●
|
the Company’s ability to raise sufficient financing on a timely basis, to secure and restore relationships with its suppliers and development partners and to retain qualified personnel;
|
●
|
the Company’s business plan consists of the development of computer-assisted robotic surgical technologies for application in minimally invasive surgery comprising its single-port robotic surgical system;
|
●
|
the Company is planning continued development of a robust training curriculum and post-training assessment tools for surgeons and surgical teams;
|
● | the proposed training curriculum is planned to include cognitive pre-training, psychomotor skills training, surgery simulations, live animal and human cadaver lab training, surgical team training, troubleshooting and an
overview of safety; |
● |
post-training assessment will include validation of the effectiveness of those assessment tools; |
● |
the Company’s intent to initially pursue gynecologic surgical indications for use of its single-port robotic surgical system; |
● |
the single-port robotic surgical system patient cart is being developed to deliver multi-articulating instruments and a 3D high definition vision system into the patient’s body cavity through a single access
port; |
● |
the Company’s technology and research and development objectives and milestones, including any estimated costs, schedules for completion and probability of success and including without limitation the table
set forth herein under the heading, “Current Development Plan” and the footnotes thereunder; |
● |
the Company’s intention with respect to updating any forward-looking statement after the date on which such statement is made or to reflect the occurrence of unanticipated events; |
● |
the Company’s expectation with respect to submitting its Investigational Device Exemption (“IDE”) application to the U.S. Food and Drug Administration (“FDA”) in a timely manner; |
● |
the Company’s expectation whether the FDA will grant IDE approval on terms which allow the Company to proceed with clinical studies in the U.S. which are required for regulatory approval or clearance; |
● |
the Company’s expectation that under the FDA guidelines, the surgical system will be classified as a Class II medical device; |
● |
the Company’s belief that the FDA regulation of robotic surgical systems remains similar to how the FDA has previously approved or cleared these types of devices; |
● |
any changes in a regulatory agency’s product classification, guidance, regulatory approval route or other requirements promulgated between now and the time the Company seeks regulatory approval or clearance; |
● |
the Company’s expectation that it can, in a timely manner, produce the appropriate preclinical and clinical data required for a regulatory submission to the FDA, and Technical File for the CE mark; |
● |
assuming the Company obtains regulatory approvals or clearances, the Company’s intentions with respect to initiating marketing activities and expectation with respect to launching a commercial product in
certain jurisdictions;
|
● |
the Company’s plans to design, create and refine software for production system functionality of the single-port robotic surgical system and the estimated incremental costs (including the status, cost, and
timing of achieving the development milestones disclosed herein); |
● |
the indication of additional specific milestones as the development of the Company’s single-port robotic surgical system progresses; |
● |
the Company’s intention to continue to assess specialized skill and knowledge requirements and recruitment of qualified personnel and partners; |
● |
the Company’s continuing efforts to secure its intellectual property by filing patent applications; |
● |
the Company’s expectations with respect to its relationship with the Key Supplier, |
● |
the future success of the Company is substantially dependent on funding its research and development program and maintaining the support of its research and development and manufacturing service providers and, in some
cases, securing new suppliers and service providers; |
● |
the Company will need to replace any product development service provider in the event it should be necessary or desirable to the Company; |
● |
the performance of human surgeries with the single-port robotic surgical system will require an IDE from the FDA, which must be submitted and approved in advance; |
● |
the recruitment of surgeons from multiple hospital sites will be necessary to perform the surgeries, with each of these sites requiring approval of their independent Institutional Review Board (“IRB”) to
approve the studies; |
● |
previous results achieved by surgeons in operating prototypes in animal and cadaver studies have validated the potential for single incision surgeries to be performed with the Company’s single-port robotic
surgical system; |
● |
insights gained from these preclinical studies have directed the Company to make further product refinements and improvements; |
● |
the Company’s intentions to complete summative human factors studies and complete the design and development of the system and initiate clinical studies; |
● |
the surgical indications for, and the potential benefits of, the robotic surgical system; |
● |
the Company’s ability to obtain and sustain favorable reimbursement determinations from the health authorities in each jurisdiction where products have regulatory approval or clearance to be marketed; |
● |
the Company’s belief that the materials and parts necessary for the manufacture of a clinical-grade robotic surgical system will be available in the marketplace; |
● |
the Company’s filing and prosecution of patent applications to expand its intellectual property portfolio as technologies are developed or refined; |
● |
the scope of protection obtained, if any, from the Company’s current or future patent applications, as well as their expected competitive advantages; |
● |
the Company’s seeking of licensing opportunities to expand its intellectual property portfolio; |
● |
obtaining or maintaining trademark registrations for the marks and names the Company uses in one or more countries and the future use of such marks and names; |
● |
the Company’s expected market segments and principal markets; |
● |
the Company’s expectation that negative cash flow is expected to continue; |
● |
the Company’s intention with respect to not paying any cash dividends on common shares in the foreseeable future; |
● |
the Company’s intention to retain future earnings, if any, to finance expansion and growth; |
● |
the Company’s industry and the markets in which it plans to operate or seeks to operate, including its general expectations and market position, market opportunities and market share; |
● |
the Company further expanding of its patent portfolio by filing additional patent applications as it progresses in the development of robotic surgical technologies and potentially, by licensing suitable
technologies; |
● |
the Company receiving a series of payments totaling up to $31 million for Medtronic’s license to such technologies, as technology milestones are completed and verified; |
● |
the Company’s ability to complete the technology milestones as outlined in the Medtronic Development Agreement (as defined herein); |
● |
the Company’s anticipated developments costs; |
● | the need to divert important financial and human resources toward resolving delays or problems; |
● |
the Company’s plans to pay the Key Supplier in full satisfaction of the outstanding payables by the end of the current calendar year; |
● |
the projected competitive conditions with respect to the Company’s products; and |
● |
the estimated size of the market for robotic surgical systems. |
● |
dependency on additional financing; |
● |
the Company’s history of losses; |
● |
reliance on strategic alliances; |
● |
the ability to retain key personnel in a highly competitive employment environment; |
● |
the possibility of the Company’s inability to augment its management team when required; |
● |
the possibility that the Company’s trade secrets, and confidential information may be compromised; |
● |
reliance on third parties for important aspects of the Company’s business; |
● |
industry competitiveness; |
● |
operating without infringement of intellectual property rights of others; |
● |
obtaining and enforcing patent protection for the Company’s products; |
● |
obtaining or maintaining the Company’s trademarks; |
● |
conflicts of interest; |
● |
fluctuating financial results; |
● |
rapidly changing markets; |
● |
introduction of more technologically advanced products by competitors; |
● |
potential product liability claims; |
● |
ability to license other intellectual property rights; |
● |
government regulation; |
● |
modifications to products requiring new regulatory approval or clearance; |
● |
the outcome of facility or supplier site inspections by regulatory authorities; |
● |
extensive post-market regulation; |
● |
the Company’s products causing or contributing to a death or serious injury; |
● |
recalls by governmental authorities; |
● |
compliance with accounting regulations and tax rules across multiple jurisdictions; |
● |
contingent liabilities; |
● |
sales cycle for the Company’s single-port robotic surgical system; |
● |
uncertainty as to product development and commercialization milestones; |
● |
uncertainties as to development and manufacturing of a commercially viable product; |
● |
manufacturing delays, interruptions, and cost overruns; |
● |
reliance on external suppliers and development firms; |
● |
delays, liability, and negative perceptions from product malfunction; |
● |
instruments, components, and accessories require repeated cleaning and sterilization; |
● |
commercial disputes; |
● |
additional regulatory burden and controls over financial reporting; |
● |
fluctuations in foreign currency; |
● |
the possibility that the Company may not be able to maintain its “foreign private issuer” status, and the possibility of delisting from the Nasdaq Capital Market (“Nasdaq”) or Toronto Stock Exchange
(“TSX”); |
● |
reduced disclosure requirements applicable to “emerging growth companies”; |
● |
the likelihood that the Company is a “passive foreign investment company”; |
● |
cyber-security risks and threats; |
● |
adverse impact on the Company’s financial condition and results of operations for fiscal 2020 as a result of COVID-19; |
● |
current global financial conditions; |
● |
results of operations; |
● |
difficulties with forecasting future operating results; |
● |
profitability; |
● |
obligations as a public company; |
● |
stock price volatility; |
● |
possible future sales by the Company’s shareholders of their securities; |
● |
limited operating history of the Company; |
● |
the negative impact of COVID-19 on the ability of suppliers of goods and services to provide resources in a timely manner to support the Company’s milestones; |
● |
enforcement of judgements against foreign persons; |
● |
there is no market for the Company’s unlisted warrants; |
● |
the negative impact of COVID-19 on present and future demand for robotic surgeries, equipment and supplies; and |
● |
the negative impact of COVID-19 on the ability of the Company to obtain regulatory approvals or clearances as required on a timely basis to accomplish its milestones and objectives. |
● |
general business and current global economic conditions; |
● |
ability to establish pricing and reimbursement at levels favorable to the Company; |
● |
future success of current research and development activities; |
● |
achieving development milestones for Medtronic or those related to its own internal development program; |
● |
inability to achieve product cost targets; |
● |
competition; |
● |
changes to tax rates and benefits; |
● |
the availability of financing on a timely basis and on terms acceptable to the Company; |
● |
the Company’s and competitors’ costs of production and operations; |
● |
the Company’s ability to attract and retain skilled employees; |
● |
the Company’s ongoing relations with its third-party service providers; |
● |
the design of the robotic surgical system and related platforms and equipment; |
● |
the progress and timing of the development of the Company’s robotic surgical system; |
● |
costs related to the development of the Company’s robotic surgical system; |
● |
receipt of all applicable regulatory approvals/clearances; |
● |
ability to respond to changes in the regulatory environment; |
● |
estimates and projections regarding the robotic surgery equipment industry; |
● |
protection of the Company’s intellectual property rights; |
● |
market acceptance of the Company’s systems under development; |
● |
the Company’s ability to meet the continued listing standards of Nasdaq and the TSX; |
● |
the type of specialized skill and knowledge required to develop the Company’s robotic surgical system and the Company’s access to such specialized skill and knowledge; and |
● |
the Company’s ability to meet the deliverables in accordance with the Medtronic Development and License Agreement (as defined herein). |
Milestone
Number
|
Development Milestones
|
Estimated Cost
(in US million $)
|
Schedule for
Milestone
Completion
|
Comments
|
Milestone 1
|
Obtain final independent report from validation testing of system safety and usability for the intended users and use environments under simulated robotic manipulation exercises intended to
replicate essential surgical tasks
|
Q4 2019
|
Completed
|
|
Complete User Manual for robotic system setup by operating room staff and surgeon operation of surgeon workstation, patient cart, instruments and accessories
|
Q4 2019
|
Completed
|
||
Obtain ISO 13485 Certification1
|
Q4 2019
|
Completed
Q1- 2020
|
||
Milestone 2
|
Perform additional software development and test system performance
|
TBD
|
TBD
|
|
Implement and test improvements to instruments, camera systems and accessories
|
||||
Perform biocompatibility testing of instruments, camera systems and accessories at independent lab
|
||||
Perform electrical safety testing for surgeon workstations and patient cart, including electromagnetic compatibility (EMC) and electromagnetic interference (EMI) tests at independent lab
|
||||
File Pre-Submission documentation with FDA regarding planned clinical studies
|
||||
Update application for IDE as additional testing lab data is received and continue preparations for human confirmatory studies
|
||||
Milestone 3
|
Launch rebranded product line, including logos with trademark pending, literature and presentation templates, product and packaging labeling, and new website
|
TBD
|
TBD
|
|
Complete system software validation
|
||||
Submit IDE application to FDA
|
Milestone 4
|
Receive IDE approval from FDA
|
TBD
|
TBD
|
|
Receive approvals from IRB Committees of IDE hospitals
|
||||
Commence human confirmatory studies under IDE protocols for FDA submittal
|
||||
Milestone 5
|
Complete human confirmatory studies and patient follow-up and compile reports from human confirmatory studies
|
TBD
|
TBD
|
|
Submit application to FDA for regulatory clearance
|
||||
Submit Technical File to European Notified Body for review for CE mark
|
||||
Ongoing software development and implementation
|
||||
Planning and preparation for manufacturing and commercialization
|
||||
Milestone 6
|
Planning and preparation for commercialization
|
TBD
|
TBD
|
Milestone (1)
|
Deadline (2)
|
Payment(3)
|
Comments
|
Milestone 1
|
Four (4) months from Development Start Date (4)
|
$10,000,000
|
-
|
Milestone 2 (5)
|
Four (4) months from Development Start Date
|
-
|
Complete
|
Milestone 3
|
Six (6) months from the later of (a) receipt by the Company of Payment for Milestone 1, (b) receipt by the Company from Medtronic of Medtronic deliverables required for Milestone 3, and (c)
receipt by the Company from Medtronic of confirmation of certain due diligence in respect of the Company’s deliverables for Milestone 1
|
$10,000,000
|
-
|
Milestone 4
|
Four (4) months from the later of (a) receipt by the Company of Payment for Milestone 3, (b) receipt by the Company of Medtronic deliverables for Milestone 4, and (c) receipt by the Company
from Medtronic of confirmation of certain due diligence in respect of the Company’s deliverables for Milestone 3
|
$11,000,000 (6),(7)
|
-
|
1. |
Milestone 1, Milestone 3, and Milestone 4 are each defined in the Development Agreement and consist of the completion of the development of certain robotic assisted surgical technologies as described in the Development
Agreement. |
2. |
All as further described and qualified in the Development Agreement. |
3. |
Each payment is conditional upon the corresponding milestone being completed on a timely basis. |
4. |
“Development Start Date” has the meaning ascribed to it in the Development Agreement. |
5. |
Milestone 2 is a non-technology milestone defined as the Company raising at least $18,000,000 of capital between the effective date of the Development Agreement and the date that is four months from the
Development Start Date. The Company has met this milestone. |
6. |
The amount of the payment will be the sum of $10,000,000 and the amount of certain legal, transaction and intellectual property related expenses to be paid to the Company up to a maximum of $1,000,000
pursuant to the Development Agreement and License Agreement. |
7. |
The balance outstanding under the Medtronic Loan (described below) will be offset against the payment for Milestone 4. |
|
Three
Months
Ended
June 30, 2020
|
Three
Months
Ended
March 31, 2020
|
Three
Months
Ended
December 31, 2019
|
Three
Months
Ended
September 30, 2019
|
Three
Months
Ended
June 30, 2019
|
Three
Months
Ended
March 31, 2019
|
Three
Months
Ended
December 31, 2018
|
Three
Months
Ended
September 30, 2018
|
||||||||||||||||||||||||
Net Sales
|
$
|
10,000,000
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||
Net and
Comprehensive
Loss (Income)
from Operations
|
$
|
1,143,199
|
$
|
768,043
|
$
|
(2,412,863
|
)
|
$
|
1,564,196
|
$
|
14,472,866
|
$
|
28,282,880
|
$
|
8,410,702
|
$
|
7,534,456
|
|||||||||||||||
Basic and
Diluted Loss
(Gain) per Share
|
$
|
0.02
|
$
|
0.02
|
$
|
(0.07
|
)
|
$
|
0.05
|
$
|
0.46
|
$
|
1.22
|
$
|
0.41
|
$
|
0.41
|
Contractual
Obligations
existing at the
date of this
MD&A
|
Total
$
|
Less than 1 year
|
1 – 3 years
|
4 – 5 years
|
After 5 years
|
|||||
Capital Leases
|
507,813
|
97,392
|
310,120
|
100,301
|
--
|
|||||
Note Payable(1)
|
1,632,000
|
--
|
1,632,000
|
--
|
--
|
|||||
Supplier
Agreement
|
4,715,231
|
4,715,231
|
--
|
--
|
--
|
|||||
Total Contractual
Obligations
|
6,855,044
|
4,812,623
|
1,942,120
|
100,301
|
--
|
Issue Date
|
Expiry Date
|
Number
Issued
|
Number
Outstanding
|
Exercise Price
(US$)
|
Exercise Price
(CDN$)
|
|
TMD.W.T.F
|
16-Nov-15
|
16-Nov-20
|
233,740
|
233,740
|
48.00
|
|
TMD.W.T.G
|
12-Feb-16
|
12-Feb-21
|
389,027
|
386,694
|
30.00
|
|
TMD.W.T.G
|
23-Feb-16
|
23-Feb-21
|
58,226
|
58,226
|
30.00
|
|
TMD.W.T.H
|
31-Mar-16
|
31-Mar-21
|
501,831
|
501,831
|
36.00
|
|
TMD.W.T.H
|
14-Apr-16
|
31-Mar-21
|
75,275
|
75,275
|
36.00
|
|
TMD.W.T.I
|
20-Sep-16
|
20-Sep-21
|
569,444
|
569,444
|
22.50
|
|
TMD.W.T.I
|
27-Oct-16
|
20-Sep-21
|
67,667
|
67,667
|
22.50
|
|
Not Listed
|
16-Mar-17
|
16-Mar-21
|
357,787
|
355,253
|
15.00
|
|
Not Listed
|
29-Jun-17
|
29-Jun-22
|
1,612,955
|
75,810
|
6.00
|
|
Not Listed
|
21-Jul-17
|
29-Jun-22
|
370,567
|
370,567
|
6.00
|
|
Not Listed
|
24-Aug-17
|
24-Aug-22
|
563,067
|
563,067
|
6.00
|
|
Not Listed
|
5-Dec-17
|
5-Dec-22
|
1,533,333
|
1,533,333
|
18.00
|
|
Not Listed
|
10-Apr-18
|
10-Apr-23
|
1,126,665
|
1,126,665
|
10.50
|
|
Not Listed
|
10-May-18
|
10-Apr-23
|
168,889
|
168,889
|
10.50
|
|
Not Listed1
|
10-Aug-18
|
10-Aug-23
|
7,679,574
|
6,661,068
|
2.920
|
|
Not Listed2
|
21-Mar-19
|
21-Mar-24
|
8,455,882
|
8,455,882
|
3.950
|
|
Not Listed
|
27-Mar-20
|
27-Mar-25
|
3,500,000
|
-
|
0.190
|
|
Not Listed
|
6-May-20
|
6-Nov-25
|
2,757,252
|
64,313
|
0.300
|
|
Not Listed
|
10-Jun-20
|
10-Jun-24
|
9,000,000
|
9,000,000
|
1.000
|
|
39,021,181
|
30,267,724
|
Note 1 - Includes a ratchet clause triggered August 29, 2019 lowering the exercise price from $3.20 to $2.92.
|
Note 2 - Includes a ratchet clause triggered August 29, 2019 lowering the exercise price from $4.00 to $3.95.
|
Date of Financing
|
Anticipated Use of Proceeds
|
Actual Use of Proceeds
|
Explanation
|
March 25, 2020
|
General corporate purposes including resuming the development of the single-port robotic surgical system, instruments, and accessories; funding working capital (including the reduction of
outstanding payables); and capital expenditures.
|
As anticipated, including a limited amount of development activity.
|
none
|
May 6, 2020
|
General corporate purposes including resuming the development of the single-port robotic surgical system, instruments, and accessories; funding working capital (including the reduction of
outstanding payables); and capital expenditures.
|
As anticipated, including a limited amount of development activity.
|
none
|
June 10, 2020
|
General corporate purposes including resuming the development of the single-port robotic surgical system, instruments, and accessories; funding working capital (including the reduction of
outstanding payables); and capital expenditures.
|
As anticipated. The majority of the proceeds are still available for future periods. The Company does not anticipate alternative use of these proceeds.
|
none
|
Type of Securities
|
Number of Common Shares issued or issuable upon conversion
|
Common Shares(1)
|
81,524,320
|
Stock options(2)
|
2,627,376
|
Warrants
|
30,267,724
|
Broker warrants(3)
|
3,265,496
|
(1) |
Refer to details of the offerings in the previous section of this document. |
(2) |
The Company has outstanding options enabling certain employees, directors, officers, and consultants to purchase common shares. Includes 25,765 stock options issued January 2020 with an exercise price of CDN
$0.657 to a director in exchange for services rendered. The options vest immediately and expire 7 years following the date of the grant. |
(3) |
A total of 3,265,496 broker warrants previously issued in connection with offerings of securities by the Company in August 2018, March 2019, March 2020, May 2020, and June 2020 offerings remain outstanding.
Details include the following: |
● |
Pursuant to the agency agreement in respect of the August 2018 offering, in addition to the cash commission paid to the agents, 537,570 broker warrants were issued to the agents. Each broker warrant entitles
the holder thereof to acquire one common share at the price of US $2.50 for a period of 24 months following the closing date. |
|
● |
Pursuant to the March 2019 Agency Agreement, in addition to the cash commission paid to the agents, 591,911 broker warrants were issued to the agents. Each broker warrant entitles the holder thereof to
acquire one common share at the price of US $3.40 for a period of 24 months following the closing date. |
|
● |
Pursuant to the agency agreement in respect of the March 2020 offering, in addition to the cash commission paid to the agents, 490,000 broker warrants were issued to the agents. Each broker warrant entitles
the holder thereof to acquire one common share at the price of US $0.21 for a period of 5 years following the closing date. |
|
● |
Pursuant to the agency agreement in respect of the May 2020 offering, in addition to the cash commission paid to the agents, 386,015 broker warrants were issued to the agents. Each broker warrant entitles the
holder thereof to acquire one common share at the price of US $0.45335 for a period of five and one half (5.5) years following the closing date. |
|
● |
Pursuant to the agency agreement in respect of the June 2020 offering, in addition to the cash commission paid to the agents, 1,260,000 broker warrants were issued to the agents. Each broker warrant entitles
the holder thereof to acquire one common share at the price of US $1.25 for a period of four years following the closing date. |
● |
Revenue from the License Agreement for intellectual property rights and know-how (“Royalty Payment”) is recognized when rights are granted and customer acceptance is established. Compensation received for the performance
of technology transfer services relating to the License Agreement is accounted for separately from the Royalty Payment and will be recognized at the time the service is performed. |
● |
Revenue from the Development Agreement (see note 7) and the allocation of ownership and license rights developed under each milestone is recognized when the rights are granted and customer acceptance is
established. |
● |
Under the terms of the Development Agreement, payment is dependent on when the customer confirms completion of each milestone as defined. Due to the uncertainty of milestone achievements and entitlement of
payments, the Company recognizes revenue only upon acceptance by the customer of work performed and the milestone achieved. |