UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
6-K
Report
of Foreign Private Issuer Pursuant to Rule 13a-16
or 15d-16 of the Securities Exchange Act of 1934
For the month of |
September 2023 |
|
|
Commission File Number |
001-41460 |
Bruush
Oral Care Inc.
(Translation
of registrant’s name into English)
128
West Hastings Street, Unit 210
Vancouver,
British Columbia V6B 1G8
Canada
(844)
427-8774
(Address
of principal executive offices)
Indicate
by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Indicate
by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
INFORMATION
CONTAINED IN THIS FORM 6-K REPORT
On
September 14, 2023, Bruush Oral Care Inc. (the “Company”) issued its unaudited condensed financial statements and
the related management discussion and analysis as of and for the six months ended April 30, 2023 and April 30, 2022. The financial statements
and related management discussion and analysis are attached hereto as Exhibit 99.1 and 99.2, respectively, and are incorporated herein
by reference.
EXHIBIT
INDEX
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
|
|
|
Bruush
Oral Care Inc. |
|
|
|
|
(Registrant) |
|
|
|
|
|
Date: |
September
14, 2023 |
|
By: |
/s/ Aneil
Singh Manhas |
|
|
|
Name: |
Aneil Singh Manhas |
|
|
|
Title: |
Chief Executive Officer |
Exhibit
99.1
BRUUSH
ORAL CARE INC.
CONDENSED
INTERIM FINANCIAL STATEMENTS
FOR
THE THREE AND SIX MONTHS ENDED APRIL 30, 2023
(Expressed
in U.S. dollars)
BRUUSH
ORAL CARE INC.
CONDENSED
INTERIM STATEMENTS OF FINANCIAL POSITION
(Unaudited
- Expressed in U.S. dollars)
As
at | |
Note | | |
April
30, 2023 | | |
October
31, 2022 | |
| |
| | |
| | |
| |
ASSETS | |
| | |
| | | |
| | |
Current | |
| | |
| | | |
| | |
Cash | |
| | |
$ | 194,321 | | |
$ | 72,921 | |
Term
deposit | |
| | |
| - | | |
| 18,506 | |
Accounts
and other receivables | |
3 | | |
| 152,604 | | |
| 175,256 | |
Inventory | |
4 | | |
| 142,950 | | |
| 241,341 | |
Prepaid
expenses and deposits | |
5 | | |
| 395,976 | | |
| 677,474 | |
| |
| | |
| 885,851 | | |
| 1,185,498 | |
Non-current | |
| | |
| | | |
| | |
Equipment | |
| | |
| 4,914 | | |
| 5,619 | |
Total
assets | |
| | |
$ | 890,765 | | |
$ | 1,191,117 | |
| |
| | |
| | | |
| | |
LIABILITIES
AND SHAREHOLDERS’ EQUITY | |
| | |
| | | |
| | |
Current | |
| | |
| | | |
| | |
Accounts
payable and accrued liabilities | |
6,8 | | |
$ | 2,308,607 | | |
$ | 1,345,288 | |
Due
to related party | |
8 | | |
| 311,774 | | |
| - | |
Loan
payable | |
7 | | |
| 2,336,222 | | |
| - | |
Deferred
revenue | |
| | |
| 2,009 | | |
| 6,045 | |
Warrant
derivative | |
10 | | |
| 1,107,775 | | |
| 1,242,580 | |
Total
liabilities | |
| | |
| 6,066,387 | | |
| 2,593,913 | |
| |
| | |
| | | |
| | |
SHAREHOLDERS’
EQUITY | |
| | |
| | | |
| | |
Share
capital | |
9 | | |
| 24,889,414 | | |
| 23,845,704 | |
Obigation
to issue securities | |
9 | | |
| 283 | | |
| - | |
Reserves | |
9 | | |
| 1,905,507 | | |
| 1,137,814 | |
Accumulated
deficit | |
| | |
| (31,970,826 | ) | |
| (26,386,314 | ) |
Total
shareholders’ equity | |
| | |
| (5,175,622 | ) | |
| (1,402,796 | ) |
Total
liabilities and shareholders’ deficiency | |
| | |
$ | 890,765 | | |
$ | 1,191,117 | |
Nature
of operations and going concern (Note 1)
Contingencies
(Note 14)
Subsequent
events (Notes 7, 9 and 14)
Approved
and authorized for issue by the Board of Directors on September 13, 2023.
The
accompanying notes are an integral part of these condensed interim financial statements.
BRUUSH
ORAL CARE INC.
CONDENSED
INTERIM STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited
- Expressed in U.S. dollars, except for the number of shares)
| |
| | |
Three
months ended | | |
Six
months ended | |
| |
Note | | |
April
30, 2023 | | |
April
30, 2022 | | |
April
30, 2023 | | |
April
30, 2022 | |
| |
| | |
| | |
| | |
| | |
| |
Revenues | |
| | |
$ | 325,532 | | |
$ | 301,978 | | |
$ | 1,401,624 | | |
$ | 1,111,808 | |
Cost
of goods sold | |
4 | | |
| 79,336 | | |
| 97,825 | | |
| 436,086 | | |
| 376,088 | |
Gross
Profit | |
| | |
| 246,196 | | |
| 204,153 | | |
| 965,538 | | |
| 735,720 | |
| |
| | |
| | | |
| | | |
| | | |
| | |
Expenses | |
| | |
| | | |
| | | |
| | | |
| | |
Advertising
and marketing | |
| | |
| 620,203 | | |
| 425,903 | | |
| 4,483,815 | | |
| 2,567,496 | |
Amortization
and depreciation expense | |
| | |
| 1,062 | | |
| 2,787 | | |
| 2,110 | | |
| 5,640 | |
Commission | |
| | |
| 12,899 | | |
| 9,954 | | |
| 62,447 | | |
| 29,841 | |
Consulting | |
8 | | |
| 273,202 | | |
| 142,384 | | |
| 559,177 | | |
| 482,991 | |
Interest
and bank charges | |
| | |
| 220,179 | | |
| 231,122 | | |
| 224,344 | | |
| 358,445 | |
Inventory
management | |
| | |
| 6,549 | | |
| 4,459 | | |
| 18,143 | | |
| 12,896 | |
Merchant
fees | |
| | |
| 9,221 | | |
| 27,393 | | |
| 47,923 | | |
| 56,460 | |
Office
and administrative expenses | |
| | |
| 116,982 | | |
| 48,882 | | |
| 260,122 | | |
| 123,782 | |
Professional
fees | |
8 | | |
| 43,429 | | |
| 27,034 | | |
| 260,802 | | |
| 73,519 | |
Research
and development | |
| | |
| 1,500 | | |
| - | | |
| 1,680 | | |
| - | |
Salaries
and wages | |
8 | | |
| 358,465 | | |
| 254,790 | | |
| 757,208 | | |
| 436,575 | |
Share-based
compensation | |
8,9 | | |
| 202,884 | | |
| - | | |
| 406,154 | | |
| 7,861 | |
Shipping
and delivery | |
| | |
| 152,205 | | |
| 135,935 | | |
| 450,147 | | |
| 350,096 | |
Travel
and entertainment | |
| | |
| 38,090 | | |
| 52,853 | | |
| 68,884 | | |
| 127,359 | |
| |
| | |
| (2,056,870 | ) | |
| (1,363,496 | ) | |
| (7,602,956 | ) | |
| (4,632,961 | ) |
| |
| | |
| | | |
| | | |
| | | |
| | |
Other
items | |
| | |
| | | |
| | | |
| | | |
| | |
Financing
costs | |
10 | | |
| - | | |
| (1,650,000 | ) | |
| (417,794 | ) | |
| (3,150,000 | ) |
Foreign
exchange | |
| | |
| 14,179 | | |
| 7,591 | | |
| (31,745 | ) | |
| 19,737 | |
Gain
on revaluation of warrant derivative | |
10 | | |
| 1,292,230 | | |
| 68,779 | | |
| 1,473,271 | | |
| 181,078 | |
Other
income | |
11 | | |
| 159,324 | | |
| - | | |
| 159,324 | | |
| - | |
Write
down of prepaid inventory | |
5 | | |
| (130,150 | ) | |
| - | | |
| (130,150 | ) | |
| - | |
| |
| | |
| 1,335,583 | | |
| (1,573,630 | ) | |
| 1,052,906 | | |
| (2,949,185 | ) |
| |
| | |
| | | |
| | | |
| | | |
| | |
Net
and comprehensive loss | |
| | |
$ | (475,091 | ) | |
$ | (2,732,973 | ) | |
$ | (5,584,512 | ) | |
$ | (6,846,426 | ) |
| |
| | |
| | | |
| | | |
| | | |
| | |
Loss
per share - Basic and diluted | |
| | |
$ | (0.95 | ) | |
$ | (17.39 | ) | |
$ | (12.79 | ) | |
$ | (43.56 | ) |
| |
| | |
| | | |
| | | |
| | | |
| | |
Weighted
average number of common shares outstanding - basic and diluted | |
| | |
| 498,721 | | |
| 157,154 | | |
| 436,525 | | |
| 157,154 | |
The
accompanying notes are an integral part of these condensed interim financial statements.
BRUUSH
ORAL CARE INC.
CONDENSED
INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited
- Expressed in U.S. dollars, except for the number of shares)
| |
Common
Stock | | |
Obligation | | |
| | |
| | |
| |
| |
Number | | |
| | |
to issue | | |
| | |
Accumulated | | |
| |
| |
of
shares | | |
Amount | | |
securities | | |
Reserves
| | |
Deficit | | |
Total | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Balance,
October 31, 2021 | |
| 157,154 | | |
$ | 13,276,909 | | |
$ | - | | |
$ | 400,936 | | |
$ | (17,621,043 | ) | |
$ | (3,943,198 | ) |
Securities
to be issued for financing costs | |
| - | | |
| - | | |
| 3,150,000 | | |
| - | | |
| - | | |
| 3,150,000 | |
Shares
issued for services | |
| - | | |
| - | | |
| - | | |
| 7,861 | | |
| - | | |
| 7,861 | |
Net
and comprehensive loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| (6,846,426 | ) | |
| (6,846,426 | ) |
Balance,
April 30, 2022 | |
| 157,154 | | |
$ | 13,276,909 | | |
$ | 3,150,000 | | |
$ | 408,797 | | |
$ | (24,467,469 | ) | |
$ | (7,631,763 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance,
October 31, 2022 | |
| 326,028 | | |
$ | 23,845,704 | | |
$ | - | | |
$ | 1,137,814 | | |
$ | (26,386,314 | ) | |
$ | (1,402,796 | ) |
Private
placement units | |
| 118,667 | | |
| 973,419 | | |
| - | | |
| - | | |
| - | | |
| 973,419 | |
Exercise
of warrants | |
| 66,666 | | |
| 637,812 | | |
| 283 | | |
| - | | |
| - | | |
| 638,095 | |
Shares
issued for services | |
| - | | |
| (361,539 | ) | |
| - | | |
| 361,539 | | |
| - | | |
| - | |
Financing
costs | |
| - | | |
| (205,982 | ) | |
| - | | |
| - | | |
| - | | |
| (205,982 | ) |
Share-based
compensation | |
| - | | |
| - | | |
| - | | |
| 406,154 | | |
| - | | |
| 406,154 | |
Net
and comprehensive loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| (5,584,512 | ) | |
| (5,584,512 | ) |
Balance,
April 30, 2023 | |
| 511,361 | | |
$ | 24,889,414 | | |
$ | 283 | | |
$ | 1,905,507 | | |
$ | (31,970,826 | ) | |
$ | (5,175,622 | ) |
The
accompanying notes are an integral part of these condensed interim financial statements.
BRUUSH
ORAL CARE INC.
CONDENSED
INTERIM STATEMENTS OF CASH FLOWS
(Unaudited
- Expressed in U.S. dollars)
| |
Six
months ended | | |
Six
months ended | |
| |
April
30, 2023 | | |
April
30, 2022 | |
Cash
flows from operating activities | |
| | | |
| | |
Net
loss | |
$ | (5,584,512 | ) | |
$ | (6,846,426 | ) |
Items
not affecting cash: | |
| | | |
| | |
Amortization
and depreciation | |
| 2,110 | | |
| 5,640 | |
Share-based
compensation | |
| 406,154 | | |
| 7,861 | |
Gain
on revaluation of warrant derivative | |
| (1,473,271 | ) | |
| (181,078 | ) |
Write
down of prepaid inventory | |
| 130,150 | | |
| - | |
Accretion
of promissory note | |
| 206,968 | | |
| 247,261 | |
Unrealized
foreign exchange | |
| (21 | ) | |
| - | |
Gain
on write-off of accounts payable | |
| - | | |
| (1,005 | ) |
Listing
expense | |
| - | | |
| (27 | ) |
Financing
costs | |
| - | | |
| 3,150,000 | |
| |
| | | |
| | |
Changes
in non-cash working capital | |
| | | |
| | |
Accounts
and other receivables | |
| 22,652 | | |
| 17,961 | |
Inventory | |
| 98,391 | | |
| 167,057 | |
Term
deposit | |
| 18,506 | | |
| - | |
Prepaid
expenses and deposits | |
| 151,348 | | |
| 40,015 | |
Accounts
payable and accrued liabilities | |
| 1,279,135 | | |
| (192,550 | ) |
Deferred
revenue | |
| (4,036 | ) | |
| 224,850 | |
Net
cash flows used in operating activities | |
| (4,746,426 | ) | |
| (3,360,441 | ) |
| |
| | | |
| | |
Cash
flows from investing activities | |
| | | |
| | |
Purchase
of property and equipment | |
| (1,405 | ) | |
| (2,042 | ) |
Net
cash flows used in investing activities | |
| (1,405 | ) | |
| (2,042 | ) |
| |
| | | |
| | |
Cash
flows from financing activities | |
| | | |
| | |
Proceeds
from private placement warrants | |
| 2,742,069 | | |
| - | |
Proceeds
from convertible debentures | |
| - | | |
| 3,760,725 | |
Proceeds
from promissory notes | |
| 1,874,254 | | |
| - | |
Proceeds
from exercise of warrants | |
| 1,667 | | |
| - | |
Share
subscriptions received in advance | |
| 283 | | |
| - | |
Proceeds
from loans | |
| 508,225 | | |
| - | |
Repayment
of loans | |
| (257,267 | ) | |
| - | |
Net
cash flows provided by financing activities | |
| 4,869,231 | | |
| 3,760,725 | |
| |
| | | |
| | |
Change
in cash | |
$ | 121,400 | | |
$ | 398,242 | |
| |
| | | |
| | |
Cash | |
| | | |
| | |
Beginning
of period | |
$ | 72,921 | | |
$ | 14,530 | |
End
of period | |
$ | 194,321 | | |
$ | 412,772 | |
| |
| | | |
| | |
Supplemental
cash flow disclosure | |
| | | |
| | |
Interest | |
$ | - | | |
$ | - | |
Taxes
paid | |
$ | - | | |
$ | - | |
Non-
cash investing and financing activities | |
| | | |
| | |
Fair
value of warrants exercised | |
$ | 636,160 | | |
$ | - | |
Broker
warrants | |
$ | 361,539 | | |
$ | - | |
The
accompanying notes are an integral part of these condensed interim financial statements.
BRUUSH
ORAL CARE INC.
NOTES
TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited
- Expressed in U.S. dollars)
Three
and six months ended April 30, 2023 and 2022
1. |
NATURE
OF OPERATIONS AND GOING CONCERN |
Bruush
Oral Care Inc. (the “Company”) was incorporated in British Columbia under the Business Corporations Act on October 10, 2017.
The Company is in the business of selling electric toothbrushes. The Company is located at 128 West Hastings Street, Unit 210, Vancouver,
British Columbia V6B 1G8. The Company’s common shares are listed for trading on NASDAQ under the symbol “BRSH”.
As
of April 30, 2023, the Company had a working capital deficit of $5,180,536, an accumulated deficit totaling $31,970,826. The ability
of the Company to carry out its business objectives is dependent on its ability to secure continued financial support from related parties,
to obtain equity financing, or to ultimately attain profitable operations in the future. The Company will need to raise additional capital
during the next twelve months and beyond to support current operations and planned development. Whether and when the Company can attain
profitability and positive cash flows is uncertain. While the Company has been successful in securing financing in the past, there is
no assurance that financing will be available in the future on terms acceptable to the Company.
These
factors form a material uncertainty that may cast significant doubt upon the Company’s ability to continue as a going concern.
These financial statements do not give effect to adjustments to the carrying value and classification of assets and liabilities and related
expense that would be necessary should the Company be unable to continue as a going concern. If the going concern assumption is not appropriate,
material adjustments to the statements could be required.
On
July 7, 2023, the Company completed a 1-for-25 reverse split of its common shares (“the Consolidation”). The Consolidation
is effective as of the close of business on July 31, 2023. Except where otherwise indicated, all historical share numbers and per share
amounts have been adjusted on a retroactive basis to reflect following the Consolidation.
Statement
of compliance
These
unaudited condensed interim financial statements have been prepared in accordance with IAS 34 – Interim Financial Reporting as
issued by the International Accounting Standards Board (“IASB”). Accordingly, certain disclosures included in annual financial
statements prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the IASB have been
condensed or omitted and these unaudited condensed interim consolidated financial statements should be read in conjunction with the Company’s
audited financial statements for the year ended October 31, 2022.
The
Company’s management makes judgments in its process of applying the Company’s accounting policies in the preparation of its
unaudited condensed interim financial statements. In addition, the preparation of the financial data requires that the Company’s
management make assumptions and estimates of the effects of uncertain future events on the carrying amounts of the Company’s assets
and liabilities at the end of the reporting period and the reported amounts of revenues and expenses during the reporting period. Actual
results may differ from those estimates as the estimation process is inherently uncertain. Estimates are reviewed on an ongoing basis
based on historical experience and other factors that are considered to be relevant under the circumstances. Revisions to estimates and
the resulting effects on the carrying amounts of the Company’s assets and liabilities are accounted for prospectively. The critical
judgments and estimates applied in the preparation of the Company’s unaudited condensed interim financial statements are consistent
with those applied and disclosed in the Company’s financial statements for the year ended October 31, 2022. In addition, other
than noted below, the accounting policies applied in these unaudited condensed interim financial statements are consistent with those
applied and disclosed in the Company’s audited financial statements for the year ended October 31, 2022.
These
unaudited condensed interim financial statements were approved by the Board of Directors on September 13, 2023.
BRUUSH
ORAL CARE INC.
NOTES
TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited
- Expressed in U.S. dollars)
Three
and six months ended April 30, 2023 and 2022
Basis
of presentation
These
condensed interim financial statements have been prepared on a historical cost basis and presented in U.S. dollars which is the functional
currency of the Company. The financial statements of the Company have been prepared on an accrual basis, except for cash flow information.
The condensed interim financial statements have been prepared on a historical cost basis except for warrants and options, which are measured
at fair value.
3. |
ACCOUNTS
AND OTHER RECEIVABLES |
| |
April
30, 2023 | | |
October
31, 2022 | |
Trade
receivables | |
$ | 52,879 | | |
$ | 103,471 | |
Sales
taxes receivable | |
| 99,725 | | |
| 71,785 | |
| |
$ | 152,604 | | |
$ | 175,256 | |
Inventory
consisted entirely of finished goods.
During
the six months ended April 30, 2023, $434,994 (six months ended April 30, 2022 - $332,657) of inventory was sold and recognized in cost
of goods sold, and $17,473 (six months ended April 30, 2022 - $89,646) of inventory was used for promotional purposes and recognized
in other expense categories, such as selling and marketing and investor relations.
5. |
PREPAID
EXPENSES AND DEPOSITS |
| |
April
30, 2023 | | |
October
31, 2022 | |
Prepaid
expenses | |
$ | 67,418 | | |
$ | 191,322 | |
Deposits
on inventory | |
| 317,864 | | |
| 475,458 | |
Deposits | |
| 10,694 | | |
| 10,694 | |
| |
$ | 395,976 | | |
$ | 677,474 | |
Deposits
on inventory relate to payment for inventory that is still to be received. During the six months ended April 30, 2023, the Company impaired
deposits on inventory of $130,150 (October 31, 2022 – $Nil).
6. |
ACCOUNTS
PAYABLE AND ACCRUED LIABILITIES |
| |
April
30, 2023 | | |
October
31, 2022 | |
Accounts
payable | |
$ | 1,661,284 | | |
$ | 909,438 | |
Accrued
liabilities | |
| 647,323 | | |
| 435,850 | |
| |
$ | 2,308,607 | | |
$ | 1,345,288 | |
On
March 6, 2023, the Company issued an unsecured promissory note (“the Promissory note”) in a principal amount of $2,749,412.
The Promissory note was issued at discount of 15% with a maturity date of July 18, 2023. The principal amount outstanding shall bear
no interest during the period up until July 18, 2023. The Promissory note will only bear simple interest at the rate of 20% per annum
in the event of default from the date of such non-payment until such amount is paid in full.
BRUUSH
ORAL CARE INC.
NOTES
TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited
- Expressed in U.S. dollars)
Three
and six months ended April 30, 2023 and 2022
A
continuity of the Promissory note is shown below:
Balance
October 31, 2022 | |
$ | - | |
Additions | |
| 2,749,412 | |
Discount | |
| (412,412 | ) |
Transaction
costs | |
| (207,746 | ) |
Accretion | |
| 206,968 | |
Balance
April 30, 2023 | |
$ | 2,336,222 | |
Subsequent
to the period ended, the Company and the Promissory note holder (“the Holder”) entered into an agreement in which the Holder
subscribed for convertible notes (Note 14) in lieu of repayment and Promissory note was cancelled in its entirety.
8. |
RELATED
PARTY TRANSACTIONS |
Key
Management Compensation
Key
management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of
the Company, directly or indirectly. Key management personnel include the Company’s executive officers and Board of Director members.
All
related party transactions are in the normal course of operations. All amounts either due from or due to related parties other than specifically
disclosed are non-interest bearing, unsecured and have no fixed terms of repayments.
Related
party transactions with key management directors, subsequent and former directors and companies and entities over which they have significant
influence over:
| |
Three
months ended | | |
Six
months ended | |
| |
April
30, 2023 | | |
April
30, 2022 | | |
April
30, 2023 | | |
April
30, 2022 | |
Consulting
fees | |
$ | 11,163 | | |
$ | 35,790 | | |
$ | 11,163 | | |
$ | - | |
Director
fees | |
| 46,500 | | |
| - | | |
| 93,000 | | |
| 47,905 | |
Professional
fees | |
| - | | |
| 50,000 | | |
| - | | |
| 50,000 | |
Salaries | |
| 224,949 | | |
| 70,880 | | |
| 321,234 | | |
| 110,354 | |
Share-based
compensation | |
| 203,268 | | |
| - | | |
| 405,419 | | |
| - | |
| |
$ | 485,880 | | |
$ | 156,670 | | |
$ | 830,816 | | |
$ | 208,259 | |
Accounts
payable and accrued liabilities – As of April 30, 2023, $11,163 (October 31, 2022 - $33,918) due to related parties was included
in accounts payable and accrued liabilities.
As
at June 30, 2023, included in loans payable is $311,774 (September 30, 2022 - $Nil) due to the Chief Executive Officer of the Company.
This loan is non-interest bearing, unsecured and payable on demand.
Authorized
share capital
Unlimited
Common Shares without par value.
BRUUSH
ORAL CARE INC.
NOTES
TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited
- Expressed in U.S. dollars)
Three
and six months ended April 30, 2023 and 2022
Shares
outstanding
On
July 29, 2022, the Company completed a share reorganization (the “Share Reorganization”) to redesignate all Class B shares
to common shares and to convert the Class A shares to common shares. The Company also effected a share consolidation on the basis of
1 new share for each 3.86 shares outstanding (the “Consolidation”). Prior to the Share Reorganization and Consolidation,
the Company had 6,824,127 Class A and 7,130,223 Class B common shares issued and outstanding. Immediately following the Share Reorganization
and Consolidation, the Company had 3,615,116 common shares outstanding. Except where otherwise indicated, all historical share numbers
and per share amounts have been adjusted on a retroactive basis to reflect the Share Reorganization and Consolidation.
The
Company also completed another Share Reorganization on July 31, 2023 in which 1 new share was issued for each 25 outstanding shares.
Prior to this Share Reorganization, a total of 12,784,209 common shares were outstanding and they were converted into 511,361 common
shares. Except where otherwise indicated, all historical share numbers and per share amounts have been adjusted on a retroactive basis
to also reflect this Share Reorganization.
Six
months ended April 30, 2023:
On
December 9, 2022, the Company closed a private placement pursuant (“the Private placement”) to a securities purchase agreement
with institutional investors. The Company issued 118,667 units (“the units”) and 78,000 pre-funded units (“the pre-funded
units”) at a purchase price of $15 per unit for gross proceeds of $2,948,050. The pre-funded units were sold at a purchase price
of $14.98. Each of the units consists of one share of common stock and one non-tradable warrant (“the unit warrants”) exercisable
for one share of common stock at a price of $15 for a period of 5.5 years from the closing date of the Private placement. The pre-funded
Unit consist of one pre-funded common share purchase warrant of the Company (a “pre-funded warrant”) and one unit warrant.
As at April 30, 2023, $283 had been received in advance as subscriptions for warrants still to be exercised.
In
connection with the Private placement, the Company paid share issuance costs of $623,776 consisting of $295,000 in underwriting fees,
$132,500 in legal fees and $196,276 in other related expenses. Total transaction costs of $623,776 were incurred relating to the Private
placement and $205,982 was allocated to equity.
During
the six months ended April 30, 2023, the Company issued 66,667 common shares as a result of the exercise of 66,667 warrants for total
proceeds of $1,667. The weighted average market price of the Company’s common shares at the period of the exercise was $9.56 per
share.
Six
months ended April 30, 2022:
There
were no share issuances during the six months ended April 30, 2022.
The
Company has established a stock option plan for its directors, officers, employees, and consultants under which the Company may grant
options (each, an “Option”) from time to time to acquire Shares. The exercise price of each Option shall be determined by
the Board of Directors. Options may be granted for a maximum term of five years from the date of grant. Options are non-transferable
and expire immediately upon termination of employment for cause, or within 30 days of termination of employment for cause, or within
30 days of termination of employment or holding office as director or officer of the Company or in the case of death. Unless otherwise
provided in the applicable grant agreement, Options fully vest upon the grant thereof.
BRUUSH
ORAL CARE INC.
NOTES
TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited
- Expressed in U.S. dollars)
Three
and six months ended April 30, 2023 and 2022
Six
months ended April 30, 2023:
On
April 3, 2023, the Company granted 40,800 stock options to its directors and officers. Each option is exercisable for one common share
in the capital of the Company at an exercise price of $6.25 per share. These options vest over four years from the date of grant and
expire on April 3, 2028. The fair value of the options was estimated to be $162,384 based on the Black-Scholes Option Pricing Model using
the following assumptions: fair value of the underlying stock – $6.48, exercise price $6.50, expected dividend yield - 0%, expected
volatility - 72%, risk-free interest rate – 2.94% and an expected remaining life – 5 years.
Six
months ended April 30, 2022:
There
were no option grants during the six months ended April 30, 2022.
During
the six months ended April 30, 2023, the Company recognized share-based compensation expense of $6,245 for the vesting of options (six
months ended April 30, 2022 - $7,862).
As
at April 30, 2023, the following options were outstanding and vested, entitling the holders thereof the right to purchase one common
share for each option held as follows:
Outstanding | | |
Exercise
Price | | |
Expiry
Date | |
Vested | |
3,207 | | |
| CAD$172.50 | | |
November
9, 2025 | |
| 3,207 | |
40,800 | | |
$ | 6.25 | | |
April
3, 2028 | |
| - | |
44,007 | | |
| | | |
| |
| 3,207 | |
During
August 2022, the Company’s volume weighted average stock price was less than the exercise floor of $52 as per the agreements for
the warrants issued as part of the units offered in the Company’s initial public offering (“IPO”) as a result, the
following occurred:
|
● |
Effective
after the closing of trading on November 3, 2022 (the 90th calendar day immediately following the issuance date of the
Warrants), the exercise price of all IPO warrants was reset from $104 to $52 (“reset price”). The other terms of the
IPO warrants remained unchanged. |
|
● |
On
November 3, 2022, the Company also issued to an aggregate amount of 266,420 additional warrants (“the additional warrants”)
to purchase 266,420 shares of common stock. The Additional Warrants expire November 3, 2027 and are exercisable at a price of $52. |
Continuity
of the warrants issued and outstanding as follows:
| |
Number
of warrants | | |
Weighted
average
exercise
price | |
Outstanding,
October 31, 2021 | |
| 29,210 | | |
$ | 196.75 | |
Granted | |
| 174,078 | | |
| 105.50 | |
Outstanding,
October 31, 2022 | |
| 203,288 | | |
$ | 118.75 | |
Granted | |
| 553,019 | | |
| 5.25 | |
Exercised | |
| (66,667 | ) | |
| 0.025 | |
Outstanding,
April 30, 2023 | |
| 689,640 | | |
$ | 46.00 | |
BRUUSH
ORAL CARE INC.
NOTES
TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited
- Expressed in U.S. dollars)
Three
and six months ended April 30, 2023 and 2022
The
following table discloses the number of warrants outstanding as at April 30, 2023:
Number
of warrants | | |
Price | | |
Expiry
date |
10,736 | | |
| CAD$86.75 | | |
August
3, 2024 |
18,474 | | |
| CAD$260.50 | | |
August
3, 2024 |
163,565 | | |
$ | 52 | | |
August
4, 2027 |
10,514 | | |
$ | 130 | | |
August
4, 2027 |
11,931 | | |
$ | 0.025 | | |
August
4, 2027 |
266,420 | | |
$ | 52 | | |
November
3, 2027 |
118,667 | | |
$ | 15 | | |
June
9, 2028 |
78,000 | | |
$ | 15 | | |
June
9, 2028 |
11,333 | | |
$ | 0.025 | | |
No
expiry |
689,640 | | |
| | | |
|
As
at April 30, 2023, the weighted average life remaining of warrants outstanding is 4.36 years.
c) |
Restricted
Share Awards |
On
June 30, 2022, the Company issued 19,689 Restricted Share Awards (“RSU” or “RSU’s”) to directors of the
Company. The RSU’s vest over a period of three years, in three equal tranches on the first, second, and third anniversaries of
the grant date. At October 31, 2022, none of the RSU’s had vested. The Company recognizes the share-based payment expense over
the vesting terms. The share-based compensation costs for the RSU’s are based on the share price at the date of grant at a price
of $71.25 per RSU.
During
the six months ended April 30, 2023, the Company recognized share-based compensation expense of $399,909 for the vesting of RSUs (Six
months ended April 30, 2022 - $nil).
As
at April 30, 2023 and October 31, 2022, 19,689 RSU’s were outstanding.
10. |
WARRANT DERIVATIVE LIABILITY |
In
July and August 2020, in connection with a private placement, the Company issued 10,710 warrants with an exercise price of CAD$86.75
($66.50) per warrant with an expiry date of twenty-four months from the time the Company completes a bone-fide public offering of common
shares under a prospectus or registration statement filed with the securities regulatory authorities in Canada or the United States (the
“Liquidity Event”). As the warrants have an exercise price denominated in a currency other than the Company’s functional
currency, they are derivative financial instrument measured at fair value at the end of each reporting period. On July 29, 2022, the
Company amended the exercise price of 3,461 of the warrants to $66.50. As a result, the derivative liability associated with these warrants
at the time of $136,047 was derecognized and recorded to equity. The fair value at the time of derecognition was based on the Black-Scholes
Option Pricing Model using the following assumptions: fair value of the underlying stock - $71.25, expected dividend yield – 0%,
expected volatility – 100%, risk-free interest rate – 2.92% and an expected remaining life – 2.01 years. As at April
30, 2023, the fair value of the remaining 7,248 warrants which were not repriced (and therefore continue to be recognized as derivative
financial instruments) was determined to be $122 based on the Black-Scholes Option Pricing Model using the following assumptions: fair
value of the underlying stock – CAD$8.75, expected dividend yield – 0%, expected volatility – 74%, risk-free interest
rate – 3.72% and an expected remaining life – 1.26 years (2022 - $30,469 based on the Black-Scholes Option Pricing Model
using the following assumptions: fair value of the underlying stock – CAD$37.25, expected dividend yield – 0%, expected volatility
– 72%, risk-free interest rate – 3.90% and an expected remaining life – 1.76 years).
BRUUSH
ORAL CARE INC.
NOTES
TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited
- Expressed in U.S. dollars)
Three
and six months ended April 30, 2023 and 2022
In
August and September 2020, in connection with a private placement, the Company issued 15,290 warrants with an exercise price of CAD$260.50
($195) per warrant with an expiry date of twenty-four months from the Liquidity Event. As the warrants have an exercise price denominated
in a currency other than the Company’s functional currency, they are derivative financial instrument measured at fair value at
the end of each reporting period. As at April 30, 2023, the fair value of the warrants was determined to be $3 and was estimated using
the Black-Scholes Options Pricing Model using the following assumptions: fair value of the underlying stock – CAD$8.75, expected
dividend yield – 0%, expected volatility – 74%, risk-free interest rate – 3.72% and an expected remaining life –
1.26 years. (2022 - $8,655 based on the Black-Scholes Option Pricing Model using the following assumptions: fair value of the underlying
stock – CAD$37.25, expected dividend yield – 0%, expected volatility – 72%, risk-free interest rate – 3.90% and
an expected remaining life – 1.76 years).
In
August 2022, in connection with the units issued as part of the Company’s IPO, the Company issued 149,142 warrants with an exercise
price of $104 per warrant with an expiry date of five years from the date of issuance. The warrants contain a cashless exercise provision
which enables the holder to receive common shares equal to the fair value of the warrants based on the number of warrants to be exercise
multiplied by the fair value of the common shares less the exercise price with the difference divided by the fair value of the share.
If a warrant holder exercises this option, there will be variability in the number of shares issued, therefore they are a derivative
financial instrument measured at fair value at the end of each reporting period. On November 3, 2022 ,the exercise price of these warrants
was reset from $104 to $52 the other terms of the IPO warrants remained unchanged (Note 9(b)).
As
at April 30, 2023, the fair value of the warrants was determined to be $152,713 and was estimated using the Black-Scholes Options Pricing
Model using the following assumptions: fair value of the underlying stock – $6.50, expected dividend yield – 0%, expected
volatility – 74%, risk-free interest rate – 3.04% and an expected remaining life – 4.27 years. (2022 – $1,097,323
based on the Black-Scholes Options Pricing Model using the following assumptions: fair value of the underlying stock – $27.25,
expected dividend yield – 0%, expected volatility – 67%, risk-free interest rate – 3.43% and an expected remaining
life – 4.76 years).
Also
in connection with the IPO, on November 3, 2022, the Company issued to an aggregate amount of 266,420 additional warrants to purchase
266,420 shares of common stock (Note 9(b)). The Additional Warrants expire November 3, 2027 and are exercisable at a price of $2.08.
These warrants also contain a cashless exercise provision which enables the holder to receive common shares equal to the fair value of
the warrants based on the number of warrants to be exercise multiplied by the fair value of the common shares less the exercise price
with the difference divided by the fair value of the share. . If a warrant holder exercises this option, there will be variability in
the number of shares issued, therefore they are a derivative financial instrument measured at fair value at the end of each reporting
period. At issuance, the fair value of the warrants was determined to be $2,736,592 and was estimated using the Black-Scholes Options
Pricing Model using the following assumptions: fair value of the underlying stock – $24.50, expected dividend yield – 0%,
expected volatility – 68%, risk-free interest rate – 3.67% and an expected remaining life – 5 years. As at April 30,
2023, the fair value of the warrants was determined to be $291,303 and was estimated using the Black-Scholes Options Pricing Model using
the following assumptions: fair value of the underlying stock – $6.50, expected dividend yield – 0%, expected volatility
– 73%, risk-free interest rate – 3.04% and an expected remaining life – 4.52 years.
In
August 2022, in connection with the units issued as part of its December Senior Secured Promissory Notes, the Company issued 14,423 warrants
with an exercise price of $104 per warrant with an expiry date of five years from the date of issuance. The warrants contain a cashless
exercise provision which enables the holder to receive common shares equal to the fair value of the warrants based on the number of warrants
to be exercise multiplied by the fair value of the common shares less the exercise price with the difference divided by the fair value
of the share. If a warrant holder exercises this option, there will be variability in the number of shares issued, therefore they are
a derivative financial instrument measured at fair value at the end of each reporting period. At issuance, the fair value of the warrants
was determined to be $488,147 and was estimated using the Black-Scholes Options Pricing Model using the following assumptions: fair value
of the underlying stock – $70.25, expected dividend yield – 0%, expected volatility – 66%, risk-free interest rate
– 2.79% and an expected remaining life – 5 years. As at April 30, 2023, the fair value of the warrants was determined to
be $36,917 and was estimated using the Black-Scholes Options Pricing Model using the following assumptions: fair value of the underlying
stock – $6.50, expected dividend yield – 0%, expected volatility – 74%, risk-free interest rate – 3.04% and an
expected remaining life – 4.27 years. (2022 – $106,119 based on the Black-Scholes Options Pricing Model using the following
assumptions: fair value of the underlying stock – $27.25, expected dividend yield – 0%, expected volatility – 67%,
risk-free interest rate – 3.43% and an expected remaining life – 4.76 years).
BRUUSH
ORAL CARE INC.
NOTES
TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited
- Expressed in U.S. dollars)
Three
and six months ended April 30, 2023 and 2022
During
December 2022, in connection with the units issued as part of the private placement (Note 9), the Company issued 118,667 unit warrants
with an exercise price of $15 with an expiry date of 5.5 years from the date of issuance. The warrants contain a cashless exercise provision
which enables the holder to receive common shares equal to the fair value of the warrants based on the number of warrants to be exercise
multiplied by the fair value of the common shares less the exercise price with the difference divided by the fair value of the share.
If a warrant holder exercises this option, there will be variability in the number of shares issued, therefore they are a derivative
financial instrument measured at fair value at the end of each reporting period. At issuance, the fair value of the warrants was determined
to be $806,581 and was estimated using the Black-Scholes Options Pricing Model using the following assumptions: fair value of the underlying
stock – $10.25, expected dividend yield – 0%, expected volatility – 67%, risk-free interest rate – 3.07% and
an expected remaining life – 5.5 years. As at April 30, 2023, the fair value of the warrants was determined to be $333,875 and
was estimated using the Black-Scholes Options Pricing Model using the following assumptions: fair value of the underlying stock –
$6.50, expected dividend yield – 0%, expected volatility – 71%, risk-free interest rate – 3.04% and an expected remaining
life – 5.11 years.
Also
in connection with the private placement (Note 9), the Company issued 78,000 pre-funded warrants with an exercise price of $0.025 with
no expiry date and another 78,000 unit warrants with an exercise price of $15 and with an expiry date of 5.5 years from the date of issuance
for total proceeds of $1,168,051. These warrants also contain a cashless exercise provision which enables the holder to receive common
shares equal to the fair value of the warrants based on the number of warrants to be exercise multiplied by the fair value of the common
shares less the exercise price with the difference divided by the fair value of the share. If a warrant holder exercises this option,
there will be variability in the number of shares issued, therefore they are a derivative financial instrument measured at fair value
at the end of each reporting period. At issuance, the fair value of the prefunded warrants and unit warrants was $747,917 and $420,134
respectively, the fair value of the pre-funded warrants was determined with reference to the fair value of the Company’s common
shares and the fair value of the unit warrants was estimated using the Black-Scholes Options Pricing Model using the following assumptions:
fair value of the underlying stock – $12.13, expected dividend yield – 0%, expected volatility – 67%, risk-free interest
rate – 3.07% and an expected remaining life – 5.5 years. As at April 30, 2023 the fair value of the unit warrants was $219,458
respectively and was estimated using the Black-Scholes Options Pricing Model based on the following assumptions: fair value of the underlying
stock – $6.50, expected dividend yield – 0%, expected volatility – 71%, risk-free interest rate – 3.04% and an
expected remaining life – 5.11 years.
During
January 2023, 49,867 pre-funded warrants were exercised (Note 9) and a fair value loss of $39,565 was recognized from the fair valuation
of these pre-funded warrants on the dates of exercise and their total fair value was $517,720.
A
further 16,800 pre- funded warrants were exercised during April 2023 (Note 9) and a fair value gain of $53,340 was recognized from the
fair valuation of these pre-funded warrants on the dates of exercise and their total fair value was $118,440.
As
at April 30, 2023 the fair value of the remaining pre-funded warrants was deterimined to be $73,384 and was estimated using the Black-Scholes
Options Pricing Model using the following assumptions: fair value of the underlying stock – $6.50, expected dividend yield –
0%, expected volatility – 71%, risk-free interest rate – 3.04% and an expected remaining life – 5.11 years.
From
the total transaction costs of $623,776 that were incurred relating to the Private placement (Note 9), $417,794 was allocated to the
derivative liability.
BRUUSH
ORAL CARE INC.
NOTES
TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited
- Expressed in U.S. dollars)
Three
and six months ended April 30, 2023 and 2022
The
following is a continuity of the Company’s warrant derivative liability:
Balance,
October 31, 2021 | |
$ | 1,582,977 | |
Issued
during the period | |
| 5,535,852 | |
Change
in fair value of derivative | |
| (5,740,202 | ) |
Derecognition
of warrant derivative | |
| (136,047 | ) |
Balance,
October 31, 2022 | |
$ | 1,242,580 | |
Issued
during the period | |
| 1,974,626 | |
Change
in fair value of derivative | |
| (1,473,271 | ) |
Derecognition
of warrant derivative | |
| (636,160 | ) |
Balance,
April 30, 2023 | |
$ | 1,107,775 | |
During
the year ended October 31, 2022, the Company fell victim to a cyber-scam that resulted in the Company making an inappropriate payment
of $166,150.
During
the six months ended April 30, 2023, the Company has filed an insurance claim and received an indemnity of CAD$217,943 ($159,324) in
relation to the cyber-scam.
12. |
FINANCIAL
INSTRUMENT RISK MANAGEMENT |
Classification
of financial instruments
Financial
assets included in the statement of financial position are as follows:
| |
Level
in fair
value
hierarchy | | |
April
30, 2023 | | |
October
31, 2022 | |
Amortized
cost: | |
| | | |
| | | |
| | |
Cash | |
| | | |
$ | 194,321 | | |
$ | 72,921 | |
Term
deposit | |
| | | |
| - | | |
| 18,506 | |
Accounts
receivable | |
| | | |
| 152,604 | | |
| 175,256 | |
| |
| | | |
$ | 346,925 | | |
$ | 266,683 | |
Financial
liabilities included in the statement of financial position are as follows:
| |
Level
in fair
value
hierarchy | | |
April
30, 2023 | | |
October
31, 2022 | |
Amortized
cost: | |
| | | |
| | | |
| | |
Accounts
payable and accrued expenses | |
| | | |
$ | 2,308,607 | | |
$ | 1,345,288 | |
Loans
payable | |
| | | |
| 2,336,222 | | |
| - | |
Due
to related party | |
| | | |
| 311,774 | | |
| - | |
| |
| | | |
| | | |
| | |
FVTPL: | |
| | | |
| | | |
| | |
Warrant
derivative liability | |
| Level
3 | | |
| 1,107,775 | | |
| 1,242,580 | |
| |
| | | |
$ | 6,064,378 | | |
$ | 2,587,868 | |
BRUUSH
ORAL CARE INC.
NOTES
TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited
- Expressed in U.S. dollars)
Three
and six months ended April 30, 2023 and 2022
Fair
value
Financial
instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability
of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are:
● |
Level
1 – Unadjusted quoted prices in active markets for identical assets or liabilities; |
● |
Level
2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and |
● |
Level
3 – Inputs that are not based on observable market data. |
The
carrying value of the Company’s cash, term deposits, accounts receivable and accounts payable and accrued liabilities as at approximate
their fair value due to their short terms to maturity.
The
following table shows the valuation techniques used in measuring Level 3 fair values for the derivative liability as well as the significant
unobservable inputs used.
Type |
|
Valuation
technique |
|
Key
inputs |
|
Inter-relationship
between significant inputs and fair value measurement |
Warrant
derivative liability |
|
The
fair value of the warrant derivative liability at initial recognition and at period-end has been calculated using the Black Scholes
option pricing model. |
|
Key
observable inputs
●
Share price
●
Risk free interest rate
●
Dividend yield
Key
unobservable inputs
●
Expected volatility
|
|
The
estimated fair value would increase (decrease) if:
●
The share price was higher (lower)
●
The risk-free interest rate was higher (lower)
●
The dividend yield was lower (higher)
●
The expected volatility was higher (lower) |
For
the fair values of the derivative liability, reasonably possible changes to the expected volatility, the most significant unobservable
input would have the following effects:
Unobservable
Inputs | |
Change | | |
Impact
on comprehensive loss | |
| |
| | |
Six
months ended
April
30, 2023 | | |
Six
months ended April
30, 2022 | |
Volatility | |
| 20 | % | |
$ | 435,415 | | |
$ | 261,511 | |
The
Company is exposed in varying degrees to a variety of financial instrument related risks. The Board of Directors approves and monitors
the risk management processes, inclusive of documented investment policies, counterparty limits, and controlling and reporting structures.
Credit
risk
The
Company’s principal financial assets are cash and trade accounts receivable. The Company’s credit risk is primarily concentrated
in its cash which is held with institutions with a high credit worthiness. Credit risk is not concentrated with any particular customer.
The Company’s accounts receivable consists primarily of GST receivable.
The
Company’s maximum credit risk exposure is $152,604.
Liquidity
risk
Liquidity
risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company has a planning and
budgeting process in place to help determine the funds required to support the Company’s normal operating requirements on an ongoing
basis.
BRUUSH
ORAL CARE INC.
NOTES
TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited
- Expressed in U.S. dollars)
Three
and six months ended April 30, 2023 and 2022
Historically,
the Company’s primary source of funding has been the issuance of equity securities for cash, primarily through the issuance of
preferred shares. The Company’s access to financing is always uncertain. There can be no assurance of continued access to significant
equity funding.
The
following is an analysis of the contractual maturities of the Company’s financial liabilities as at April 30, 2023:
| |
Within
one
year | | |
Between
one
and
five years | | |
More
than
five
years | |
Accounts
payable and accrued expenses | |
$ | 2,308,607 | | |
$ | - | | |
$ | - | |
Foreign
exchange risk
Foreign
currency risk arises from fluctuations in foreign currencies versus the United States dollar that could adversely affect reported balances
and transactions denominated in those currencies. As at April 30, 2023, a portion of the Company’s financial assets are held in
Canadian dollars. The Company’s objective in managing its foreign currency risk is to minimize its net exposure to foreign currency
cash flows by transacting, to the greatest extent possible, with third parties in United States dollars. The Company does not currently
use foreign exchange contracts to hedge its exposure of its foreign currency cash flows as management has determined that this risk is
not significant at this point in time. The Company is not exposed to any material foreign currency risk.
Interest
rate risk
Interest
rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market
interest rates. The Company is not exposed to any material interest rate risk.
Capital
Management
In
the management of capital, the Company includes components of shareholders’ equity. The Company aims to manage its capital resources
to ensure financial strength and to maximize its financial flexibility by maintaining strong liquidity and by utilizing alternative sources
of capital including equity, debt and bank loans or lines of credit to fund continued growth. The Company sets the amount of capital
in proportion to risk and based on the availability of funding sources. The Company manages the capital structure and makes adjustments
to it in light of changes in economic conditions and the risk characteristics of the underlying assets. Issuance of equity has been the
primary source of capital to date. Additional debt and/or equity financing may be pursued in future as deemed appropriate to balance
debt and equity. To maintain or adjust the capital structure, the Company may issue new shares, take on additional debt or sell assets
to reduce debt.
13. |
SEGMENTED
INFORMATION |
The
Company’s breakdown of sales by geographical region is as follows:
| |
Six
months ended April 30, 2023 | | |
Six
months ended April 30, 2022 | |
United
States of America | |
$ | 1,319,868 | | |
$ | 1,079,617 | |
Canada | |
| 81,756 | | |
| 32,191 | |
| |
$ | 1,401,624 | | |
$ | 1,111,808 | |
| |
Three
months ended April 30, 2023 | | |
Three
months ended April 30, 2022 | |
United
States of America | |
$ | 295,627 | | |
$ | 289,670 | |
Canada | |
| 29,905 | | |
| 12,308 | |
| |
$ | 325,532 | | |
$ | 301,978 | |
BRUUSH
ORAL CARE INC.
NOTES
TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
(Unaudited
- Expressed in U.S. dollars)
Three
and six months ended April 30, 2023 and 2022
The
Company’s breakdown of sales by product segment is as follows:
| |
Six
months ended April 30, 2023 | | |
Six
months ended April 30, 2022 | |
Devices | |
$ | 1,088,876 | | |
$ | 665,475 | |
Consumables | |
| 312,748 | | |
| 446,333 | |
| |
$ | 1,401,624 | | |
$ | 1,111,808 | |
| |
Three
months ended April 30, 2023 | | |
Three
months ended April 30, 2022 | |
Devices | |
$ | 280,450 | | |
$ | 62,683 | |
Consumables | |
| 45,082 | | |
| 238,295 | |
| |
$ | 325,532 | | |
$ | 1,111,808 | |
Litigation
During
the subsequent period, litigation was brought against the Company by the Toronto Dominion Bank (“TD Bank”) in which TD Bank
made a claim for an amount of $1,721,345 (the “Principal Amount”) relating to a bank overdraft. TD Bank and the Company reached
a settlement agreement in which the Company agreed to repay the Principal Amount plus interest and additional costs. The Settlement was
guaranteed by a letter of credit issued to TD Bank by the Royal Bank of Canada of $2,000,000.
Convertible
debentures
On
June 26, 2023, the Company completed its issuance of an unsecured convertible note with a principal aggregate amount of $3,341,176 (the
“June 2023 Note”) to the Selling Securityholder with a maturity date of June 26, 2024. The conversion price in effect on
any Conversion Date shall be equal to (i) for the first seven months following the date hereof, shall be $0.25, and (ii) following the
seven month anniversary of the date hereof, 90% of the lowest closing price of the Company’s shares for the previous three Trading
Days prior to the conversion date provided, however, that such price shall in no event be less than $0.15. A maximum of 22,274,507 shares
of Common Stock are issuable by the Company upon conversion of the June 2023 note.
In
connection with the issuance of the June 2023 Note, the Company entered into a securities purchase agreement with the Selling Securityholder
and issued a common stock purchase warrant to purchase 10,023,530 shares of Common Stock (the “Purchase Warrant”), with an
Exercise Price of $0.001 or on a cashless basis, to the Selling Securityholder. The Purchase Warrants will be classified as financial
liabilities since the terms allows for a cashless net share settlement at the option of the holder.
Share
capital
On
August 25, 2023, the company offered warrant holders the option to exercise their existing warrants at $3.33 per share, resulting in
633,026 Warrant Shares being issued. Holders were also given new warrants (New Warrants) allowing them to purchase up to 250% of the
exercised Warrant Shares at the same price, with an expiration date of June 9, 2028. The exercise of Existing Warrants led to the issuance
of New Warrants for a total of 1,582,566 New Warrant Shares.
From
August 1 to August 25, 2023, a total of 883,131 shares were issued from warrants being exercised for proceeds of $2,855,979. On August
10 and 14th, the company issued 50,000 and 150,000 common shares as compensation for consulting services.
Exhibit 99.2
BRUUSH
ORAL CARE INC.
MANAGEMENT’s
DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
September
13, 2023
You
should read the following management’s discussion and analysis of financial condition and results of operations together with our
unaudited condensed interim financial statements as of and for the three and six months ended April 30, 2023 and April 30, 2022, of
Bruush Oral Care Inc. (herein after referred to as “the Company”) which were prepared in accordance with International
Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board, or IASB.
The
statements in this discussion regarding industry outlook, our expectations regarding our future performance, liquidity and capital resources
and other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and
uncertainties, including the risks and uncertainties described in the section titled “Risk Factors”. Our actual results may
differ materially from those contained in the following discussion and analysis, as well as the section titled “Cautionary Note
Regarding Forward-Looking Statements”.
Basis
of Presentation
Our
unaudited condensed interim financial statements as of and for the three and six months ended April 30, 2023 and April 30, 2022 are presented
in U.S. dollars and have been prepared in accordance with IFRS which may differ in material respects from generally accepted accounting
principles accounting principles in the United States, or U.S. GAAP. Our presentation and functional currency is the U.S. dollar and,
accordingly, all the amounts in this discussion and analysis are in U.S. dollars unless otherwise indicated. See “Results of Operations
– April 30, 2023 compared to April 30, 2022”.
Non-IFRS
Financial Measures
This
discussion may refer to certain non-IFRS measures. These measures are not recognized measures under IFRS, do not have a standardized
meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other companies. Rather, these measures
are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations
from management’s perspective. Accordingly, these measures should not be considered in isolation or as a substitute for analysis
of our financial information reported under IFRS.
Going
Concern
As
of and for the six months ended April 30, 2023, the Company has recurring losses, a working capital deficit of $5,180,536 (October
31, 2022 – working capital deficit of $1,408,415), an accumulated deficit totaling $31,970,826 (October 31, 2022 –
accumulated deficit of $26,386,314) and negative cash flows used in operating activities of $4,746,426 (April 30, 2022 –
negative cash flows used in operating activities of $3,360,441). The ability of the Company to carry out its business objectives is dependent
on its ability to secure continued financial support from related parties, to obtain equity financing or to ultimately attain profitable
operations in the future. The Company will need to raise additional capital during the next twelve months and beyond to support current
operations and planned development. Whether and when the Company can attain profitability and positive cash flows is uncertain. While
the Company has been successful in securing financing in the past, there is no assurance that we will be able to obtain financing in
the future on terms acceptable to us.
Company
Overview
The
Company is on a mission to inspire confidence through brighter smiles and better oral health. Founded in 2018 by Chief Executive Officer
Aneil Manhas, a former investment banker and private equity investor turned entrepreneur, we are an oral care company that is disrupting
the space by reducing the barriers between consumers and access to premium oral care products because it is our belief that high-quality
oral care products should be more accessible. We are an e-commerce business with a product portfolio that currently consists of a sonic-powered
electric toothbrush kit and brush head refills. Through our website, consumers can purchase a Brüush starter kit (the “Brüush
Kit”), which includes: (i) the Brüush electric toothbrush (the “Brüush Toothbrush”); (ii) three brush heads;
(iii) a magnetic charging stand and USB power adapter; and (iv) a travel case. We also sell the brush heads separately which come in
a three-pack (the “Brüush Refill”) and can be purchased on a subscription basis, where the customer will automatically
receive a Brüush Refill every six months (the “Subscription”). We consider a Subscription to be active (an “Active
Subscription”) until it is either cancelled by the customer or terminated due to payment failure (for example, a lost or expired
credit card). In 2024, we plan to expand our portfolio with the launch of several new subscription-based consumable oral care products,
including toothpaste, mouthwash, dental floss, a whitening pen, as well as an electric toothbrush designed for kids.
Financial
Operations Overview
Revenues
Revenues
are comprised of sales of Brüush Kits and of Brüush Refills net of changes in the provision for payment discounts and product
return allowances.
Cost
of goods sold
Cost
of goods sold consists of: (i) the costs of finished goods sold; and (ii) the freight expense of
transporting the finished goods from the manufacturer to our third-party distribution facility in Salt Lake City, Utah.
Operating
expenses
Operating
expenses consist primarily of advertising and marketing expenses, salaries and wages, consulting services, professional fees, interest
charges, and shipping and delivery expense. We offer free regular shipping on all of our
website orders. All of these expenses have increased year-over-year and are expected to keep rising as we continue to scale our brand
building and customer acquisition efforts, as well as expand our operations to facilitate higher revenues.
Results
of Operations – Six months ended April 30, 2023 compared to six months ended April 30, 2022
The
table below sets forth a summary of our results of operations for the six months ended April 30, 2023 and April 30, 2022:
| |
Six months ended April 30, | | |
| |
| |
2023 | | |
2022 | | |
| | |
| |
| |
(unaudited) | | |
(unaudited) | | |
Change | | |
% Change | |
| |
| | |
| | |
| | |
| |
Revenues | |
$ | 1,401,624 | | |
$ | 1,111,808 | | |
$ | 289,816 | | |
| 26 | % |
Cost of goods sold | |
| (436,086 | ) | |
| (376,088 | ) | |
| (59,998 | ) | |
| (16 | )% |
Gross profit | |
$ | 965,538 | | |
$ | 735,720 | | |
$ | 229,818 | | |
| 31 | % |
Gross margin | |
| 69 | % | |
| 66 | % | |
| | | |
| | |
Revenues
Our
revenues increased 26% for the six months ended April 30, 2023 to $1,401,624 from $1,111,808 for the six months ended April 30, 2022,
due primarily to the results of our expanded marketing and customer acquisition efforts.
Cost
of goods sold
Our
cost of goods sold increased 16% to $436,086 for the six months ended April 30, 2023 from $376,088 for the six months ended April 30,
2022. The increase was mainly due to the increase in goods sold during the six months ended April 30, 2023 compared to six months ended
April 30, 2022 as explained above.
Gross
profit
We
recorded gross profit of $965,538 and $735,720 for the six months ended April 30, 2023 and the six months ended April 30, 2022. Our gross
margin increased to 69% for the six months ended April 30, 2023 from 66% for the six months ended April 30, 2022. The increase in gross
profit is primarily due to the fact that a larger portion of revenue came from Brüush Kits, which have a higher gross margin compared
to Brüush Refills. The split between Brüush Kit and Brüush Refill sales was 78% and 22%, respectively during the six months
ended April 30, 2023, compared to 60% and 40%, respectively during the six months ended April 30, 2022.
Operating
expenses
The
following table sets forth our operating expenses for the six months ended April 30, 2023, and April 30, 2022:
| |
Six months ended April 30, | | |
| |
| |
2023 | | |
2022 | | |
| | |
% | |
| |
(unaudited) | | |
(unaudited) | | |
Change | | |
Change | |
Advertising and marketing | |
$ | (4,483,815 | ) | |
$ | (2,567,496 | ) | |
$ | (1,916,319 | ) | |
| (75 | )% |
Depreciation expense | |
| (2,110 | ) | |
| (5,640 | ) | |
| 3,530 | | |
| 63 | % |
Commission | |
| (62,447 | ) | |
| (29,841 | ) | |
| (32,606 | ) | |
| (109 | )% |
Consulting | |
| (559,177 | ) | |
| (482,991 | ) | |
| (76,186 | ) | |
| (16 | )% |
Interest and bank charges | |
| (224,344 | ) | |
| (358,445 | ) | |
| 134,101 | | |
| 37 | % |
Inventory management | |
| (18,143 | ) | |
| (12,896 | ) | |
| (5,247 | ) | |
| (41 | )% |
Merchant fees | |
| (47,923 | ) | |
| (56,460 | ) | |
| 8,537 | | |
| 15 | % |
Office and administrative expenses | |
| (260,122 | ) | |
| (123,782 | ) | |
| (136,340 | ) | |
| (110 | )% |
Professional fees | |
| (260,802 | ) | |
| (73,519 | ) | |
| (187,283 | ) | |
| (255 | )% |
Research and development | |
| (1,680 | ) | |
| - | | |
| (1,680 | ) | |
| - | |
Salaries and benefits | |
| (757,208 | ) | |
| (436,575 | ) | |
| (320,633 | ) | |
| (73 | )% |
Share-based compensation | |
| (406,154 | ) | |
| (7,861 | ) | |
| (398,293 | ) | |
| (5067 | )% |
Shipping and delivery | |
| (450,147 | ) | |
| (350,096 | ) | |
| (100,051 | ) | |
| (29 | )% |
Travel and entertainment | |
| (68,884 | ) | |
| (127,359 | ) | |
| 58,475 | | |
| 46 | % |
| |
$ | (7,602,956 | ) | |
$ | (4,632,961 | ) | |
$ | (2,969,995 | ) | |
| (64 | )% |
Operating
expenses for the six months ended April 30, 2023 were $7,602,956, compared to $4,632,961, for the six months ended April 30, 2022.
The primary reasons for the increase are: (i) increased advertising and marketing efforts, particularly during the holiday season; (ii)
increased shipping and delivery to facilitate a higher level of sales; (iii) a higher salaries and benefits expense due to expansion
of the team during this period, including the addition of senior team members in operations and sales roles; (iii) a higher office and
administrative expense as we expanded our office in Toronto to support a growing team; (iv) higher professional fees due to an increase
in legal fees related to maintaining the Company’s listing on the Nasdaq Stock Market; and (v) and increased share-based compensation.
Operating
loss before other items
| |
Six months ended April 30, | | |
| |
| |
2023 | | |
2022 | | |
| | |
% | |
| |
(unaudited) | | |
(unaudited) | | |
Change | | |
Change | |
| |
| | |
| | |
| | |
| |
Gross profit | |
$ | 965,538 | | |
$ | 735,720 | | |
$ | 229,818 | | |
| 31 | % |
Operating expenses | |
| (7,602,956 | ) | |
| (4,632,961 | ) | |
| (2,969,995 | ) | |
| (64 | )% |
Operating loss before other items | |
$ | (6,637,418 | ) | |
$ | (3,897,241 | ) | |
$ | (2,740,177 | ) | |
| (70 | )% |
Our
operating loss before other items was $6,637,418 for the six months ended April 30, 2023 as compared to an operating loss before
other items of $3,897,241 for the six months ended April 30, 2022. The increase of $2,740,177 in operating loss is due to an increase
in overall operating expenses as described above.
Other
items
The
following table sets forth our other income (loss) for the six months ended April 30, 2023, and April 30, 2022:
| |
Six months ended April 30, | | |
| |
| |
2023 | | |
2022 | | |
| | |
% | |
| |
(unaudited) | | |
(unaudited) | | |
Change | | |
Change | |
| |
| | |
| | |
| | |
| |
Foreign exchange | |
$ | (31,745 | ) | |
$ | 19,737 | | |
$ | (51,482 | ) | |
| (261 | )% |
Gain on revaluation of warrant derivative | |
| 1,473,271 | | |
| 181,078 | | |
| 1,292,193 | | |
| 714 | % |
Financing costs | |
| (417,794 | ) | |
| (3,150,000 | ) | |
| 2,732,206 | | |
| 87 | % |
Other income (refer to Note 11 of the financial statements) | |
| 159,324 | | |
| - | | |
| 159,324 | | |
| 100 | % |
Write down of prepaid inventory (refer to Note 5 of the financial statements) | |
| (130,150 | ) | |
| - | | |
| (130,150 | ) | |
| (100 | )% |
| |
$ | 1,052,906 | | |
$ | (2,949,185 | ) | |
$ | 4,002,091 | | |
| 136 | % |
Income
from other items was $1,052,906 for the six months ended April 30, 2023 as compared to a loss from other items of $2,949,185 for
the six months ended April 30, 2022. This is largely due to the $1,473,271 gain on the revaluation of the warrant derivative for six
months ended April 30, 2023 in comparison to a gain of $181,078 during the six months ended April 30, 2022. The main drivers of the gain
on the revaluation of the warrant derivative from the time of issuance are the decrease in the estimated stock price for the underlying
shares. This gain is offset by financing costs of $417,794 related to the transaction costs incurred on issuance of warrants during the
December 2022 private placement. See “Subsequent Events — December 2022 Private Placement and Inducement Letter” below.
The
following table shows the evolution of the Company’s derivate warrant liability:
Balance, October 31, 2022 | |
$ | 1,242,580 | |
Issued during the period | |
| 1,974,626 | |
Change in fair value of derivative | |
| (1,473,271 | ) |
Derecognition of warrant derivative | |
| (636,160 | ) |
Balance, April 30, 2023 | |
$ | 1,107,775 | |
Selected
Quarterly Information
The
following table presents selected financial information for each of the previous eight quarters:
| |
April 30, | | |
January 31, | | |
October 31, | | |
July 31, | |
| |
2023 | | |
2023 | | |
2022 | | |
2022 | |
| |
| | |
| | |
| | |
| |
Revenues | |
$ | 325,532 | | |
$ | 1,076,092 | | |
$ | 789,678 | | |
$ | 730,956 | |
Net loss | |
| (475,091 | ) | |
| (5,109,421 | ) | |
| (625,947 | ) | |
| (1,292,898 | ) |
Net loss per share | |
| (0.95 | ) | |
| (32.58 | ) | |
| (2.00 | ) | |
| (9.00 | ) |
| |
April 30, | | |
January 31, | | |
October 31, | | |
July 31, | |
| |
2022 | | |
2022 | | |
2021 | | |
2021 | |
| |
| | |
| | |
| | |
| |
Revenues | |
$ | 301,978 | | |
$ | 809,830 | | |
$ | 528,359 | | |
$ | 516,367 | |
Net loss | |
| (2,732,972 | ) | |
| (4,113,453 | ) | |
| (1,568,006 | ) | |
| (1,929,305 | ) |
Net loss per share | |
| (17.39 | ) | |
| (26.25 | ) | |
| (10.00 | ) | |
| (12.25 | ) |
Liquidity
and Capital Resources
The
following table sets forth a summary of our cash flows from (used in) operating activities, investing activities and financing activities
for the six months ended April 30, 2023 and April 30, 2022:
| |
Six months ended April 30, | | |
| | |
| |
| |
2023 | | |
2022 | | |
| | |
% | |
| |
(unaudited) | | |
(unaudited) | | |
Change | | |
Change | |
| |
| | |
| | |
| | |
| |
Net cash flows used in operating activities | |
$ | (4,746,426 | ) | |
$ | (3,360,441 | ) | |
$ | (1,385,985 | ) | |
| (41 | )% |
Net cash flows used in investing activities | |
| (1,405 | ) | |
| (2,042 | ) | |
| 637 | | |
| 31 | % |
Net cash flows from financing activities | |
| 4,869,231 | | |
| 3,760,725 | | |
| 1,108,506 | | |
| 29 | % |
| |
$ | 121,400 | | |
$ | 398,242 | | |
$ | (276,842 | ) | |
| (70 | )% |
Net
cash used in operating activities
Cash
flows used in operations, which is generally the net income or loss adjusted for non-cash items, such as amortization and depreciation,
fair valuation changes of the warrant derivative and changes in non-cash working capital items, was an outflow of $4,746,426 for
the six months ended April 30, 2023, as compared to an outflow of $3,360,441 for the six months ended April 30, 2022. The main factor
that contributed to the increase in cash outflow from operations was the higher operating loss of $6,637,418 for the six months
ended April 30, 2023 compared to the operating loss for the six months ended April 30, 2022 of $3,897,241.
Net
cash used in investing activities
Cash
used in investing activities was $1,405 for the six months ended April 30, 2023 as compared to $2,042 for the six months ended April
30, 2022. Investing activities in both the current period and the comparative period consisted of purchases of equipment.
Net
cash from financing activities
Cash
provided by financing activities was $4,869,231 for the six months ended April 30, 2023 as compared to $3,760,725 for the six months
ended April 30, 2022. The increase in cash provided from financing activities is due to: (i) a private placement that closed on December
9, 2022 for aggregate gross proceeds of approximately $3.0 million, before deducting fees to the placement agent and other offering expenses
payable by the Company; and (ii) the issuance of an unsecured promissory note on March 20, 2023 in a principal amount of US$2,749,412
to Target Capital 14 LLC. The unsecured promissory note was issued at an original issue discount of 15% with a maturity date of July
18, 2023. See “Subsequent Events — Issuance of Convertible Note” below.
As
of April 30, 2023, the Company had a working capital deficit of $5,180,536, compared to a working capital deficit of $1,408,415
as of October 31, 2022.
Funding
requirements
As
of and for the six-month period ended April 30, 2023, the Company has recurring losses, a working capital deficit of $5,180,536
(October 31, 2022 – working capital deficit of $1,408,415), an accumulated deficit totaling $31,970,826 (October 31, 2022
– accumulated deficit of $26,386,314) and negative cash flows used in operating activities of $4,746,426 (October 31, 2022
– negative cash flows used in operating activities of $12,590,778). The ability of the Company to carry out its business objectives
is dependent on its ability to raise additional capital to support current operations and planned development.
Off-balance
asset arrangements
During
the periods presented, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future
effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Financial
Instruments and Risk Management
The
following table shows the valuation techniques used in measuring Level 3 fair values for the derivative liability as well as the significant
unobservable inputs used.
Type |
|
Valuation
technique |
|
Key
inputs |
|
Inter-relationship
between significant
inputs and fair value measurement |
Warrant
derivative liability |
|
The
fair value of the warrant derivative liability at initial recognition and at period-end has been calculated using the Black Scholes
option pricing model. |
|
Key
observable inputs
●
Share price
●
Risk free interest rate
●
Dividend yield
Key
unobservable inputs
●
Expected volatility |
|
The
estimated fair value would increase (decrease) if:
●
The share price was higher (lower)
●
The risk-free interest rate was higher (lower)
●
The dividend yield was lower (higher)
●
The expected volatility was higher (lower) |
For
the fair values of the derivative liability, reasonably possible changes to the expected volatility, the most significant unobservable
input would have the following effects:
Unobservable Inputs | |
Change | | |
Impact on comprehensive loss | |
| |
| | |
Six months ended April 30, 2023 | | |
Six months ended April 30, 2022 | |
Volatility | |
| 20 | % | |
$ | 435,415 | | |
$ | 261,511 | |
The
Company is exposed in varying degrees to a variety of financial instrument-related risks. The Board of Directors approves and monitors
the risk management processes, inclusive of documented investment policies, counterparty limits, and controlling and reporting structures.
Risk
Management
In
the normal course of our business, we are exposed to a number of financial risks that can affect our operating performance and financial
condition. These risks, and the actions taken to manage them, are as noted below.
Interest
rate risk
Interest
rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market
interest rates. The Company is not exposed to any material interest rate risk.
Credit
risk
Credit
risk is the risk of loss associated with the counterparty’s inability to fulfill its payment obligations. For financial assets,
this is typically the gross carrying amount, net of any amounts offset and any impairment losses.
The
Company’s principal financial assets are cash and trade accounts receivable. The Company’s credit risk is primarily concentrated
in its cash which is held with institutions with a high credit worthiness. Credit risk is not concentrated with any particular customer.
The Company’s accounts receivable consists primarily of GST receivable. Trade receivables are generally insignificant.
At
April 30, 2023, the Company’s maximum credit risk exposure is $152,604.
Foreign
exchange risk
Foreign
currency risk arises from fluctuations in foreign currencies versus the United States dollar that could adversely affect reported balances
and transactions denominated in those currencies. As at April 30, 2023, a portion of the Company’s financial assets are held in
Canadian dollars. The Company’s objective in managing its foreign currency risk is to minimize its net exposure to foreign currency
cash flows by transacting, to the greatest extent possible, with third parties in United States dollars. The Company does not currently
use foreign exchange contracts to hedge its exposure of its foreign currency cash flows as management has determined that this risk is
not significant at this point in time. The Company is not exposed to any material foreign currency risk.
Liquidity
risk
Liquidity
risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company has a planning and
budgeting process in place to help determine the funds required to support the Company’s normal operating requirements on an ongoing
basis.
Historically,
the Company’s primary source of funding has been the issuance of equity securities for cash, primarily through the issuance of
common shares. The Company’s access to financing is always uncertain. There can be no assurance of continued access to significant
equity funding.
As
of April 30, 2023, the Company had cash of $194,321 and current liabilities of $6,066,387, compared to $72,921 and $2,593,913,
respectively, as of October 31, 2022. Appropriate going concern disclosures have been made in Notes to the financial statements. To address
the negative working capital balance and any short-term cash shortfalls as of April 30, 2023, the Company issued convertible debentures
for gross proceeds of $3,341,176 in June 2023.
Capital
Management
In
the management of capital, the Company includes components of shareholders’ equity. The Company aims to manage its capital resources
to ensure financial strength and to maximize its financial flexibility by maintaining strong liquidity and by utilizing alternative sources
of capital including equity, debt and bank loans or lines of credit to fund continued growth. The Company sets the amount of capital
in proportion to risk and based on the availability of funding sources. The Company manages the capital structure and makes adjustments
to it in light of changes in economic conditions and the risk characteristics of the underlying assets. Issuance of equity has been the
primary source of capital to date. Additional debt and/or equity financing may be pursued in future as deemed appropriate to balance
debt and equity. To maintain or adjust the capital structure, the Company may issue new shares, take on additional debt or sell assets
to reduce debt.
Contractual
Obligations
All
of our contractual maturities for liabilities as at April 30, 2023 and October 31, 2022 are within one year, consisting of accounts payable
and accrued expenses and loans payable.
Related
Party Transactions
Key
management personnel are those persons having authority and responsibility for planning, directing, and controlling the activities of
the Company, directly or indirectly. Key management personnel include the Company’s executive officers and Board of Director members.
All
related party transactions are in the normal course of operations. All amounts either due from or due to related parties other than specifically
disclosed are non-interest bearing, unsecured and have no fixed terms of repayments.
Related
party transactions with directors, subsequent and former directors and companies and entities over which they have significant influence:
| |
Six months ended | |
| |
April 30, 2023 | | |
April 30, 2022 | |
Consulting fees | |
$ | 11,163 | | |
$ | - | |
Director fees | |
| 93,000 | | |
| 47,905 | |
Professional fees | |
| - | | |
| 50,000 | |
Salaries | |
| 321,234 | | |
| 110,354 | |
Share-based compensation | |
| 405,419 | | |
| - | |
| |
$ | 830,816 | | |
$ | 208,259 | |
Accounts
payable and accrued liabilities – As of April 30, 2023, $11,163 (October 31, 2022 - $33,918) due to related parties was included
in accounts payable and accrued liabilities.
Critical
Accounting Estimates and Judgments
The
preparation of the Company’s Financial Statements in conformity with IFRS requires management to make judgments, estimates and
assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ
from these estimates.
The
estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period
in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods, if revision
affects current and future periods.
The
key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, which have a significant
risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are prepared
in accordance with the same accounting policies, critical estimates and methods described in the Company’s Financial Statements.
The Company based its assumptions and estimates on parameters available when the Financial Statements were prepared. Existing circumstances
and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control
of the Company. Such changes are reflected in the assumptions when they occur.
Recent
Accounting Pronouncements
None
that specifically apply to the Company as evaluated by management.
Subsequent
Events
Litigation
During
the subsequent period, litigation was brought against the Company by the Toronto Dominion Bank (“TD Bank”) in which TD Bank
made a claim for an amount of $1,721,345 (the “Principal Amount”) relating to a bank overdraft. TD Bank and the Company reached
a settlement agreement in which the Company agreed to repay the Principal Amount plus interest and additional costs. The Settlement was
guaranteed by a letter of credit issued to TD Bank by the Royal Bank of Canada in a notional amount of $2,000,000.
Issuance
of Convertible Note
On
June 26, 2023, the Company issued an unsecured convertible note in an aggregate principal amount of $3,341,176 (the “June 2023
Note”) to Target Capital 14 LLC (“Target Capital”) with a maturity date of June 26, 2024. The conversion price in effect
is equal to $6.25 for the first seven months, and thereafter, 90% of the lowest closing price of the Company’s shares for the previous
three trading days prior to the conversion date; provided, however, that such price shall in no event be less than $3.75. Consequently,
a maximum of 890,980 shares of Common Stock are issuable by the Company upon conversion of the June 2023 Note. The June 2023 Note contains
customary and standard representations and warranties, and covenants.
In
connection with the issuance of the June 2023 Note, the Company entered into a securities purchase agreement with Target Capital and
issued to Target Capital a common share purchase warrant to purchase 400,941 common shares (the “Purchase Warrant”), with
an exercise price of $0.001 or on a cashless basis. The Purchase Warrants are classified as financial liabilities since the terms allows
for a cashless net share settlement at the option of the holder.
The
June 2023 Note cancelled an unsecured promissory note in the principal amount of $2,749,412 (the “Note”) that was issued
to Target Capital on March 20, 2023 (the “March 2023 Note”). The March 2023 Note was issued at an original issue discount
of 15% with a maturity date of July 18, 2023. As a result, the Company has no obligations pursuant to the March 2023 Note.
December
2022 Private Placement and Inducement Letter
On
December 9, 2022, the Company closed a $3 million private placement transaction, pursuant to which the Company issued to certain investors
(the “Holders”) common share purchase warrants (the “Existing Warrants”), each warrant exercisable for one share
of Common Stock. On August 22, 2023, the Company issued an offer letter to the Holders (the “Inducement Letter”), providing
the Holders the opportunity to exercise for cash all or some of the Existing Warrants at an exercise price of $3.33 per share of Common
Stock in consideration for the issuance to each exercising Holder of a new Common Stock purchase warrant (the “New Warrant”)
exercisable at an exercise price of $3.33 per share for a number of shares of Common Stock equal to 250% of the number of shares of Common
Stock issued in connection with the Inducement Letter. In connection with the Inducement Letter, the Holders elected to exercise Existing
Warrants for 633,026 shares of Common Stock. As a result of such exercise, New Warrants exercisable for an aggregate 1,582,565 shares
of Common Stock were issued.
Share
Capital
From
August 1 to August 25, 2023, a total of 883,131 shares were issued from warrants being exercised for proceeds of $2,855,979. On August
10 and 14, 2023, the company issued 50,000 and 150,000 common shares, respectively, as compensation for consulting services.
Outstanding
Share Data
The
Company is authorized to issue an unlimited number of common shares without par value.
As
at April 30, 2023, the Company had a total of 511,361 common shares outstanding and 19,689 restricted share units (“RSUs”)
outstanding, and none of the RSUs had vested.
As
of April 30, 2023, the following options were outstanding and vested, entitling the holders thereof the right to purchase one common
share for each option held as follows:
Outstanding | | |
Exercise Price | | |
Expiry Date | |
Vested | |
| 3,207 | | |
| CAD$172.50 | | |
November 9, 2025 | |
| 3,207 | |
| 40,800 | | |
$ | 6.25 | | |
April 3, 2028 | |
| - | |
| 44,007 | | |
| | | |
| |
| 3,207 | |
The
following table discloses the number of warrants outstanding as at April 30, 2023:
Number of warrants | | |
Exercise Price | | |
Expiry date |
| 10,736 | | |
| CAD$86.75 | | |
August 3, 2024 |
| 18,474 | | |
| CAD$260.50 | | |
August 3, 2024 |
| 163,565 | | |
$ | 52 | | |
August 4, 2027 |
| 10,514 | | |
$ | 130 | | |
August 4, 2027 |
| 11,931 | | |
$ | 0.025 | | |
August 4, 2027 |
| 266,420 | | |
$ | 52 | | |
November 3, 2027 |
| 118,667 | | |
$ | 15 | | |
June 9, 2028 |
| 78,000 | | |
$ | 15 | | |
June 9, 2028 |
| 11,333 | | |
$ | 0.025 | | |
No expiry |
| 689,640 | | |
| | | |
|
As
of September 13, 2023, the Company had a total of 1,594,492 shares outstanding and 19,689 restricted share units (“RSUs”)
outstanding, and 6,563 RSUs had vested.
The
Company also had the following warrants outstanding as of such date:
Number of warrants | | |
Exercise Price | | |
Expiry date |
| 10,736 | | |
| CAD$86.85 | | |
August 3, 2024 |
| 18,474 | | |
| CAD$260.55 | | |
August 3, 2024 |
| 149,142 | | |
$ | 52 | | |
August 4, 2027 |
| 10,514 | | |
$ | 130 | | |
August 4, 2027 |
| 266,420 | | |
$ | 52 | | |
November 3, 2027 |
| 11,931 | | |
$ | 0.025 | | |
August 4, 2027 |
| 1,582,566 | | |
$ | 3.33 | | |
June 9, 2028 |
| 2,049,783 | | |
| | | |
|
Bruush Oral Care (NASDAQ:BRSH)
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