. In addition, the Company recognized additional shares to be issued for warrant
exercise request received but not processed as of quarter end. As a result of the cancellation of to be issued shares, $ was reduced
from balance of shares to be issued, and the Company increased the balance of the shares to be issued by $
(e) Warrant issuances, exercises and other activity
Warrant exercises and issuances during the three months ended June 30, 2023
None.
Warrant exercises and issuances during the three months ended June 30, 2022
During
the three months ended June 30, 2022, the Company issued warrants as compensation to an executive of the Company who was not part
of the Company stock options plan. The warrant expenses were fair valued at $
Warrant activity during the three months ended June 30, 2023 is indicated below:
| Broker Warrants | Consultant and Noteholder Warrants | Warrants Issued on Convertible Notes | Total | |||||||||||||
| As at March 31, 2023 | ||||||||||||||||
| Expired/cancelled | ( | ) | ( | ) | ||||||||||||
| Exercised | ||||||||||||||||
| Issued | ||||||||||||||||
| As at June 30, 2023 | ||||||||||||||||
| Exercise Price | $ | $ | $ | |||||||||||||
| Expiration Date | ||||||||||||||||
(f) Stock-based compensation
2016 Equity Incentive Plan
On February 2, 2016, the Board of Directors of the Company approved the Company’s 2016 Equity Incentive Plan (the “Plan”). The purpose of the Plan is to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Company and by motivating such persons to contribute to the growth and profitability of the Company. The Plan seeks to achieve this purpose by providing for awards in the form of options, stock appreciation rights, restricted stock purchase rights, restricted stock bonuses, restricted stock units, performance shares, performance units and other stock-based awards.
| 27 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023 (Unaudited)
(Expressed in US dollars)
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 shares; provided that the maximum number of shares of stock that may be issued under the Plan pursuant to awards shall automatically and without any further Company or shareholder approval, increase on January 1 of each year for not more than 10 years from the effective date, so the number of shares that may be issued is an amount no greater than 20% of the Company’s outstanding shares of stock and shares of stock underlying any outstanding exchangeable shares as of such January 1; provided further that no such increase shall be effective if it would violate any applicable law or stock exchange rule or regulation, or result in adverse tax consequences to the Company or any participant that would not otherwise result but for the increase.
During the three months ended June 30, 2023 and 2022, the Company granted and stock options, respectively. The Company recorded stock-based compensation of $ and $ during the three months ended June 30, 2023 and 2022, respectively in connection with the Plan under selling, general and administrative expenses with corresponding credit to additional paid in capital.
Number of Options | Weighted Average Exercise Price | |||||||
| Outstanding at March 31, 2023 | $ | |||||||
| Granted | $ | |||||||
| Exercised | ||||||||
| Expired | ( | ) | $ | |||||
| Forfeited | ||||||||
| Outstanding at June 30, 2023 | $ | |||||||
| 2023 | 2022 | |||||||
| Exercise price ($) | ||||||||
| Risk free interest rate (%) | - | |||||||
| Expected term (Years) | - | |||||||
| Expected volatility (%) | - | |||||||
| Expected dividend yield (%) | ||||||||
| Fair value of option ($) | - | |||||||
| Expected forfeiture (attrition) rate (%) | ||||||||
2023 Equity Incentive Plan and the Employee Stock Purchase Plans
On March 31, 2023, the Company adopted the 2023 Equity Incentive Plan (the “2023 Plan”). The 2023 Plan authorizes grants of equity-based and incentive cash awards to eligible participants designated by the 2023 Plan’s administrator. The 2023 Plan will be administered by the Compensation Committee of the Company’s Board of Directors (the “Board”). An aggregate of shares of the Company’s common stock (the “Common Stock”), plus the number of shares available for issuance under the Company’s 2016 Equity Incentive Plan that had not been made subject to outstanding awards, were reserved for issuance under the 2023 Plan. Unless earlier terminated by the Board, the 2023 Plan will remain in effect until all Common Stock reserved for issuance has been issued, 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 of the 2023 Plan.
| 28 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023 (Unaudited)
(Expressed in US dollars)
The Company also adopted the Employee Stock Purchase Plan (the “ESPP”). The ESPP allows eligible employees of the Company and the Company’s designated subsidiaries the ability to purchase shares of the Company’s Common Stock at a discount, subject to various limitations. Under the ESPP, employees will be granted the right to purchase Common Stock at a discount during a series of successive offerings, the duration and timing of which will be determined by the ESPP administrator (the “Administrator”). In no event can any single offering period be longer than 27 months. The purchase price (the “Purchase Price”) for each offering will be established by the Administrator. With respect to an offering under Section 423 of the Internal Revenue Code of 1986 (“Section 423 Offering”), in no case may such Purchase Price be less than the lesser of (i) an amount equal to 85 percent of the fair market value on the commencement date, or (ii) an amount not less than 85 percent of the fair market value the on the purchase date. In the event of financial hardship, an employee may withdraw from the ESPP by providing a request at least 20 Business Days before the end of the offering period (the “Offering Period”). Otherwise, the employee will be deemed to have exercised the purchase right in full as of such exercise date. Upon exercise, the employee will purchase the number of whole shares that the participant’s accumulated payroll deductions will buy at the Purchase Price. If an employee wants to decrease the rate of contribution, the employee must make a request at least 20 Business Days before the end of an Offering Period (or such earlier date as determined by the Administrator). An employee may not transfer any rights under the ESPP other than by will or the laws of descent and distribution. During a participant’s lifetime, purchase rights under the ESPP shall be exercisable only by the participant.
There were no issuances under either the 2023 Plan or the ESPP as of June 30, 2023.
10. OPERATING LEASE RIGHT-OF-USE ASSETS AND LEASE OBLIGATIONS
The Company has one operating lease primarily for office and administration.
During
December 2021, the Company entered into a new lease agreement. The Company paid $
When
measuring the lease obligations, the Company discounted lease payments using its incremental borrowing rate. The weighted-average-rate
applied was
| 2023 | 2022 | |||||||
| Right of Use Asset | $ | $ | ||||||
| Beginning balance at March 31 | ||||||||
| New leases | ||||||||
| Amortization | ( | ) | ( | ) | ||||
| Ending balance at June 30 | ||||||||
| 2023 | 2022 | |||||||
| Lease Liability | $ | $ | ||||||
| Beginning balance at March 31 | ||||||||
| New leases | ||||||||
| Repayment and interest accretion, net | ( | ) | ( | ) | ||||
| Ending balance at June 30 | ||||||||
| 29 |
BIOTRICITY INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2023 (Unaudited)
(Expressed in US dollars)
| June 30, 2023 | March 31, 2023 | |||||||
| Lease Liability | $ | $ | ||||||
| Current portion of operating lease liability | ||||||||
| Noncurrent portion of operating lease liability | ||||||||
The
operating lease expense was $
The following table represents the contractual undiscounted cash flows for lease obligations as at June 30, 2023:
| Calendar year | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Total undiscounted lease liability | ||||
| Less imputed interest | ( | ) | ||
| Total | ||||
11. COMMITMENTS AND CONTINGENCIES
There are no claims against the Company that were assessed as significant, which were outstanding as at June 30, 2023 or March 31, 2023 and, consequently, no provision for such has been recognized in the condensed consolidated financial statements.
12. PROPERTY AND EQUIPMENT
During
the three months ended June 30, 2023 and 2022, the Company did not purchase any property and equipment. The Company recognized depreciation expense for these assets in the amount of $
| Cost | Office equipment | Leasehold improvement | Total | |||||||||
| $ | $ | $ | ||||||||||
| Balance at March 31, 2023 | ||||||||||||
| Additions | ||||||||||||
| Disposals | ||||||||||||
| Balance at June 30, 2023 | ||||||||||||
| Accumulated depreciation | Office equipment | Leasehold improvement | Total | |||||||||
| $ | $ | $ | ||||||||||
| Balance at March 31, 2023 | ||||||||||||
| Depreciation for the period | ||||||||||||
| Disposals | ||||||||||||
| Balance at June 30, 2023 | ||||||||||||
| Net book value | ||||||||||||
| Balance at March 31, 2023 | ||||||||||||
| Balance at June 30, 2023 | ||||||||||||
13. SUBSEQUENT EVENTS
The Company’s management has evaluated subsequent events during the period from July 1 to August 14, 2023, the date the condensed consolidated financial statements were issued, pursuant to the requirements of ASC 855, and has determined the following material subsequent events:
| ● | ||
| ● | The
Company issued a further $ | |
| ● | The
Company also sold
shares through use of its registration statement, for gross proceeds of $ | |
| ● | The
Company financed a further $ |
| 30 |
BIOTRICITY INC.
FORM 10-Q
JUNE 30, 2023
(Expressed in US dollars)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Cautionary Note Regarding Forward-Looking Statements
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 are 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. Any such forward-looking statements 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. (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 intend to first focus on a segment of the diagnostic mobile cardiac telemetry market, otherwise known as COM, while providing our chosen markets with the capability to also perform other cardiac studies.
We developed our FDA-cleared Bioflux® COM technology, comprised of a monitoring device and software components, which we made available to the market under limited release on April 6, 2018, in order to assess, establish and develop sales processes and market dynamics. The fiscal year ended March 31, 2021 marked the Company’s first year of expanded commercialization efforts, focused on sales growth and expansion. In 2021, the Company announced the initial launch of Bioheart, a direct-to-consumer heart monitor that offers the same continuous heart monitoring technology used by physicians. In addition to developing and receiving regulatory approval or clearance of other technologies that enhance its ecosystem, in 2022, the Company announced the launch of its Biotres Cardiac Monitoring Device (“Biotres”), a three-lead device for ECG and arrhythmia monitoring intended for lower risk patients, a much broader addressable market segment. We have since expanded our sales efforts to 31 states, with intention to expand further and compete in the broader US market using an insourcing business model. Our technology has a large potential total addressable market, which can include hospitals, clinics and physicians’ offices, as well as other Independent Diagnostic Testing Facilities (“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.
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We are a technology company focused on earning utilization-based recurring technology fee revenue. The Company’s ability to grow this type of revenue is predicated on the size and quality of its sales force and their ability to penetrate the market and place devices with clinically focused, repeat users of its cardiac study technology. The Company plans to grow its sales force in order to address new markets and achieve sales penetration in the markets currently served.
Full market release of the Bioflux COM device for commercialization launched in April 2019, after receiving its second and final required FDA clearance. To commence commercialization, we ordered device inventory from our FDA-approved manufacturer and hired a small, captive sales force, with deep experience in cardiac technology sales; we expanded on our limited market release, which identified potential anchor clients who could be early adopters of our technology. By increasing our sales force and geographic footprint, we had launched sales in 31 U.S. states by December 31, 2022.
On January 24, 2022 the Company announced that it has received the 510(k) FDA clearance of its Biotres patch solution, which is a novel product in the field of Holter monitoring. This three-lead technology can provide connected Holter monitoring that is designed to produce more accurate arrythmia detection than is typical of competing remote patient monitoring solutions. It is also foundational, since already developed improvements to this technology will follow which are not known by the Company to be currently available in the market, for clinical and consumer patch solution applications.
During 2021, the Company also announced that it received a 510(k) clearance from the FDA for its Bioflux Software II System, engineered to improve workflows and reduce estimated analysis time from 5 minutes to 30 seconds. ECG monitoring requires significant human oversight to review and interpret incoming patient data to discern actionable events for clinical intervention, highlighting the necessity of driving operational efficiency. This improvement in analysis time reduces operational costs and allows the company to continue to focus on excellent customer service and industry-leading response times to physicians and their at-risk patients. Additionally, these advances mean we can focus our resources on high-level operations and sales.
The Company has also developed or is developing several other ancillary technologies, which will require application for further FDA clearances, which the Company anticipates applying for within the next to twelve months. Among these are:
| ● | advanced ECG analysis software that can analyze and synthesize patient ECG monitoring data with the purpose of distilling it down to the important information that requires clinical intervention, while reducing the amount of human intervention necessary in the process; | |
| ● | the Bioflux® 2.0, which is the next generation of our award winning Bioflux® |
During 2021 and the early part of 2022, the Company has also commercially launched its Bioheart technology, which is a consumer technology whose development was forged out of prior the development of the clinical technologies that are already part of the Company’s technology ecosystem, the BioSphere. In recognition of its product development, in November 2022, the Company’s Bioheart received recognition as one of Time Magazine’s Best Inventions of 2022.
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The COVID-19 pandemic has highlighted the importance of telemedicine and remote patient monitoring technologies. The Company continues to develop a telemedicine platform, with capabilities of real-time streaming of medical devices. Telemedicine offers patients the ability to communicate directly with their health care providers without the need of leaving their home. The introduction of a telemedicine solution is intended to align with the Company’s Bioflux product and facilitate remote visits and remote prescriptions for cardiac diagnostics, but it will also serve as a means of establishing referral and other synergies across the network of doctors and patients that use the technologies we are building within the Biotricity ecosystem. The intention is to continue to provide improved care to patients that may otherwise elect not to go to medical facilities and continue to provide economic benefits and costs savings to healthcare service providers and payers that reimburse. The Company’s goal is to position itself as an all-in-one cardiac diagnostic and disease management solution. The Company continues to grow its data set of billions of patient heartbeats, allowing it to further develop its predictive capabilities relative to atrial fibrillation and arrythmias.
In October 2022, the Company launched its Biocare Cardiac Disease Management Solution, after successfully piloting this technology in two facilities that provide cardiac care to more than 60,000 patients. This technology and other consumer technologies and applications such as the Biokit and Biocare have been developed to allow the Company to transform and use its strong cardiac footprint to expand into remote chronic care management solutions that will be part of the BioSphere. The technology puts actionable data into the hands of physicians in order to assist them in making effective treatment decisions quickly. During March 2023, the Company launched its patient-facing Biocare app on Android and Apple app stores. This further allows the Company to expand its footprint in providing full-cycle chronic care management solutions to its clinic and patient network.
The Company identified the importance of recent developments in accelerating its path to profitability, including the launch of important new products identified, which have a ready market through cross-selling to existing large customer clinics, and large new distribution partnerships that allow the Company to sell into large hospital networks. Additionally, in September 2022, the Company was awarded a NIH Grant from the National Heart, Blood, and Lung Institute for AI-Enabled real-time monitoring, and predictive analytics for stroke due to chronic kidney failure. This is a significant achievement that broadens our technology platform’s disease space demographic. The grant focusses on Bioflux-AI as an innovative system for real-time monitoring and prediction of stroke episodes in chronic kidney disease patients. The Company received $238,703 under this award in March 2023, used to defray research, development and other associated costs.
Management has indicated that its mission is to innovate and create transformative healthcare products while ensuring financial discipline, in order to drive margin and revenue growth to deliver value creation for our investors. Our commitment to innovation means that we harness data intelligently to explore novel avenues for enhancing healthcare outcomes. Through cutting-edge research and development, we believe we are redefining medical diagnostics and patient care and innovating new AI-driven solutions.
As a result of providing its Bioflux and Biotres products, Biotricity has monitored over two billion heartbeats for atrial fibrillation (afib), a leading cause of strokes. Over the past two years, these efforts have benefited over 14,000 patients diagnosed with afib, by providing them with the prospect of earlier medical intervention – which also produces significant healthcare savings to patients and the healthcare system.
We have announced that we are expanding our AI technology development in remote cardiac care, leveraging proprietary AI technology in order to provide a suite of predictive monitoring tools to enhance new disease profiling, improve patient management, and revolutionize the healthcare industry for disease prevention.
We have also strengthened relationships with Amazon and Google. The healthcare AI market opportunity is projected to grow to $208.2 billion by 2030 according to Grand View Research. Our Company has already established a strong foothold, having already built a powerful proprietary cardiac AI model that combines Google’s TensorFlow, AWS infrastructure, big data and a continuous learning engine. This combination allows us to rapidly improve our cardiac technology. In the near future, we believe the capabilities of our cardiac AI model will allow us to support healthcare professionals in handling exponentially more patients while identifying the most critical data. This will enable healthcare workers to elevate the quality of care while serving a larger number of patients. As growing patient numbers further stress the shortage of healthcare professionals, our technology could help alleviate this pressing issue. We have engineered our technology to not only improve patient care and outcomes, but to do so in a manner that supports more patients. This has led to increasing sales of our remote cardiac monitoring devices and the ramp-up of our subscription-based service, increasing our recurring revenue over the past few quarters and charting a clear path to profitability.
From a market perspective, the increasing interest and demand continue to drive the adoption of our suite of products focused on chronic cardiac disease prevention and management. Our efforts in commercialization and development have yielded tremendous progress in remote monitoring solutions for diagnostic and post-diagnostic products.
Results of Operations
The following table sets forth our results of operations for the three months ended June 30, 2023 and 2022.
For the 3 months ended June 30, | ||||||||||||
| 2023 | 2022 | Period to Period Change | ||||||||||
| Revenue | $ | 3,020,765 | $ | 2,056,052 | $ | 964,713 | ||||||
| Cost of revenue | 1,104,061 | 830,923 | 273,138 | |||||||||
| Gross profit | 1,916,704 | 1,225,129 | 691,575 | |||||||||
| Gross Margin | 63.5 | % | 59.6 | % | ||||||||
| Operating expenses: | ||||||||||||
| Selling, general and administrative | 3,520,215 | 4,492,615 | (972,400 | ) | ||||||||
| Research and development | 712,975 | 821,176 | (108,201 | ) | ||||||||
| Total operating expenses | 4,233,190 | 5,313,791 | (1,080,601 | ) | ||||||||
| Loss from operations | (2,316,486 | ) | (4,088,662 | ) | 1,772,176 | |||||||
| Interest expense | (660,512 | ) | (388,388 | ) | (272,124 | ) | ||||||
| Accretion and amortization expenses | (557,219 | ) | (50,070 | ) | (507,149 | ) | ||||||
| Change in fair value of derivative liabilities | 101,452 | (198,224 | ) | 299,676 | ||||||||
| Gain (loss) upon convertible promissory note conversion and redemption | 6,448 | (50,908 | ) | 57,356 | ||||||||
| Other income | 13,435 | — | 13,435 | |||||||||
| Net loss before income taxes | (3,412,882 | ) | (4,776,252 | ) | 1,363,370 | |||||||
| Income taxes | — | — | — | |||||||||
| Net loss before dividends | $ | (3,412,882 | ) | $ | (4,776,252 | ) | $ | 1,363,370 | ||||
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The results for the three months ended June 30, 2023, demonstrate year-over-year revenue growth and improvements in key operating metrics. Specifically, our recurring technology fees, device sales, and gross margins all demonstrated positive growth while maintaining cost control through management’s efforts to ensure cost reduction and expense management in order to make progress on its plan to achieve positive cash flow and profitability.
Revenue and cost of revenue
By increasing our sales force and geographic footprint, we are actively selling in 30 U.S. states as of June 30, 2023. The Company earned combined device sales and technology fee income totaling $3.0 million during the three months ended June 30, 2023 – 46.9% growth in revenue over the $2.1 million earned in the prior year comparable quarter.
Technology fees increased to $2.77 million during the three months ended June 30, 2023, which is a 47% increase over the corresponding three-month period of the prior year. The majority of these fees are recurring, and their growth can be attributed to strong customer retention that is supported by the quality of customer and cardiologist-friendly support services that emphasize accuracy of diagnostics and ease-of-use. Device sales comprised 8.3% of our total revenue, or $252 thousand for the three-month period ended June 30, 2023. Gross profit percentage was 63.5% for the three months ended June 30, 2023, as compared to 59.6% in the corresponding prior year quarter. This increase in gross margin can primarily be attributed to improved margins on technology fees. Given consistent gross margin on technology fees of approximately 70%, and efficiencies gained in using AI in data processing as well as an evolving revenue mix where technology fees are expected to comprise an increasing proportion of revenue, we anticipate continued improvement in overall blended gross margin over time. Technology fees comprised 92% of total revenue for the three-month period ended June 30, 2023.
Operating Expenses
Total operating expenses for the three months ended June 30, 2023, were $4.2 million as compared to $5.3 million for the three months ended June 30, 2022. See further explanations below.
Selling, General and administrative expenses
Our selling, general and administrative expenses for the three months ended June 30, 2023 was $3.5 million, compared to approximately $4.5 million during the three months ended June 30, 2022 – a 22% reduction. Despite our increased on sales efforts and the resulting revenue growth, we reduced total selling, general and administrative expenses decreased by $1.0 million for the fiscal quarter ended June 30, 2023 when compared to the comparable prior year period primarily due to increased monitoring of spending efficiency over our fixed general and administrative expenses in the current period.
Research and development expenses
For the three months ended June 30, 2023 we recorded research and development expenses of $0.7 million, compared to $0.8 million incurred for three months ended June 30, 2022. The research and development activity related to both existing and new products. The decrease in research and development activity was a result of the timing of activities associated with the development of new technologies for our ecosystem and product enhancements.
Interest Expense
For the three months ended June 30, 2023 and 2022, we incurred interest expenses of $0.7 million and $0.4 million, respectively. The increase in interest expense during the current period was the result of an increase in borrowings and market interest rate increases when compared to the prior year period.
Accretion and amortization expenses
For the three months ended June 30, 2023 and 2022, we incurred accretion expenses of $557 thousand and $50 thousand, respectively. The increase in the current period was a result of debt discount amortization related to new convertible notes entered towards end of the prior fiscal year.
Change in fair value of derivative liabilities
For the three months ended June 30, 2023 and 2022, we recognized a gain of $101 thousand versus a loss of $198 thousand, respectively, related to the change in fair value of derivative liabilities. The fair value changes were largely attributed to the underlying change in our equity fair value coupled with the timing of anticipated settlement events.
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Loss upon convertible promissory notes conversion
During the three months ended June 30, 2023 and 2022, we recorded a gain of $6 thousand versus a loss of $51 thousand, respectively, related to the redemption or conversion of our convertible promissory notes. The change of loss upon conversion upon convertible notes conversion was largely the result of decreased volumes of conversions in the current quarter as compared to comparable quarter in the prior year.
Other income
During the three months ended June 30, 2023, we recognized $13 thousand in net other income attributed to the financing component provisions contained in our revenue contracts. There was no other income during the corresponding prior year quarter.
Net Loss
As a result of the foregoing, the net loss attributable to common stockholders for the three months ended June 30, 2023 was $3.6 million compared to a net loss of $5.0 million during the comparable quarter in the prior year. This represents a 33% year-over-year reduction in net loss, and a reduction in loss per share to $0.069 from $0.098 for the three-month period ended June 30, 2022.
EBITDA and Adjusted EBITDA
Earnings before interest, taxes, depreciation and amortization expenses (EBITDA) and Adjusted EBITDA, which are presented below, are non-generally accepted accounting principles (non-GAAP) measures that we believe are useful to management, investors and other users of our financial information in evaluating operating profitability. EBITDA is calculated by adding back interest, taxes, depreciation and amortization expenses to net income.
Adjusted EBITDA is calculated by excluding from EBITDA the effect of the following non-operational items: equity in earnings and losses of unconsolidated businesses and other income and expense, net, as well as the effect of special items that related to one-time, non-recurring expenditures or expenditures that do not reduce operating cash flows. We believe that this measure is useful to management, investors and other users of our financial information in evaluating the effectiveness of our operations and underlying business trends in a manner that is consistent with management’s evaluation of business performance. Further, the exclusion of non-operational items and special items enables comparability to prior period performance and trend analysis, and are an important indicator to management of its progress towards achieving operational cash flow break-even and profitability. See notes in the table below for additional information regarding special items. The table below demonstrates significant reductions in quarterly negative EBITDA of $1.8 million from the corresponding three-month period a year earlier, and a reduction of $1.1 million from the immediately preceding three-month period ended March 31, 2023. This resulted from management’s consistent effort to grow the recurring technology fee revenue base, while controlling administrative costs and reducing the costs associated with selling its services and processing the provision of those to customers. Management believes that they have achieved these results by continuous improvement to their technology, including thru the implementation of AI, in order to also strengthen the quality of the services provided to the customer.
It is management’s intent to provide non-GAAP financial information to enhance the understanding of Biotricity’s GAAP financial information, and it should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. We believe that providing these non-GAAP measures in addition to the GAAP measures allows management, investors and other users of our financial information to more fully and accurately assess business performance. The non-GAAP financial information presented may be determined or calculated differently by other companies and may not be directly comparable to that of other companies.
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EBITDA and Adjusted EBITDA
| 3 months ended June 30, 2023 | 3 months ended March 31, 2023 | 3 months ended June 30, 2022 | ||||||||||
| $ | $ | $ | ||||||||||
| Net loss attributable to common stockholders | (3,601,579 | ) | (4,857,438 | ) | (5,024,389 | ) | ||||||
| Add: | ||||||||||||
| Provision for income taxes | — | — | — | |||||||||
| Interest expense | 660,512 | 665,350 | 388,388 | |||||||||
| Accretion and amortization expenses | 558,707 | 561,444 | 51,558 | |||||||||
| EBITDA | (2,382,360 | ) | (3,630,644 | ) | (4,584,442 | ) | ||||||
| Add (Less) | ||||||||||||
| Share based compensation (1) | 211,180 | 281,978 | 226,604 | |||||||||
| Preferred stock dividends (2) | 188,697 | 185,210 | 248,137 | |||||||||
| Other income/(loss) (3) | 13,435 | 6,167 | — | |||||||||
| Gain (loss) upon convertible promissory notes conversion and redemption (3) | (6,448 | ) | (14,418 | ) | 50,908 | |||||||
| Fair value change on derivative liabilities (3) | (101,452 | ) | 13,902 | 198,224 | ||||||||
| Adjusted EBITDA | (2,076,948 | ) | (3,157,805 | ) | (3,860,569 | ) | ||||||
| Weighted average number of common shares outstanding | 52,514,582 | 52,394,387 | 51,440,944 | |||||||||
| Adjusted Loss per Share, Basic and Diluted | (0.040 | ) | (0.060 | ) | (0.075 | ) | ||||||
(1) Share based compensation is a non-cash item therefore is removed from our adjusted EBITDA analysis
(2) Preferred stock dividend payment is at Company’s discretion and therefore is removed from our adjusted EBITDA analysis
(3) These items relate to financing transactions and therefore do not reflect the Company’s core operating activities
Translation Adjustment
Translation adjustment was a loss of $176 thousand versus a gain of $233 thousand for the three months ended June 30, 2023 and 2022, respectively. This translation adjustment represents gains and losses that result from the translation of currency in the financial statements from our functional currency of Canadian dollars to the reporting currency in U.S. dollars over the course of the reporting period.
Global Economic Conditions
Generally, worldwide economic conditions remain uncertain, particularly due to the effects of the COVID-19 pandemic and increased inflation. The general economic and capital market conditions both in the U.S. and worldwide, have been volatile in the past and at times have adversely affected our access to capital and increased the cost of capital. The capital and credit markets may not be available to support future capital raising activity on favorable terms. If economic conditions decline, our future cost of equity or debt capital and access to the capital markets could be adversely affected.
The COVID-19 pandemic that began in late 2019 introduced significant volatility to the global economy, disrupted supply chains and had a widespread adverse effect on the financial markets. Additionally, our operating results could be materially impacted by changes in the overall macroeconomic environment and other economic factors. Changes in economic conditions, supply chain constraints, logistics challenges, labor shortages, the conflict in Ukraine, and steps taken by governments and central banks, particularly in response to the COVID-19 pandemic as well as other stimulus and spending programs, have led to higher inflation, which has led to an increase in costs and has caused changes in fiscal and monetary policy, including increased interest rates.
| 36 |
Liquidity and Capital Resources
On June 30, 2023, we had cash deposits in the aggregate of approximately $51 thousand. In addition, we had undeposited funds of $469 thousand, which represented customer payments that were processed by payment processors but were in transit to us, and were deposited in our bank account shortly after June 30, 2023.
Management has noted the existence of substantial doubt about our ability to continue as a going concern. Additionally, our independent registered public accounting firm included an explanatory paragraph in the report on our financial statements as of and for the years ended March 31, 2023 and 2022, respectively, noting the existence of substantial doubt about our ability to continue as a going concern. Our existing cash deposits may not be sufficient to fund our operating expenses through at least twelve months from the date of this filing. To continue to fund operations, we will need to secure additional funding through public or private equity or debt financings, through collaborations or partnerships with other companies or other sources. We may not be able to raise additional capital on terms acceptable to us, or at all. Any failure to raise capital when needed could compromise our ability to execute our business plan. If we are unable to raise additional funds, or if our anticipated operating results are not achieved, we believe planned expenditure may need to be reduced in order to extend the time period that existing resources can fund our operations. If we are unable to obtain the necessary capital, it may have a material adverse effect on our operations and the development of our technology, or we may have to cease operations altogether.
The development and commercialization of our product offerings are subject to numerous uncertainties, and we could use our cash resources sooner than we expect. Additionally, the process of developing our products is costly, and the timing of progress can be subject to uncertainty; our ability to successfully transition to profitability may be dependent upon achieving further regulatory approvals and achieving a level of product sales adequate to support our cost structure. Though we are optimistic with respect to our revenue growth trajectory and our cost control initiatives, we cannot be certain that we will ever be profitable or generate positive cash flow from operating activities.
The Company is in commercialization mode, while continuing to pursue the development of its next generation COM 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 expense obligations as they come due. |
The Company is in the early stages of commercializing its products. 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 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 incurred recurring losses from operations, and as at June 30, 2023, has an accumulated deficit of $116.2 million. On August 30, 2021 the Company completed an underwritten public offering of its common stock that concurrently facilitated its listing on the Nasdaq Capital Market. On June 30, 2023, the Company has a working capital deficit of $10.7 million. Prior to listing on the Nasdaq Capital Market, the Company had also filed a shelf Registration Statement on Form S-3 (No. 333-255544) with the Securities and Exchange Commission on April 27, 2021, which was declared effective on May 4, 2021. This facilitates better transactional preparedness when the Company seeks to issue equity or debt to potential investors, since it continues to allow the Company to offer its shares to investors only by means of a prospectus, including a prospectus supplement, which forms part of an effective registration statement.
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The Company has developed and continues to pursue sources of funding that management believes will 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 year ended March 31, 2022, the Company raised an additional $499,900 through government EIDL loan., The Company also raised total net proceeds of $14,545,805 through the underwritten public offering that was concurrent with its listing onto the Nasdaq Capital Markets. The Company raised additional net proceeds of $11,756,563 through a term loan transaction (Note 6) and made repayment of the previously issued promissory notes and short-term loans. In connection with this loan, the Company and Lender entered into a Guarantee and Collateral Agreement, as well as an Intellectual Property Security Agreement, wherein the Company agreed to secure the Credit Agreement with all of the Company’s assets, as well as secured by the Company’s right title and interest in the Company’s Intellectual Property. During the fiscal year ended March 31, 2023, the Company raised short-term loans and promissory notes, net of repayments of $1,476,121 from various lenders. The Company also raised convertible notes, net of redemptions of $2,355,318 from various lenders. During the three months ended June 30, 2023, the Company raised additional convertible notes, net of redemptions of $855,538 from various lenders. In addition, the Company raised additional short-term loans and promissory notes, net of repayments of $479,656 from various lenders.
As we proceed with the commercialization of the Bioflux, Biotres and Biocare products and continue their development, we expect to continue to devote significant resources on capital expenditures, as 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 continuous commercialization and expansion of the technologies that will form part of its BioSphere eco-system. Based on the current known facts and assumptions, we believe our existing cash and cash equivalents, access to funding sources, along with anticipated near-term debt and equity financings, will be sufficient to meet our needs for the next twelve months from the filing date of this report. We intend to seek and opportunistically acquire additional debt or equity capital to respond to business opportunities and challenges, including our ongoing operating expenses, protecting our intellectual property, developing or acquiring new lines of business and enhancing 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 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 of our proposed product lines.
The following is a summary of cash flows for each of the periods set forth below.
| For the Three Months Ended | ||||||||
| June 30, | ||||||||
| 2023 | 2022 | |||||||
| Net cash used in operating activities | $ | (1,832,118 | ) | $ | (4,039,394 | ) | ||
| Net cash used in investing activities | — | — | ||||||
| Net cash provided by (used in) financing activities | 1,329,145 | (833,321 | ) | |||||
| Net decrease in cash | $ | (502,973 | ) | $ | (4,872,715 | ) | ||
Net Cash Used in Operating Activities
During the three months ended June 30, 2023, we used cash in operating activities in the amount of $1.8 million. The cash in operating activities was primarily due to selling expenses as well as research, product development, business development, marketing and general operations. The decrease in cash used reflects management’s concerted effort to contain costs while increasing revenues, on the path of achieving break-even.
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During the three months ended June 30, 2022, we used cash in operating activities of $4.0 million. These activities involved expenditures for sales, infrastructure and business development, as well as marketing and operating activities, and continued research and product development.
Net Cash Used in Investing Activities
Net cash used in investing activities was Nil during the three months ended June 30, 2023 and 2022.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was $1.3 million as compared to net cash used of $0.8 million during the three months ended June 30, 2023 and 2022, respectively.
For the three months ended June 30, 2023, the net cash provided by financing activities related to net proceeds attributed to the issuance of additional convertible notes of $0.9 million, as well as net proceeds from issuance of short term loans and promissory notes in the amount of approximately $0.4 million.
For the three months ended June 30, 2022, the cash used by financing activities was primarily due to the redemption of preferred stock in the amount of $0.3 million and the payment of preferred stock dividends in the amount of $0.5 million.
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with GAAP. These accounting principles require us to make estimates and judgments that can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenue and expense during the periods presented. We believe that the estimates and judgments upon which we rely are reasonably based upon information available to us at the time that we make these estimates and judgments. To the extent that there are material differences between these estimates and actual results, our financial results will be affected. The accounting policies that reflect our more significant estimates and judgments and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, included in our 2023 Form 10-K filed on June 29, 2023.
During the three months ended June 30, 2023, there were no material changes to our critical accounting estimates disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2023 Form 10-K filed on June 29, 2023.
Recent Accounting Pronouncements
Refer to Note 3— Summary of Significant Accounting Policies to our condensed consolidated financial statements included elsewhere in this report for a discussion of recently issued accounting pronouncements.
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.
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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. 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 June 30 2023 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.
From time to time, we may be involved in various claims and legal proceedings relating to claims arising out of our operations. We are not currently a party to any legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
Item 1A. Risk Factors
Not required for smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits
| 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.INS | Inline XBRL Instance Document |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
** Furnished herewith.
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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 14th day of August 2023.
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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