Biotricity Inc.: Form 10-Q for the period ended Dec 31, 2023

Cautionary Note Regarding Forward-Looking Statements

Except for historical information contained herein, this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. These forward-looking statements are based on various factors and were derived utilizing numerous important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements. Important assumptions and other factors that could cause actual results to differ materially from those in the forward-looking statements, include but are not limited to: (a) any fluctuations in sales and operating results; (b) risks associated with international operations; (c) regulatory, competitive and contractual risks; (d) development risks; (e) the ability to achieve strategic initiatives, including but not limited to the ability to achieve sales growth across the business segments through a combination of enhanced sales force, new products, and customer service; (f) competition in the Company’s existing and potential future product lines of business; (g) the Company’s ability to obtain financing on acceptable terms if and when needed; (h) uncertainty as to the Company’s future profitability; (i) uncertainty as to the future profitability of acquired businesses or product lines; and (j) uncertainty as to any future expansion of the Company. Other factors and assumptions not identified above were also involved in the derivation of these forward-looking statements and the failure of such assumptions to be realized as well as other factors may also cause actual results to differ materially from those projected. The Company assumes no obligation to update these forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements, except as may be required under applicable law. Past results are no guaranty of future performance. Any such forward-looking statements speak only as of the dates they are made. When used in this Report, the words “believes,” “anticipates,” “expects,” “estimates,” “plans,” “intends,” “will” and similar expressions are intended to identify forward-looking statements.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the financial statements and footnotes thereto included in this Quarterly Report on Form 10-Q (the “Financial Statements”).

Company Overview

Biotricity Inc. (the “Company”, “Biotricity”, “we”, “us”, “our”) is a medical technology company focused on biometric data monitoring solutions. Our aim is to deliver innovative, remote monitoring solutions to the medical, healthcare, and consumer markets, with a focus on diagnostic and post-diagnostic solutions for lifestyle and chronic illnesses. We approach the diagnostic side of remote patient monitoring by applying innovation within existing business models where reimbursement is established. We believe this approach reduces the risk associated with traditional medical device development and accelerates the path to revenue. In post-diagnostic markets, we intend to apply medical grade biometrics to enable consumers to self-manage, thereby driving patient compliance and reducing healthcare costs. We first focused on a segment of the ambulatory diagnostic cardiac market, otherwise known as COM, while also providing the capability to perform all type of ambulatory cardiac studies.

We developed our FDA-cleared Bioflux® COM technology, comprised of a monitoring device and software components, which we made available to the market under limited release on April 6, 2018, in order to assess, establish and develop sales processes and market dynamics. The fiscal year ended March 31, 2021 marked the Company’s first year of expanded commercialization efforts, focused on sales growth and expansion. In 2021, the Company announced the initial launch of Bioheart, a direct-to-consumer heart monitor that offers the same continuous heart monitoring technology used by physicians. In addition to developing and receiving regulatory approval or clearance of other technologies that enhance its ecosystem, in 2022, the Company announced the launch of its Biotres Cardiac Monitoring Device (“Biotres”), a three-lead device for ECG and arrhythmia monitoring intended for lower risk patients, a much broader addressable market segment. We have since expanded our sales efforts to 35 states, with intention to expand further and compete in the broader US market using an insourcing business model. Our technology has a large potential total addressable market, which can include hospitals, clinics and physicians’ offices, as well as other Independent Diagnostic Testing Facilities (“IDTFs)”. We believe our solution’s insourcing model, which empowers physicians with state-of-the-art technology and charges technology service fees for its use, has the benefit of a reduced operating overhead for the Company, and enables a more efficient market penetration and distribution strategy.

We are a technology company focused on earning utilization-based recurring technology fee revenue. The Company’s ability to grow this type of revenue is predicated on the size and quality of its sales force and their ability to penetrate the market and place devices with clinically focused, repeat users of its cardiac study technology. The Company plans to grow its sales force in order to address new markets and achieve sales penetration in the markets currently served.

Full market release of the Bioflux COM device for commercialization launched in April 2019, after receiving its second and final required FDA clearance. To commence commercialization, we ordered device inventory from our FDA-approved manufacturer and hired a small, captive sales force, with deep experience in cardiac technology sales; we expanded on our limited market release, which identified potential anchor clients who could be early adopters of our technology. By increasing our sales force and geographic footprint, we had launched sales in 33 U.S. states by December 31, 2023.

On January 24, 2022 the Company announced that it has received the 510(k) FDA clearance of its Biotres patch solution, which is a novel product in the field of Holter monitoring. This three-lead technology can provide connected Holter monitoring that is designed to produce more accurate arrythmia detection than is typical of competing remote patient monitoring solutions. It is also foundational, since already developed improvements to this technology will follow which are not known by the Company to be currently available in the market, for clinical and consumer patch solution applications. In October 2023, the Company launched the cellular version of this device, the Biotres Pro.

During 2021, the Company also announced that it received a 510(k) clearance from the FDA for its Bioflux Software II System, engineered to improve workflows and reduce estimated analysis time from 5 minutes to 30 seconds. ECG monitoring requires significant human oversight to review and interpret incoming patient data to discern actionable events for clinical intervention, highlighting the necessity of driving operational efficiency. This improvement in analysis time reduces operational costs and allows the company to continue to focus on excellent customer service and industry-leading response times to physicians and their at-risk patients. Additionally, these advances mean we can focus our resources on high-level operations and sales.

The Company has also developed or is developing several other ancillary technologies, which will require application for further FDA clearances, which the Company anticipates applying for within the next to twelve months. Among these are:

• advanced ECG analysis software that can analyze and synthesize patient ECG monitoring data with the purpose of distilling it down to the important information that requires clinical intervention, while reducing the amount of human intervention necessary in the process;
• the Bioflux® 2.0, which is the next generation of our award winning Bioflux®

During 2021 and the early part of 2022, the Company has also commercially launched its Bioheart technology, which is a consumer technology whose development was forged out of prior the development of the clinical technologies that are already part of the Company’s technology ecosystem, the BioSphere. In recognition of its product development, in November 2022, the Company’s Bioheart received recognition as one of Time Magazine’s Best Inventions of 2022.

The COVID-19 pandemic has highlighted the importance of telemedicine and remote patient monitoring technologies. The Company continues to develop a telemedicine platform, with capabilities of real-time streaming of medical devices. Telemedicine offers patients the ability to communicate directly with their health care providers without the need of leaving their home. The introduction of a telemedicine solution is intended to align with the Company’s Bioflux product and facilitate remote visits and remote prescriptions for cardiac diagnostics, but it will also serve as a means of establishing referral and other synergies across the network of doctors and patients that use the technologies we are building within the Biotricity ecosystem. The intention is to continue to provide improved care to patients that may otherwise elect not to go to medical facilities and continue to provide economic benefits and costs savings to healthcare service providers and payers that reimburse. The Company’s goal is to position itself as an all-in-one cardiac diagnostic and disease management solution. The Company continues to grow its data set of billions of patient heartbeats, allowing it to further develop its predictive capabilities relative to atrial fibrillation and arrythmias.

In October 2022, the Company launched its Biocare Cardiac Disease Management Solution, after successfully piloting this technology in two facilities that provide cardiac care to more than 60,000 patients. This technology and other consumer technologies and applications such as the Biokit and Biocare have been developed to allow the Company to transform and use its strong cardiac footprint to expand into remote chronic care management solutions that will be part of the BioSphere. The technology puts actionable data into the hands of physicians in order to assist them in making effective treatment decisions quickly. During March 2023, the Company launched its patient-facing Biocare app on Android and Apple app stores; this further allows the Company to expand its footprint in providing full-cycle chronic care management solutions to its clinic and patient network. In January 2024, the Company appointed Dr. Fareeha Siddiqui, a scientist and expert in community health and diagnostics, to the position of VP of Healthcare to spearhead the roll-out and adoption of Biocare to existing and new customers. This has the potential for being a significant business for us in 2026 and beyond.

The Company identified the importance of recent developments in accelerating its path to profitability, including the launch of important new products identified, which have a ready market through cross-selling to existing large customer clinics, and large new distribution partnerships that allow the Company to sell into large hospital networks. Additionally, in September 2022, the Company was awarded a NIH Grant from the National Heart, Blood, and Lung Institute for AI-Enabled real-time monitoring, and predictive analytics for stroke due to chronic kidney failure. This is a significant achievement that broadens our technology platform’s disease space demographic. The grant focusses on Bioflux-AI as an innovative system for real-time monitoring and prediction of stroke episodes in chronic kidney disease patients. The Company received $238,703 under this award in March 2023, used to defray research, development and other associated costs.

Management has indicated that its mission is to innovate and create transformative healthcare products while ensuring financial discipline, in order to drive margin and revenue growth to deliver value creation for our investors. Our commitment to innovation means that we harness data intelligently to explore novel avenues for enhancing healthcare outcomes. Through cutting-edge research and development, we believe we are redefining medical diagnostics and patient care and innovating new AI-driven solutions.

As a result of providing its Bioflux and Biotres products, Biotricity has monitored over two billion heartbeats for atrial fibrillation (afib), a leading cause of strokes. Over the past two years, these efforts have benefited over 28,000 patients diagnosed with afib, by providing them with the prospect of earlier medical intervention – which also produces significant healthcare savings to patients and the healthcare system.

We have announced that we are expanding our AI technology development in remote cardiac care, leveraging proprietary AI technology in order to provide a suite of predictive monitoring tools to enhance new disease profiling, improve patient management, and revolutionize the healthcare industry for disease prevention.

We have also strengthened relationships with Amazon and Google. The healthcare AI market opportunity is projected to grow to $208.2 billion by 2030 according to Grand View Research. Our Company has already established a strong foothold, having already built a powerful proprietary cardiac AI model that combines Google’s TensorFlow, AWS infrastructure, big data and a continuous learning engine. This combination allows us to rapidly improve our cardiac technology. In the near future, we believe the capabilities of our cardiac AI model will allow us to support healthcare professionals in handling exponentially more patients while identifying the most critical data. This will enable healthcare workers to elevate the quality of care while serving a larger number of patients. As growing patient numbers further stress the shortage of healthcare professionals, our technology could help alleviate this pressing issue. We have engineered our technology to not only improve patient care and outcomes, but to do so in a manner that supports more patients. This has led to increasing sales of our remote cardiac monitoring devices and the ramp-up of our subscription-based service, increasing our recurring revenue over the past few quarters and charting a clear path to profitability.

The Company has relationships with the strongest hospital Group Purchasing Organizations (GPO’s) in the United States, which we anticipate will translate into an ability to sell to over 80% of US hospitals. We expect this to positively impact revenue growth in future quarters.

Our technology is globally useful; cardiac disease is the number one chronic care condition across the globe. We have recently made inroads or received approvals from the regulatory bodies of other countries that will allow us to sell in another jurisdictions. These sets us up for new initiatives we intend to move on in 2026.

From a market perspective, increasing interest and demand continue to drive the adoption of our suite of products, which are focused on chronic cardiac disease prevention and management. Our efforts in commercialization and development have yielded tremendous progress in remote monitoring solutions for diagnostic and post-diagnostic products.

Recent Developments

Subscription Agreement

On October 31, 2023, we entered into a subscription agreement (the “Agreement”) pursuant to which we issued an unsecured convertible preferred note (the “Note”) in the principal amount of $1,000,000 to an investor (“Investor”). The Note bears interest at a rate of 12% per annum, paid in cash monthly. The Note matures on the earlier of 18 months or if there is more than one closing, the 18-month anniversary of the last closing date of the offering (the “Maturity Date”).

The Note and accrued interest may be prepaid by us in whole or in part in cash or by a conversion, mutually consented to by us and the Investor, at a price that is equal to a 15% discount to the 10-day VWAP of our Common Stock. The Investor may, at its option, convert all of the outstanding balance and accrued interest on the Note, at any time subsequent to the consummation of a Qualified Financing through to earlier of the Early Payout Date or the Maturity Date, as such terms are defined in the Note, at a conversion price equal to a 20% discount to the lesser of (i) the actual price paid for the securities issued in the Qualified Financing or (ii) if there is no Qualified Financing as of the Maturity Date, by mutual consent and election of us and the Investor, at a 15% discount to the average VWAP for ten (10) consecutive trading days immediately prior to the Maturity Date.

The Note includes standard Events of Default, including, but not limited to: (i) failure to issue and deliver shares upon conversion, (ii) default in the payment of principal or interest, when same is due, (iii) the entry of a decree or order adjudging us as bankrupt or insolvent; or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of us, or appointing a receiver, liquidator, assignee, trustee or sequestrator (or other similar official) of us or of any substantial part of our property, or ordering the winding-up or liquidation of our affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 days; or (iv) our institution of proceedings to be adjudicated as bankrupt or insolvent, or the consent by us to the institution of bankruptcy or insolvency proceedings against us, or the filing by us of a petition or answer or consent seeking reorganization or relief under the Federal Bankruptcy Code or any other applicable federal or state law.

Nasdaq Listing

On August 4, 2023, we received a deficiency letter from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market (“Nasdaq”) notifying us that, for the preceding 30 consecutive business days, our Market Value of Listed Securities (“MVLS”) was below the $35 million minimum requirement for continued inclusion on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(b)(2) (the “MVLS Requirement”). In accordance with Nasdaq Listing Rule 5810(c)(3)(C), Nasdaq granted us 180 calendar days, or until January 29, 2024 (the “Compliance Date”), to regain compliance with the MVLS Requirement.

On January 30, 2024, we received a delisting determination letter (the “Letter”) from the Staff advising us that the Staff had determined that we did not regain compliance with the MVLS Requirement by the Compliance Date because our MVLS did not close at or above $35 million for a minimum of 10 consecutive business days prior to the Compliance Date. As a result, trading of our Common Stock on the Nasdaq Capital Market was subject to suspension at the opening of business on February 8, 2024, and a Form 25-NSE would have been filed with the SEC to remove our securities from listing and registration on the Nasdaq Stock Market unless we requested an appeal of the Staff’s determination.

On February 6, 2024, we submitted a hearing request to the Nasdaq Hearings Panel (the “Panel”) to appeal the Staff’s delisting determination. The hearing request has stayed the suspension of our securities and the filing of a Form 25-NSE pending the Panel’s decision. At the hearing, we intend to present a plan to regain compliance with the MVLS Requirement.

Results of Operations

Three Months Ended December 31, 2023 and 2022

The following table sets forth our results of operations for the three months ended December 31, 2023 and 2022.

The results for the three months ended December 31, 2023, demonstrate year-over-year revenue growth and improvements in key operating metrics. Specifically, our recurring technology fees, device sales, and gross margins all demonstrated positive growth while maintaining cost control through management’s efforts to ensure cost reduction and expense management in order to make progress on its plan to achieve positive cash flow and profitability.

Revenue and cost of revenue

By increasing our sales force and geographic footprint, we are actively selling in 35 U.S. states. The Company earned combined device sales and technology fee income totaling $2.97 million during the three months ended December 31, 2023 – 20.9% growth in revenue over the $2.46 million earned in the prior year comparable quarter. During the last two quarters, we have also focused on improving the quality of our earnings by converting existing business to our subscription revenue model from a per use model and have directed the vast majority of our new business in that same subscription model.

Technology fees increased to $2.78 million during the three months ended December 31, 2023, which is a 23.4% increase over the corresponding three-month period of the prior year. The majority of these fees are recurring, and their growth can be attributed to strong customer retention that is supported by the quality of customer and cardiologist-friendly support services that emphasize accuracy of diagnostics and ease-of-use.

Device sales comprised 6.5% of our total revenue, or $193 thousand for the three-month period ended December 31, 2023. This period was the highest selling device quarter reported to-date. These device sales will positively impact technology fee subscription revenues in the next quarter and beyond. Device sales achieved and the revenues reported should be seen in the context of the fact that they occurred in a traditionally low selling quarter, which included thanksgiving and Christmas vacation periods, when we would have also expected lower usage-based revenues.

Gross profit percentage was 73% for the three months ended December 31, 2023, as compared to 57% in the corresponding prior year quarter. This increase in gross margin can primarily be attributed to improved margins on technology fees. Gross margin on technology fees stayed consistently above 70%. The company gained efficiencies in using AI for workflow automation and continued improving its revenue mix where technology fees are expected to comprise an increasing proportion of revenue. We anticipate continued improvement in overall blended gross margin over time. Technology fees comprised 94.3% of total revenue for the three-month period ended December 31, 2023.

Operating Expenses

Total operating expenses for the three months ended December 31, 2023 were $3.45 million as compared to $5.24 million for the three months ended December 31, 2022. See further explanations below.

Selling, General and administrative expenses

Our selling, general and administrative expenses for the three months ended December 31, 2023 was $3 million, compared to approximately $4.36 million during the three months ended December 31, 2022, a 31.3% reduction. Despite our increased sales efforts and the resulting revenue growth, we reduced total selling, general and administrative expenses by $1.37 million during the three months ended December 31, 2023 when compared to the comparable prior year quarter period primarily due to a revised focus on using our outside sales force to engage new business, while using less expensive inside sales personnel to support existing business. We have also increased our focus on monitoring of spending efficiency over our fixed general and administrative expenses in the current period.

Research and development expenses

For the three months ended December 31, 2023 we recorded research and development expenses of $0.45 million, compared to $0.88 million incurred for three months ended December 31, 2022. The research and development activity related to both existing and new products. The decrease in research and development activity was a result of the timing of activities associated with the development of new technologies for our ecosystem and product enhancements.

Interest Expense

For the three months ended December 31, 2023 and 2022, we incurred interest expenses of $0.79 million and $0.41 million, respectively. The increase in interest expenses during the current period was primarily the result of increases in borrowings outstanding and variable market interest rates.

Accretion and amortization expenses

For the three months ended December 31, 2023 and 2022, we incurred accretion expenses of $0.42 million and $51 thousand, respectively. The increase in the current period was largely the result of debt discount amortization related to new convertible notes entered towards the end of the prior fiscal year.

Change in fair value of derivative liabilities

For the three months ended December 31, 2023 and 2022, we recognized a loss of $0.33 million and $99.7 thousand, respectively, related to the change in fair value of derivative liabilities. The fair value changes were largely attributed to the underlying change in our equity fair value coupled with the timing of anticipated settlement events.

Gain (loss) upon convertible promissory notes conversion and redemption

During the three months ended December 31, 2023 and 2022, we recorded a gain of $2 thousand versus a gain of $5 thousand, respectively, related to the redemption or conversion of our convertible promissory notes. The change of gain upon convertible notes conversion was the result of decreased volumes of conversions and redemptions in the current period as compared to the comparable period in the prior year.

Other (expense) income, net

During the three months ended December 31, 2023 and 2022, we recognized $11 thousand of net other income compared to $120 thousand net other expense, respectively. Other (expense) income, net comprises of non-operating costs from note modifications and financing income contained in our revenue contracts.

Net loss attributed to common stockholders

As a result of the foregoing, the net loss attributable to common stockholders for the three months ended December 31, 2023 was $2.80 million compared to a net loss of $4.75 million during the comparable quarter in the prior year. This represents a 37.9% year-over-year reduction in net loss, and a reduction in loss per share to $0.124 from $0.434 for the three-month period ended December 31, 2022.

This improved result was reported despite some mitigating factors that include the increased expenses associated with necessary infrastructure growth and rising variable interest rates, which impact short term notes and our term debt, resulting in a year-over-year increase of $377 thousand in interest that impacted this quarter.

Nine Months Ended December 31, 2023 and 2022

The following table sets forth our results of operations for the nine months ended December 31, 2023 and 2022.

The results for the nine months ended December 31, 2023, demonstrate year-over-year revenue growth and improvements in key operating metrics. Specifically, our recurring technology fees, device sales, and gross margins all demonstrated positive growth while maintaining cost control through management’s efforts to ensure cost reduction and expense management in order to make progress on its plan to achieve positive cash flow and profitability.

Revenue and cost of revenue

By increasing our sales force and geographic footprint, we are actively selling in 35 U.S. states. The Company earned combined device sales and technology fee income totaling $8.89 million during the nine months ended December 31, 2023 – 28.8% growth in revenue over the $6.90 million earned in the prior comparable period.

Technology fees increased to $8.28 million during the nine months ended December 31, 2023, which is a 32.7% increase over the corresponding nine month period of the prior year. The majority of these fees are recurring, and their growth can be attributed to strong customer retention that is supported by the quality of customer and cardiologist-friendly support services that emphasize accuracy of diagnostics and ease-of-use. Device sales comprised 6.8% of our total revenue, or $0.60 million for the nine month period ended December 31, 2023. Gross profit percentage was 68.5% for the nine months ended December 31, 2023, as compared to 56.7% in the corresponding prior year period. This increase in gross margin can primarily be attributed to improved margins on technology fees. Given consistent gross margin on technology fees above 70%, and efficiencies gained in using AI in operational automation as well as an evolving revenue mix where technology fees are expected to comprise an increasing proportion of revenue, we anticipate continued improvement in overall blended gross margin over time. Technology fees comprised 93.2% of total revenue for the nine-month period ended December 31, 2023.

Operating Expenses

Total operating expenses for the nine months ended December 31, 2023, were $11.87 million as compared to $15.86 million for the nine months ended December 31, 2022. See further explanations below.

Selling, General and administrative expenses

Our selling, general and administrative expenses for the nine months ended December 31, 2023 was $10 million, compared to approximately $13.34 million during the nine months ended December 31, 2022 – a 25.0% reduction. Despite our increased sales efforts and the resulting revenue growth, we reduced total selling, general and administrative expenses by $3.37 million for the fiscal quarter ended December 31, 2023 when compared to the comparable prior year period primarily due to increased monitoring of spending efficiency over our fixed general and administrative expenses in the current period.

Research and development expenses

For the nine months ended December 31, 2023 we recorded research and development expenses of $1.86 million, compared to $2.53 million incurred for nine months ended December 31, 2022. The research and development activity related to both existing and new products. The decrease in research and development activity was a result of the timing of activities associated with the development of new technologies for our ecosystem and product enhancements.

Interest Expense

For the nine months ended December 31, 2023 and 2022, we incurred interest expenses of $2.20 million and $1.21 million, respectively. The increase in interest expense during the current period was primarily the result of increase in borrowings outstanding and market interest rates.

Accretion and amortization expenses

For the nine months ended December 31, 2023 and 2022, we incurred accretion expenses of $1.58 million and $0.15 million, respectively. The increase in the current period was a result of debt discount amortization related largely to new convertible notes entered towards the end of the prior fiscal year.

Change in fair value of derivative liabilities

For the nine months ended December 31, 2023 and 2022, we recognized a loss of $0.24 million versus a loss of $0.47 million, respectively, related to the change in fair value of derivative liabilities. The fair value changes were largely attributed to the underlying change in our equity fair value coupled with the timing of anticipated settlement events.

Gain (loss) upon convertible promissory notes conversion and redemption

During the nine months ended December 31, 2023 and 2022, we recorded a gain of $15 thousand versus a loss of $86 thousand, respectively, related to the redemption or conversion of our convertible promissory notes. The change of loss upon conversion upon convertible notes conversion was largely the result of decreased volumes of conversions and redemptions in the current quarter as compared to the comparable quarter in the prior year.

Other (expense) income, net

During the nine months ended December 31, 2023 and 2022, we recognized $119 thousand net other expense compared to $117 thousand, respectively. Other (expense) income, net comprises of non-operating costs from note modifications, transaction expense on the Series B preferred share issuance and financing income contained in our revenue contracts.

Net loss attributed to common stockholders

As a result of the foregoing, the net loss attributable to common stockholders for the nine months ended December 31, 2023 was $10.53 million compared to a net loss of $14.68 million during the comparable period in the prior year. This represents a 28.3% year-over-year reduction in net loss, and a reduction in loss per share to $1.191 from $1.699 for the nine-month period ended December 31, 2022.

EBITDA and Adjusted EBITDA

Earnings before interest, taxes, depreciation and amortization expenses (EBITDA) and Adjusted EBITDA, which are presented below, are non-generally accepted accounting principles (non-GAAP) measures that we believe are useful to management, investors and other users of our financial information in evaluating operating profitability. EBITDA is calculated by adding back interest, taxes, depreciation and amortization expenses to net income.

Adjusted EBITDA is calculated by excluding from EBITDA the effect of the following non-operational items: other income and expense, net, as well as the effect of special items that related to one-time, non-recurring expenditures or expenditures that do not reduce operating cash flows. We believe that this measure is useful to management, investors and other users of our financial information in evaluating the effectiveness of our operations and underlying business trends in a manner that is consistent with management’s evaluation of business performance. Further, the exclusion of non-operational items and special items enables comparability to prior period performance and trend analysis, and are an important indicator to management of its progress towards achieving operational cash flow break-even and profitability. See notes in the table below for additional information regarding special items. The table below demonstrates significant reductions in quarterly negative EBITDA of $2.46 million from the corresponding three-month period a year earlier, and a reduction of $6.50 million from the corresponding prior year nine month period ended December 31, 2022. This resulted from management’s consistent effort to grow the recurring technology fee revenue base, while controlling administrative costs and reducing the costs associated with selling its services and processing the provision of those to customers. Management believes that they have achieved these results by continuous improvement to their technology, including thru the implementation of AI, operationally.

It is management’s intent to provide non-GAAP financial information to enhance the understanding of Biotricity’s GAAP financial information, and it should be considered by the reader in addition to, but not instead of, the financial statements prepared in accordance with GAAP. We believe that providing these non-GAAP measures in addition to the GAAP measures allows management, investors and other users of our financial information to more fully and accurately assess business performance. The non-GAAP financial information presented may be determined or calculated differently by other companies and may not be directly comparable to that of other companies.

EBITDA and Adjusted EBITDA

(1) This relates to recognition of accretion expenses related to the debt discount balances on notes, as well as fixed asset depreciation expense.

(2) This relates to one-time recognition of expenses (gains) related to our financing transactions.

(3) Fair value changes on derivative liabilities corresponds to changes in the underlying stock value and thus does not reflect our day to day operations

(4) Loss from note and warrant modifications and other financing transactions that do not reflect the Company’s core operating activities.

Translation Adjustment

Translation adjustment for the three and nine months ended December 31, 2023 was a loss of $0.20 million and $99.1 thousand, respectively, versus a loss of $73 thousand and a gain of $0.62 million during the three and nine months ended December 31, 2022, respectively. This translation adjustment represents gains and losses that result from the translation of currency in the financial statements from our functional currency of Canadian dollars to the reporting currency in U.S. dollars over the course of the reporting period.

Global Economic Conditions

Generally, worldwide economic conditions remain uncertain, particularly due to the effects of the COVID-19 pandemic and increased inflation. The general economic and capital market conditions both in the U.S. and worldwide, have been volatile in the past and at times have adversely affected our access to capital and increased the cost of capital. The capital and credit markets may not be available to support future capital raising activity on favorable terms. If economic conditions decline, our future cost of equity or debt capital and access to the capital markets could be adversely affected.

The COVID-19 pandemic that began in late 2019 introduced significant volatility to the global economy, disrupted supply chains and had a widespread adverse effect on the financial markets. Additionally, our operating results could be materially impacted by changes in the overall macroeconomic environment and other economic factors. Changes in economic conditions, supply chain constraints, logistics challenges, labor shortages, the conflict in Ukraine, and steps taken by governments and central banks, particularly in response to the COVID-19 pandemic as well as other stimulus and spending programs, have led to higher inflation, which has led to an increase in costs and has caused changes in fiscal and monetary policy, including increased interest rates.

Liquidity and Capital Resources

Management has noted the existence of substantial doubt about our ability to continue as a going concern. Additionally, our independent registered public accounting firm included an explanatory paragraph in the report on our financial statements as of and for the years ended March 31, 2023 and 2022, respectively, noting the existence of substantial doubt about our ability to continue as a going concern. Our existing cash deposits may not be sufficient to fund our operating expenses through at least twelve months from the date of this filing. To continue to fund operations, we will need to secure additional funding through public or private equity or debt financings, through collaborations or partnerships with other companies or other sources. We may not be able to raise additional capital on terms acceptable to us, or at all. Any failure to raise capital when needed could compromise our ability to execute our business plan. If we are unable to raise additional funds, or if our anticipated operating results are not achieved, we believe planned expenditure may need to be reduced in order to extend the time period that existing resources can fund our operations. If we are unable to obtain the necessary capital, it may have a material adverse effect on our operations and the development of our technology, or we may have to cease operations altogether.

The development and commercialization of our product offerings are subject to numerous uncertainties, and we could use our cash resources sooner than we expect. Additionally, the process of developing our products is costly, and the timing of progress can be subject to uncertainty; our ability to successfully transition to profitability may be dependent upon achieving further regulatory approvals and achieving a level of product sales adequate to support our cost structure. Though we are optimistic with respect to our revenue growth trajectory and our cost control initiatives, we cannot be certain that we will ever be profitable or generate positive cash flow from operating activities.

The Company is in commercialization mode, while continuing to pursue the development of its next generation COM product as well as new products that are being developed.

We generally require cash to:

• purchase devices that will be placed in the field for pilot projects and to produce revenue,
• launch sales initiatives,
• fund our operations and working capital requirements,
• develop and execute our product development and market introduction plans,
• fund research and development efforts, and
• pay any expense obligations as they come due.

45

The Company is in the early stages of commercializing its products. It is concurrently in development mode, operating a research and development program in order to develop an ecosystem of medical technologies, and, where required or deemed advisable, obtain regulatory approvals for, and commercialize other proposed products. The Company launched its first commercial sales program as part of a limited market release, during the year ended March 31, 2019, using an experienced professional in-house sales team. A full market release ensued during the year ended March 31, 2020. Management anticipates the Company will continue on its revenue growth trajectory and improve its liquidity through continued business development and after additional equity or debt capitalization of the Company. The Company has incurred recurring losses from operations, and as at December 31, 2023, has an accumulated deficit of $122.54 million. On August 30, 2021 the Company completed an underwritten public offering of its common stock that concurrently facilitated its listing on the Nasdaq Capital Market. On December 31, 2023, the Company has a working capital deficit of $14.69 million. Prior to listing on the Nasdaq Capital Market, the Company had also filed a shelf Registration Statement on Form S-3 (No. 333-255544) with the Securities and Exchange Commission on April 27, 2021, which was declared effective on May 4, 2021. This facilitates better transactional preparedness when the Company seeks to issue equity or debt to potential investors, since it continues to allow the Company to offer its shares to investors only by means of a prospectus, including a prospectus supplement, which forms part of an effective registration statement.

On December 31, 2023, we had cash deposits in the aggregate of approximately $85 thousand.

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, 2022, the Company raised $499,900 through government EIDL loan. The Company also raised total net proceeds of $14,545,805 through the underwritten public offering that was concurrent with its listing onto the Nasdaq Capital Markets. The Company raised additional net proceeds of $11,756,563 through a term loan transaction (Note 6) and made repayment of the previously issued promissory notes and short-term loans. In connection with this loan, the Company and Lender entered into a Guarantee and Collateral Agreement, as well as an Intellectual Property Security Agreement, wherein the Company agreed to secure the Credit Agreement with all of the Company’s assets, as well as secured by the Company’s right title and interest in the Company’s Intellectual Property. During the fiscal year ended March 31, 2023, the Company raised short-term loans and promissory notes, net of repayments of $1,476,121 from various lenders. The Company also raised convertible notes, net of redemptions of $2,355,318 from various lenders.

During the nine months ended December 31, 2023, the Company raised additional convertible notes from various lenders of approximately $2.2 million net of issuance costs. In addition, the Company raised additional short-term loans and promissory notes, net of repayments, of $0.7 million from various lenders. Lastly, on September 19, 2023, the Company entered into a security purchase agreement with an institutional investor for the issuance and sale of 220 shares of the Company’s newly designated Series B Convertible Preferred Stock, $0.001 par value (the “Series B Preferred Stock”), at a purchase price of $9,090.91 per share of Series B Preferred Stock, or gross proceeds of $2,000,000. Net proceeds after issuance costs amounted to $1,900,000 for the Series B Preferred Stock. Shares of Series B Preferred Stock and shares of common stock of the Company that are issuable upon conversion of, or as dividends on, the Series B Preferred Stock were offered and were issued pursuant to the Prospectus Supplement, filed September 19, 2023, to the Prospectus included in the Company’s Registration Statement on Form S-3 (Registration No. 333-255544) filed with the Securities and Exchange Commission on April 27, 2021, and declared effective May 4, 2021.

As we proceed with the commercialization of the Bioflux, Biotres and Biocare products and continue their development, we expect to continue to devote significant resources on capital expenditures, as well as research and development costs and operations, marketing and sales expenditures.

We expect to require additional funds to further develop our business plan, including the continuous commercialization and expansion of the technologies that will form part of its BioSphere eco-system. Based on the current known facts and assumptions, we believe our existing cash and cash equivalents, access to funding sources, along with anticipated near-term debt and equity financings, will be sufficient to meet our needs for the next twelve months from the filing date of this report. We intend to seek and opportunistically acquire additional debt or equity capital to respond to business opportunities and challenges, including our ongoing operating expenses, protecting our intellectual property, developing or acquiring new lines of business and enhancing our operating infrastructure. The terms of our future financing may be dilutive to, or otherwise adversely affect, holders of our common stock. We may also seek additional funds through arrangements with collaborators or other third parties. There can be no assurance we will be able to raise this additional capital on acceptable terms, or at all. If we are unable to obtain additional funding on a timely basis, we may be required to modify our operating plan and otherwise curtail or slow the pace of development and commercialization of our proposed product lines.

The following is a summary of cash flows for each of the periods set forth below.

Net Cash Used in Operating Activities

During the nine months ended December 31, 2023, we used cash in operating activities in the amount of $5.53 million. The cash in operating activities was primarily due to selling expenses as well as research, product development, business development, marketing and general operations. The decrease in cash used reflects management’s concerted effort to contain costs while increasing revenues, on the path of achieving break-even.

During the nine months ended December 31, 2022, we used cash in operating activities of $11.7 million. These activities involved expenditures for sales, infrastructure and business development, as well as marketing and operating activities, and continued research and product development.

Net Cash Used in Investing Activities

Net cash used in investing activities was Nil during the nine months ended December 31, 2023 and 2022.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was $4.95 million as compared to $4 thousand during the nine months ended December 31, 2023 and 2022, respectively.

For the nine months ended December 31, 2023, the net cash provided by financing activities related primarily to net proceeds attributed to the issuance of Series B preferred stock in the amount of $1.9 million, the issuance of convertible notes in the amount of $2.3 million and the issuance of short term loans and promissory notes in the amount of approximately $1.4 million, net of repayments. Lastly, we issued common stock resulting in $0.1 million of net proceeds.

For the nine months ended December 31, 2022, the net cash provided by financing activities related primarily to net proceeds attributed to short term loans and promissory notes in the amount of 1.89 million. This was largely offset by the redemption of preferred stock in the amount of $0.9 million and the payment of preferred stock dividends in the amount of $0.94 million.

Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with GAAP. These accounting principles require us to make estimates and judgments that can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenue and expense during the periods presented. We believe that the estimates and judgments upon which we rely are reasonably based upon information available to us at the time that we make these estimates and judgments. To the extent that there are material differences between these estimates and actual results, our financial results will be affected. The accounting policies that reflect our more significant estimates and judgments and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, included in our 2023 Form 10-K filed on June 29, 2023.

During the three and nine months ended December 31, 2023, there were no material changes to our critical accounting estimates disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2023 Form 10-K filed on June 29, 2023.

Recent Accounting Pronouncements

Refer to Note 3— Summary of Significant Accounting Policies to our condensed consolidated financial statements included elsewhere in this report for a discussion of recently issued accounting pronouncements.

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 13a-15(e). The Company’s disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching the Company’s desired disclosure control objectives. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Therefore, even a system which is determined to be effective cannot provide absolute assurance that all control issues have been detected or prevented. Our systems of internal controls are designed to provide reasonable assurance with respect to financial statement preparation and presentation.

At the end of the period being reported upon, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective to ensure that the material information required to be included in our Securities and Exchange Commission reports is accumulated and communicated to our management, including our principal executive and financial officer, as well as recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms relating to the Company.

Changes in Internal Controls

There were no changes in the Company’s internal controls over financial reporting that occurred during the three-month period ended December 31 2023 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II

OTHER INFORMATION