The accompanying notes are an integral part of these condensed consolidated interim financial statements.
The Condensed Consolidated
Interim Financial Statements have been adjusted retroactively to reflect the 150 to 1 reverse stock split effected on October 29,
2018, as discussed in Note 2
The accompanying notes are an integral part
of these condensed consolidated interim financial statements.
The accompanying notes are an integral part
of these condensed consolidated interim financial statements.
The accompanying notes are an integral part
of these condensed consolidated interim financial statements.
NOTES
TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For
the six month periods ended September 30, 2019 and 2018
(Amounts
expressed in U.S. Dollars) (unaudited)
1. NATURE OF OPERATIONS AND
GOING CONCERN
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. (“Drywave”) 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 October
29, 2018, the Company implemented at 1 for 150 reverse stock-split of the common and exchangeable shares.
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 Special
Preferred Voting Share (the “Special Preferred Share”) (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 Mergerco). 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. In return for acquiring IMT, IMT shareholders received an aggregate of 157,667
shares of the Company’s common stock (Note 4).
On November 6, 2017, the
Company approved the authorization of a common share capital share increase to 250,000,000 from 150,000,000 and on June 12, 2018,
the Company approved the authorization of a common share increase to 500,000,000 from 250,000,000.
References to the Company refer
to the Company and its wholly owned subsidiaries, Bionik Inc., Bionik Acquisition Inc. and Bionik Canada.
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 the 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 02472.
Going Concern
As at September 30, 2019,
the Company had a working capital of $5,144,499 (March 31, 2019 - $479,408) and an accumulated deficit of $(51,860,701) (March
31, 2019 - $(46,357,373)) and the Company incurred comprehensive loss of $(5,503,328) for the six month period ended September 30,
2019 (September 30, 2018 - $(4,743,803)).
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 and consequently continue as a going concern.
The Company will require
additional financing to fund its operations and it is currently working on securing this funding through corporate collaborations,
public or private equity offerings or debt financings. Sales of additional equity 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. The Company expects to raise additional funds to meet the Company’s anticipated cash requirements
for the next 12 months; however, these conditions raise substantial doubt about the Company’s ability to continue as a going
concern. The accompanying condensed consolidated financial statements do not include any adjustments to reflect the possible future
effects on recoverability and reclassification of assets or the amounts and classification 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 financial
statements.
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the six month periods
ended September 30, 2019 and 2018
(Amounts expressed in
U.S. Dollars) (unaudited)
2. BASIS OF PRESENTATION
During the 2019 fiscal year,
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 Bionik’s common stock and exchangeable shares at a ratio up to one-to-one hundred and fifty.
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. All owners of record on October 29, 2018 received one issued and outstanding share
of Bionik common stock or exchangeable share in exchange for one hundred and fifty issued and outstanding shares of Bionik common
stock or Bionik exchangeable stock. No fractional shares were issued in connection with the reverse stock split. All fractional
shares created by the one-for-one hundred and fifty reverse split were rounded up to the next whole share. The reverse stock split
had no impact on the par value per share of Bionik common stock, which remains at $0.001. All current and prior period amounts
related to shares, share prices and earnings per share, presented in the Company’s consolidated financial statements and
the accompanying Notes contained in this Quarterly Report on Form 10–Q have been restated to give retrospective presentation
for the reverse stock split.
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, 2019. The interim disclosures generally do not repeat those in the annual statements. In the opinion of management, these
unaudited condensed consolidated interim financial statements reflect all 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.
The changes in accounting
policies in the Company’s unaudited condensed consolidated interim financial statements from the March 31, 2019 audited financial
statements are described below.
Newly Adopted and Recently
Issued Accounting Pronouncements
Newly Adopted
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 September 30, 2019.
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-2014-1 for the fiscal
year ended March 31, 2019 and it did not have a material effect on the consolidated balance sheet and the consolidated results
of operations.
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 ended March 31, 2019 and it did not have a material effect on the consolidated balance sheet or 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 2017. The Company
has adopted ASU 2016-01 for the year ended March 31, 2019 and it did not have a material effect on the consolidated balance sheet
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 has adopted ASU 2016-02 and it did not have a material effect on
the consolidated balance sheet and consolidated statement 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 ended March 31, 2019 and it did not have material effect on the consolidated balance sheet or on the consolidated statement
of cash flows.
BIONIK
LABORATORIES CORP.
NOTES
TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For
the six month periods ended September 30, 2019 and 2018
(Amounts
expressed in U.S. Dollars) (unaudited)
3. SIGNIFICANT ACCOUNTING POLICIES
– Continued
In May 2017, the FASB issued ASU No. 2017-09,
Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting (ASU 2017-09). The FASB issued the update to provide
clarity and reduce the cost and complexity when applying the 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 modification accounting
in Topic 718. The Company adopted ASU 2017-09 during the year ended March 31, 2019 and it did not have a material effect on the
consolidated balance sheet and the consolidated results of operations.
Recently Issued
In January 2017, the FASB
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 acquitted 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. 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 September 30, 2019, with early adoption permitted.
Adoption of this guidance will be applied prospectively on or after the effective date and the Company does not expect this policy
will have a material effect on the consolidated balance sheet or consolidated statement of cash flows.
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. The Company is still assessing the impact that the adoption of ASU 2017-04 will have on the consolidated
balance sheet and consolidated statement of operations.
In June 2016, the FASB issued
ASU 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses of Financial Instruments, which
introduces an expected credit loss methodology for the impairment of financial assets measured at amortized cost basis. The methodology
replaces the probable, incurred loss model for those assets. The update if effective for fiscal years beginning after December
15, 2019. The Company is still assessing the impact that the adoption of ASU 2016-13 will have on the consolidated balance sheet
and consolidated statement of operations.
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 condensed consolidated interim balance sheets and amounted to $165,207 at September 30, 2019 (March
31, 2019 - $143,500). 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 $26,912 of expenses
related to warranty expenses and recorded this expense in cost of goods sold for the six-month period ended September 30, 2019
(September 30, 2018 - $10,108).
4. TECHNOLOGY AND OTHER ASSETS
The schedule below reflects the intangible assets
acquired in the IMT acquisition and the assets amortization period and expense for the six months ended September 30, 2019, and
the year ended March 31, 2019:
|
|
Amortization
|
|
|
Value
Acquired
|
|
|
Amortization
March 31,
2019
|
|
|
Value at
March 31,
2019
|
|
|
Amortization
September 30,
2019
|
|
|
Value at
September 30,
2019
|
|
Intangible assets acquired
|
|
period (years)
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
Patents and exclusive License Agreement
|
|
|
9.74
|
|
|
|
1,306,031
|
|
|
|
134,090
|
|
|
|
911,440
|
|
|
|
67,044
|
|
|
|
844,396
|
|
Trademark
|
|
|
Indefinite
|
|
|
|
2,505,907
|
|
|
|
-
|
|
|
|
2,505,907
|
|
|
|
-
|
|
|
|
2,505,907
|
|
Customer relationships
|
|
|
10
|
|
|
|
1,431,680
|
|
|
|
143,168
|
|
|
|
1,010,375
|
|
|
|
71,584
|
|
|
|
938,791
|
|
Non compete agreement
|
|
|
2
|
|
|
|
61,366
|
|
|
|
1,739
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Assembled workforce
|
|
|
1
|
|
|
|
275,720
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
5,580,704
|
|
|
|
278,997
|
|
|
|
4,427,722
|
|
|
|
138,628
|
|
|
|
4,289,094
|
|
Amortization expense
for the technology and other assets was $138,628 and $140,368 for the six months ended September 30, 2019 and 2018,
respectively. Amortization expensed for the technology and other assets was $69,314 and $69,315 for the three months ended
September 30, 2019 and 2018, respectively.
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the six month periods
ended September 30, 2019 and 2018
(Amounts expressed in U.S.
Dollars) (unaudited)
5. PREPAID EXPENSES AND OTHER RECEIVABLES
|
|
September 30, 2019
|
|
|
March 31, 2019
|
|
|
|
$
|
|
|
$
|
|
Prepaid expenses and other receivables
|
|
|
147,858
|
|
|
|
92,170
|
|
Prepaid inventory
|
|
|
1,897,873
|
|
|
|
1,144,392
|
|
Prepaid insurance
|
|
|
117,343
|
|
|
|
66,320
|
|
Sales taxes receivable (i)
|
|
|
29,103
|
|
|
|
52,150
|
|
|
|
|
2,192,177
|
|
|
|
1,355,032
|
|
i) Sales tax receivable represents net harmonized sales taxes (HST) input tax credits receivable from the Government of Canada.
6. INVENTORIES
|
|
September 30, 2019
|
|
|
March 31, 2019
|
|
Finished Goods
|
|
|
1,037,058
|
|
|
|
405,682
|
|
During the three and six month period ended September
30, 2019, the Company expensed $76,843 and $376,639 in inventory as cost of goods sold (September 30, 2018 - $342,345 and $579,354).
The Company no longer maintains a raw materials inventory as it has outsourced its manufacturing to a third party.
7. EQUIPMENT
Equipment consisted of the following as at September
30, 2019 and March 31, 2019:
|
|
September 30, 2019
|
|
|
March 31, 2019
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Cost
|
|
|
Depreciation
|
|
|
Net
|
|
|
Cost
|
|
|
Depreciation
|
|
|
Net
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
Computers and electronics
|
|
|
296,917
|
|
|
|
253,648
|
|
|
|
43,269
|
|
|
|
286,855
|
|
|
|
243,346
|
|
|
|
43,509
|
|
Furniture and fixtures
|
|
|
36,795
|
|
|
|
30,333
|
|
|
|
6,462
|
|
|
|
36,795
|
|
|
|
29,648
|
|
|
|
7,147
|
|
Demonstration equipment
|
|
|
352,694
|
|
|
|
184,311
|
|
|
|
168,383
|
|
|
|
271,615
|
|
|
|
147,257
|
|
|
|
124,358
|
|
Manufacturing equipment
|
|
|
88,742
|
|
|
|
86,471
|
|
|
|
2,271
|
|
|
|
88,742
|
|
|
|
86,230
|
|
|
|
2,512
|
|
Tools and parts
|
|
|
11,422
|
|
|
|
7,224
|
|
|
|
4,198
|
|
|
|
11,422
|
|
|
|
6,779
|
|
|
|
4,643
|
|
Assets under capital lease
|
|
|
23,019
|
|
|
|
14,962
|
|
|
|
8,057
|
|
|
|
23,019
|
|
|
|
12,660
|
|
|
|
10,359
|
|
|
|
|
809,589
|
|
|
|
576,949
|
|
|
|
232,640
|
|
|
|
718,448
|
|
|
|
525,920
|
|
|
|
192,528
|
|
Equipment is recorded at cost less accumulated depreciation.
Depreciation expense during the three-and six month period ended September 30, 2019 was $27,059 and $51,029 (September 30, 2018
-$16,626 and $34,221, respectively).
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the six month periods
ended September 30, 2019 and 2018
(Amounts expressed in
U.S. Dollars) (unaudited)
8. NOTES PAYABLE
(a) Convertible Loans Payable
During the six months ended
September 30, 2019, the Company received loans from new and existing investors totaling $9,000,000 pursuant to an up to $9,000,000
convertible note offering. This included the conversion and satisfaction of an existing $500,000 term loan at June 30, 2019. The
convertible notes bore interest at a fixed rate of 1% per month until September 30, 2019 and $6,070,000 of these convertible notes
were converted into common shares of the Company on September 30, 2019 at a conversion price of $6.80 per share and $2,930,000
of these convertible notes were converted into common shares of the Company on September 30, 2019 at a conversion price of $8.265.
The interest accrued on these convertible loans for
the three and six months ended September 30, 2019 was $139,477 and $143,927 respectively and the interest was converted into shares
at the respective conversion prices.
In the event the Company
raises capital through the sale of Common Stock for cash during the period ending on the three year anniversary of the earliest
issuance date of the convertible notes, and the price per share thereof (the “Offering Price”) is less than
the original Conversion Price, then in such event the Company shall issue to all convertible loan holder at, at no further cost,
additional shares of common stock equal to the number of conversion shares the holders would have received upon conversion if the
Conversion Price equaled the Offering Price, less the number of shares of conversion shares actually issued on or as of the Maturity
Date. Since the Company has early adopted ASU 2017-11, the anti-dilution protection clause does not contribute to the conversion
feature to be a derivative liability.
March 31, 2019
|
|
-
|
|
Convertible loans issued
|
|
$
|
9,000,000
|
|
Interest
|
|
|
143,927
|
|
Convertible loans and interest converted in 1,268,191 shares
|
|
|
(9,143,927
|
)
|
September 30, 2019
|
|
$
|
-
|
|
(b) Convertible Loans Payable
During the six months ended September 30, 2019,
the Company received $70,000 from an existing investor pursuant to a $3,000,000 (or up to $7,000,000 at the discretion of the Company)
convertible note offering. The convertible notes bear interest at a fixed rate at 1% per month and will be payable, along with
the principal amount on the earlier of (the “Maturity Date”); (a) March 20, 2020 and (b) the consummation of the offering
provided that the Company raises in one or more tranches aggregate gross proceeds of no less than $3,000,000. The convertible loans
will be convertible into equity of the Company upon the following events on the following terms:
|
(i)
|
On the Maturity Date, the outstanding principal and accrued
and unpaid interest under the convertible note will be converted into shares of common stock at a conversion price of $8.55 per
shares in the event of an investment on or prior to September 30, 2019, and $9.50 per share in the event of an investment after
September 30, 2019. (the Conversion Price”).
|
|
(j)
|
Upon change of control transaction prior to the Maturity
Date, the outstanding principal and accrued and unpaid interest under the convertible notes would, at the election of the holders
of a majority of the outstanding principal of the loans under the offering, be either (i) payable upon demand as of the closing
of such change of control transaction or (ii) convertible into shares of the Company’s common stock immediately prior to
such change of control transaction at a price per share equal to the lesser of (x) the Conversion Price or (y) the per share consideration
to be received by the holders of the common stock in such change of control transaction.
|
The interest accrued on these convertible loans
for the six months ended September 30, 2019 was $117.
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the six month periods
ended September 30, 2019 and 2018
(Amounts expressed in
U.S. Dollars) (unaudited)
9. RELATED PARTY TRANSACTIONS AND BALANCES
(a) Due from related
parties
At September 30, 2019 there
was an outstanding loan to the Chief Technology Officer (“CTO”) of the Company of $18,932 (March 31, 2019 – $18,585).
The loan had an interest rate of 1% until June 30, 2018 and 2% after this date 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, 2019, the Company
accrued interest receivable in the amount of $236 (March 31, 2019 – $353); 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, 2019, $1,957 (March 31, 2019 – $229,473) was owing to the CEO of the Company; $12,813 (March 31,
2019 – $14,851) was owing to the Chief Technology Officer; $1,845 (March 31, 2019 – $33,387) was owing to the
Chief Financial Officer (“CFO”), $Nil (March 31, 2019 – $28,025) was owing to the current and former Chief
Commercial Officer (“CCO”), all related to bonuses and business expenses. All bonuses accrued at March 31, 2019
have been paid.
10. SHARE CAPITAL
|
|
September 30, 2019
|
|
|
March 31, 2019
|
|
|
|
Number of shares
|
|
|
$
|
|
|
Number of shares
|
|
|
$
|
|
Exchangeable Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance beginning of year
|
|
|
196,799
|
|
|
|
197
|
|
|
|
295,146
|
|
|
|
295
|
|
Converted into common shares (a)
|
|
|
(40,560
|
)
|
|
|
(41
|
)
|
|
|
(98,347
|
)
|
|
|
(98
|
)
|
Balance at end of year
|
|
|
156,239
|
|
|
|
156
|
|
|
|
196,799
|
|
|
|
197
|
|
Common Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of the year
|
|
|
3,661,838
|
|
|
|
3,661
|
|
|
|
1,368,856
|
|
|
|
1,369
|
|
Shares issued to exchangeable shareholders (a)
|
|
|
40,560
|
|
|
|
41
|
|
|
|
98,347
|
|
|
|
98
|
|
Shares issued on conversion of loans
|
|
|
1,268,191
|
|
|
|
1,268
|
|
|
|
2,194,133
|
|
|
|
2,194
|
|
Share consolidation rounding adjustment
|
|
|
6
|
|
|
|
-
|
|
|
|
502
|
|
|
|
-
|
|
Balance at end of the year
|
|
|
4,970,595
|
|
|
|
4,970
|
|
|
|
3,661,838
|
|
|
|
3,661
|
|
TOTAL SHARES
|
|
|
5,126,834
|
|
|
|
5,126
|
|
|
|
3,858,637
|
|
|
|
3,858
|
|
|
(a)
|
During the six months ended September 30, 2019, 40,560
exchangeable shares were exchanged for common shares on a 1 for 1 basis in accordance with their terms. (March 31, 2019 –
98,347 shares)
|
|
(b)
|
On September 30, 2019 $9,143,927 of promissory notes and interest were converted into
1,268,191 common shares. These shareholders have price protection until June 10, 2022.
|
|
(c)
|
On October 29, 2018, the Company completed a one-for-one
hundred and fifty (1:150) reverse stock consolidation that has been reflected in all shares and per share amounts, warrants and
options.
|
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 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 will 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
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 shares of common stock of the Company. The voting rights of the Special Voting Preferred Share will terminate pursuant to
and in accordance with the Trust Agreement and the Special Voting Preferred Share will be automatically cancelled.
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the six month periods
ended September 30, 2019 and 2018
(Amounts expressed in
U.S. Dollars) (unaudited)
11. STOCK OPTIONS
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 April
26, 2016, the Company issued 1,667 options to an employee with an exercise price of $150.00 per share that will vest over
three years at the anniversary date. The grant fair value was $213,750. During the three and six months ended September 30,
2019 $Nil and $3,431 (September 30, 2018 – $17,813 and $35,625) was recognized as stock compensation expense due to
the employee leaving the Company.
On February 6, 2017, the
Company issued 2,667 options to an employee with an exercise price of $105.00 per share that will vest over three years at the
anniversary date. The grant fair value was $245,200. During the three and six months ended September 30, 2019 $20,433 and $40,867
(September 30, 2018 – $20,433 and $40,867) of stock compensation expense was recognized.
On
September 1, 2017, the Company granted 81,436 options at $24.15 per share equally to an executive officer and a consultant,
who is now the Chairman of the Company. 27,148 options have vested and 50% of the remaining options vest on performance being
met and 50% vest annually over 5 years for the CEO, for our Chairman the options vest over 5 years. The grant date fair value
was $1,832,304 and $133,605 and $190,865 is the current expense for the three and six months ended September 30, 2019
(September 30, 2018 – $190,865 and $229,037.
On January 24, 2018, the
Company granted 24,267 options at $23.25 per share to employees that vest equally on January 24, 2019, 2020 and 2021. 7,334 options
were cancelled for the year ended March 31, 2019 and 778 for the three and six month period ended September 30, 2019. The grant
fair value was $491,036 and $26,306 and $54,860 is the current stock compensation expense for the three and six months ended September
30, 2019 (September 30, 2018 – $37,266 and $76,968).
On April 30, 2018, the Company
granted to an executive officer, 40,000 options with an exercise price of $9.74 that vest immediately with a 10-year expiry. These
options were valued using the Black Scholes model and the following inputs were used: expected life 10 years, expected volatility
114% and a risk-free rate of 1.59%. As these options vested immediately as of the grant date and $363,714 of stock compensation
expense was recorded for the year ended March 31, 2019.
On June 11, 2018, the Company
granted to an 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 $Nil and $1,686
of stock compensation was recognized for three and six months ended September 30, 2019 (September 30, 2018 $2,528 and $3,090).
This executive left the Company and all 5,000 options were cancelled, as they had not vested.
On May 31, 2019 169,882
options were issued to employees and directors of the Company with an exercise price of $3.16 per share that vest over 18 months,
with one third immediately vesting and one third vesting in each of the following two 6-month periods 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 $453,585 and $84,601 and $260,995 of stock compensation was recognized
for three and six months ended September 30, 2019.
On July 26, 2019, 484,612
options were granted to employees and consultants at an exercise price of $3.595. The options were 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 $1,525,525 and $372,923 of stock compensation was recognized for three and six months ended September 30, 2019.
On September 3, 2019, 5,000
options were granted to an employee at an exercise price of $3.20 which vest over three years starting September 3, 2020. 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 $14,010 and $350 of stock compensation was recognized for the three
and six months ended September 30, 2019
During the three and six months
ended September 30, 2019, the Company recorded $638,219 and $925,976 in share-based compensation related to the vesting of stock
options (September 30, 2018 – $439,328 and $1,034,740).
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the six month periods
ended September 30, 2019 and 2018
(Amounts expressed in
U.S. Dollars) (unaudited)
11. STOCK OPTIONS – Continued
The following is a summary of stock options outstanding
and exercisable as of September 30, 2019:
Exercise Price ($)
|
|
|
Number of Options
|
|
|
Expiry
Date
|
|
|
Exercisable
Options
|
|
|
34.500
|
|
|
|
630
|
|
|
|
20-Jun-21
|
|
|
|
630
|
|
|
34.500
|
|
|
|
13,212
|
|
|
|
01-Jul-21
|
|
|
|
13,212
|
|
|
34.500
|
|
|
|
944
|
|
|
|
17-Feb-22
|
|
|
|
944
|
|
|
183.000
|
|
|
|
2,667
|
|
|
|
24-Nov-22
|
|
|
|
2,667
|
|
|
150.000
|
|
|
|
11,400
|
|
|
|
14-Dec-22
|
|
|
|
11,400
|
|
|
142.500
|
|
|
|
359
|
|
|
|
28-Mar-23
|
|
|
|
359
|
|
|
157.500
|
|
|
|
1,387
|
|
|
|
28-Mar-23
|
|
|
|
1,387
|
|
|
105.000
|
|
|
|
2,667
|
|
|
|
06-Feb-24
|
|
|
|
1,778
|
|
|
102.000
|
|
|
|
1,667
|
|
|
|
13-Feb-24
|
|
|
|
1,667
|
|
|
142.500
|
|
|
|
106
|
|
|
|
03-Mar-24
|
|
|
|
106
|
|
|
157.500
|
|
|
|
408
|
|
|
|
03-Mar-24
|
|
|
|
408
|
|
|
142.500
|
|
|
|
43
|
|
|
|
14-Mar-24
|
|
|
|
43
|
|
|
157.500
|
|
|
|
164
|
|
|
|
14-Mar-24
|
|
|
|
164
|
|
|
142.500
|
|
|
|
485
|
|
|
|
30-Sep-24
|
|
|
|
485
|
|
|
157.500
|
|
|
|
1,876
|
|
|
|
30-Sep-24
|
|
|
|
1,876
|
|
|
24.150
|
|
|
|
81,436
|
|
|
|
01-Sep-27
|
|
|
|
40,722
|
|
|
23.250
|
|
|
|
15,822
|
|
|
|
24-Jan-25
|
|
|
|
5,533
|
|
|
9.735
|
|
|
|
40,000
|
|
|
|
19-Apr-28
|
|
|
|
40,000
|
|
|
3.16
|
|
|
|
169,549
|
|
|
|
31-May-26
|
|
|
|
56,629
|
|
|
3.595
|
|
|
|
484,612
|
|
|
|
26-Jul-26
|
|
|
|
58,639
|
|
|
3.20
|
|
|
|
5,000
|
|
|
|
03-Sept-26
|
|
|
|
-
|
|
|
|
|
|
|
834,434
|
|
|
|
|
|
|
|
238,649
|
|
The weighted-average remaining contractual term of
the outstanding options is 6.78 years (March 31, 2019 – 7.20 years) and for the options that are exercisable the weighted
average is 6.62 years (March 31, 2019 – 5.74 years).
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the six month periods
ended September 30, 2019 and 2018
(Amounts expressed in
U.S. Dollars) (unaudited)
12. WARRANTS
The following is a continuity schedule of the Company’s common share purchase warrants:
|
|
Number of Warrants
|
|
|
Weighted Average Exercise Price ($)
|
|
Outstanding and exercisable, March 31, 2018
and September 30, 2018
|
|
365,974
|
|
|
|
53.19
|
|
Issued in connection with anti-dilution provision connected warrant transaction
|
|
67,952
|
|
|
|
55.71
|
|
Issued in connection with anti-dilution provision connected warrant transaction
|
|
6,305
|
|
|
|
34.50
|
|
Issued in connection with anti-dilution provision connected warrant transaction
|
|
52,590
|
|
|
|
38.91
|
|
Expired
|
|
(204,304
|
)
|
|
|
(51.85
|
)
|
Outstanding and exercisable, March 31, 2019
|
|
288,517
|
|
|
|
40.27
|
|
Expired
|
|
(163,483
|
)
|
|
|
(38.91
|
)
|
Outstanding and exercisable, September 30, 2019
|
|
125,034
|
|
|
|
20.07
|
|
During the six months ended September 30, 2019,
163,483 warrants expired in accordance with their terms (September 30, 2018 – Nil)
Common share purchase
warrants
The following is a summary of common share purchase
warrants outstanding as of September 30, 2019.
Exercise
Price ($)
|
|
|
Number of
Warrants
|
|
|
Expiry Date
|
|
|
90.00
|
|
|
|
15,658
|
|
|
|
March 31, 2023
|
|
|
37.50
|
|
|
|
2,667
|
|
|
|
June 27, 2020
|
|
|
9.375
|
|
|
|
64,025
|
|
|
|
August 14, 2022
|
|
|
9.375
|
|
|
|
42,684
|
|
|
|
March 31, 2022
|
|
|
|
|
|
|
125,034
|
|
|
|
|
|
The weighted-average remaining contractual term of
the outstanding warrants was 2.82 years (March 31, 2019 – 1.51 years).
BIONIK LABORATORIES CORP.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
For the six month periods
ended September 30, 2019 and 2018
(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 Company’s then-CTO and COO had transferred 2,098 common shares
to the lenders. For contributing the common shares to the lenders, the Company intends to reimburse the former CTO and COO 2,134
common shares. As at September 30, 2019 these shares have not yet been issued.
|
(b)
|
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 China Bionik
Medical Rehabilitation Technology Ltd. (“China JV”), in which the Company will have a 25% interest and the JV Partner
75%. The China JV was formally established on receiving a business license on May 22, 2018. Under the terms of the JV Contract,
the JV Partner is required to contribute $290,000 within 30 days of the date of establishment, $435,000 12 months later and $725,000,
60 months after the date of establishment. 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, 2019, the Company has provided certain
technical information to the Chinese JV in order to obtain Chinese regulatory approvals.
|
(c)
|
In connection with the acquisition of IMT, the Company acquired a license
agreement dated June 8, 2009, with a former director as a co- licenser, pursuant to which the Company pays the director and the
co-licenser an aggregate royalty of 1% of sales based on patent #8,613,691. No sales have been made, as the technology under this
patent has not been commercialized.
|
(d)
|
The Company has committed to upgrading two robots previously sold to a customer
to the newest version when released. As part of this transaction, the customer will enter into an extended warranty agreement that
will be approximately equal to the manufacturing value of robots. These 2 robots were shipped in November 2019 and the warranty
revenue will be recognized over the term of the warranty.
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
This
Quarterly Report on Form 10-Q contains statements reflecting assumptions, expectations, projections, intentions or beliefs about
future events that are intended as “forward-looking statements”. All statements included or incorporated by reference
in this Quarterly Report on Form 10-Q, other than statements of historical fact, that address activities, events or developments
that we expect, believe or anticipate will or may occur in the future are forward- looking statements. These statements appear
in a number of places, including, but not limited to in this “Management’s Discussion and Analysis of Financial Condition
and Results of Operations.” These statements represent our reasonable judgment of the future based on various factors and
using numerous assumptions and are subject to known and unknown risks, uncertainties and other factors that could cause our actual
results and financial position to differ materially from those contemplated by the statements. You can identify these statements
by the fact that they do not relate strictly to historical or current facts, and use words such as “anticipate,” “believe,”
“estimate,” “expect,” “forecast,” “may,” “will”, “should,”
“plan,” “project” and other words of similar meaning. In particular, these include, but are not limited
to, statements relating to the following:
|
·
|
projected operating or financial results, including anticipated cash flows used in operations;
|
|
·
|
expectations regarding capital expenditures; and
|
|
·
|
our beliefs and assumptions relating to our liquidity position, including our ability to obtain additional financing.
|
Any
or all of our forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions or by known or
unknown risks, uncertainties and other factors including, among others:
|
·
|
the loss of key management personnel on whom we depend;
|
|
·
|
our ability to operate our business efficiently, manage capital expenditures and costs (including
general and administrative expenses) and obtain financing when required; and
|
|
·
|
our expectations with respect to our acquisition activity.
|
In addition,
there may be other factors that could cause our actual results to be materially different from the results referenced in the forward-looking
statements, some of which are included in this Quarterly Report on Form 10-Q, including in this “Management’s Discussion
and Analysis of Financial Condition and Results of Operations.” Many of these factors will be important in determining our
actual future results. Consequently, no forward-looking statement can be guaranteed. Our actual future results may vary materially
from those expressed or implied in any forward-looking statements. All forward- looking statements contained in this Quarterly
Report on Form 10-Q are qualified in their entirety by this cautionary statement. Forward-looking statements speak only as of the
date they are made, and we disclaim any obligation to update any forward-looking statements to reflect events or circumstances
after the date of this Quarterly Report on Form 10-Q, except as otherwise required by applicable law.
This
discussion and analysis should be read in conjunction with the accompanying condensed consolidated interim financial statements
and related notes, and the Company’s Annual Report on Form 10-K for the year ended March 31, 2019 as filed with the Securities
and Exchange Commission.
The
discussion and analysis of the financial condition and results of operations are based upon the financial statements, which have
been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation
of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosure of any contingent liabilities at the financial statement date and reported amounts of revenue
and expenses during the reporting period. On an on-going basis we review our estimates and assumptions. The estimates were based
on historical experience and other assumptions that we believe to be reasonable under the circumstances. Actual results are likely
to differ from those estimates under different assumptions or conditions, but we do not believe such differences will materially
affect our financial position or results of operations.
In light
of these risks and uncertainties, and especially given the nature of our existing and proposed business, there can be no assurance
that the forward-looking statements contained in this section and elsewhere in this Quarterly Report on Form 10-Q will in fact
occur. Potential investors should not place undue reliance on any forward- looking statements. Except as expressly required by
the federal securities laws, there is no undertaking to publicly update or revise any forward-looking statements, whether as a
result of new information, future events, changed circumstances or any other reason.
The discussion
and analysis of the financial condition and results of operations are based upon the financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States. The preparation of consolidated financial statements
in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of any contingent liabilities at the financial statement
date and reported amounts of revenue and expenses during the reporting period. On an on-going basis we review our estimates and
assumptions. The estimates were based on historical experience and other assumptions that we believe to be reasonable under the
circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions, but we do not
believe such differences will materially affect our financial position or results of operations.
Company Overview
Bionik
Laboratories Corp. is a healthcare company focused on improving the quality of life of millions of people with neurological or
mobility impairments by combining artificial intelligence and innovative robotics technology to help individuals from hospital
to home to regain mobility, enhance autonomy, and regain self-esteem.
The
Company uses artificial intelligence and machine learning technologies to make rehabilitation methods and processes smarter and
more intuitive to deliver greater recovery for patients with neurological or mobility impairments. These technologies allow large
amounts of data to be collected and processed in real-time, enabling appropriately challenging and individualized therapy during
every treatment session. This is the foundation of the InMotion™ therapy. The Company’s rehabilitation therapy robots
are built on an artificial intelligence platform, measuring the position, the speed and the acceleration of the patient 200 times
per second. The artificial intelligence platform is designed to adapt in real time to the patient’s needs and progress while
providing quantifiable feedback of a patient’s progress and performance, in a way that the Company believes a trained clinician
cannot.
Based
on this foundational work, the Company has a portfolio of products focused on upper and lower extremity rehabilitation for stroke
and other mobility-impaired individuals, including three InMotion™ robots currently in the market and two products in varying
stages of development.
The
InMotion™ therapy uses the Company’s robots to assist patients to rewire a segment of their brains after injury, also
known as neuroplasticity. The InMotion™ Robots - the InMotion™ ARM, InMotion™ WRIST and the InMotion™
ARM/HAND – are designed to provide intelligent, adaptive therapy in a manner that has been clinically shown to maximize
neurorecovery. The Company is also developing a home version of the InMotion™ upper-body rehabilitation technology, as well
as a lower-body wearable assistive product based on the Company’s existing ARKE lower body exoskeleton technology, which
could allow certain mobility impaired individuals to walk better. The Company intends to launch this mobility assistance solution
into the consumer market when the Company has sufficient funds to develop this product.
The
InMotion™ ARM InMotion™ ARM/HAND, and InMotion™ WRIST are robotic therapies for the upper
limbs. InMotion™ robotic therapies have been characterized as Class II medical devices by the U.S. Food and Drug Administration,
or FDA, and are listed with the FDA to market and sell in the United States. More than 280 of our clinical robotic products for
stroke rehabilitation have been sold in over 15 countries, including the United States. In addition to these fully developed, clinical
rehabilitation solutions, we are also developing “InMotion™ Home”, which is an upper extremity product that allows
the patient to extend their therapy for as long as needed while rehabilitating at home. This rehabilitation solution is being developed
on the same design platform as the InMotion™ clinical products.
We believe
recent payment changes in the US marketplace proposed and finalized by the Centers for Medicare and Medicaid Services create a
favorable environment for greater clinical adoption of our robotic technology. For instance, the Improving Medicare Post-Acute
Care Transformation Act of 2014, or the Impact Act of 2014, began the shift toward standardizing patient assessment data for quality
measures. The updated Prospective Payment System (PPS), SNF QRP (Quality Reporting Program) and SNF VBP (Value Based Purchasing)
programs have further shifted reimbursement toward the needs of the patient and away from volume of services provided in the skilled
nursing setting. Other programs have caused a similar shift in the Inpatient Rehabilitation Facility setting, as well. We expect
that in the next 3-9 months, further incentives toward quality based care will be implemented, resulting in providers being publicly
ranked, as well as financially rewarded, for quality reporting and better outcomes.
We
have a growing body of clinical data for our products. More than 1,500 patients participated in trials using our
InMotion™ robots, the results of which have been published in peer-reviewed medical journals (including the New England
Journal of Medicine and Stroke).
An earlier model of InMotion™
robots were used in a multicenter randomized controlled phase III interventional trial, funded by the National Institute for Health
Research Health Technology Assessment Program (RATULS) in the United Kingdom. The study was completed in 2018, included the enrollment
of 770 stroke patients in a multi-center randomized controlled research trial to evaluate the clinical and cost effectiveness of
robot-assisted training in post-stoke care. The Company is pleased that the RATULS trial confirmed the finding of previous research
studies which demonstrated that robot assisted therapy improved upper limb impairment when compared with conventional care of stroke
victims. The primary outcome for upper limb success was determined by an Action Research Arm Test (ARAT), with four distinct success
criteria that varied according to baseline severity. This test with these success criteria was developed by the RATULS trial team
for this study and has not been used previously in clinical trials. The findings of this major research trial demonstrated that
robot assisted therapy improved upper limb impairment, however, using this ARAT measurement, the trial was unable to conclude that
robot assisted therapy or enhance upper limb therapy resulted in improved upper limb functionality after stroke compared with usual
care provided to patients with stroke related upper limb functional limitation. The study findings also showed that the attrition
rate was drastically reduced in the patient population following either robotic therapy or enhanced upper limb therapy versus usual
care only. Most of the withdrawals from the study were before 3 months of usual care due to the disappointment with the treatment
allocation.
In addition
to our proprietary in-house products, we had the exclusive right to market and sell the Morning Walk lower body rehabilitation
technology owned by Curexo Inc., a South Korean company, within the United States. We have decided not to distribute the Morning
Walk product due to market conditions in the U.S. and are renegotiating the contract with our distributor in Korea. We may in the
future further augment our product portfolio through technology acquisition opportunities should they come available and if we
are sufficiently capitalized to undertake these investments.
On December
14, 2018, we entered into a Sale of Goods Agreement (the “Agreement”) with CHC Management Services, LLC, or Kindred,
pursuant to which, among other things, Kindred agreed to purchase from us in a first phase a minimum of 21 of the Company’s
InMotion™ ARM Interactive Therapy Systems – a minimum of one for each of Kindred’s existing and soon-to-open
affiliated inpatient rehabilitation hospitals and similar facilities described in the Agreement, and in a second phase a minimum
of one InMotion™ ARM Interactive Therapy System for each future facilities of Kindred, during the four-year minimum
term of the Agreement. Kindred entered into an initial purchase order for nine InMotion™ ARM Interactive Therapy System that
shipped before December 31, 2018, with further robots in the year ended March 31, 2019 and six months ended September 30, 2019,
for a total of 21 InMotion™ robots sold prior to the period ended September 30, 2019.
On
January 23, 2019, we announced the commercial launch of our newest generation InMotion™ ARM/HAND robotic system for clinical
rehabilitation of stroke survivors and those with mobility impairments due to neurological conditions. The improved new generation
InMotion™ ARM/HAND was developed according to the same principals of motor learning and neuro plasticity that were
incorporated into the original InMotion™ ARM robotic system and utilizes artificial intelligence and data analysis
to provide individualized therapy and reports that empower patients.
It includes the following new features:
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Enhanced hand-rehabilitation technology: The updated hand robot provides therapy focused on hand
opening and grasping for patients ready to retrain reach and grasp functional tasks.
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InMotion™ EVAL: The InMotion™ ARM/HAND offers the ability to assess hand movements
in a precise and objective manner, allowing the clinician to better measure and quantify a patient’s progress and response
to therapy.
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Improved, comprehensive reporting: Optimized report formats provide improved documentation of
patient outcomes, improved ease of use and enhanced interpretation of evaluation results, allowing clearer indications of progress
over their complete rehabilitation journey, all on one screen.
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We
are collaborating with Intelliware Development, a leading custom software solutions company based in Toronto to customize and
deploy a new software platform, InMotion ConnectTM. InMotion ConnectTM is designed to target the critical
need to link patient centric rehabilitation results to patient management portals and electronic medical records (EMR) at any
hospital or rehabilitation facility. We believe that leveraging Intelliware’s healthcare software development expertise
will ensure the HL7 compliant InMotion ConnectTM will seamlessly feed data through existing various hospital protocols,
providing practitioners protected patient data and treatment results. Customized reporting capabilities in the platform focus
on facility and organization measurement dashboards to support effective decision making for clinicians and for hospital management.
We
have worked with industry leaders in manufacturing and design and have also expanded our development team through
partnerships with researchers and academia. On May 17, 2017, we entered into a Co-operative Joint Venture Contract with
Ginger Capital Investment Holding Ltd., pursuant to which the Company has a 25% interest and Ginger Capital has a 75%
interest. As of the date of this 10-Q, Ginger Capital is obligated to contribute $725,000 to the joint venture and is
required to contribute an additional $725,000 by May 22, 2023. To date, the Chinese partners of the JV have contributed
$1,100,000 to the JV. Three InMotion™ robots have been delivered from us to the joint venture, which were used for
product demonstration and for quality assessment by Chinese authorities. During the period ended September 30, 2019, due to
regulatory restrictions only 3 new robots were shipped by Bionik to the Chinese JV according to contract terms.
On
June 20, 2017, we entered into a joint development and manufacturing agreement with Wistron Medical Tech Holding Company of Taiwan
to jointly develop a lower body assistive robotic product based on the ARKE technology for the consumer home market. As the lower
body assistive robotic device is on an engineering hold due to prioritizing the development of the InMotion™ Home
robotic device, no work has been done with Wistron recently.
We have
also entered into an agreement with Cogmedix Inc., a wholly owned subsidiary of Coghlin Companies, a medical device development
and manufacturing company located in West Boylston, MA, for the production of InMotion™ robots. The initial agreement
is for turnkey, compliant manufacturing with the capability of scaling faster production to meet increased volume as the Company
grows. In addition, our Massachusetts-based manufacturing facility is compliant with ISO- 13485 and FDA regulations.
We
currently hold an intellectual property portfolio that includes 4 U.S. patents and 2 U.S. pending patent, 5 of which are pending
internationally, as well as other patents under development. We may file provisional patents from time to time, which may expire
if we do not pursue full patents within 12 months of the filing date. One new provisional patent has recently been filed, pertaining
to BIONIK’s InMotion™ Home development, which the Company plans to file as a full patent prior to the 12-month
deadline. The provisional patents may not be filed as full patents and new provisional patents may be filed as the technology evolves
or changes. Additionally, we hold exclusive licenses to three additional patents of which one is currently being used for the InMotion™
Wrist and is licensed to us from the Massachusetts Institute of Technology.
We have filed trademarks in the U.S. and
European Union for InMotion™, InMotion Connect™, InMotion Pulse™, and InMotion Insights™; the trademark
for InMotion™ is registered in the European Union and pending in the U.S., while InMotion Connect™, InMotion Pulse™,
and InMotion Insights™ are pending in both jurisdictions. These trademarks are to be used for the robots and software that
Bionik develops and sells related to this product line.
We currently sell our products directly or can introduce customers
to a third-party finance company to lease at a monthly fee over the term or other fee structure for our products to hospitals,
clinics, distribution companies and/or buying groups that supply those rehabilitation facilities.
We
introduced our new enhanced commercial version of the InMotion™ product line starting with the InMotion™
Arm in December 2017 and then the InMotion™ Arm/Hand in January 2019. We sold 11 InMotion™ robots in the
year ended March 31, 2018, 33 InMotion™ robots in the year ended March 31, 2019 and 2 and 8 robots in the first three and
six months respectively ended September 30, 2019.
We had $281,691 and $1,072,070 of revenue for the
three and six months ended September 30, 2019 (September 30, 2018 – $547,085 and $1,048,418).
History; Recent Developments
Bionik
Laboratories Corp. was incorporated on January 8, 2010 in the State of Colorado. At the time of our incorporation the name of our
company was Strategic Dental Management Corp. On July 16, 2013, we changed our name from Strategic Dental Management Corp. to Drywave
Technologies, Inc. and changed our state of incorporation from Colorado to Delaware. Effective February 13, 2015, we changed our
name to Bionik Laboratories Corp.
Bionik Laboratories Inc., which we refer to in this
Form 10-Q as Bionik Canada, was incorporated on March 24, 2011 under the Canada Business Corporations Act.
On February
26, 2015, we entered into an Investment Agreement with Bionik Acquisition Inc., a company existing under the laws of Canada and
our wholly owned subsidiary, and Bionik Canada whereby we acquired 100 Class 1 common shares of Bionik Canada representing 100%
of the outstanding Class 1 common shares of Bionik Canada. After giving effect to this and related transactions, we commenced operations
through Bionik Canada. Subsequently, on April 21, 2016, we acquired Interactive Motion Technologies, Inc., or IMT, a Boston, Massachusetts-based
provider of effective robotic products for neurorehabilitation, including all of its owned and licensed products both commercialized
and in development.
We
effected a one-for-one hundred fifty reverse stock split on October 29, 2018. As a result of the reverse stock split, each one
hundred fifty shares of our common stock automatically combined into and became one share of our common stock. Accordingly, as
of October 29, 2018, there were 2,337,964 shares of our common stock issued and outstanding. Any fractional shares which would
otherwise be due as a result of the reverse stock split were rounded up to the nearest whole share. The reverse stock split automatically
and proportionately adjusted, based on the one-for-one hundred fifty reverse stock split ratio, all issued and outstanding shares
of our common stock and exchangeable shares, as well as 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 our equity-based plans was also proportionately reduced.
Share and per share data (except par value) for the periods presented reflect the effects of this reverse stock split. References
to numbers of shares of common stock and per share data in the accompanying financial statements and notes thereto relating to
dates prior to the reverse stock split have been adjusted to reflect the reverse stock split on a retroactive basis.
From June through September 2019, we issued
convertible promissory notes in the aggregate principal amount of $9,000,000 to investors, which included an aggregate of $500,000
from an affiliate of Remi Gaston-Dreyfus, a director and major shareholder of the Company. Pursuant to the terms of such notes,
as of September 30, 2019, the principal amount and accrued interest of the notes converted in accordance under their terms into
an aggregate of 1,268,191 shares of the Company’s common stock.
In September 2019, we commenced an up to
$3 million convertible note offering (or up to $7,000,000 in the discretion of the Company), of which $70,000 has been raised through
November12, 2019.
Corporate Information
Our
principal executive office is located at 483 Bay Street, N105, Toronto, ON, Canada M5G 2C9 and our main corporate telephone number
is (416) 640-7887 x 508. Our principal US office is located at 80 Coolidge Hill Road, Watertown, MA, USA 02472. Our website is
www.bioniklabs.com. Information on our website does not constitute a part of this Quarterly Report on Form 10-Q.
Significant Accounting Policies and Estimates
The discussion
and analysis of the financial condition and results of operations are based upon the financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States. The preparation of consolidated financial statements
in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of any contingent liabilities at the financial statement
date and reported amounts of revenue and expenses during the reporting period. On an on-going basis we review our estimates and
assumptions. The estimates were based on historical experience and other assumptions that we believe to be reasonable under the
circumstances. Actual results are likely to differ from those estimates under different assumptions or conditions, but we do not
believe such differences will materially affect our financial position or results of operations.
Results of Operations
From the inception of Bionik Canada on March 24,
2011 through September 30, 2019 and we have generated a deficit of $51,860,701.
We
expect to incur additional operating losses through the fiscal year ending March 31, 2020 and beyond, principally as a result of
our continuing research and development, building the sales and marketing team, long sales cycles and general and administrative
costs predominantly associated with being a public company
For the three and six months ended September
30, 2019 compared to the three and six months ended September 30, 2018
Sales
were $281,691 and $ 1,072,070 for the three and six months ended September 30, 2019 (September 30, 2018 – $547,085 and
$1,048,418). The revenues for the three and six months ended September 30, 2019 are comprised of sales of 2 and 8 (September
30, 2018 – 7 and 12) InMotion™ robots, service and warranty income Sales decreased from the prior three and six
month corresponding period of 2018 due to the Company’s long sales cycle.
Cost of Sales and Gross Margin
Cost
of sales was $83,207 and $419,292 for the three and six months ended September 30, 2019 (September 30, 2018 – $384,073
and $637,236). Gross margin increased to 70.5% and 60.9% for the three and six months ended September 30, 2019 (September 30,
2018 – 29.8% and 39.2%) due to economies of scale deriving from higher volume manufacturing.