Biotricity (BTCY) - 2023 Q1 - Quarterly Report

Part I – Financial Information This part presents Biotricity Inc.'s unaudited condensed consolidated financial statements and notes for Q2 2022 Item 1 – Condensed Consolidated Financial Statements This section provides Biotricity Inc.'s unaudited condensed consolidated financial statements and notes for Q2 2022 Condensed Consolidated Balance Sheets The balance sheet shows a decrease in total assets from $16.68 million at March 31, 2022, to $12.15 million at June 30, 2022, primarily driven by a significant reduction in cash | Metric | As at June 30, 2022 ($) | As at March 31, 2022 ($) | Change ($) | Change (%) | | :---------------------- | :---------------------- | :----------------------- | :--------- | :--------- | | Cash | 7,207,974 | 12,066,929 | (4,858,955) | -40.27% | | Total Current Assets | 10,846,540 | 15,322,811 | (4,476,271) | -29.21% | | Total Assets | 12,149,679 | 16,677,970 | (4,528,291) | -27.15% | | Total Current Liabilities | 4,577,442 | 4,866,814 | (289,372) | -5.95% | | Total Liabilities | 18,710,097 | 18,822,706 | (112,609) | -0.60% | | Stockholders' Deficiency| (6,560,418) | (2,144,736) | (4,415,682) | 205.89% | Condensed Consolidated Statements of Operations and Comprehensive Loss For the three months ended June 30, 2022, the company reported increased revenue and gross profit but also higher operating expenses, with net loss improving to $(5.02) million | Metric | Three Months Ended June 30, 2022 ($) | Three Months Ended June 30, 2021 ($) | Change ($) | Change (%) | | :--------------------------------------- | :----------------------------------- | :----------------------------------- | :--------- | :--------- | | Revenue | 2,056,052 | 1,764,110 | 291,942 | 16.55% | | Cost of Revenue | 830,923 | 594,029 | 236,894 | 39.88% | | Gross Profit | 1,225,129 | 1,170,081 | 55,048 | 4.70% | | Total Operating Expenses | 5,702,179 | 4,172,597 | 1,529,582 | 36.66% | | Net Loss Before Income Taxes | (4,776,252) | (5,656,099) | 879,847 | -15.56% | | Net Loss Attributable to Common Stockholders | (5,024,389) | (5,897,363) | 872,974 | -14.80% | | Comprehensive Loss | (4,791,385) | (5,890,803) | 1,099,418 | -18.66% | | Loss Per Share, Basic and Diluted | (0.098) | (0.151) | 0.053 | -35.10% | Condensed Consolidated Statements of Stockholders' Deficiency The stockholders' deficiency significantly increased to $(6.56) million at June 30, 2022, primarily due to net loss and preferred stock dividends | Metric | As at June 30, 2022 ($) | As at March 31, 2022 ($) | | :----------------------------------- | :---------------------- | :----------------------- | | Total Stockholders' Equity (Deficiency) | (6,560,418) | (2,144,736) | | Net Loss Before Dividends for the period | (4,776,252) | N/A | | Preferred Stock Dividends | (248,137) | N/A | | Conversion of convertible notes into common shares | 457,026 | N/A | | Preferred stock purchased back via cash | (285,427) | N/A | Condensed Consolidated Statements of Cash Flows The company experienced a net decrease in cash of $4.86 million for Q2 2022, primarily from operating and financing activities | Metric | Three Months Ended June 30, 2022 ($) | Three Months Ended June 30, 2021 ($) | Change ($) | Change (%) | | :-------------------------------------- | :----------------------------------- | :----------------------------------- | :--------- | :--------- | | Net Cash Used in Operating Activities | (4,039,394) | (2,681,396) | (1,357,998) | 50.65% | | Net Cash (Used in) Provided by Financing Activities | (833,221) | 581,088 | (1,414,309) | -243.39% | | Net Cash Used in Investing Activities | - | - | 0 | 0.00% | | Net Decrease in Cash During the Period | (4,858,955) | (1,999,974) | (2,858,981) | 142.95% | | Cash, End of Period | 7,207,974 | 201,588 | 7,006,386 | 3475.60% | Notes to the Condensed Consolidated Financial Statements These notes provide detailed information supporting the condensed consolidated financial statements, covering operations, accounting policies, and specific financial instruments 1. Nature of Operations Biotricity Inc. focuses on research, development, and commercialization of remote monitoring solutions for preventative care, particularly in mobile cardiac telemetry - Biotricity Inc. focuses on research, development, and commercialization of remote monitoring solutions in preventative care, specifically diagnostic and post-diagnostic solutions for cardiac health[19][20] 2. Basis of Presentation, Measurement and Consolidation The unaudited condensed consolidated financial statements are prepared in accordance with US GAAP for interim information, expressed in USD, and include the accounts of the Company and its wholly-owned subsidiary - Financial statements are prepared under US GAAP for interim periods, expressed in USD, and consolidate the Company and its wholly-owned subsidiary[21][22][23] Liquidity and Basis of Presentation The Company has incurred recurring losses and an accumulated deficit of $98.06 million but maintains a working capital surplus of $6.27 million and seeks additional capitalization | Metric | As at June 30, 2022 ($) | As at March 31, 2022 ($) | | :---------------------- | :---------------------- | :----------------------- | | Accumulated Deficit | (98,061,531) | (93,037,142) | | Working Capital Surplus | 6,269,098 | (10,455,997) | - The Company expects to continue devoting significant resources to capital expenditures, R&D, operations, marketing, and sales for Bioflux product development[26][251] - Management believes existing cash and anticipated near-term equity financings will meet needs for the next 12 months, but additional capital may be required for business opportunities and challenges[28][252] 3. Summary of Significant Accounting Policies This section details the Company's significant accounting policies, including revenue recognition, inventory valuation, and critical accounting estimates for fair value measurements - Revenue is recognized under ASC 606, primarily from technology fee sales and device sales for the Bioflux mobile cardiac telemetry device[33][35][178] | Revenue Type | For Three Months Ended June 30, 2022 ($) | For Three Months Ended June 30, 2021 ($) | Change ($) | Change (%) | | :----------------- | :--------------------------------------- | :--------------------------------------- | :--------- | :--------- | | Technology fee sales | 1,889,982 | 1,464,937 | 425,045 | 29.01% | | Device sales | 166,070 | 299,173 | (133,103) | -44.52% | | Total Revenue | 2,056,052 | 1,764,110 | 291,942 | 16.55% | - Key accounting estimates involve fair value of stock options, warrants, and derivative liabilities, which are sensitive to assumptions like volatility, risk-free rates, and expected life[41][43][44] 4. Accounts Payable and Accrued Liabilities Total accounts payable and accrued liabilities increased slightly to $2.70 million at June 30, 2022, from $2.60 million at March 31, 2022 | Metric | As at June 30, 2022 ($) | As at March 31, 2022 ($) | Change ($) | Change (%) | | :----------------------------------- | :---------------------- | :----------------------- | :--------- | :--------- | | Accounts payable and deferred revenue | 1,457,901 | 1,159,477 | 298,424 | 25.74% | | Accrued liabilities | 1,243,176 | 1,436,270 | (193,094) | -13.44% | | Total | 2,701,077 | 2,595,747 | 105,330 | 4.06% | 5. Convertible Promissory Notes and Short Term Loans The Company had $1.24 million in outstanding convertible notes at June 30, 2022, down from $1.54 million at March 31, 2022, due to conversions | Metric | As at June 30, 2022 ($) | As at March 31, 2022 ($) | | :-------------------------------------- | :---------------------- | :----------------------- | | Balance of Convertible Promissory Notes | 1,238,000 | 1,540,000 | | Metric | Three Months Ended June 30, 2022 ($) | Three Months Ended June 30, 2021 ($) | | :-------------------------------------- | :----------------------------------- | :----------------------------------- | | Interest Expense on Debt Instruments | 31,414 | 265,658 | - During Q2 2022, $302,000 (face value) of Series B Notes were converted into 390,464 common shares[106] 6. Term Loan The Company secured a $12 million term loan on December 21, 2021, maturing in December 2026, with an interest rate of LIBOR + 10.5% - The Company entered into a $12 million term loan on December 21, 2021, with a maturity date of December 21, 2026, and an interest rate of LIBOR + 10.5%[111] - The term loan is secured by all of the Company's assets and intellectual property[112][250] | Metric | Three Months Ended June 30, 2022 ($) | | :-------------------------------------- | :----------------------------------- | | Amortization of Debt Discount Expense | 50,070 | | Total Interest Expense on Term Loan | 348,833 | 7. Federally Guaranteed Loans The Company received $370,900 and $499,900 from the SBA EIDL program, while a $1.2 million PPP loan was fully forgiven - Received $370,900 (April 2020) and $499,900 (May 2021) from SBA EIDL program (30-year term, 3.75% interest)[117][118] - $1.2 million PPP Loan was fully forgiven by SBA in May 2021[119] 8. Derivative Liabilities Derivative liabilities related to preferred shares increased to $537,318, while those for convertible notes decreased to $419,332 due to conversions | Metric | As at June 30, 2022 ($) | As at March 31, 2022 ($) | | :-------------------------------------- | :---------------------- | :----------------------- | | Derivative liabilities (Preferred Shares) | 537,318 | 352,402 | | Derivative liabilities (Convertible Notes) | 419,332 | 520,747 | - The Company redeemed $328,904 preferred shares through cash during Q2 2022, resulting in a deemed dividend distribution of $32,872[125] 9. Stockholders' Equity (Deficiency) This section details changes in stockholders' equity, including authorized stock, the reverse takeover exchange agreement, share issuances, warrant activities, and stock-based compensation Authorized Stock As of June 30, 2022, the Company is authorized to issue 125 million common shares and 10 million preferred shares, with 20,000 designated as Series A preferred stock | Stock Type | Authorized Shares (June 30, 2022) | Issued & Outstanding (June 30, 2022) | | :------------------ | :-------------------------------- | :----------------------------------- | | Common Stock | 125,000,000 | 50,219,034 | | Preferred Stock | 10,000,000 | 1 (Special Voting) | | Series A Preferred Stock | 20,000 | 6,872 | | Exchangeable Shares | N/A | 1,466,718 | Exchange Agreement The Company was formed through a reverse-take-over on February 2, 2016, involving the exchange of iMedical shares for Biotricity common stock and exchangeable shares - Reverse-take-over on February 2, 2016, involved issuing 13,376,947 common shares and 9,123,031 exchangeable shares for iMedical shareholders[131] Share Issuances During Q2 2022, 404,545 common shares were issued from convertible note conversions, settling $406,118 in debt for a fair value of $457,026 | Metric | Three Months Ended June 30, 2022 ($) | | :-------------------------------------- | :----------------------------------- | | Common Shares Issued (from conversions) | 404,545 | | Debt Settled (face value) | 302,000 | | Carrying amount of conversion/redemption feature | 104,118 | | Fair Value of Shares Issued | 457,026 | | Loss on Conversion | 50,908 | Shares to be Issued During Q2 2022, 40,094 previously designated shares were removed due to warrant exercise cancellations, and 11,792 new shares were recognized for warrant exercise requests - 40,094 shares previously designated "to be issued" were removed due to warrant exercise cancellations, reducing the balance by $42,500[139] - An additional 11,792 shares were recognized as "to be issued" for new warrant exercise requests, increasing the balance by $12,500[139] Warrant Issuances and Exercises During Q2 2022, 53,827 warrants were issued as compensation to an executive, fair valued at $77,414, with 8,055,698 total outstanding warrants | Metric | Three Months Ended June 30, 2022 | | :-------------------------------------- | :------------------------------- | | Warrants Issued (compensation) | 53,827 | | Fair Value of Warrants Issued | $77,414 | | Total Warrants Outstanding (June 30, 2022) | 8,055,698 | Stock-based Compensation The Company granted 10,180 options during Q2 2022, recorded $149,190 in stock-based compensation expense, and had 7,419,894 total outstanding options | Metric | Three Months Ended June 30, 2022 | | :-------------------------------------- | :------------------------------- | | Options Granted | 10,180 | | Stock-based Compensation Expense | $149,190 | | Total Options Outstanding (June 30, 2022) | 7,419,894 | 10. Operating Lease Right-of-Use Assets and Lease Obligations The Company's right-of-use asset decreased to $1.19 million and lease obligations decreased to $1.28 million at June 30, 2022, with $121,735 in operating lease expense | Metric | As at June 30, 2022 ($) | As at March 31, 2022 ($) | | :-------------------------------------- | :---------------------- | :----------------------- | | Right-of-Use Asset | 1,192,169 | 1,242,700 | | Lease Obligations | 1,280,828 | 1,330,338 | | Operating Lease Expense (Q2 2022) | 121,735 | N/A | 11. Property and Equipment Net book value of property and equipment decreased to $25,970 at June 30, 2022, due to $1,489 in depreciation expense for the quarter | Metric | As at June 30, 2022 ($) | As at March 31, 2022 ($) | | :-------------------------------------- | :---------------------- | :----------------------- | | Net Book Value of Property and Equipment | 25,970 | 27,459 | | Depreciation Expense (Q2 2022) | 1,489 | N/A | 12. Contingencies As of June 30, 2022, there were no significant unrecognized claims against the Company - No significant unrecognized claims against the Company as of June 30, 2022[163] 13. Subsequent Events Subsequent to June 30, 2022, the Company issued shares from convertible note conversions, to an advisor for services, and for warrant exercises - Subsequent to June 30, 2022, the Company issued 117,647 shares from Series B convertible note conversions[164] - Issued 22,772 shares to an advisor for contractual services and 71,792 shares for warrant exercise requests after June 30, 2022[164] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Management discusses the Company's financial condition, operating results, liquidity, and capital resources for Q2 2022 Company Overview Biotricity Inc. is a medical technology company focused on remote biometric data monitoring solutions, particularly diagnostic mobile cardiac telemetry with its FDA-cleared Bioflux® technology - Biotricity Inc. is a medical technology company providing remote biometric data monitoring solutions, focusing on diagnostic and post-diagnostic solutions for cardiac illnesses[168] - The company's FDA-cleared Bioflux® MCT technology is available in 29 U.S. states, with a focus on an insourcing business model to generate utilization-based recurring technology fee revenue[169][171][172] - Recent FDA clearances include the Biotres patch solution (January 2022) for Holter monitoring and the Bioflux Software II System (2021) to improve workflow and reduce analysis time[173][174] - The Company commercially launched its Bioheart consumer technology and is developing other ancillary technologies and a telemedicine platform to expand into remote chronic care management[175][176] Critical Accounting Policies This section reiterates the Company's critical accounting policies, including revenue recognition under ASC 606, inventory valuation, and significant accounting estimates for fair value of financial instruments - Revenue recognition follows ASC 606, distinguishing between device sales and technology fee sales, with technology fees being the primary focus for recurring revenue[178][179][184] - Significant accounting estimates are required for fair value measurements of complex financial instruments like stock options, warrants, and derivative liabilities, which are sensitive to underlying assumptions[187][188][189] - The Company continues to evaluate the impact of new accounting pronouncements, including ASU 2016-13 (CECL), ASU 2019-12 (Income Taxes), and ASU 2021-04 (Warrant modifications), on its financial statements[222][225][227] Results of Operations For Q2 2022, revenue increased by 17% to $2.1 million, with technology fees comprising 91.9% of total revenues, and net loss improved to $5.0 million despite increased operating expenses | Metric | Three Months Ended June 30, 2022 ($) | Three Months Ended June 30, 2021 ($) | Change ($) | Change (%) | | :--------------------------------------- | :----------------------------------- | :----------------------------------- | :--------- | :--------- | | Revenue | 2,056,052 | 1,764,110 | 291,942 | 16.55% | | Technology Fees (% of Revenue) | 91.9% | N/A | N/A | N/A | | Gross Margin | 60% | 66% | -6% | -9.09% | | Net Loss Attributable to Common Stockholders | (5,024,389) | (5,897,363) | 872,974 | -14.80% | | Total Operating Expenses | 5,702,179 | 4,172,597 | 1,529,582 | 36.66% | | General and Administrative Expenses | 4,881,003 | 3,583,600 | 1,297,403 | 36.20% | | Research and Development Expenses | 821,176 | 588,997 | 232,179 | 39.42% | - The increase in general and administrative expenses is due to investment in building the professional sales force, while R&D expenses increased for new technologies and product enhancements[236][237] - Accretion and amortization expense related to debt financing decreased significantly to $0.05 million from $2.3 million in the prior year, as debt discount for Series A and B convertible notes was fully amortized[239] EBITDA and Adjusted EBITDA Adjusted EBITDA for Q2 2022 improved to $(4.39) million from $(4.69) million in the prior year, reflecting adjustments for non-operational items | Metric | Three Months Ended June 30, 2022 ($) | Three Months Ended June 30, 2021 ($) | | :--------------------------------------- | :----------------------------------- | :----------------------------------- | | Net Loss Attributable to Common Stockholders | (5,024,389) | (5,897,363) | | EBITDA | (4,634,512) | (5,501,678) | | Adjusted EBITDA | (4,385,381) | (4,685,749) | | Adjusted Loss per Share, Basic and Diluted | (0.085) | (0.120) | - Adjusted EBITDA excludes one-time accretion expenses, losses from convertible note conversions, and fair value changes on derivative liabilities to provide a clearer view of operational performance[242][245] Translation Adjustment The translation adjustment for Q2 2022 resulted in a loss of approximately $0.2 million, reflecting currency translation from Canadian to U.S. dollars | Metric | Three Months Ended June 30, 2022 ($) | Three Months Ended June 30, 2021 ($) | | :-------------------- | :----------------------------------- | :----------------------------------- | | Translation Adjustment | (200,000) (approx) | (70,000) (approx) | Liquidity and Capital Resources The Company requires cash for commercialization and product development, maintaining a $6.27 million working capital surplus and anticipating sufficient liquidity for the next 12 months - The Company requires cash for device purchases, sales initiatives, operating expenses, and R&D for its Bioflux product and BioSphere ecosystem[248][249][251] | Metric | As at June 30, 2022 ($) | As at March 31, 2022 ($) | | :---------------------- | :---------------------- | :----------------------- | | Accumulated Deficit | (98,061,531) | (93,037,142) | | Working Capital Surplus | 6,269,098 | (10,455,997) | - Management believes current cash and anticipated near-term equity financings will cover needs for the next 12 months, but additional debt or equity capital may be sought for future opportunities and challenges[252] Net Cash Used in Operating Activities Cash used in operating activities increased to $4.0 million for Q2 2022, reflecting increased expenditures for sales, infrastructure, business development, marketing, and R&D | Metric | Three Months Ended June 30, 2022 ($) | Three Months Ended June 30, 2021 ($) | | :-------------------------------------- | :----------------------------------- | :----------------------------------- | | Net Cash Used in Operating Activities | (4,039,394) | (2,681,396) | Net Cash from Financing Activities Net cash used in financing activities was $0.8 million for Q2 2022, a significant shift from $0.6 million net cash provided in the prior year period | Metric | Three Months Ended June 30, 2022 ($) | Three Months Ended June 30, 2021 ($) | | :-------------------------------------- | :----------------------------------- | :----------------------------------- | | Net Cash (Used in) Provided by Financing Activities | (833,221) | 581,088 | Net Cash Used in Investing Activities The Company reported no cash used in investing activities for Q2 2022, consistent with the prior year period | Metric | Three Months Ended June 30, 2022 ($) | Three Months Ended June 30, 2021 ($) | | :-------------------------------------- | :----------------------------------- | :----------------------------------- | | Net Cash Used in Investing Activities | - | - | Off-Balance Sheet Arrangements The Company has no off-balance sheet arrangements that have or are reasonably likely to have a material effect on its financial condition or results of operations - The Company has no off-balance sheet arrangements[257] Item 3. Quantitative and Qualitative Disclosures About Market Risk This item is not required for a smaller reporting company - Not required for a smaller reporting company[258] Item 4. Controls and Procedures The Company's management evaluated the effectiveness of disclosure controls and procedures as of June 30, 2022, concluding they were effective, with no material changes in internal controls Evaluation of Disclosure Controls and Procedures The Company's disclosure controls and procedures were evaluated by management and deemed effective as of June 30, 2022 - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2022[261] Changes in Internal Controls There were no material changes in the Company's internal controls over financial reporting during the three-month period ended June 30, 2022 - No material changes in internal controls over financial reporting during the three months ended June 30, 2022[262] Part II – Other Information This part contains additional information including legal proceedings, equity sales, and exhibits Item 1. Legal Proceedings The Company reported no legal proceedings - No legal proceedings[266] Item 1A. Risk Factors This item is not required for smaller reporting companies - Not required for smaller reporting companies[267] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Post-Q2 2022, the Company issued common shares from conversions, exercises, and for services under Section 4(a)(2) exemption - Subsequent to June 30, 2022, the Company issued 117,647 common shares from convertible note conversions, 71,792 common shares from warrant exercises, and 22,772 common shares to consultants for services[269] - All these issuances were made under the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933[269] Item 3. Defaults Upon Senior Securities The Company reported no defaults upon senior securities - No defaults upon senior securities[271] Item 4. Mine Safety Disclosures This item is not applicable to the Company - Not applicable[273] Item 5. Other Information The Company reported no other information - No other information[275] Item 6. Exhibits This section lists the exhibits filed with the 10-Q report, including certifications and Inline XBRL documents - Includes certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[276] - Contains Inline XBRL Instance Document, Taxonomy Extension Schema, Calculation Linkbase, Definition Linkbase, Label Linkbase, and Presentation Linkbase Documents[276] Signatures The report was signed on August 15, 2022, by the Chief Executive Officer and Chief Financial Officer, certifying its submission - Report signed by CEO Waqaas Al-Siddiq and CFO John Ayanoglou on August 15, 2022[279]