BIOTRICITY INC

Previous wording

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”).

Current wording

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

Previous wording

Our selling, general and administrative expenses for the three months ended June 30, 2024 was $3.0 million, compared to approximately $3.5 million during the three months ended June 30, 2023 – a 15% reduction. The reduction was a result of increased monitoring of spending efficiency over our fixed general and administrative expenses in the current period.

Current wording

Our selling, general and administrative expenses for the six months ended September 30, 2024, was $5.2 million, compared to approximately $7 million during the six months ended September 30, 2023 – a 25.6% reduction. The reduction was a result of increased monitoring of spending efficiency over our fixed general and administrative expenses in the current period.

Previous wording

For the three months ended June 30, 2024 and 2023, we incurred interest expenses of $0.8 million and $0.7 million, respectively. The increase in interest expense during the current period was the result of an increase in borrowings when compared to the prior year period.

Current wording

For the six months ended September 30, 2024, and 2023, we incurred interest expenses of $1.5 million and $1.4 million, respectively. The increase in interest expense during the current period was the result of an increase in borrowings when compared to the prior year period.

Previous wording

For the three months ended June 30, 2024 and 2023, we incurred accretion expenses of $1.1 million and $0.6 million, respectively. The increase in the current period was a result of debt discount amortization related to convertible notes conversions during the current fiscal quarter.

Current wording

For the six months ended September 30, 2024, and 2023, we incurred accretion expenses of $1.5 million and $1.2 million, respectively. The increase in the current period was a result of debt discount amortization related to convertible notes conversions during the first fiscal quarter.

Previous wording

For the three months ended June 30, 2024 and 2023, we recognized a loss of $307 thousand versus a gain of $101 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 mezzanine equity, convertible notes and equity fair value.

Current wording

For the six months ended September 30, 2024, and 2023, we recognized a loss of $501 thousand versus a gain of $83 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 mezzanine equity, convertible notes and equity fair value.

Previous wording

By increasing our sales force and geographic footprint, we are actively selling in 35 U.S. states as of June 30, 2024. The Company earned combined device sales and technology fee income totaling $3.2 million during the three months ended June 30, 2024 – 5.8% growth in revenue over the $3.0 million earned in the prior year comparable quarter.

Current wording

By increasing our sales force and geographic footprint, we are actively selling in 35 U.S. states as of September 30, 2024. The Company earned combined device sales and technology fee income of $3.3 million during the three months ended September 30, 2024 – 13% growth in revenue over the $2.9 million earned in the prior year comparable quarter.

Previous wording

Technology fee revenue increased to $3.0 million during the three months ended June 30, 2024, which is an 8.9% increase over the corresponding three-month period of the prior year. The majority of this revenue is recurring, and its 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 5.8% of our total revenue, or $185 thousand for the three-month period ended June 30, 2024. Gross profit percentage was 73.8% for the three months ended June 30, 2024, as compared to 63.5% in the corresponding prior year quarter. This increase in gross margin is a result of improved margins on technology fee revenue as well as significantly improved margin on device sales. Given consistent gross margin on technology fees of approximately 76%, and efficiencies gained in using AI in data processing 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 94% of total revenue for the three-month period ended June 30, 2024.

Current wording

Technology fee revenue increased to $3.0 million during the three months ended September 30, 2024, which is a 12.2% increase over the corresponding three-month period of the prior year. The majority of this revenue is recurring, and its 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 6.2% of our total revenue, or $202 thousand for the three-month period ended September 30, 2024. Gross profit percentage was 75.3% for the three months ended September 30, 2024, as compared to 69.1% in the corresponding prior year quarter. This increase in gross margin is a result of improved margins on technology fee revenue as well as significantly improved margin on device sales. Given strong gross margin on technology fees of approximately 78.9%, and efficiencies gained in using AI in data processing 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 93.8% of total revenue for the three-month period ended September 30, 2024.

Previous wording

Total operating expenses for the three months ended June 30, 2024, were $3.5 million as compared to $4.2 million for the three months ended June 30, 2023. See further explanations below.

Current wording

Total operating expenses for the three months ended September 30, 2024, were $2.8 million as compared to $4.2 million for the three months ended September 30, 2023. See further explanations below.

Previous wording

For the three months ended June 30, 2024 we recorded research and development expenses of $0.5 million, compared to $0.7 million incurred for three months ended June 30, 2023. 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.

Current wording

For the three months ended September 30, 2024, we recorded research and development expenses of $0.5 million, compared to $0.7 million incurred for the three months ended September 30, 2023. 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.

Previous wording

During the three months ended June 30, 2024 and 2023, we recorded a loss of $128 thousand versus a gain of $6 thousand, respectively, related to the redemption and conversion of our convertible promissory notes. The change of loss upon conversion upon convertible notes conversion was largely the result of increased volumes of conversions in the current quarter as compared to comparable quarter in the prior year.

Current wording

During the three months ended September 30, 2024, and 2023, we recorded a loss of $5 thousand versus a gain of $7 thousand, respectively, related to the redemption and conversion of our convertible promissory notes.

Previous wording

During the three months ended June 30, 2024, we recognized $230 thousand in net other expense, which consisted of loss on debt extinguishment as well as expenses attributed to the financing component provisions contained in our revenue contracts. During the three months ended June 30, 2023, we recognized $13 thousand in net other expense attributed to financing component provisions contained in our revenue contracts .

Current wording

During the three months ended September 30, 2024, we recognized $36 thousand in net other income/expense, which consisted of loss on debt extinguishment, income from late payment charges, as well as income attributed to the financing component provisions contained in our revenue contracts. During the three months ended September 30, 2023, we recognized $143 thousand in net other expense attributed to non-operating costs from note modifications, transaction expense on the Series B preferred share issuance, and the financing component provisions contained in our revenue contracts.

Previous wording

Adjusted EBITDA is calculated by excluding from EBITDA the effect of the following non-operational items: equity in earnings and losses of unconsolidated businesses and other income and expense, net, as well as the effect of special items that related to one-time, non-recurring expenditures . 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. See notes in the table below for additional information regarding special items.

Current wording

Adjusted EBITDA is calculated by excluding from EBITDA the effect of the following non-operational items: equity in earnings and losses of unconsolidated businesses and other income and expenses that do not involve an outlay in cash, net, as well as the effect of special items that related to one-time, non-recurring expenditures. 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 on the Company’s monthly and quarterly free cash flows, 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. See notes in the table below for additional information regarding special items.

Previous wording

Management considers the EBITDA and adjusted EBITDA measures for the three month period ended June 30, 2024, which improved by 18.9% and 49.8%, respectively, when compared to the corresponding prior year period, to be indicators of the Company’s progress towards breakeven profitability as well as improvement towards operating cash-flow break-even.

Current wording

Management considers the EBITDA and adjusted EBITDA measures for the three and six-month periods ended September 30, 2024, to be indicators of the Company’s progress towards breakeven profitability as well as improvement towards operating cash-flow break-even. EBITDA improved by 80% and 50.4%, respectively, when compared to the three and six months ended for the corresponding prior period. Adjusted EBITDA, which management uses as a measure for tracking free cashflow levels, improved to negative $249 thousand for the quarter ended September 30, 2024, a reduction of over $1.7 million dollars in negative Adjusted EBITDA from the comparative period of the prior fiscal year, which is an 87% improvement. The Company was able to achieve a positive Adjusted EBITDA for the month of September 2024 for the first time in its history.

Previous wording

Translation adjustment was a gain of $24 thousand versus a loss of $176 thousand for the three months ended June 30, 2024 and 2023, 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.

Current wording

Translation adjustment was a loss of $105 thousand versus a gain of $105 thousand for the six months ended September 30, 2024, and 2023, 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.

Previous wording

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 and debt capitalization of the Company. The Company has incurred recurring losses from operations, and as at June 30, 2024, has an accumulated deficit of $134,077,588. 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 had a working capital deficit of $14.69 million. On August 1, 2024, the Company received a notice from Nasdaq stating that Nasdaq has determined to delist the Company’s shares of common stock on The Nasdaq Capital Market, effective at the open of business on August 5, 2024. Nasdaq reached its decision pursuant to Nasdaq Listing Rule 5550(b)(2) because the Company no longer complied with the minimum $35 million market value of listed securities. Following the suspension of trading on The Nasdaq Capital Market, the Company’s shares of common stock were again listed on the OTCQB under the symbol “BTCY.”

Current wording

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 and debt capitalization of the Company. The Company has incurred recurring losses from operations, and as at September 30, 2024, has an accumulated deficit of $136,101,106. On August 30, 2021 the Company completed an underwritten public offering of its common stock that concurrently facilitated its listing on the Nasdaq Capital Market. On September 30, 2024, the Company had a working capital deficit of $17,424,814. On August 1, 2024, the Company received a notice from Nasdaq stating that Nasdaq has determined to delist the Company’s shares of common stock on The Nasdaq Capital Market, effective at the open of business on August 5, 2024. Nasdaq reached its decision pursuant to Nasdaq Listing Rule 5550(b)(2) because the Company no longer complied with the minimum $35 million market value of listed securities. Following the suspension of trading on The Nasdaq Capital Market, the Company’s shares of common stock were again listed on the OTCQB under the symbol “BTCY.”

Previous wording

On June 30, 2024, we had cash deposits in the aggregate of approximately $0.1 million.

Current wording

On September 30, 2024, we had cash deposits in the aggregate of $173,270.

Previous wording

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.

Current wording

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 Condensed Consolidated Financial Statements.

Previous wording

Additionally, 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, at a purchase price of $9,091 per share of Series B Preferred Stock (Note 9), or gross proceeds of $2,000,000. Net proceeds after issuance costs amounted to $1,900,000. During the three months ended March 31, 2024, 110 Series B preferred shares were issued for net proceeds of $925,000.

Current wording

Additionally, 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, at a purchase price of $9,091 per share of Series B Preferred Stock (Note 9), or gross proceeds of $2,000,000. Net proceeds after issuance costs was $1,900,000. During the three months ended March 31, 2024, 110 Series B preferred shares were issued for net proceeds of $925,000.

Previous wording

During the three months ended June 30, 2024, 165 Series B preferred shares were issued for net proceeds of $1,312,532. The Company also raised $300,000 from the issuance of convertible notes to a lender. Lastly, the Company sold 97,811 common shares through use of its registration statement, for net proceeds of $125,227.

Current wording

During the six months ended September 30, 2024, 220 Series B preferred shares were issued for net proceeds of $1,732,532. The Company also raised $650,000 from the issuance of convertible notes to a lender. Lastly, the Company sold 97,811 common shares through use of its registration statement, for net proceeds of $125,227.

Previous wording

During the three months ended June 30, 2024, we used cash in operating activities in the amount of $1.5 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.

Current wording

During the six months ended September 30, 2024, we used cash in operating activities in the amount of $1.9 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.

Previous wording

During the three months ended June 30, 2023, we used cash in operating activities of $1.8 million. These activities involved expenditures for sales, infrastructure and business development, as well as marketing and operating activities, and continued research and product development.

Current wording

During the six months ended September 30, 2023, we used cash in operating activities of $4.2 million. These activities involved expenditures for sales, infrastructure and business development, as well as marketing and operating activities, and continued research and product development.

Previous wording

Net cash used in investing activities was Nil during the three months ended June 30, 2024 and 2023.

Current wording

Net cash used in investing activities was Nil during the six months ended September 30, 2024, and 2023.

Previous wording

Net cash provided by financing activities was $0.9 million as compared to net cash used of $1.3 million during the three months ended June 30, 2024 and 2023, respectively.

Current wording

Net cash provided by financing activities was $1.3 million as compared to net cash provided of $4.8 million during the six months ended September 30, 2024, and 2023, respectively.

Previous wording

For the three months ended June 30, 2024, the net cash provided by financing activities was primarily due to the issuance of Series B preferred stock in the amount of $1.3 million.

Current wording

For the six months ended September 30, 2024, the net cash provided by financing activities was primarily due to the issuance of Series B preferred stock of $1.7 million.

Previous wording

For the three months ended June 30, 2023, the net cash provided by financing activities related to net proceeds attributed to the issuance of additional convertible notes of $0.9 million, as well as net proceeds from issuance of short term loans and promissory notes in the amount of approximately $0.4 million.

Current wording

For the six months ended September 30, 2023, the net cash provided by financing activities related primarily to net proceeds attributed to the issuance of Series B preferred stock of $1.9 million, the issuance of convertible notes of $2.0 million and the issuance of short term loans and promissory notes of approximately $0.8 million, net of repayments. Lastly, we issued common stock resulting in $0.1 million of net proceeds.

Previous wording

During the three months ended June 30, 2024, 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 2024 Form 10-K filed on June 27, 2024.

Current wording

During the six months ended September 30, 2024, 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 2024 Form 10-K filed on June 27, 2024.