Biotricity (BTCY) - 2023 Q4 - Annual Report

PART I Business Biotricity provides biometric data monitoring solutions for cardiology, leveraging a TaaS model with FDA-cleared devices Company Overview - Biotricity is a medical technology company focused on biometric data monitoring, delivering remote solutions for diagnostic and post-diagnostic management of chronic illnesses[226][229] - The company's business model is technology-as-a-service (TaaS), focusing on earning utilization-based recurring technology fee revenue[230] - Key products include the FDA-cleared Bioflux® for mobile cardiac outpatient monitoring (COM), Biotres for Holter monitoring, and the direct-to-consumer Bioheart monitor[211][215] Market Opportunity and Strategy - The global ECG market is growing at a CAGR of 8.3%, with the US accounting for about 25%[217][261] - The company targets approximately 23,018 physician offices, 612 hospitals, and 300 Independent Diagnostic Testing Facilities (IDTFs) in the U.S[285] - Biotricity's 'insourcing' business model allows physicians to bill for diagnostic services directly, creating a new revenue stream for them[269][288] - The company is expanding into the chronic care management (CCM) and remote patient monitoring (RPM) markets with its Biocare platform[233][271] Product and Technology - Bioflux is a one-piece, 3-channel mobile cardiac telemetry (COM) device, considered clinically superior to competitor two-piece, 2-channel solutions[252][272][290] - Biotres is a 3-channel, connected, and rechargeable Holter patch solution, designed to provide faster and higher quality data than competing 1-channel, non-connected patches[254][275][292] - Bioheart and Biocare form a cardiac-tailored disease management solution for consumers and physicians respectively[250][293][295] Competition - Primary competitors in the Cardiac Outpatient Monitoring (COM) market include Biotelemetry (Philips), Preventice (Boston Scientific), ScottCare, and Infobionic[280][300][281] - In the Holter patch market, key competitors are iRhythm Technologies and BardyDx (Hillrom), who primarily operate as IDTFs with 1-channel, non-connected devices[319][284] - Competitors in the cardiac disease management space include Alivecor for direct-to-consumer monitoring and Optimize Health for chronic care platforms[320][303][304] Intellectual Property and R&D - The company primarily relies on trade secret protection for its proprietary information and uses non-disclosure and confidentiality agreements with employees and partners[307][308] Research and Development Costs (Millions USD) | Expense | FY 2023 | FY 2022 | | :--- | :--- | :--- | | Research and Development Costs | $3.0 million | $2.7 million | Government Regulation - The company's products are subject to regulation by the U.S. FDA and other federal, state, and foreign agencies, governing development, manufacturing, labeling, and marketing[324][9] - The company's products, such as Bioflux and Biotres, are classified as Class II medical devices and have received 510(k) clearance from the FDA[315][332] - Post-clearance, the company must comply with ongoing FDA requirements, including the Quality System Regulation (QSR) and Medical Device Reporting (MDR)[344][492] Risk Factors The company faces significant risks including limited operating history, net losses, going concern doubt, regulatory compliance, and intense competition Risks Related to Our Business - The company has a limited operating history and has not been profitable, with an accumulated deficit of $112.6 million as of March 31, 2023[338][359][22] - There is substantial doubt about the company's ability to continue as a going concern due to recurring losses, negative cash flow, and a cash balance of only $0.6 million at year-end[407][522] - The business is dependent on physicians utilizing its solutions; failure to drive adoption could cause revenue to decrease[14][363] - The company's assets, including intellectual property, are secured as collateral under a credit agreement, with default potentially leading to foreclosure[471][362][341] - Operations are subject to extensive and changing government regulations (FDA, Health Canada), and non-compliance could result in fines or suspension[343][15][366] Risks Related to Our Industry - The medical technology industry is highly competitive and subject to rapid technological change, with competitors potentially having greater resources[408][425] - Unfavorable clinical trial data, from the company or competitors, could adversely affect regulatory approvals and market perception[429][523] - Changes in healthcare reimbursement policies from government or private payers could reduce demand, create pricing pressure, and negatively impact revenue[369][417] - The company may be subject to federal and state healthcare fraud and abuse laws, with violations leading to substantial penalties[415][454][455] Risks Related to Intellectual Property - The company has no utility patent protection and relies on trade secrets, copyrights, and limited design patents, which may not provide meaningful protection[465][5] - The company may become involved in costly intellectual property litigation, either by asserting its rights or defending against claims from others[103][430][105] - Failure to protect proprietary rights could allow competitors to develop similar technologies, potentially damaging the company's competitive position[412][6] Risks Related to Our Securities - The company is at risk of being delisted from Nasdaq for failing to maintain the minimum $1.00 bid price requirement[437][456] - The company's common stock is classified as a "penny stock" under SEC rules, which could make it more difficult for broker-dealers to complete transactions[3][485] - The company has never paid cash dividends on its common stock and does not anticipate doing so in the foreseeable future[4][487] - Anti-takeover provisions in the company's charter and bylaws may prevent or frustrate attempts by stockholders to change the board or management[2][448] Unresolved Staff Comments The company reports that there are no unresolved staff comments - None identified[109][84] Properties The company leases its 8,300 square foot principal executive office in Redwood City, California, owning no real estate - The company's principal executive office is a leased space of approximately 8,300 square feet at 203 Redwood Shores Parkway, Suite 600, Redwood City, California[109] - The company does not own any real estate[109] Legal Proceedings The company is not a party to any material legal or governmental regulatory proceedings - The company is not currently a party in any material legal or governmental regulatory proceeding[111] Mine Safety Disclosures This item is not applicable to the company - Not applicable[112][143] PART II Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities The company's common stock trades on NASDAQ, with 51 million shares outstanding, and no cash dividends are anticipated - The company's common stock has traded on NASDAQ under the symbol "BTCY" since August 26, 2021, with a closing price of $0.47 per share on March 31, 2023[87] - As of June 29, 2023, there were 51,047,865 shares of common stock issued and outstanding[88] - The company does not anticipate paying no cash dividends on common shares, while Series A preferred shares earn a 12% per annum dividend[90] - In March 2023, the company adopted a new 2023 Equity Incentive Plan, reserving 5,000,000 shares plus shares remaining from the 2016 plan[95] Selected Financial Data This item is not applicable as the company is a smaller reporting company - Not applicable to a smaller reporting company[17] Management's Discussion and Analysis of Financial Condition and Results of Operations Revenue grew 26% to $9.6 million, net loss narrowed, but liquidity challenges raise going concern doubt Results of Operations Financial Performance Summary (USD) | Metric | FY 2023 (USD) | FY 2022 (USD) | Change (USD) | | :--- | :--- | :--- | :--- | | Revenue | $9,639,057 | $7,650,269 | +$1,988,788 | | Gross Profit | $5,442,033 | $4,570,153 | +$871,880 | | Gross Margin | 56.5% | 59.7% | -3.2% | | Operating Expenses | $20,851,744 | $21,301,414 | -$455,212 | | Loss from Operations | ($15,409,711) | ($16,731,261) | +$1,327,092 | | Net Loss | ($18,658,143) | ($29,130,477) | +$10,472,334 | - Revenue growth of 26% was primarily driven by an increase in technology fees, which rose to $8.8 million in FY2023 from $5.9 million in FY2022[529][57] - The slight decrease in gross margin was due to discounts on device hardware sales intended to increase volumes and expand subscription billings[25] - Selling, general and administrative (SG&A) expenses decreased by $0.9 million to $17.6 million, primarily due to increased monitoring of spending efficiency[26] Liquidity and Capital Resources - Management has noted substantial doubt about the company's ability to continue as a going concern, with only $0.6 million in cash deposits as of March 31, 2023[30] - The company will need to secure additional funding through equity or debt financing to fund operations for the next twelve months[30][68] Cash Flow Summary (USD) | Cash Flow Activity | FY 2023 (USD) | FY 2022 (USD) | | :--- | :--- | :--- | | Net cash used in operating activities | ($13,547,935) | ($15,163,384) | | Net cash used in investing activities | $0 | ($29,767) | | Net cash provided by financing activities | $2,001,603 | $25,168,230 | - Net cash from financing activities decreased significantly from $25.2 million in FY2022 to $2.0 million in FY2023, as the prior year included Nasdaq uplisting proceeds[55][70] Critical Accounting Policies - Revenue is recognized in accordance with ASC 606, with technology fee revenue recognized upon study completion and device sales revenue upon delivery[71][519] - Significant accounting estimates are required for share-based compensation, impairment analysis, fair value of warrants, convertible debt, derivative liabilities, and inventory obsolescence[75][545] - Derivative liabilities related to convertible notes and preferred shares are measured at fair value, with changes recognized in the statement of operations using complex models[77][667] - Inventories are stated at the lower of cost or market value, with write-downs for obsolete or excess inventory charged to cost of revenue[73][60] Quantitative and Qualitative Disclosures About Market Risk This item is not applicable as the company is a smaller reporting company - Not applicable to a smaller reporting company[151] Financial Statements and Supplementary Data The company's financial statements and corresponding notes are included in the report, beginning on page F-1 - The company's financial statements and related notes can be found starting on page F-1 of the Annual Report[152] Changes in and Disagreements with Accountants on Accounting and Financial Disclosures The company reports no changes in or disagreements with its accountants on accounting and financial disclosures - None[153] Controls and Procedures Management evaluated disclosure controls and internal control over financial reporting, concluding both were effective with no material changes - Management concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[134][172] - Based on an assessment using the COSO framework, management concluded that the company's internal control over financial reporting was effective as of March 31, 2023[155] - There were no changes in internal controls over financial reporting during the fiscal year that materially affected these controls[157] PART III Directors and Executive Officers and Corporate Governance This section identifies executive officers and directors, outlines corporate governance, and includes board diversity information - The company's executive officers include Waqaas Al-Siddiq (President, CEO, Chairman) and John Ayanoglou (CFO)[178][180][182] - The Board of Directors has three standing committees: Audit, Compensation, and Nominating and Corporate Governance[190] - The Audit Committee is responsible for overseeing the independent auditor, reviewing financial statements, and managing risk assessment policies[203][191] Board Diversity (As of June 29, 2023) | Board Diversity (As of June 29, 2023) | | :--- | | Total Directors: 4 | | Gender Identity | | Male: 4 | | Demographic Background | | African American or Black: 1 | | Asian: 1 | | White: 3 | | Note: Some directors may identify with more than one demographic background. | Executive Compensation This section details executive compensation for FY2023 and FY2022, including salary, bonus, and equity awards for key officers Executive Compensation Summary (USD) | Executive | Fiscal Year | Salary (USD) | Bonus (USD) | Option/Warrant Awards (USD) | Total Compensation (USD) | | :--- | :--- | :--- | :--- | :--- | :--- | | Waqaas Al-Siddiq (CEO) | 2023 | $480,000 | $240,000 | $428,757 | $1,160,757 | | | 2022 | $480,000 | $225,000 | $169,513 | $886,513 | | John Ayanoglou (CFO) | 2023 | $293,750 | $0 | $232,537 | $538,287 | | | 2022 | $300,000 | $75,000 | $504,910 | $891,910 | - CEO Waqaas Al-Siddiq's employment agreement provides for a salary of $480,000 for FY2023 and eligibility for a cash/equity bonus of up to 50% of his annual salary[196] - CFO John Ayanoglou's base salary for calendar year 2023 was set at $300,000, including annual grants of warrants to purchase 200,000 shares of common stock[187] Security Ownership of Certain Beneficial Owners and Management This section discloses beneficial ownership of common stock, with CEO Waqaas Al-Siddiq as the largest individual shareholder at 15.08% Beneficial Ownership as of June 29, 2023 | Name of Beneficial Owner | Shares Beneficially Owned | % of Shares Beneficially Owned | | :--- | :--- | :--- | | Waqaas Al-Siddiq (CEO) | 9,053,997 | 15.08% | | All directors and executive officers as a group | 11,925,924 | 19.86% | - Beneficial ownership is determined by SEC rules and includes voting and/or investment power, including shares subject to options and warrants exercisable within 60 days[590] Certain Relationships and Related Transactions, and Director Independence The company reports no certain relationships or related transactions that require disclosure - None[594] Principal Accountant Fees and Services This section presents fees paid to the principal accountant for professional services for FY2023 and FY2022 Principal Accountant Fees (USD) | Fee Category | FY 2023 (USD) | FY 2022 (USD) | | :--- | :--- | :--- | | Audit Fees | $145,733 | $169,250 | | Total Fees | $145,733 | $169,250 | - The Board pre-approves all audit and permitted non-audit services to be performed by the independent auditors[599] PART IV Exhibits, Financial Statement Schedules This section lists exhibits filed as part of the Form 10-K report, including corporate governance documents and material contracts - Lists key corporate documents filed as exhibits, including Amended and Restated Articles of Incorporation (Exhibit 3.1) and By-Laws (Exhibit 3.2)[601] - Includes material agreements such as the 2016 Equity Incentive Plan (Exhibit 10.5) and various credit and employment agreements[602] - Contains required certifications from the Principal Executive Officer and Principal Financial Officer under Sections 302 and 906 of the Sarbanes-Oxley Act[603]