The Financial Statements have been adjusted
to retroactively reflect the 150-to-1 reverse stock split effected on October 29, 2018, as discussed in Note 2(a).
The Financial Statements have been adjusted
to retroactively reflect the 150-to-1 reverse stock split effected on October 29, 2018, as discussed in Note 2(a).
The Financial Statements have been adjusted
to retroactively reflect the 150-to-1 reverse stock split effected on October 29, 2018, as discussed in Note 2(a).
NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
For the three and six month periods ended
September 30, 2018 and 2017
(Amounts expressed in U.S. Dollars) (unaudited)
The Company and its Operations
Bionik Laboratories Corp. (the “Company”
or “Bionik”) was incorporated on January 8, 2010 in the State of Colorado as Strategic Dental Management Corp. On July
16, 2013, the Company changed its name to Drywave Technologies Inc. and its state of incorporation from Colorado to Delaware. Effective
February 13, 2015, the Company changed its name to Bionik Laboratories Corp. and reduced the authorized number of shares of common
stock from 200,000,000 to 150,000,000. Concurrently, the Company implemented a 1-for-0.831105 reverse stock split of the common
stock, which had previously been approved on September 24, 2014.
On February 26, 2015, the Company entered
into a Share Exchange Agreement and related transactions whereby it acquired Bionik Laboratories Inc., a Canadian Corporation (“Bionik
Canada”), and Bionik Canada issued 333,334 Exchangeable Shares, representing a 3.14 exchange ratio, for 100% of the then
outstanding common shares of Bionik Canada (the “Merger”). The Exchangeable Shares are exchangeable at the option of
the holder, each into one share of the common stock of the Company. In addition, the Company issued one share of its Special Voting
Preferred Stock (Note 10).
On April 21, 2016, the Company acquired
all of the outstanding shares and, accordingly, all assets and liabilities of Interactive Motion Technologies, Inc. (“IMT”),
a Boston, Massachusetts-based global pioneer and leader in providing effective robotic products for neurorehabilitation, pursuant
to an Agreement and Plan of Merger (the “Merger Agreement”) dated March 1, 2016, with IMT, Hermano Igo Krebs, and Bionik
Mergerco Inc., a Massachusetts corporation and the Company’s wholly owned subsidiary (Bionik Mergeco). The merger agreement
provided for the merger of Bionik Mergerco with and into IMT, with IMT surviving the merger as the Company’s wholly owned
subsidiary which was renamed Bionik, Inc. In return for acquiring IMT, IMT shareholders received an aggregate of 157,667 shares
of the Company’s common stock.
References to the Company refer to the
Company and its wholly owned subsidiaries, Bionik Inc., Bionik Acquisition Inc. and Bionik Canada.
On November 6, 2017, the Company approved the authorization of a common share capital increase to 250,000,000 from 150,000,000 and on June 12, 2018, the Company approved
the authorization of a common share capital increase to 500,000,000 from 250,000,000.
The Company is a global pioneering robotics
company focused on providing rehabilitation solutions to individuals with neurological disorders, specializing in designing, developing
and commercializing cost-effective physical rehabilitation technologies, prosthetics, and assisted robotic products. The Company
strives to innovate and build devices that can rehabilitate and improve an individual’s health, comfort, accessibility and
quality of life through the use of advanced algorithms and sensing technologies that anticipate a user’s every move.
These unaudited condensed consolidated
interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States
of America (“US GAAP”), which contemplates continuation of the Company as a going concern, which assumes the realization
of assets and satisfaction of liabilities and commitments in the normal course of business.
The Company’s principal offices are
located at 483 Bay Street, N105, Toronto, Ontario, Canada M5G 2C9 and its U.S. address is 80 Coolidge Hill Road, Watertown, MA.
USA 02472.
Going Concern
As at September 30, 2018, the Company had
a working capital deficit of $116,551 (March 31, 2018 – $6,711,941) and an accumulated deficit of $40,526,427 (March 31,
2018 – $35,766,340) and the Company incurred a net loss and comprehensive loss of $3,983,105 for the three month period ended
September 30, 2018 (September 30, 2017 - $3,615,361) and $4,743,803 for the six month period ended September 30, 2018 (September
30, 2017 – $5,855,877).
There is no certainty that the Company
will be successful in generating sufficient cash flow from operations or achieving and maintaining profitable operations in the
future to enable it to meet its obligations as they come due, however the Company believes it has the support of its major shareholders
who have provided convertible loans to meet the Company’s cash flow needs and to continue as a going concern. The Company
hopes to raise sufficient cash in the next six months to meet the Company’s anticipated cash requirements for the 12 months
thereafter. Sales of additional equity or equity-linked securities by the Company would result in the dilution of the interests
of existing stockholders. There can be no assurance that financing will be available when required. In the event that the necessary
additional financing is not obtained, the Company would reduce its discretionary overhead costs substantially or otherwise curtail
operations.
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
For the three and six month periods ended
September 30, 2018 and 2017
(Amounts expressed in U.S. Dollars) (unaudited)
|
1.
|
NATURE OF OPERATIONS (continued)
|
The Company expects the forgoing, or combination
thereof, to meet the Company’s anticipated cash requirements for the next 12 months; however, if these conditions are not
achieved, this will raise significant doubt about the Company’s ability to continue as a going concern. The accompanying
consolidated interim financial statements do not include any adjustments to reflect the possible effects of recoverability and
reclassification of assets or amounts and classifications of liabilities that may result from the outcome of this uncertainty.
All adjustments, consisting only of normal
recurring items, considered necessary for fair presentation have been included in these condensed consolidated interim financial
statements.
|
2.
|
CHANGE IN ACCOUNTING POLICY AND CHANGE IN ACCOUNTING
POLICY
|
On or about August 7, 2018, holders of
the common stock and exchangeable shares of the Company approved, through a majority shareholder vote, an amendment to the Company’s
Amended and Restated Certificate of Incorporation authorizing the Board of Directors to effect a reverse stock split of the Company’s
common stock and exchangeable shares at a ratio up to one-for-one hundred and fifty (1:150).
On October 29, 2018, the Company effected
a reverse stock split and thereafter Bionik’s common stock began trading on the OTCQB market on a one-for-one hundred and
fifty (1:150) split adjusted basis. As a result of the reverse stock split, every 150 shares of the Company’s then-existing
common stock was converted into one share of the Company’s common stock. No fractional shares were issued in connection with
the reverse stock split. All fractional shares created by the reverse split were rounded up to the next whole share. The reverse
stock split automatically and proportionately adjusted, based on the one-for-one hundred fifty split ratio, all issued and outstanding
shares of the Company’s common stock, as well as exchangeable shares and common stock underlying stock options, warrants
and other derivative securities outstanding at the time of the effectiveness of the reverse stock split. The exercise price on
outstanding equity based-grants was proportionately increased, while the number of shares available under the Company’s equity-based
plans was also proportionately reduced. The reverse stock split has no impact on the par value per share of Bionik’s common
stock, which remains at $0.001. All current and prior period amounts related to share, share prices and earnings per share, warrant
and options presented in the Company’s consolidated financial statements contained in this Quarterly report on Form 10-Q
and the accompanying notes have been restated to give retrospective presentation for the reverse split.
|
b)
|
Change in accounting policy
|
The FASB issued ASU No. 2017-11,
Earnings
Per Share (Topic 260) Distinguishing Liabilities From Equity (Topic 480) Derivatives and Hedging (Topic 815): Accounting for Certain
Financial Instruments With Down Round Features II Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments
of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests With a Scope Exception
, allows a
financial instrument with a down-round feature to no longer automatically be classified as a liability solely based on the existence
of the down-round provision. The update also means the instrument would not have to be accounted for as a derivative and be subject
to an updated fair value measurement each reporting period.
On consideration of the above factors,
the Company elected to early adopt ASU 2017-11 on July 1, 2017. The ASU is effective for public business entities for fiscal years,
and interim periods within those fiscal years, beginning after December 15, 2018. For all other organizations, the amendments are
effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December
15, 2020.
The early adoption allows the Company to
reduce the cost and complexity of updating the fair value measurement each reporting period and eliminate the unnecessary volatility
in reported earnings created by the revaluation when the Company’s shares’ value changes.
The Company presented the change in accounting
policy through the retrospective application of the new accounting principle to all prior periods, as described in ASU No. 250-10-45-5,
Accounting Changes and Error Corrections.
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the three and six month periods ended
September 30, 2018 and 2017
(Amounts expressed in U.S. Dollars) (unaudited)
|
3.
|
SIGNIFICANT ACCOUNTING POLICIES
|
Unaudited Condensed Consolidated Interim
Financial Statements
These unaudited condensed consolidated
interim financial statements have been prepared on the same basis as the annual audited financial statements of the Company and
should be read in conjunction with those annual audited financial statements filed on Form 10-K for the year ended March 31, 2018.
In the opinion of management, these unaudited condensed consolidated interim financial statements reflect adjustments, necessary
to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results
of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.
This is the second set of the Company’s
unaudited condensed consolidated interim financial statements where ASU-2014-09 “Revenue from Contracts with Customers (Topic
606)” has been applied. The changes in accounting policies from those used in the Company’s unaudited condensed consolidated
interim financial statements from the quarter ended September 30, 2018 are described below.
Newly Adopted and Recently Issued
Accounting Pronouncements
Management does not believe that any other
recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying
condensed consolidated interim financial statements.
In May 2014, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers
(Topic 606). The updated standard will replace most existing revenue recognition guidance in U.S. GAAP. The new standard introduces
a five-step process to be followed in determining the amount and timing of revenue recognition. It also provides guidance on accounting
for costs incurred to obtain or fulfill contracts with customers, and establishes disclosure requirements, which are more extensive
than those required under existing U.S. GAAP. The FASB has issued numerous amendments to ASU 2014-09 from August 2015 through January
2018, which provide supplemental and clarifying guidance, as well as amend the effective date of the new standard. ASU 2014-09,
as amended, is effective for the Company in the interim period ended June 30, 2018. The standard permits the use of either the
retrospective or modified retrospective (cumulative effect) transition method. The Company adopted the new standard using the modified
retrospective transition method. The Company has adopted ASU-2014-01 for the fiscal year ending March 31, 2019 and it did not have
material effect on the consolidated financial position and the consolidated results of operations.
As a result of the adoption of ASU-2014-09,
the Company’s accounting policies have been updated. See “Revenue Recognition” below for these changes in accounting
policies, as well as new disclosure requirements. The changes in accounting policies will also be reflected in the Company’s
audited consolidated financial statements for the year ending March 31, 2019.
In November 2015, the FASB issued ASU No.
2015-17, “Balance Sheet Classification of Deferred Taxes,” which require that deferred tax liabilities and assets be
classified on our Consolidated Balance Sheets as noncurrent based on an analysis of each taxpaying component within a jurisdiction.
ASU No. 2015- 17 is effective for the fiscal year commencing after December 15, 2017. The Company has adopted ASU-2015-17 for the
fiscal year ending March 31, 2019 and it did not have material effect on the consolidated financial position and the consolidated
results of operations.
In January 2016, the FASB issued ASU No.
2016-01 Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.
The updates make several modifications to Subtopic 825-10, including the elimination of the available-for-sale classification of
equity investments, and it requires equity investments with readily determinable fair values to be measured at fair value with
changes in fair value recognized in operations. The update is effective for fiscal years beginning after December 15, 2017. The
Company has adopted ASU-2016-01 for the fiscal year ending March 31, 2019 and it did not have material effect on the consolidated
financial position and the consolidated results of operations.
In February 2016,
the FASB issued ASU 2016-02, “Leases.” This update requires organizations that lease assets to recognize on the balance
sheet the assets and liabilities for the rights and obligations created by those leases. The new guidance will also require additional
disclosure about the amount, timing and uncertainty of cash flows arising from leases. The provisions of this update are effective
for annual and interim periods beginning after December 15, 2018. The Company is still assessing the impact that the adoption of
ASU 2016-02 will have on the consolidated financial position and the consolidated results of operations.
In August 2016, the FASB issued ASU 2016-15,
“Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments”. This ASU provides eight targeted
changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective
for the fiscal year commencing after December 15, 2017. The Company has adopted ASU-2016-15 for the fiscal year ending March 31,
2019 and it did not have material effect on the consolidated financial position and the consolidated results of operations.
In January 2017, the FAS issued ASU 2017-01,
“Business Combinations: Clarifying the definition of a Business” which amends the current definition of a business.
Under ASU 2017-01, to be considered a business, an acquisition would have to include an input and a substantive process that together
significantly contributes to the ability to create outputs. ASU 2017-01 further states that when substantially all of the fair
value of gross assets acquired is concentrated in a single asset (or a group of similar assets), the assets acquired would not
represent a business. The new guidance also narrows the definition of the term “outputs” to be consistent with how
it is described in Topic 606, Revenue from Contracts with Customers.
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
For the three and six month periods ended
September 30, 2018 and 2017
(Amounts expressed in U.S. Dollars) (unaudited)
|
3.
|
SIGNIFICANT ACCOUNTING POLICIES (continued)
|
The changes to the definition of a business
will likely result in more acquisitions being accounted for as asset acquisitions. ASU 2017-01 is effective for acquisitions commencing
on or after June 30, 2019, with early adoption permitted. Adoption of this guidance will be applied prospectively on or after the
effective date.
In January 2017, the FASB issued ASU 2017-04,
“Intangibles – Goodwill and Other” ASU 2017-04 simplifies the accounting for goodwill impairment by eliminating
Step 2 of the current goodwill impairment test, which required a hypothetical purchase price allocation. Goodwill impairment will
now be the amount by which the reporting unit’s carrying value exceeds its fair value, limited to the carrying value of the
goodwill. ASU 2017-04 is effective for financial statements issued for fiscal years, and interim periods beginning after December
15, 2019.
In May 2017, the FASB issued ASU 2017-09,
“Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting (ASU 2107-9).” The FASB issued the update
to provide clarity and reduce the cost and complexity when applying guidance in Topic 718. The amendments in this update provide
guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modifications
accounting in Topic 718. ASU 2017-09 is effective for the Company in the interim period ended June 30, 2018. The Company adopted
ASU-2017-09 during the quarter ended June 30, 2018 and it did not have material effect on the consolidated financial position and
the consolidated results of operations.
Inventory
Inventory is stated at the lower of cost
or net realizable value. Cost is recorded at standard cost, on the first-in, first-out basis. Work-in-progress and finished goods
consist of materials, labor and allocated overhead.
Revenue Recognition
The Company has adopted ASU-2014-09 with
an initial application date of April 1, 2018. The updated accounting policies and the impact on the unaudited condensed consolidated
interim financial statements and additional disclosures are detailed as follows:
The Company determines revenue recognition
through the following steps: a) identification of the contract with a customer; b) identification of the performance obligation
in the contract; c) determination of the transaction price; d) allocation of the transaction price for the performance obligations
in the contract; and e) recognition of revenue when the Company satisfies a performance obligation.
Revenue is recognized when control of a
product is transferred to a customer. Revenue is measured based on the consideration specified in a contract with a customer, net
of returns and discounts. Accruals for sales returns are calculated based on the best estimate of the amount of product that will
ultimately be returned by customers, reflecting historical experience and the magnitude of non-conforming inventory claims made
by the customers that have either been approved or are pending review.
Contract liabilities are recorded when
cash payments are received or due in advance of the Company’s performance.
In the comparative period, revenue was
measured at the fair value of the consideration received or receivable, net of returns and discounts and was recognized when the
risks and rewards of ownership has transferred to the customer. No revenue was recognized if there was significant uncertainties
regarding recovery of the consideration due, the costs incurred or to be incurred could not be measured reliably, or there was
continuing management involvement with the goods.
Impact on the unaudited condensed
consolidated interim financial statements
ASU-2014-09 had no
impact on the Company’s unaudited condensed consolidated interim statement of loss and comprehensive loss for the three and
six month periods ended September 30, 2018.
Warranty Reserve and
Deferred Warranty Revenue
The Company provides a one-year warranty
as part of its normal sales offering. When products are sold, the Company provides warranty reserves, which, based on the historical
experience of the Company are sufficient to cover warranty claims. Accrued warranty reserves are included in accrued liabilities
on the balance sheet and amounted to $80,273 and $64,957 at September 30, 2018 and March 31, 2018, respectively. The Company also
sells extended warranties for additional periods beyond the standard warranty. Extended warranty revenue is deferred and recognized
as revenue over the extended warranty period. The Company recognized $5,208 and $15,316 of expense related to the change in warranty
reserves and warranty costs incurred and recorded as an expense in cost of goods sold during the three and six month period ended
September 30, 2018 (September 30, 2017 – $Nil and $Nil).
Foreign Currency Translation
The functional currency of the Company
and its wholly owned subsidiaries is the U.S. dollar. Transactions denominated in a currency other than the functional currency
are recorded on initial recognition at the exchange rate at the date of the transaction. After initial recognition, monetary assets
and liabilities denominated in foreign currency are translated at the end of each reporting period into the functional currency
at the exchange rate at that date. Exchange differences are recognized in profit or loss. Non-monetary assets and liabilities measured
at cost are translated at the exchange rate at the date of the transaction.
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
For the three and six month periods ended
September 30, 2018 and 2017
(Amounts expressed in U.S. Dollars) (unaudited)
|
3.
|
SIGNIFICANT ACCOUNTING POLICIES (continued)
|
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 consolidated financial statements
and the reported amounts of revenues and expenses during the reporting periods. The estimates are based on management’s best
knowledge of current events and actions of the Company it may undertake in the future. Significant areas requiring the use of estimates
relate to the valuation of inventory, revenue recognition, the useful life of equipment and intangible assets, impairment of goodwill
and intangible assets. Actual results could differ from these estimates.
Fair Value of Financial Instruments
ASC Topic 820 defines fair value, establishes
a framework for measuring fair value, and expands disclosures about fair value measurements. Included in the ASC Topic 820 framework
is a three level valuation inputs hierarchy with Level 1 being inputs and transactions that can be effectively fully observed by
market participants spanning to Level 3 where estimates are unobservable by market participants outside of the Company and must
be estimated using assumptions developed by the Company. The Company discloses the lowest level input significant to each category
of asset or liability valued within the scope of ASC Topic 820 and the valuation method as exchange, income or use. The Company
uses inputs, which are as observable as possible, and the methods most applicable to the specific situation of each company or
valued item.
The carrying amounts reported in the balance
sheets for cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, due from related parties, demand
loans, and convertible loans approximate fair value because of the short period of time between the origination of such instruments,
their expected realization and their current market rates of interest. Per ASC Topic 820 framework these are considered Level 2
inputs where inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets
for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active,
or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets
or liabilities.
The Company has recognized shares to be
issued, stock options and warrants, for which it did not as of March 31, 2018 have sufficient authorized share capital to issue,
as a liability that is measured at fair value based on Level 1 inputs, for the component related to shares to be issued, and Level
3 inputs for the measurement of the stock options and warrants using a valuation model, as disclosed in Notes 11 & 12. This
was reversed in the quarter ended June 30, 2018, when the Company’s authorized capital was increased from 250,000,000 to
500,000,000 and gain on mark to market valuation of $2,048,697 was recognized.
The Company’s policy is to recognize
transfers into and out of Level 3 as of the date of the event or change in the circumstances that caused the transfer. There were
no such transfers during the quarter ended September 30, 2018.
|
4.
|
TECHNOLOGY AND OTHER ASSETS
|
The schedule below reflects the intangible assets acquired in
the IMT acquisition on April 21, 2016 and the asset amortization period and expense for the six month period ended September 30,
2018 and the year ended March 31, 2018:
|
|
|
|
|
|
|
|
Expense March
|
|
|
Value at March
|
|
|
Expense Sept.
|
|
|
Value at Sept.
|
|
Intangible
|
|
Amortization
|
|
|
Value acquired
|
|
|
31, 2018
|
|
|
31, 2018
|
|
|
30, 2018
|
|
|
30, 2018
|
|
assets acquired
|
|
period (years)
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Patents and exclusive License Agreement
|
|
|
9.74
|
|
|
|
1,306,031
|
|
|
|
134,126
|
|
|
|
1,045,530
|
|
|
|
67,045
|
|
|
|
978,485
|
|
Trademark
|
|
|
Indefinite
|
|
|
|
2,505,907
|
|
|
|
-
|
|
|
|
2,505,907
|
|
|
|
-
|
|
|
|
2,505,907
|
|
Customer relationships
|
|
|
10
|
|
|
|
1,431,680
|
|
|
|
143,206
|
|
|
|
1,153,543
|
|
|
|
71,584
|
|
|
|
1,081,959
|
|
Non-compete agreement
|
|
|
2
|
|
|
|
61,366
|
|
|
|
30,709
|
|
|
|
1,739
|
|
|
|
1,739
|
|
|
|
-
|
|
Assembled Workforce
|
|
|
1
|
|
|
|
275,720
|
|
|
|
15,864
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
5,580,704
|
|
|
|
323,905
|
|
|
|
4,706,719
|
|
|
|
140,368
|
|
|
|
4,566,351
|
|
Amortization for the six months ended September 30, 2017 was
$169,934.
Amortization for three months ended September 30, 2018 was $69,315
(September 30, 2017 - $76,985).
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
For the three and six month periods ended
September 30, 2018 and 2017
(Amounts expressed in U.S. Dollars) (unaudited)
|
5.
|
PREPAID EXPENSES AND OTHER RECEIVABLES
|
|
|
September 30,
2018
|
|
|
March 31,
2018
|
|
|
|
$
|
|
|
$
|
|
Prepaid expenses and sundry receivables
|
|
|
58,694
|
|
|
|
86,957
|
|
Prepaid inventory
|
|
|
672,231
|
|
|
|
301,104
|
|
Prepaid insurance
|
|
|
103,070
|
|
|
|
36,497
|
|
Sales taxes receivable (i)
|
|
|
17,184
|
|
|
|
9,097
|
|
|
|
|
851,179
|
|
|
|
433,655
|
|
(i) Sales tax receivable represents net harmonized sales taxes
(HST) input tax credits receivable from the Government of Canada.
|
|
September 30,
2018
|
|
|
March 31,
2018
|
|
|
|
$
|
|
|
$
|
|
Raw materials
|
|
|
87,006
|
|
|
|
237,443
|
|
Finished goods
|
|
|
105,620
|
|
|
|
-
|
|
|
|
|
192,626
|
|
|
|
237,443
|
|
During the three and six month periods ended September 30, 2018,
the Company expensed $342,345 and $579,354, respectively, in inventory as cost of goods sold (September 30, 2017 – $58,600
and $87,900).
Equipment consisted of the following as at September 30, 2018
and March 31, 2018:
|
|
September 30, 2018
|
|
|
March 31, 2018
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Cost
|
|
|
Depreciation
|
|
|
Net
|
|
|
Cost
|
|
|
Depreciation
|
|
|
Net
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Computers and electronics
|
|
|
270,145
|
|
|
|
232,639
|
|
|
|
37,506
|
|
|
|
256,505
|
|
|
|
223,750
|
|
|
|
32,755
|
|
Furniture and fixtures
|
|
|
36,795
|
|
|
|
28,889
|
|
|
|
7,906
|
|
|
|
36,795
|
|
|
|
28,051
|
|
|
|
8,744
|
|
Demonstration equipment
|
|
|
200,186
|
|
|
|
126,793
|
|
|
|
73,393
|
|
|
|
200,186
|
|
|
|
105,441
|
|
|
|
94,745
|
|
Manufacturing equipment
|
|
|
88,742
|
|
|
|
85,963
|
|
|
|
2,779
|
|
|
|
88,742
|
|
|
|
85,668
|
|
|
|
3,074
|
|
Tools and parts
|
|
|
11,422
|
|
|
|
6,286
|
|
|
|
5,136
|
|
|
|
11,422
|
|
|
|
5,741
|
|
|
|
5,681
|
|
Assets under capital lease
|
|
|
23,019
|
|
|
|
10,359
|
|
|
|
12,660
|
|
|
|
23,019
|
|
|
|
8,057
|
|
|
|
14,962
|
|
|
|
|
630,309
|
|
|
|
490,929
|
|
|
|
139,380
|
|
|
|
616,669
|
|
|
|
456,708
|
|
|
|
159,961
|
|
Equipment is recorded at cost less accumulated depreciation.
Depreciation expense during the three and six month periods ended September 30, 2018 was $16,626 and $34,221, respectively (September
30, 2017 – $23,820 and $48,372).
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
For the three and
six month periods ended September 30, 2018 and 2017
(Amounts expressed
in U.S. Dollars) (unaudited)
Demand Notes payable
The Company had outstanding
notes payable (“Notes”) of $Nil at September 30, 2018 ($51,479 – March 31, 2018) which was acquired when the
Company bought IMT on April 21, 2016. The Notes and interest were repaid during the fiscal quarter ended June 30, 2018.
Balance, March 31, 2018
|
|
$
|
51,479
|
|
Accrued interest
|
|
|
1,496
|
|
Repayment
|
|
|
(52,975
|
)
|
Balance, September 30, 2018
|
|
$
|
-
|
|
Interest expense
incurred on the Notes totaled $1,496 for the three and six month periods ended September 30, 2018 (September 30, 2017 – $5,251
and $9,898), which was included in accrued liabilities until it was paid off.
Convertible Loans Payable
During the six month period ended September
30, 2018, the Company received loans totaling $4,708,306 (which is inclusive of $31,673 that was capitalized interest) which carry
an interest rate of 1% per month and of which $2,297,928 came from related parties. The loans and interest thereon were converted
as of July 20, 2018 at a 10% discount to the 30 day volume weighted average price (“VWAP”) of the Company’s stock
price.
In the event the Company consummates a
firm commitment or underwritten offering of its common stock by March 27, 2019, and the price per share thereof (the “
Offering
Price
”) is less than the original conversion price on July 20, 2018, then in such event the Company shall issue to all
convertible loan holder at June 30, 2018, at no further cost, additional shares of common stock equal to the number of conversion
shares the shareholders that they would have received upon conversion if the conversion price equaled the Offering Price, less
the number of shares of conversion shares actually issued on July 20, 2018.
The tables below reflect the fair value
and anti-dilution features of the convertible loans, which resulted in accretion expense for the three and six months ended September
30, 2018 of $1,970,167 and $2,104,418, respectively, and a fair value adjustment of $382,010 and $337,923, respectively, being
expensed for the three and six month periods ended September 30, 2018 (September 30, 2017 - $74,073 accretion for both periods
and $Nil and $Nil fair value adjustment).
|
|
At
issuance
|
|
|
At
July 20, 2018
|
|
|
|
|
|
|
Conversion
feature fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal
|
|
|
Beneficial
conversion
|
|
|
Anti-dilution
|
|
|
Fair value
of
debt
|
|
|
Accretion
expense
|
|
|
Interest
|
|
|
Loan
converted
|
|
Convertible promissory note
|
|
$
|
4,708,306
|
|
|
$
|
406,744
|
|
|
$
|
1,697,674
|
|
|
$
|
2,603,888
|
|
|
$
|
2,104,418
|
|
|
$
|
24,547
|
|
|
$
|
4,732,853
|
|
Conversion feature fair value
|
|
Beneficial conversion
|
|
|
Anti-dilution
|
|
|
Total
|
|
At Issuance
|
|
$
|
406,744
|
|
|
$
|
1,697,674
|
|
|
$
|
2,104,418
|
|
Fair value adjustment
|
|
$
|
(406,744
|
)
|
|
$
|
68,821
|
|
|
$
|
(337,923
|
)
|
Balance allocated to equity on conversion
|
|
$
|
-
|
|
|
$
|
(1,766,495
|
)
|
|
$
|
(1,766,495
|
)
|
Ending balance at September 30, 2018
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
For the three and
six month periods ended September 30, 2018 and 2017
(Amounts expressed
in U.S. Dollars) (unaudited)
|
9.
|
RELATED PARTY TRANSACTIONS AND BALANCES
|
|
a)
|
Due from related parties
|
As at September 30, 2018, there was an
outstanding loan to the Chief Technology Officer of the Company for $18,913 (March 31, 2018 – $18,897). The
loan has an interest rate of 1% based on the Canada Revenue Agency’s prescribed rate for such advances and is denominated
in Canadian dollars. During the six month period ended September 30, 2018, the Company accrued interest receivable in the amount
of $91 (March 31, 2018 – $707) and the remaining fluctuation in the balance from the prior year is due to changes in foreign
exchange.
|
b)
|
Accounts payable and accrued liabilities
|
As at September 30, 2018, $24,489 (March
31, 2018 – $208,567) was owing to the CEO of the Company; $1,985 (March 31, 2018 – $135,039) was owing to the Chief
Technology Officer; and $1,215 (March 31, 2018 – $116,624) was owing to the Chief Financial Officer, all related to business
expenses. Balances owing are included in accounts payable or accrued liabilities.
|
|
September 30, 2018
|
|
|
March 31, 2018
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
shares
|
|
|
$
|
|
|
shares
|
|
|
$
|
|
Exchangeable Shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance beginning of year
|
|
|
295,146
|
|
|
|
295
|
|
|
|
319,396
|
|
|
|
319
|
|
Converted into common shares (a)
|
|
|
(21,572
|
)
|
|
|
(22
|
)
|
|
|
(24,250
|
)
|
|
|
(24
|
)
|
Balance at the end of period
|
|
|
273,574
|
|
|
|
273
|
|
|
|
295,146
|
|
|
|
295
|
|
Common Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of the period
|
|
|
1,368,856
|
|
|
|
1,369
|
|
|
|
325,901
|
|
|
|
326
|
|
Shares issued to exchangeable shares
|
|
|
21,572
|
|
|
|
22
|
|
|
|
24,250
|
|
|
|
24
|
|
Shares issued on conversion of loans (b)
|
|
|
947,034
|
|
|
|
947
|
|
|
|
985,370
|
|
|
|
986
|
|
Warrants exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
33,335
|
|
|
|
33
|
|
Balance at end of the period
|
|
|
2,337,462
|
|
|
|
2,338
|
|
|
|
1,368,856
|
|
|
|
1,369
|
|
TOTAL SHARES
|
|
|
2,611,036
|
|
|
|
2,611
|
|
|
|
1,664,002
|
|
|
|
1,664
|
|
|
(a)
|
During the six month period ended September 30, 2018
21,572 exchangeable shares were exchanged on a 1 for 1 basis in accordance with their terms. (March 31, 2018 – 24,250)
|
|
(b)
|
During the six month period ended September 30, 2018,
947,034 shares of common stock were issued. Of this amount 263,639 shares of common stock were issued once the Company increased
its authorized shares of common stock from 250,000,000 to 500,000,000. These shares relate to convertible loans and interest that
converted on March 31, 2018 and were recorded as a liability on March 31, 2018 until the shares were issued on June 12, 2018.
The liability was reclassified at June 12, 2018 into equity by recording the original value of $2,470,622 of the shares to be
issued, as well as the fair value of options and warrants at June 12, 2018 net of fair value of options issued in the period ended
June 12, 2018 of $1,173,534, which was charged to equity and a $2,048,697 gain on the fair value reevaluation was recognized as
other income in the Statement of Operations and Comprehensive Loss. The Company converted $4,732,853 of convertible loans and
interest into 683,395 common shares on July 20, 2018 in accordance with their terms.
|
|
(c)
|
On October 29, 2018 the Company completed the consolidation
on a one-for-one to one hundred and fifty (1:150) reverse consolidation.
|
Special Voting Preferred Share
In connection with the Merger (Note 1),
on February 26, 2015, the Company entered into a voting and exchange trust agreement (the “Trust Agreement”). Pursuant
to the Trust Agreement, the Company issued one share of the Special Voting Preferred Stock, par value $0.001 per share, of the
Company (the Special Voting Preferred Share”) to the Trustee, and the parties created a trust for the Trustee to hold the
Special Voting Preferred Share for the benefit of the holders of the Exchangeable Shares (the “Beneficiaries”). Pursuant
to the Trust Agreement, the Beneficiaries have voting rights in the Company equivalent to what they would have had, had they received
shares of common stock in the same amount as the Exchangeable Shares held by the Beneficiaries.
In connection with the Merger and the Trust
Agreement, effective February 20, 2015, the Company filed a certificate of designation of the Special Voting Preferred Share (the
“Special Voting Certificate of Designation”) with the Delaware Secretary of State. Pursuant to the Special Voting Certificate
of Designation, one share of the Company’s blank check preferred stock was designated as the Special Voting Preferred Share.
The Special Voting Preferred Share entitles the Trustee to exercise the number of votes equal to the number of Exchangeable Shares
outstanding on a one-for-one basis during the term of the Trust Agreement.
The Special Voting Preferred Share is not
entitled to receive any dividends or to receive any assets of the Company upon liquidation, and is not convertible into common
shares of the Company.
The voting rights of the Special Voting
Preferred Share will terminate pursuant to and in accordance with the Trust Agreement. The Special Voting Preferred Share will
be automatically cancelled at such time as no Exchangeable Shares are held by a Beneficiary.
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
For the three and
six month periods ended September 30, 2018 and 2017
(Amounts expressed
in U.S. Dollars) (unaudited)
The purpose of the Company’s equity
incentive plan, is to attract, retain and motivate persons of training, experience and leadership to the Company, including their
directors, officers and employees, and to advance the interests of the Company by providing such persons with the opportunity,
through share options, to acquire an increased proprietary interest in the Company.
Options or other securities may be granted
in respect of authorized and unissued shares, provided that the aggregate number of shares reserved for issuance upon the exercise
of all options or other securities granted under the Plan shall not exceed 15% of the shares of common stock and Exchangeable Shares
issued and outstanding (determined as of January 1 of each year). Optioned shares in respect of which options are not exercised
shall be available for subsequent options.
On November 24, 2015, the Company granted
4,334 options granted to employees at an exercise price of $183.00 per share that vest over three years at the anniversary date.
The grant date fair value of the options was $694,384. During the year ended March 31, 2016, 1,667 options were cancelled and during
the three and six month period ended September 30, 2018, $35,609 and $71,219 (September 30, 2017 – $35,609 and $71,218) in
stock compensation expense was recognized.
On December 14, 2015, the Company granted
16,634 options to employees, directors and consultants at an exercise price of $150 per share that vest over three years at the
anniversary date. The grant date fair value of the options was $1,260,437. During the years ended March 31, 2016, 2017 and 2018
and for the six month period ended September 30, 2018, 167 options, 267 options, 2,912 options and 789 options, respectively, were
cancelled and for the three and six month period ended September 30, 2018, $36,275 and $77,625 (September 30, 2017 – $298,573
and $396,523) of stock compensation expense was recognized.
On April 21, 2016, the Company granted
20,000 stock options to employees of Bionik, Inc., the Company’s wholly-owned subsidiary (formerly IMT) in exchange for 3,895,000
options that existed before the Company purchased IMT of which 6,667 have an exercise price of $37.50 per share, 6,667 have an
exercise price of $142.50 per share and 16,666 have an exercise price of $157.50 per share. The grant date fair value of vested
options was $2,582,890 and has been recorded as part of the original acquisition equation. The options are fully expensed.
On April 26, 2016, the Company granted
1,667 options to an employee with an exercise price of $150 per share that vest over three years at the anniversary date. The grant
fair value was $213,750. During the three and six months ended September 30, 2018, $17,813 and $35,625 (September 30, 2017- $17,813
and $35,625) was recognized as stock compensation expense.
On August 8, 2016, the Company granted
5,000 options to an employee with an exercise price of $150 per share that vest over three years at the anniversary date. The grant
fair value was $652,068. The employee left in April 2018 and 3,334 options that had not vested were cancelled and the remaining
1,667 options will expire in November 2018. During the three and six months ended September 30, 2018, $18,113 and $36,226 (September
30, 2017 – $54,339 and $108,678) of stock compensation expense was recognized.
On February 6, 2017, the Company granted
2,667 options to an employee with an exercise price of $105.00 per share that vest over three years at the anniversary date. The
grant fair value was $245,200. During the three and six months ended September 30, 2018, $20,433 and $40,867 (September 30, 2017
– $20,433 and $40,867) of stock compensation expense was recognized.
On February 13, 2017, the Company granted
1,667 options to a consultant with an exercise price of $102.00 per share that vest over one and one-half years, every six months.
The grant fair value was $148,750. During the three and six months ended September 30, 2018, $80,425 and $92,821 (September 30,
2017 – $12,396 and $24,792) of stock compensation expense was recognized. These options are now fully vested.
On August 3, 2017, 10,000 options
with an exercise price of $31.50 per share were granted to an executive officer, which vest equally over three future years.
In addition, this executive officer was also granted up to 13,334 additional performance options based on meeting sales
targets for the years ended March 31, 2018 and 2019. The grant value was $387,209 and $7,546 was expensed as stock compensation for the three and six months ended September 30, 2018. The executive left in April 2018 and all
of these options were cancelled.
On September 1, 2017, the Company granted
81,436 options with an exercise price of $24.15 per share equally to an executive officer and a consultant who is now the Chairman
of the Company. Of such options, 13,573 have vested at issuance and (a) with respect to the executive officer, 50% of the remaining
options vest on performance goals being met and 50% vest over 5 years, and (b) with respect to the Chairman, the remaining options
vest over 5 years. The grant fair value was $1,832,304 and for the three and six months ended September 30, 2018, $190,865 and
$229,037 in stock compensation expense was recognized.
On January 24, 2018,
the Company granted 24,267 options with an exercise price of $23.25 per share to employees that vest equally on January 24, 2019,
2020 and 2021, The grant fair value was $491,036. During the six month period ended September 30, 2018, 2,834 options were cancelled
and for the three and six months ended September 30, 2018, $37,266 and $76,968 in stock compensation expense was recognized.
On April 20, 2018, the Company granted
to an executive officer, 40,000 options with an exercise price of $9.74 per share that vest immediately with a 10-year expiry.
The Options were valued using the Black-Scholes model and the following inputs were used: expected life of 10 years, expected volatility
of 114% and a risk free rate of 1.59%. As these options fully vested on the grant date, $363,714 of stock based compensation was
recognized during the six months ended September 30, 2018.
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
For the three and
six month periods ended September 30, 2018 and 2017
(Amounts expressed
in U.S. Dollars) (unaudited)
|
11.
|
STOCK OPTIONS (Continued)
|
On June 11, 2018, the Company granted to
a newly-hired executive officer 5,000 options with an exercise price of $6.93 per share that vest over three years from the anniversary
of the grant and expire in 7 years. The Options were valued using the Black-Scholes model and the following inputs were used: expected
life of 7 years, expected volatility of 114% and a risk free rate of 1.59%. The grant fair value was $30,341, and $2,528 and $3,090
of stock compensation expense was recognized in the three and six months ended September 30, 2018, respectively. During the three
and six months ended September 30, 2018, the Company recorded $439,328 and $1,034,740 in share-based compensation related to the
vesting of stock options (September 30, 2017 – $762,208 and $1,013,256).
The following is a summary of stock options outstanding and
exercisable as of September 30, 2018:
Exercise Price ($)
|
|
|
Number of Options
|
|
|
Expiry Date
|
|
Exercisable Options
|
|
|
24.75
|
|
|
|
1,028
|
|
|
April 1, 2021
|
|
|
1,028
|
|
|
34.50
|
|
|
|
630
|
|
|
June 20, 2021
|
|
|
630
|
|
|
34.50
|
|
|
|
13,212
|
|
|
July 1, 2021
|
|
|
13,212
|
|
|
34.50
|
|
|
|
944
|
|
|
February 17, 2022
|
|
|
944
|
|
|
183.00
|
|
|
|
2,667
|
|
|
November 24, 2022
|
|
|
1,778
|
|
|
150.00
|
|
|
|
12,912
|
|
|
December 14, 2022
|
|
|
10,889
|
|
|
142.50
|
|
|
|
747
|
|
|
March 28, 2023
|
|
|
747
|
|
|
157.50
|
|
|
|
2,887
|
|
|
March 28, 2023
|
|
|
2,887
|
|
|
150.00
|
|
|
|
1,667
|
|
|
April 26, 2023
|
|
|
1,112
|
|
|
150.00
|
|
|
|
1,667
|
|
|
August 8, 2023
|
|
|
1,667
|
|
|
105.00
|
|
|
|
2,667
|
|
|
February 6, 2024
|
|
|
889
|
|
|
102.00
|
|
|
|
1,667
|
|
|
February 13, 2024
|
|
|
1,667
|
|
|
142.50
|
|
|
|
211
|
|
|
March 3, 2024
|
|
|
211
|
|
|
157.50
|
|
|
|
816
|
|
|
March 3, 2024
|
|
|
816
|
|
|
142.50
|
|
|
|
43
|
|
|
March 14, 2024
|
|
|
43
|
|
|
157.50
|
|
|
|
164
|
|
|
March 14,2024
|
|
|
164
|
|
|
142.50
|
|
|
|
485
|
|
|
September 30, 2024
|
|
|
485
|
|
|
157.50
|
|
|
|
1,876
|
|
|
September 30, 2024
|
|
|
1,876
|
|
|
142.50
|
|
|
|
24
|
|
|
June 2, 2025
|
|
|
24
|
|
|
157.50
|
|
|
|
90
|
|
|
June 2, 2025
|
|
|
90
|
|
|
37.50
|
|
|
|
442
|
|
|
December 30, 2025
|
|
|
442
|
|
|
142.50
|
|
|
|
328
|
|
|
December 30, 2025
|
|
|
182
|
|
|
24.15
|
|
|
|
81,436
|
|
|
September 1, 2027
|
|
|
20,360
|
|
|
23.25
|
|
|
|
22,434
|
|
|
January 24, 2025
|
|
|
-
|
|
|
9.735
|
|
|
|
40,000
|
|
|
April 19, 2028
|
|
|
40,000
|
|
|
6.93
|
|
|
|
5,000
|
|
|
June 10, 2025
|
|
|
-
|
|
|
|
|
|
|
196,044
|
|
|
|
|
|
102,143
|
|
The weighted-average remaining contractual term of the outstanding
options was 7.53 (March 31, 2018 – 5.81) and for the options that are exercisable the weighted average was 7.15 (March 31,
2018 – 5.70).
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
For the three and
six month periods ended September 30, 2018 and 2017
(Amounts expressed
in U.S. Dollars) (unaudited)
The following is a continuity schedule of the Company’s
common share purchase warrants:
|
|
Weighted-Average
|
|
|
|
Number of Warrants
|
|
|
Exercise Price ($)
|
|
Outstanding and exercisable, March 31, 2015
|
|
|
72,157
|
|
|
|
202.50
|
|
Issued
|
|
|
48,171
|
|
|
|
202.50
|
|
Exercised
|
|
|
(992
|
)
|
|
|
(120.00
|
)
|
Outstanding and exercisable, March 31, 2016
|
|
|
119,336
|
|
|
|
202.50
|
|
Exercised
|
|
|
(1,747
|
)
|
|
|
(120.00
|
)
|
Outstanding and exercisable, March 31, 2017
|
|
|
117,589
|
|
|
|
202.50
|
|
Exercised
|
|
|
(33,335
|
)
|
|
|
(37.50
|
)
|
Issued in connection with anti-dilution provision connected to warrant transaction
|
|
|
559
|
|
|
|
112.35
|
|
Issued in connection with anti-dilution provision connected to warrant transaction
|
|
|
6,275
|
|
|
|
194.00
|
|
Issued in connection to the warrant transaction to the broker
|
|
|
2,667
|
|
|
|
37.50
|
|
Issued in connection with the conversion of loans and interest into common shares
|
|
|
106,709
|
|
|
|
9.375
|
|
Issued in connection with the conversion of loans and interest into common shares
|
|
|
15,658
|
|
|
|
90.00
|
|
Issued in connection with anti-dilution provision connected to warrant transaction
|
|
|
136,388
|
|
|
|
73.02
|
|
Issued in connection with anti-dilution provision connected to warrant transaction
|
|
|
13,464
|
|
|
|
44.28
|
|
Outstanding at March 31, 2018
|
|
|
365,974
|
|
|
|
53.19
|
|
Issued in connection with anti-dilution provision connected to warrant transaction
|
|
|
67,952
|
|
|
|
55.71
|
|
Issued in connection with anti-dilution provision connected to warrant transaction
|
|
|
6,305
|
|
|
|
34.50
|
|
Outstanding at September 30, 2018
|
|
|
440,231
|
|
|
|
44.21
|
|
During the year ended March 31, 2018, the
Company consummated an offer to amend and exercise its outstanding warrants, enabling the holders of the warrants to exercise such
warrants for $37.50 per share. The Company received net proceeds of $1,125,038. The Company also converted loans and interest due.
Due to the anti-dilution
clause in the warrant agreement for such outstanding warrants, the warrants were adjusted to reflect an additional 559 shares underlying
the $120 per share warrants and an additional 6,275 shares underlying the $210.00 per share warrants. Furthermore, as a result
of the anti-dilution clause, the exercise price of the warrants were adjusted from $120.00 per share to $112.35 per share and from
$210.00 per share to $194.00 per share.
Due to the anti-dilution clause in the
warrant agreements for such outstanding warrants, the warrants were adjusted to reflect an additional 13,464 shares underlying
the $112.35 per share warrant and an additional 136,388 shares underlying the $194.00 per share warrants. Furthermore, as a result
of the anti-dilution clause, the exercise price of the warrants were adjusted from $112.50 per share to $44.28 per share and from
$194.00 per share to $73.02 per share, all as a result of the loan and interest conversion for shares at March 31, 2018 and June
12, 2018.
The Company measured the effects of the
above two transactions, which triggered anti-dilution clause using the binomial tree model and recorded a loss of $74,086 against
the deficit for the year ended March 31, 2018.
The Company issued 2,667 warrants at $37.50
per share for four years expiring June 27, 2020 to the firm who facilitated the warrant offer.
The Company issued 15,658 warrants at $90.00
per share which expire in 5 years on March 31, 2023 and 106,709 warrants at $9.375 per share which also expire March 31, 2023 in
connection with the loan and interest conversion transaction.
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
For the three and
six month periods ended September 30, 2018 and 2017
(Amounts expressed in U.S. Dollars) (unaudited)
Due to the anti-dilution clause in the
warrant agreements for such outstanding warrants, the warrants were adjusted to reflect an additional 67,952 shares underlying
the $73.02 per share warrants and an additional 6,305 shares underlying the $44.28 per share warrants. Furthermore, as a result
of the anti-dilution clause, the exercise price of the warrants were adjusted from $73.02 per share to $55.71 per share and from
$44.28 per share to $34.50 per share, all as a result of a loan and interest conversion for shares on July 20, 2018.
Common share purchase warrants
The following is a summary of common share
purchase warrants as of September 30, 2018:
Exercise
Price ($)
|
|
|
Number of
Warrants
|
|
|
Expiry Date
|
|
90.00
|
|
|
|
15,658
|
|
|
March 31, 2023
|
|
55.71
|
|
|
|
136,339
|
|
|
February 26, 2019
|
|
55.71
|
|
|
|
28,531
|
|
|
March 27, 2019
|
|
55.71
|
|
|
|
7,618
|
|
|
March 31, 2019
|
|
55.71
|
|
|
|
59,061
|
|
|
April 21, 2019
|
|
55.71
|
|
|
|
27,883
|
|
|
May 27,2019
|
|
55.71
|
|
|
|
27,238
|
|
|
June 30, 2019
|
|
34.50
|
|
|
|
28,527
|
|
|
February 26, 2019
|
|
37.50
|
|
|
|
2,667
|
|
|
June 27, 2020
|
|
9.375
|
|
|
|
64,025
|
|
|
August 14, 2022
|
|
9.375
|
|
|
|
42,684
|
|
|
March 31, 2022
|
|
|
|
|
|
440,231
|
|
|
|
The weighted-average remaining contractual
term of the outstanding warrants was 1.53 (March 31, 2018 – 2.27).
The exercise price and number
of underlying shares of the Company’s outstanding warrants currently priced at $55.71 and $34.50 are expected to be
further adjusted pursuant to the anti-dilution provisions in the warrant agreements, as a result of any further common stock
issuances, whether upon the conversion of indebtedness or otherwise.
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM
FINANCIAL STATEMENTS
For the three and
six month periods ended September 30, 2018 and 2017
(Amounts expressed in U.S. Dollars) (unaudited)
|
13.
|
COMMITMENTS AND CONTINGENCIES
|
Contingencies
From time to time, the Company may be involved
in a variety of claims, suits, investigations and proceedings arising in the ordinary course of our business, collections claims,
breach of contract claims, labor and employment claims, tax and other matters. Although claims, suits, investigations and proceedings
are inherently uncertain, and their results cannot be predicted with certainty, the Company believes that the resolution of current
pending matters will not have a material adverse effect on its business, financial position, results of operations or cash flow.
Regardless of the outcome, litigation can have an adverse impact on the Company because of legal costs, diversion of management
resources and other factors.
Commitments
a. On
February 25, 2015, 1,753 common shares were issued to two former lenders connected with a $241,185 loan received and repaid during
fiscal 2013. The common shares were valued at $210,323 based on the value of the concurrent private placement and recorded in stock-based
compensation on the consolidated statement of operations and comprehensive loss. As part of the consideration for the initial loan,
the former Chief Technology Officer and the new Chief Technology Officer had transferred 2,098 common shares to the lenders. For
contributing the common shares to the lenders, the Company intends to reimburse the former Chief Technology Officer and the new
Chief Technology Officer 2,134 common shares collectively. As at September 30, 2018, these shares have not yet been issued.
b. In
connection with the acquisition of IMT, the Company acquired a license agreement dated June 8, 2009, pursuant to which the Company
pays the licensors an aggregate royalty of 1% of sales based on patent #8,613,691. No sales were made on the technology under this
patent as it has not yet been commercialized. One of the licensors is a founder of IMT and a former officer and director of the
Company.
c. On
March 6, 2018, the Company signed a distribution agreement with Curexo Inc. for South Korea and as part of this agreement, the
Company is obligated to buy a rehabilitative product from Curexo Inc. for $200,000 when this product is fully developed. It is
not yet developed at September 30, 2018.
d. On
May 17, 2017, the Company entered into a Co-operative Joint Venture Contract (the “JV Contract”) with Ginger Capital
Investment Holding, Ltd. (the “JV Partner”) to form a China-based joint venture to commercialize the Company’s
products (“China JV”) in which the Company has a 25% interest and the JV Partner has a 75% interest. The China JV entity
formally was created on May 22, 2018. Under the terms of the JV Contract, the JV Partner is required to contribute $290,000 within
30 days of formation, $435,000 12 months later and $725,000 60 months after the date of formation. The Company is required to license
certain intellectual property to the China JV. The Company is applying the equity method of accounting to the joint venture. As
of September 30, 2018, the Company has provided certain technical information to the Chinese JV in order to obtain Chinese regulatory
approvals.
The Company’s cash balances are maintained
in a bank in Canada and a USA bank. Deposits held in banks in Canada are insured up to $100,000 CAD per depositor for each bank
by The Canada Deposit Insurance Corporation, a federal crown corporation. Actual balances at times may exceed these limits.
Interest Rate Risk
Interest rate risk is the risk that the
value of a financial instrument might be adversely affected by a change in the interest rates. The Company has minimal exposure
to fluctuations in the market interest rate. In seeking to minimize the risks from interest rate fluctuations, the Company manages
exposure through its normal operating and financing activities.
Liquidity Risk
Liquidity risk is the risk that the Company
will incur difficulties meeting its financial obligations, as they are due. The Company’s approach to managing liquidity
is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due. Accounts payable and
accrued liabilities are due within the current operating period.
The Company has funded its operations through
the issuance of capital stock, convertible debt and loans in addition to grants and investment tax credits received from the Government
of Canada.
|
(a)
|
Subsequent to September 30, 2018, investors, including
a company controlled by the Company’s Chairman, loaned an aggregate of $2,750,000 to the Company, evidenced by convertible
promissory notes. The convertible promissory notes bear interest at a fixed rate of 1% per month and are convertible based on
a 20% discount to the 30 day VWAP of the Company’s stock price if more than $2,000,000 is raised in an equity financing
or upon maturity on March 28, 2019.
|
|
(b)
|
On October 29, 2018, the Company completed a reverse
stock split and thereafter the Company’s common stock began trading on the OTCQB market on a one-for-one hundred and fifty
(1:150) split-adjusted basis. Refer to details in Note 2(a).
|
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations