See accompanying notes to unaudited condensed
consolidated interim financial statements
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2021 (Unaudited)
(Expressed
in US dollars)
1.
NATURE OF OPERATIONS
Biotricity
Inc. (formerly MetaSolutions, Inc.) (the “Company”) was incorporated under the laws of the State of Nevada on August 29,
2012. iMedical Innovations Inc. (“iMedical”) was incorporated on July 3, 2014 under the laws of the Province of Ontario,
Canada and became a wholly-owned subsidiary of Biotricity through reverse take-over 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 financial statements and should be read in conjunction with Biotricity’s
audited consolidated financial statements for the years ended March 31, 2021 and 2020 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, 2022. The Company’s
fiscal year-end is March 31.
The
unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Significant
intercompany accounts and transactions have been eliminated.
Certain
prior year amounts have been reclassified to conform to the current year’s presentation.
Liquidity
and Basis of Presentation
The
Company commenced commercializing its first product. It is concurrently in development mode, operating a research and development
program in order to develop an ecosystem of medical technologies, and, where required or deemed advisable, obtain regulatory approvals
for, and commercialize other proposed products. The Company 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 September 30, 2021, has an accumulated deficit of $79,712,541
(March 31, 2021 - $62,817,688).
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 September 30, 2021, the Company has a working capital surplus of $8,731,955
(March 31, 2021 – working capital
deficiency of $6,168,700.
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 placements offering of convertible notes,
which have raised net cash proceeds of $11,375,690.
During the six months ended September 30, 2021, $9,836,500
of convertible notes issued during
last fiscal year was converted into common shares. During the fiscal quarter ended June 30, 2021, the Company raised an additional $499,900
through government EIDL loan, and $250,000
through short term loans. During the fiscal quarter
ended September 30, 2021, the Company raised a 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’s operating plan is predicated on a variety of assumptions including, but not limited to, the level of product demand,
cost estimates, its ability to continue to raise additional financing and the state of the general economic environment in which the
Company operates. There can be no assurance that these assumptions will prove to be accurate in all material respects, or that the Company
will be able to successfully execute its operating plan. In the absence of additional appropriate financing, the Company may have to
modify its operating plan or slow down the pace of development and commercialization of its proposed products. No assurance can be given
that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if
the Company is able to obtain additional financing, it may contain restrictions on our operations, in the case of debt financing or cause
substantial dilution for our stockholders, in case of equity financing.
Due
to the disruption of the COVID-19 crisis, the Company’s business activities might be subject to certain levels of adverse
impact; to the date of the issuance of these condensed consolidated financial statements, the Company continues to
assess the respective impact on its business, results of operations, financial position and cash flows, and will adjust
its financial records, as required,when reliable estimates become available.
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use
of Estimates
The
preparation of the consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period. Areas involving significant estimates
and assumptions include: deferred income tax assets and related valuation allowance, accruals and valuation of derivatives, convertible
promissory notes, stock options, and assumptions used in the going concern assessment. Actual results could differ from those estimates.
These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the period in which
they become known.
Earnings
(Loss) Per Share
The
Company has adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”)
Topic 260-10 which provides for calculation of “basic” and “diluted” earnings per share. Basic earnings per share
includes no dilution and is computed by dividing net income or loss available to common stockholders by the weighted average number of
common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in
the earnings of an entity. Diluted earnings per share exclude all potentially dilutive shares if their effect is anti-dilutive. There
were no
potentially dilutive shares outstanding as at
September 30, 2021 and 2020.
Fair
Value of Financial Instruments
ASC
820 defines fair value, establishes a framework for measuring fair value and expands required disclosure about fair value measurements
of assets and liabilities. ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer
a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. ASC 820-10 also establishes a fair value hierarchy, which requires an entity to maximize
the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels
of inputs that may be used to measure fair value:
●
Level 1 – Valuation based on quoted market prices in active markets for identical assets or liabilities.
●
Level 2 – Valuation based on quoted market prices for similar assets and liabilities in active markets.
●
Level 3 – Valuation based on unobservable inputs that are supported by little or no market activity, therefore requiring management’s
best estimate of what market participants would use as fair value.
In
instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy,
the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is
significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to
the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
Fair
value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The respective
carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these
instruments or interest rates that are comparable to market rates. These financial instruments include cash, accounts receivable, deposits
and other receivables, convertible promissory notes, and accounts payable and accrued liabilities. The Company’s cash and derivative
liabilities, which are carried at fair values, are classified as a Level 1 and Level 3, respectively. The Company’s bank accounts
are maintained with financial institutions of reputable credit, therefore, bear minimal credit risk.
Leases
The
Company is the lessee in a lease contract when the Company obtains the right to use the asset. Operating leases are included in the line
items right-of-use asset, lease liability, current, and lease liability, long-term in the consolidated balance sheet.
Right-of-use
(“ROU”) asset represents the Company’s right to use an underlying asset for the lease term and lease obligations represent
the Company’s obligations to make lease payments arising from the lease, both of which are recognized based on the present value
of the future minimum lease payments over the lease term at the commencement date. Leases with a lease term of 12 months or less at inception
are not recorded on the consolidated balance sheet and are expensed on a straight-line basis over the lease term in our consolidated
statement of income. The Company determines the lease term by agreement with lessor. As our lease do not provide an implicit interest
rate, the Company uses the Company’s incremental borrowing rate based on the information available at commencement date in determining
the present value of future payments.
Government
loan
Loans
that were received from the federal government, which contain certain operating conditions and with terms of over twelve months, are
recorded by the Company as long-term liabilities.
Convertible
Promissory Notes Payable and Derivative Instruments
The
Company has adopted the provisions of ASU 2017-11 to account for the down round features of warrants issued with private placements effective
as of April 1, 2017. In doing so, warrants with a down round feature previously treated as derivative liabilities in the consolidated
balance sheet and measured at fair value are henceforth treated as equity, with no adjustment for changes in fair value at each reporting
period. Previously, the Company accounted for conversion options embedded in convertible notes in accordance with ASC 815. ASC 815 generally
requires companies to bifurcate conversion options embedded in convertible notes from their host instruments and to account for them
as free-standing derivative financial instruments. ASC 815 provides for an exception to this rule when convertible notes, as host instruments,
are deemed to be conventional, as defined by ASC 815-40. The Company accounts for convertible notes deemed conventional and conversion
options embedded in non-conventional convertible notes which qualify as equity under ASC 815, in accordance with the provisions of ASC
470-20, which provides guidance on accounting for convertible securities with beneficial conversion features. Accordingly, the Company
records, as a discount to convertible notes, the intrinsic value of such conversion options based upon the differences between the fair
value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the
note. Debt discounts under these arrangements are amortized over the term of the related debt.
Recently
Issued Accounting Pronouncements
In
June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial
Instruments.” This pronouncement, along with subsequent ASUs issued to clarify provisions of ASU 2016-13, changes the impairment
model for most financial assets and will require the use of an “expected loss” model for instruments measured at amortized
cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance
to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on
the financial asset. In developing the estimate for lifetime expected credit loss, entities must incorporate historical experience, current
conditions, and reasonable and supportable forecasts. This pronouncement is effective for fiscal years, and for interim periods within
those fiscal years, beginning after December 15, 2019. On November 19, 2019, the FASB issued ASU No. 2019-10, Financial Instruments—Credit
Losses (Topic 326), finalized various effective date delays for private companies, not-for-profit organizations, and certain smaller
reporting companies applying the credit losses (CECL), the revised effective date is January 2023.
In
July 2019, the FASB issued ASU 2019-07, Codification Updates to SEC Sections. This ASU amends various SEC paragraphs pursuant to the
issuance of SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification, and Nos. 33-10231 and 33-10442, Investment Company
Reporting Modernization. One of the changes in the ASU requires a presentation of changes in stockholders’ equity in the form of
a reconciliation, either as a separate financial statement or in the notes to the financial statements, for the current and comparative
year-to-date interim periods. The Company presented changes in stockholders’ equity as separate financial statements for the current
and comparative year-to-date interim periods beginning on April 1, 2019. The additional elements of the ASU did not have a material impact
on the Company’s consolidated financial statements.
In
December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies
the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current
guidance to promote consistency among reporting entities. ASU 2019-12 is effective for fiscal years beginning after December 15, 2021.
Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a
retrospective or modified retrospective basis. The Company is currently evaluating the impacts of the provisions of ASU 2019-12 on its
financial condition, results of operations, and cash flows.
In
March 2020, the FASB issued ASU No. 2030-20 Codification Improvements to Financial Instruments, An Amendment of the FASB Accounting Standards
Codification: a) in ASU No. 2016-01, b) in Subtopic 820-10, c) for depository and lending institutions clarification in disclosure requirements,
d) in Subtopic 470-50, e) in Subtopic 820-10, f) Interaction of Topic 842 and Topic 326, g) Interaction of the guidance in Topic 326
and Subtopic 860-20.The amendments in this Update represent changes to clarify or improve the Codification. The amendments make the Codification
easier to understand and easier to apply by eliminating inconsistencies and providing clarifications. For public business entities updates
under the following paragraphs: a), b), d) and e) are effective upon issuance of this final update. The effective date for c) is for
fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company does not expect that
the new guidance will significantly impact its consolidated financial statements.
The
Company continues to evaluate the impact of the new accounting pronouncement, including enhanced disclosure requirements, on our business
processes, controls and systems.
4.
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
SCHEDULE
OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
|
|
|
As
at
September 30,
2021
$
|
|
|
As
at
March 31,
2021
$
|
|
|
Accounts
payable
|
|
|
1,622,501
|
|
|
|
1,041,385
|
|
|
Accrued
liabilities
|
|
|
1,068,076
|
|
|
|
1,478,739
|
|
|
Accounts
payable and accrued liabilities
|
|
|
2,690,577
|
|
|
|
2,520,124
|
|
Accounts
payable as at September 30, 2021, and March 31, 2021 include $220,898
and $182,995,
respectively, due to a shareholder and executive of the Company, primarily as a result of that individual’s role as an employee.
These amounts are unsecured, non-interest bearing and payable on demand.
5.
CONVERTIBLE PROMISSORY NOTES AND SHORT TERM LOANS
|
|
a)
|
The
Company has issued various promissory notes and obtained several short term loans. The promissory notes and short-term loans are
generally for a 1-year
term at interest rates of between 10%
and 12%,
with allowance for the Company to repay early, and the possibility to convert into equity on the basis of mutual consent. Warrants
to purchase the Company’s shares of common stock were granted pursuant to the issuance of certain promissory notes. Management
has evaluated the terms of these notes issued in accordance with the guidance provided by ASC 470 and ASC 815 and concluded that
there is no derivative or beneficial conversion feature attached to these notes.
|
During
the year ended March 31, 2021, the Company raised additional $500,000
in promissory notes that were subject to the
same terms of the notes previously issued. During the year ended March 31, 2021, the Company made repayment of the notes and short term
loan in the amount of $908,082,
and one noteholder further paid the Company $67,941
to exercise warrants related to 97,500
shares of the Company’s common stock. During
the year ended March 31, 2021, one noteholder converted a $100,000
note and $15,000
accrued interest into 115
Series A preferred shares.
During
the three months ended June 30, 2021, the Company raised additional $250,000
in short-term loans; this was repaid during
the three months ended September 30, 2021. Similarly, during the three months ended September
30, 2021, while awaiting to complete the financing transaction that was part of the Company’s path towards achieving its listing
onto the Nasdaq Capital Market, it drew on interim short-term financing of $576,000, which was fully repaid during that same period.
As
at September 30, 2021, the Company had promissory note outstanding of $550,000
(March 31, 2021 – $600,577).
As
at September 30, 2021, the Company also had short term loan of $1,000,000
(March 31, 2021 – $1,059,643)
outstanding.
General
and administrative expenses included financing charges and interest expense on the above notes of $215,260
and $226,480
for the three and six months ended September
30, 2021 (September 30, 2020, $109,699
and $147,155)
respectively.
|
|
(b)
|
During
the year ended March 31, 2021, the Company issued $11,275,500
(face value) in two series of convertible
promissory notes (the “Series A Notes”) sold under subscription agreements to accredited investors. The Notes mature
one year from the final closing date of the offering and accrue interest at 12%
per annum.
|
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: (i) the Outstanding Balance divided by (ii) 75% of the volume weighted average price of the Common Stock for
the 5 trading days prior to the Conversion Date (the conversion price).
For
the first series of Series A Notes, the
notes would automatically convert into common stock (in each case, subject to the trading volume of the Company’s common
stock being a minimum of $500,000 for each trading day in the 20 consecutive trading days immediately preceding the conversion date),
upon the earlier to occur of (i) the Company’s common stock being listed on a national securities exchange, in which event the
conversion price would be equal to 75% of the volume weighted average price of the common stock for the 20 trading days prior
to the conversion date, or (ii) upon the closing of the Company’s next equity round of financing for gross proceeds of greater
than $5,000,000, in which event the conversion price would be equal to 75% of the price per share of the common stock (or of the
conversion price in the event of the sale of securities convertible into common stock) sold in such financing. The Company could,
at its discretion redeem the notes for 115% of their face value plus accrued interest.
For
second series of Series A Notes, the notes could be converted into shares of common stock, at the option of the holder, commencing six
months from issuance, at a conversion price equal to the lower of $4.00 per share or 75% of the volume weighted average price of the
common stock for the five trading days prior to the conversion date
For
the second series of Series A Notes, the notes would automatically convert into common stock (in each case, subject to the trading
volume of the Company’s common stock being a minimum of $500,000 for each trading day in the 20 consecutive trading days immediately
preceding the conversion date), upon the earlier to occur of (i) the Company’s common stock being listed on a national securities
exchange, in which event the conversion price would be equal to the lower of $4.00 per share or 75% of the volume weighted average
price of the common stock for the 20 trading days prior to the conversion date, or (ii) upon the closing of the Company’s next
equity round of financing for gross proceeds of greater than $5,000,000, in which event the conversion price would be equal to
the lower of $4.00 per share or 75% of the price per share of the common stock (or of the conversion price in the event of the sale of
securities convertible into common stock) sold in such financing. The Company could, at its discretion redeem the notes for 115%
of their face value plus accrued interest.
The
Company was obligated to issue warrants that accompany the convertible notes and provide 50% warrant coverage. The warrants have a 3-year
term from date of issuance and an exercise price that is 120% of the 20-day volume weighted average price of the Company’s common
shares at the time final closing.
The
Company was obligated to pay the placement agent of the first series of Series A Notes a 12% cash fee for $8,925,550 (face value) of
the notes and 2.5% cash fee and other sundry expenses for the remaining $2,350,000 (face value) of the notes.
Net
proceeds to the Company from Series A Notes issuance up to March 31, 2021 amounted to $10,135,690
after payment of the relevant financing related
fees.
The
Company was also obligated to issue warrants to the placement agent that have a 10-year term and cover 12% of funds raised for $8,925,550
(face value) of the notes (first series) and 2.5% of funds raised for the remaining $2,350,000 (face value) of notes (second series),
with an exercise price that is 120% of the 20-day volume weighted average price of the Company’s common shares at the time final
closing. On final closing, which occurred on January 8, 2021, the warrants’ exercise price was struck at $1.06
per
share.
Prior
to January 8, 2021 (final closing date), the Company determined that the conversion and redemption features, investor warrants and placement
agent warrants contained in those Notes represented a single compound derivative liability that meets the requirements for liability
classification under ASC 815. The Company accounted for these obligations by determining the fair value of the related derivative liabilities
associated with the embedded conversion and redemption features, as well as investor warrants and placement agent warrants. The initial
fair value of the derivative liabilities generated as a result of issuing the Series A Notes was $6,932,194
(Note 7).
Subsequently,
the exercise price of all warrants was concluded and locked to $1.06
as of January 8, 2021. Since the exercise price
was no longer a variable, the Company concluded that the noteholder and placement agent warrants should no longer be accounted for as
a derivative liability in accordance with ASC 815 guidelines related to equity indexation and classification. The derivative liabilities
related to those warrants were therefore marked to market as of January 8, 2021 and then transferred to equity (collectively, “End
of warrants derivative treatment”) (Note 7 and Note 8).
For
the Series A Notes, The Company recognized debt issuance costs in the amount of $2,301,854
and treated these as a deduction from the convertible
note liabilities directly, as a contra-liability, and amortized the debt issuance cost over the term of the Notes. The Company also recognized
initial debt discount in the amount of $8,088,003
and accreted the interest over the remaining
lives of those Notes.
At
September 30, 2021, the Company recorded $66,871
of interest accruals for the Series A Notes.
In connection with the foregoing, the Company relied upon the exemption from registration provided by Section 4(a)(2) under the Securities
Act of 1933, as amended, for transactions not involving a public offering.
During
the year ended March 31, 2021, $739,000
(face value) of Series A Notes together with
their respective unpaid interest were converted into 751,487
common shares, out of which 18,402
common shares were issued subsequent to year
end.
During
the three months ended June 30, 2021, $1,157,500
(face value) of Series A Notes together with
their respective unpaid interests were converted into 528,878
common shares, out of which 345,676
common shares were issued subsequent to June
30, 2021 (Note 8 c).
During
the three months ended September 30, 2021, $8,679,000
(face value) of Series A Notes
together with their respective unpaid interests were converted into 3,085,399
common shares, out of which 908,197
were common shares that would be issued
subsequent to September 30, 2021 (Note 8 c).
In
addition, during the year ended March 31, 2021, the Company also issued $1,312,500
(face value) of convertible promissory notes
(“Series B Notes”) to various accredited investors.
Commencing
six months following the issuance date, and at any time thereafter, subject to the Company’s Conversion Buyout clause, at the sole
election of the holder, any amount of the outstanding principal and accrued interest of the note (the “outstanding balance”)
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. The
holder may exercise such conversion right by providing written notice to the Company of such exercise in a form reasonably acceptable
to the Company (a “conversion notice”). Conversion price means (subject in all cases to proportionate adjustment for stock
splits, stock dividends, and similar transactions), seventy-five percent (75%) multiplied by the average of the three (3) lowest closing
prices during the previous ten (10) trading days prior to the receipt of the conversion notice.
The
Series B Notes will automatically convert into common stock upon a merger, consolidation, exchange of shares, recapitalization, reorganization,
as a result of which the Company’s common stock shall be changed into another class or classes of stock of the Company or another
entity, or in the case of the sale of all or substantially all of the assets of the Company other than a complete liquidation of the
Company. Within the first 180 days after the issuance date, the Company may, at its discretion redeem the notes for 115% of their face
value plus accrued interest. The Company is obligated
to issue warrants that accompany the convertible notes and provide 50% warrant coverage. The warrants have a 3-year
term from date of issuance and an exercise price that is $1.06
per share for 100,000
warrant shares and $1.5
per share for 212,500
warrant shares.
Net
proceeds to the Company from convertible note issuances to March 31, 2021 amounted to $1,240,000
after the original issuance discount as well
as payment of the financing related fees. The Company determined that the conversion and redemption features contained in the Series
B Notes represented a single compound derivative liability that meets the requirements for liability classification under ASC 815. The
Company accounted for these obligations by determining the fair value of the related derivative liability associated with the embedded
conversion and redemption features. The initial fair value of the derivative liabilities generated as a result of issuing the Series
B Notes was $497,042
(Note 7).
The
Company recognized debt issuance costs in the amount of $10,000
and treated these as a deduction from the convertible
note liabilities directly, as a contra-liability, and amortized the debt issuance cost over the term of the Series B Notes. The Company
recognized initial debt discount in the amount of $1,312,500
and accreted the interest over the remaining
lives of those notes.
At
September 30, 2021, the Company recorded $41,263
of interest accruals for the Series B Notes.
In connection with the foregoing, the Company relied upon the exemption from registration provided by Section 4(a)(2) under the Securities
Act of 1933, as amended, for transactions not involving a public offering.
SCHEDULE
OF CONVERTIBLE PROMISSORY NOTES AND SHORT TERM LOANS
|
|
|
Total
|
|
|
|
|
$
|
|
|
Year
ended March 31, 2021
|
|
|
|
|
|
Face
value of convertible notes issued
|
|
|
12,588,000
|
|
|
Debt
discount
|
|
|
(9,400,503
|
)
|
|
Debt
issuance cost
|
|
|
(2,311,854
|
)
|
|
Day
1 value of convertible notes issued
|
|
|
875,643
|
|
|
|
|
|
|
|
|
Accretion
of debt discount
|
|
|
1,802,807
|
|
|
Amortization
of debt issuance cost
|
|
|
678,348
|
|
|
Total
accretion and amortization expenses
|
|
|
2,481,155
|
|
|
|
|
|
|
|
|
Conversion
to common shares (Note 8)
|
|
|
(739,000
|
)
|
|
|
|
|
|
|
|
Balance
at March 31, 2021
|
|
|
2,617,798
|
|
|
|
|
|
|
|
|
Three
months ended June 30, 2021
|
|
|
|
|
|
Accretion
of debt discount
|
|
|
1,833,967
|
|
|
Amortization
of debt issuance cost
|
|
|
501,200
|
|
|
Total
accretion and amortization expenses
|
|
|
2,335,167
|
|
|
|
|
|
|
|
|
Conversion
to common shares (Note 8)
|
|
|
(1,157,500
|
)
|
|
|
|
|
|
|
|
Balance
at June 30, 2021
|
|
|
3,795,465
|
|
|
|
|
|
|
|
|
Three
months ended September 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
Accretion
of debt discount
|
|
|
4,627,415
|
|
|
Amortization
of debt issuance cost
|
|
|
537,304
|
|
|
Total
accretion and amortization expenses
|
|
|
5,164,719
|
|
|
|
|
|
|
|
|
Conversion
to common shares (Note 8)
|
|
|
(8,679,000
|
)
|
|
|
|
|
|
|
|
Balance
at September 30, 2021
|
|
|
281,184
|
|
General
and administrative expenses include interest expense on the above debt instruments of $157,620
and $479,498
for the three and six months ended
September 30, 2021 (September 30, 2020: $84,676,
$84,676),
respectively.
6.
FEDERALLY GUARANTEED LOANS
Economic
Injury Disaster Loan (“EIDL”)
In
April 2020, the Company received $370,900
from the U.S. Small Business Administration (SBA)
under the captioned program. The
loan has a term of 30
years
and an interest rate of 3.75%,
without the requirement for payment in its first 12 months. The
Company may prepay the loan without penalty at will.
In
May 2021, the Company received an additional $499,900
from the SBA under the same terms.
Payment
Protection Program (“PPP”) Loan
In
May 2020, Biotricity received loan proceeds of $1,200,000
(the “PPP Loan”) under the Paycheck
Protection Program established by the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) administered by
the U.S. Small Business Administration (“SBA”). The Company met the criteria for the loan forgiveness and applied for the
loan forgiveness in March 2021. For the year ended March 31, 2021, the Company recognized the loan forgiveness as a reduction to payroll
expense in the amount of $1,156,453
and a reduction to the rent expense of $43,547.
The loan forgiveness was granted by the SBA in May 2021. As at September 30, 2021, the balance of outstanding PPP loan is NIL (March
31, 2021: NIL).
7.
DERIVATIVE LIABILITIES
On
December 19, 2019 and January 9, 2020, the Company issued 7,830
Series A preferred shares; 6,000
of these were issued for cash proceeds of $6,000,000
and 1,830
of these were issued on conversion of $1,830,000
of promissory notes that had previously been
issued for cash proceeds in October 2019.
On
May 22, 2020, another 215
Series A preferred shares were issued as a result
of a combined transaction that included the conversion of $100,000
in promissory notes (Note 5(a)) and $15,000
(Note 5(a)) in accrued interest for 115
preferred shares, as well as a purchase of 100
preferred shares for cash proceeds of $100,000.
During
the three months ended September 30, 2021, an additional 100
Series A preferred shares were issued for cash
proceeds of $100,000
(Note 8 c).
The
Company analyzed the compound features of variable conversion and redemption embedded in this instrument, for potential derivative accounting
treatment on the basis of ASC 820 (Fair Value in Financial Instruments), ASC 815 (Accounting for Derivative Instruments and Hedging Activities),
Emerging Issues Task Force (“EITF”) Issue No. 00–19 and EITF 07–05, and determined that the embedded derivatives
should be bundled and valued as a single, compound embedded derivative, bifurcated from the underlying equity instrument, treated as
a derivative liability, and measured at fair value.
SCHEDULE
OF DERIVATIVE LIABILITIES
|
|
|
Total
|
|
|
|
|
$
|
|
|
Derivative
liabilities as at March 31, 2020
|
|
|
1,144,733
|
|
|
Derivative
fair value at issuance during fiscal 2021
|
|
|
41,749
|
|
|
Change
in fair value of derivatives
|
|
|
(776,440
|
)
|
|
Derivative
liabilities as at March 31, 2021
|
|
|
410,042
|
|
|
Change
in fair value of derivatives during the period
|
|
|
(203,525
|
)
|
|
Derivative
liabilities as at June 30, 2021
|
|
|
206,517
|
|
|
Derivative fair
value at issuance during three months ended September 30, 2021
|
|
|
17,084
|
|
|
Change
in fair value of derivatives during the period
|
|
|
(101,783
|
)
|
|
Derivative
liabilities as at September 30, 2021
|
|
|
121,818
|
|
The
lattice methodology was used to value the derivative components, using the following assumptions:
SCHEDULE
OF DERIVATIVE COMPONENTS VALUATION ASSUMPTIONS
|
|
|
Assumptions
|
|
|
Dividend
yield
|
|
|
12
|
%
|
|
Risk-free
rate for term
|
|
|
0.40%
– 0.57
|
%
|
|
Volatility
|
|
|
119.2%
- 104.4
|
%
|
|
Remaining
terms (Years)
|
|
|
2.34
to 4.00
|
|
|
Stock
price ($ per share)
|
|
$
|
2.91
to $3.79
|
|
In
addition, the Company recorded derivative liabilities related to the conversion and redemption features of the convertible notes, as
well as warrants that were issued in connection with the convertible notes, during the year ended March 31, 2021 (Note 5(b)). As the
warrant exercise price became final and locked, the derivative liabilities related to those warrants were marked to market and transferred
to equity (Note 5(b)). Any noteholder and placement agent warrants that were issued after the finalization of exercise price was accounted
for as equity.
SCHEDULE
OF DERIVATIVE LIABILITIES
|
|
|
Total
|
|
|
|
|
$
|
|
|
For
the year ended March 31, 2021
|
|
|
|
|
|
Derivative
fair value at issuance
|
|
|
|
|
|
Series
A notes (Note 5(b))
|
|
|
6,932,194
|
|
|
Series
B notes (Note 5(b))
|
|
|
497,042
|
|
|
|
|
|
7,429,236
|
|
|
|
|
|
|
|
|
Fair
value change upon end of warrants derivative treatment (Note 5(b))
|
|
|
(82,444
|
)
|
|
Carrying
amount of warrants transferred equity upon end of warrants derivative treatment (Note 5(b))
|
|
|
(3,937,664
|
)
|
|
|
|
|
|
|
|
Conversion
to common shares (Note 5(b))
|
|
|
(225,284
|
)
|
|
|
|
|
|
|
|
Change
in fair value of derivative liabilities
|
|
|
450,012
|
|
|
|
|
|
|
|
|
Balance
at March 31, 2021
|
|
|
3,633,856
|
|
|
|
|
|
|
|
|
For
the three months ended June 30, 2021
|
|
|
|
|
|
Conversion
to common shares (Note 5(b))
|
|
|
(403,108
|
)
|
|
|
|
|
|
|
|
Change
in fair value of derivative liabilities
|
|
|
502,508
|
|
|
|
|
|
|
|
|
Balance
at June 30, 2021
|
|
|
3,733,256
|
|
|
|
|
|
|
|
|
For
the three months ended September 30, 2021
|
|
|
|
|
|
Conversion
to common shares (Note 5(b))
|
|
|
(2,744,711
|
)
|
|
|
|
|
|
|
|
Change
in fair value of derivative liabilities
|
|
|
(295,801
|
)
|
|
|
|
|
|
|
|
Balance
at September 30, 2021
|
|
|
692,744
|
|
The
monte-carlo methodology was used to value the convertible note and warrant derivative components, using the following assumptions:
SCHEDULE
OF DERIVATIVE COMPONENTS VALUATION ASSUMPTIONS
|
|
|
|
Conversion
and redemption features
|
|
|
Risk-free
rate for term (%)
|
|
|
0.11
- 0.20
|
|
|
Volatility (%)
|
|
|
75.2
–
111.3
|
|
|
Remaining
terms (Years)
|
|
|
0.27
–
0.52
|
|
|
Stock price ($ per
share)
|
|
|
2.91
–
3.79
|
|
8.
STOCKHOLDERS’ EQUITY (DEFICIENCY)
a)
Authorized stock
As
at September 30, 2021, the Company is authorized to issue 125,000,000
(March 31, 2021 – 125,000,000)
shares of common stock ($0.001
par value) and 10,000,000
(March 31, 2021 – 10,000,000)
shares of preferred stock ($0.001
par value), 20,000
of which (March 31, 2021 – 20,000)
are designated shares of Series A preferred stock ($0.001
par value).
At
September 30, 2021, common shares and shares directly exchangeable into equivalent common shares that were issued and outstanding totaled
48,876,312
(March 31, 2021 – 39,014,942);
these were comprised of 47,409,594 (March
31, 2021 – 36,124,964)
shares of common stock and 1,466,718
(March 31, 2021 – 2,889,978)
exchangeable shares. There is currently one share of the Special Voting Preferred Stock issued and outstanding, held by one holder of
record, which is the Trustee in accordance with the terms of the Trust Agreement. The Company has also issued a Series A preferred stock,
$0.001
par value; 20,000 shares
have been designated as authorized (as at September 30 and March 31, 2021); 8,145
Series A preferred shares were issued and outstanding
as at September 30 and March 31, 2021.
b)
Exchange Agreement
On
February 2, 2016, the Company was formed through reverse-take-over:
|
|
●
|
The
Company issued approximately 1.197
shares of its common stock in exchange for each common share of iMedical held by the iMedical shareholders who in general terms,
are not residents of Canada (for the purposes of the Income Tax Act (Canada). Accordingly, the Company issued 13,376,947 shares;
|
|
|
●
|
Shareholders
of iMedical who in general terms, are Canadian residents (for the purposes of the Income Tax Act (Canada)) received approximately
1.197
Exchangeable Shares in the capital of Exchangeco in exchange for each common share of iMedical held. Accordingly, the Company issued
9,123,031 Exchangeable Shares;
|
|
|
●
|
Each
outstanding option to purchase common shares in iMedical (whether vested or unvested) was exchanged, without any further action or
consideration on the part of the holder of such option, for approximately 1.197
economically equivalent replacement options with an inverse adjustment to the exercise price of the replacement option to reflect
the exchange ratio of approximately 1.197:1;
|
|
|
●
|
Each
outstanding warrant to purchase common shares in iMedical was adjusted, in accordance with the terms thereof, such that it entitles
the holder to receive approximately 1.197
shares of the common stock of the Company for each warrant, with an inverse adjustment to the exercise price of the warrants to reflect
the exchange ratio of approximately 1.197:1
|
|
|
●
|
Each
outstanding advisor warrant to purchase common shares in iMedical was adjusted, in accordance with the terms thereof, such that it
entitles the holder to receive approximately 1.197
shares of the common stock of the Company for each advisor warrant, with an inverse adjustment to the exercise price of the Advisor
Warrants to reflect the exchange ratio of approximately 1.197:1;
and
|
|
|
●
|
The
outstanding 11% secured convertible promissory notes of iMedical were adjusted, in accordance with the adjustment provisions thereof,
as and from closing, so as to permit the holders to convert (and in some circumstances permit the Company to force the conversion
of) the convertible promissory notes into shares of the common stock of the Company at a 25%
discount
to purchase price per share in Biotricity’s next offering.
|
Issuance
of common stock, exchangeable shares and cancellation of shares in connection with the reverse takeover transaction as explained above
represents recapitalization of capital retroactively adjusting the accounting acquirer’s legal capital to reflect the legal capital
of the accounting acquiree.
c)
Share issuances
Share
issuances during the year ended March 31, 2021
During
the year ended March 31, 2021, the Company recorded preferred stock dividends for the Series A preferred stock in amount of $962,148
(2020 - $257,927)
and made a payment in the amount of $602,969
(2020 - $180,000).
During
the year ended March 31, 2021, the Company issued 733,085
common shares in connection with conversion of
convertible notes (Note 5(b)) not including another 18,402
that were to be issued subsequent to year
end. The total amounts of convertible notes settled was $1,011,286
comprised
of face value of convertible promissory notes in the amount of $739,000
(Note 5(b), carrying amount of conversion and
redemption feature derived from notes in the amount of $225,284
and unpaid interest in the amount of $47,002.
The fair value of the shares issued and to be issued was determined based on the market price upon conversion and was in the amount of
$1,076,561
and $38,460
respectively. The difference between amounts
of notes settled and the fair value of common shares issued was $103,735,
which was recorded as a loss on conversion of convertible promissory
notes in the statement of operations.
During
the year ended March 31, 2021, the Company issued 1,900,042
common shares in payment of services provided,
as well as the exercise of warrants.
During
the year ended March 31, 2021, the Company also issued an aggregate of 898,084
shares of its common stock to investors as part
of the one-for-one exchange of previously issued exchangeable shares into the Company’s Common Stock, which is a non-cash transaction.
Share
issuances during the six months ended September 30, 2021
During
the three months ended June 30, 2021, the Company issued 183,202
common shares in connection with conversion of
convertible notes (Note 5(b)), not including another 345,676
that were to be issued subsequent to June
30, 2021. The total amounts of convertible notes settled is in amount of $1,642,049
comprised of
face value of convertible promissory notes with a face value of $1,157,500
(Note 5(b)), carrying amount of conversion and
redemption feature derived from notes in amount of $403,108
and unpaid interest in the amount of $81,441.
The fair value of the shares issued and to be issued was determined based on the market price upon conversion and was in the amount of
$479,760
and $1,190,502
respectively. The difference, that represented
a loss on conversion, between amounts of notes settled and the fair value of common shares issued was in the amount of
$28,213
and was recorded as other expenses in the
condensed consolidated statement of operations.
During
the three months ended June 30, 2021, the Company also issued an aggregate of 1,423,260
shares of its common stock to investors as part
of the one-for-one exchange of previously issued exchangeable shares into the Company’s Common Stock, which is a non-cash transaction.
During
the three months ended September 30, 2021, the Company issued 3,013,673
common shares in connection with conversion of
convertible notes (Note 5(b)), and 908,197
shares to be issued subsequent to September
30, 2021. The total amount of debts settled was $12,157,500,
which consisted of face value of $8,679,000
(Note 5(b)), carrying amount of the conversion
and redemption feature derived from notes in the amount of $2,744,711
and unpaid interest in the amount
of $733,789.
The fair value of the shares issued and to be issued was determined
based on the market price upon conversion and was in the amount of $11,641,222
and $1,338,485
respectively.
The difference, between the amounts of notes settled and the fair value of common shares issued, which
represents a loss on conversion, was in the amount of $822,207
and was recorded as other expenses in
the condensed consolidated statement of operations.
During
the three months ended September 30, 2021, the Company issued 5,382,331
common shares in connection with the equity
financing that was concurrent with its listing on the Nasdaq Capital Market, for total net cash proceeds of $14,545,805.
During
the three months ended September 30, 2021, the Company issued 181,666
common shares
for services received, with a fair value of $568,615.
During
the three months ended September 30, 2021, The Company issued 69,252
common shares for cash proceeds of $250,000,
which were initially received as a promissory note, and paid through the issuance common shares within the same quarter.
During three months
ended June 30, 2021, the Company issued 100,236 common shares in connection with warrant exercises for cash proceeds of $146,250.
During the three months ended September 30,
2021, the
Company issued 279,197
(cash exercise – 194,017; cashless exercise - 85,180) common
shares in connection with warrant exercises, for a cash exercise proceeds of $308,564.
In addition, the Company issued 633,412
common shares in connection with shares that
were to be issued at previous quarter end.
During the three months ended September 30,
2021, an additional 100 Series A preferred shares were issued for cash proceeds of $100,000 (Note 7). The fair value of the derivative
at issuance date, in the amount of $17,804, was recognized with a corresponding debit in stockholder’s equity (Note 7).
d)
Shares to be issued
During
the three months ended September 30, 2021, the Company issued 633,412
of previously to be issued shares, in connection
with convertible note conversions. As of September 30, 2021, the Company has recognized its contractual obligations for 908,197
shares to be issued, in connection with conversions
of convertible notes that took place in the quarter (Note 5(b)), with fair value of shares to be issued of $1,338,485,
determined based on the market price upon conversion. In addition,
the Company recognized its contractual obligations for 81,522
shares to be issued for services received and
23,584
shares to be issued for warrant exercises request
received but not yet processed as of quarter end.
e)
Warrant issuances and exercises
Warrant
exercises and issuances during the year ended March 31, 2021
During
the year ended March 31, 2021, 97,500
warrants were exercised (2020 – nil) pursuant
to receipt of exercise proceeds of $67,941.
(Note 5(a))
During
the year ended March 31, 2021, the Company issued 449,583
warrants as compensation for advisor and consultant
services which were fair valued. The vested portion of $275,801 related to these warrants were recognized in general and administrative
expenses, with a corresponding credit to additional paid in capital. As of December 31, 2020, the Company extended the expiry dates of
788,806
warrants previously issued to an executive of
the Company, in order to extend their term from 3
to 10
years in accord with the same term extension
made to the options of all other Company employees in fiscal 2020. As part of this revision in terms, 288,806
of these same warrants, previously issued and
expensed, were repriced to reflect current market conditions; the resulting increase in the fair value of these warrants of $464,971
was expensed to general and administrative expenses.
In addition, the Company issued 1,065,857
warrants to brokers, and 5,631,132
warrants to convertible note holders, in connection
with the convertible note issuance (Note 5(b)). The warrants’ fair value has been estimated using a monte-carlo model (Note
7), which were initially recorded as derivative liabilities, then recorded as equity upon the end of derivative treatment of such warrants
(Note 5(b) and Note 7).
During the three months ended June 30, 2021,
100,236 of warrants previously issued on convertible notes were exercised for cash of $106,250, recognized as a credit to common stock
and additional paid in capital accordingly.
During the three
months ended June 30, 2021, one warrant holder provided cash of $40,000 to exercise 37,736 warrants, such that 37,736 shares were to
be issued as at June 30, 2021. Total shares to be issued for warrant exercise requests received but not processed was 24,584 as at September
30, 2021.
During
the three months ended September 30, 2021, the Company issued 65,000
warrants as compensation for advisor and
consultant services, including 50,000
warrants issued to an executive of the Company.
The warrants were fair valued at $144,353 and
their respective value recognized in general and administrative expenses, with a corresponding credit to additional paid-in
capital.
During
the three months ended September 30, 2021, 194,017
of warrants previously issued on convertible
notes were exercised for cash of $308,564,
recognized as a credit to common stock and additional paid in capital
in amount of $194 and $308,370 respectively.
During the three months ended September 30,
2021, as a result of cashless exercise of warrants that were previously issued on convertible notes, 85,180
common shares were issued and 1,000 common shares
were to be issued subsequent to September 30, 2021 to placement agents in settlement of placement agent warrants.
During
the three months ended September 30, 2021, one warrant holder paid cash of $25,000
to exercise 23,584
warrants, which led to 23,584
common
shares to be issued as at September 30, 2021.
During the three months ended September 30,
2021, the Company issued 373,404 share purchase warrants to underwriter. The fair value of those warrants, in the amount of $900,371, was
determined by using Black Scholes model, based on the following key inputs and assumptions: expiry date August 26, 2026, exercise price $3.75, rate of returns 0.77%,
and volatility 111.9%
Warrant
issuances, exercises and expirations or cancellations during the three months ended September 30, 2021 and preceding periods resulted
in warrants outstanding at the end of those respective periods as follows:
SCHEDULE
OF WARRANTS OUTSTANDING
|
|
|
Broker
Warrants
|
|
|
Consultant
Warrants
|
|
|
Warrants
Issued on Conversion
of
Convertible
Notes
|
|
|
Private
Placement Warrants
|
|
|
Total
|
|
|
As
at March 31, 2020
|
|
|
321,314
|
|
|
|
2,049,837
|
|
|
|
2,734,530
|
|
|
|
1,163,722
|
|
|
|
6,269,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Expired/cancelled
|
|
|
(128,676
|
)
|
|
|
(271,365
|
)
|
|
|
(911,510
|
)
|
|
|
(1,163,722
|
)
|
|
|
(2,475,273
|
)
|
|
Less:
Exercised
|
|
|
|
|
|
|
(97,500
|
)
|
|
|
|
|
|
|
|
|
|
|
(97,500
|
)
|
|
Add:
Issued
|
|
|
1,065,857
|
|
|
|
449,583
|
|
|
|
5,631,132
|
|
|
|
-
|
|
|
|
7,146,572
|
|
|
As
at March 31, 2021
|
|
|
1,258,495
|
|
|
|
2,130,555
|
|
|
|
7,454,152
|
|
|
|
-
|
|
|
|
10,843,202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Expired/cancelled
|
|
|
-
|
|
|
|
(93,750
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(93,750
|
)
|
|
Less:
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
(137,972
|
)
|
|
|
-
|
|
|
|
(137,972
|
)
|
|
Add:
Issued
|
|
|
-
|
|
|
|
60,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
60,000
|
|
|
As
at June 30, 2021
|
|
|
1,258,495
|
|
|
|
2,096,805
|
|
|
|
7,316,180
|
|
|
|
-
|
|
|
|
10,671,480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Expired/cancelled
|
|
|
-
|
|
|
|
(229,583
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(229,583
|
)
|
|
Less:
Exercised
|
|
|
(153,560
|
)
|
|
|
-
|
|
|
|
(193,097
|
)
|
|
|
-
|
|
|
|
(346,657
|
)
|
|
Add:
Issued
|
|
|
373,404
|
|
|
|
65,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
438,404
|
|
|
As
at September 30, 2021
|
|
|
1,478,339
|
|
|
|
1,932,222
|
|
|
|
7,123,083
|
|
|
|
-
|
|
|
|
10,533,644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
Price
|
|
|
$1.06
to
$3.75
|
|
|
|
$0.48
to $7.59
|
|
|
|
$1.06
to
$2.00
|
|
|
|
|
|
|
|
|
|
|
Expiration
Date
|
|
|
Dec
2021 to Jan 2031
|
|
|
|
Oct
2017 to Sep 2031
|
|
|
|
May
2022 to Feb 2024
|
|
|
|
|
|
|
|
|
|
f)
Stock-based compensation
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.
The
Plan shall continue in effect until its termination by the board of directors or committee formed by the board; provided, however, that
all awards shall be granted, if at all, on or before the day immediately preceding the tenth (10th) anniversary of the effective date.
The maximum number of shares of stock that may be issued under the Plan shall be equal to 3,750,000
shares; provided that the maximum number of shares
of stock that may be issued under the Plan pursuant to awards shall automatically and without any further Company or shareholder approval,
increase on January 1 of each year for not more than 10
years from the effective date, so the number
of shares that may be issued is an amount no greater than 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.
Based
on the 2016 Option Plan, the Company is authorized to issue employee options with a 10-year
term. On March 31, 2020, the Company’s Board of Directors approved the amendment of certain prior options grants, issued to current
employees, previously issued with a 3-year
term, such that the respective options issued under these agreements would have their term extended to 10
years. The Company revalued these options using
a lattice model with an expected life of 10
years, risk free rates of 0.46%
to 0.75%,
stock price of $0.974
and expected volatility of 132.2%,
in order to recognize the additional expense associated with the longer term and recognized a one-time charge of $1,600,515
in share-based compensation, with a corresponding
adjustment to adjusted paid in capital.
During
the year ended March 31, 2021, the Company granted 2,610,647
stock options with a weighted average remaining
contractual life of 8.7
years. The Company recorded stock-based compensation
of $790,535
in connection with ESOP 2016 Plan under general
and administrative expenses with corresponding credit to additional paid in capital.
During
the three months ended June 30, 2021, the Company granted 170,532 of options with a weighted average remaining contractual life of 9.3
years. The Company recorded stock-based compensation of $155,851 in connection with ESOP 2016 Plan (June 30, 2020 - $232,519), under
general and administrative expenses with corresponding credit to additional paid in capital.
During
the three months ended September 30, 2021, the Company granted 174,426
of options with a weighted average remaining
contractual life of 9.6
years. The Company recorded stock-based compensation
of $169,778
in connection with ESOP 2016 Plan (September
30, 2020 - $229,647),
under general and administrative expenses with corresponding credit to additional paid in capital.
The
following table summarizes the stock option activities of the Company to September 30, 2021:
SCHEDULE
OF STOCK OPTION ACTIVITIES
|
|
|
Number
of
options
|
|
|
Weighted
Average
exercise price ($)
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
Granted
|
|
|
4,147,498
|
|
|
|
3.2306
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding
as of March 31, 2018
|
|
|
4,147,498
|
|
|
|
3.2306
|
|
|
Granted
|
|
|
270,521
|
|
|
|
1.8096
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding
as of March 31, 2019
|
|
|
4,418,019
|
|
|
|
3.1436
|
|
|
Granted
|
|
|
88,100
|
|
|
|
0.7763
|
|
|
Expired
|
|
|
(112,509
|
)
|
|
|
2.723
|
|
|
Outstanding
as of March 31, 2020
|
|
|
4,393,610
|
|
|
|
3.1069
|
|
|
Granted
|
|
|
2,610,647
|
|
|
|
1.0072
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding
as of March 31, 2021
|
|
|
7,004,256
|
|
|
|
2.3268
|
|
|
Granted
|
|
|
170,532
|
|
|
|
1.7931
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding
as of June 30, 2021
|
|
|
7,174,788
|
|
|
|
2.3141
|
|
|
Granted
|
|
|
174,426
|
|
|
|
2.5579
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding
as of September 30, 2021
|
|
|
7,349,214
|
|
|
|
2.3199
|
|
The
fair value of each option granted is estimated at the time of grant using the Black Scholes model using the following assumptions, for
each of the respective fiscal year:
SCHEDULE
OF FAIR VALUE OF OPTION GRANTED USING VALUATION ASSUMPTIONS
|
|
|
2022
|
|
|
2021
|
|
|
2020
|
|
|
2019
|
|
|
Exercise price ($)
|
|
|
0.74
–
3.15
|
|
|
|
0.74-2.89
|
|
|
|
1.40-2.00
|
|
|
|
1.40-2.00
|
|
|
Risk
free interest rate (%)
|
|
|
0.30
–
1.72
|
|
|
|
0.18
–
1.72
|
|
|
|
0.52-2.81
|
|
|
|
2.27-2.81
|
|
|
Expected
term (Years)
|
|
|
2.0
– 10.0
|
|
|
|
2.0
– 10.0
|
|
|
|
2.0-3.0
|
|
|
|
2.0-3.0
|
|
|
Expected
volatility (%)
|
|
|
106.6
–
129.9
|
|
|
|
106.8
–
129.9
|
|
|
|
97.8-141.1
|
|
|
|
97.8-141.1
|
|
|
Expected
dividend yield (%)
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
Fair value of option
($)
|
|
|
0.59
–
2.60
|
|
|
|
0.72
- 1.72
|
|
|
|
0.76
|
|
|
|
0.588
|
|
|
Expected
forfeiture (attrition) rate (%)
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
|
|
0.00
|
|
9.
LEASE
The
Company has one operating lease primarily for office and administration.
The
Company adopted ASC 842 – Leases using the modified retrospective cumulative catch-up approach beginning on April 1, 2019. Under
this approach, the Company did not restate its comparative amounts and recognized a right-of-use asset equal to the present value of
the future lease payments. The Company elected to apply the practical expedient to only transition contracts which were previously identified
as leases and elected to not recognize right-of-use assets and lease obligations for leases of low value assets.
As
of June 30, 2021, the previous lease term for the office ended. The operating lease obligation was fully paid and the operating lease
right-of-use asset was fully amortized. During June 2021, the Company entered into a short-term lease for the leased premise at monthly
base rent of $19,177.
The extended term is not to extend beyond Dec 31, 2021. No additional operating right-of-use asset was recognized as a result of this
extension.
The
operating lease expense was $60,826 and
$128,254 for
the three and six months ended September 30, 2021, and was included in the general and administrative expenses.
10.
CONTINGENCIES
There
are no unrecognized claims against the Company that were assessed as significant, which were outstanding as at September 30, 2021
and, consequently, no additional provision for such has been recognized in the consolidated financial statements during the three and
six months then ended.
11.
SUBSEQUENT EVENTS
The
Company’s management has evaluated subsequent events up to November 4, 2021, the date the condensed consolidated financial
statements were issued, pursuant to the requirements of ASC 855 and has determined the following material subsequent events:
During
the period from October 1 to November 4, 2021, the Company received conversion notices and issued 120,740
common shares to a Series B convertible
note holder who converted portions of notes with a combined face value of $262,500. Also during the same period, the Company issued 131,522
shares as compensation valued at $331,500 to advisors and directors, out of which 81,522 (valued at $255,979) was part of the to be issued
shares as of September 30, 2021.