Burcon NutraScience Corp 40-F/A for FY2021
Burcon NutraScience Corp (BRCNF)
About this 40-F/A
Burcon NutraScience Corp filed this 40-F/A on August 11, 2021, covering the fiscal year ended March 31, 2021 (FY2021).
Headline figures
Fiscal year ended March 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- 258.65K CAD
- up 730.8% from 31.13K CAD a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
AMENDMENT NO.1
TO
FORM
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Registration statement pursuant to Section 12 of the Securities Exchange Act of 1934
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or
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Annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
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For the fiscal year ended
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Commission File Number
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____________________
(Exact name of Registrant as specified in its charter)
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British Columbia
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8731
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Not Applicable
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(Province or other jurisdiction of
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(Primary Standard Industrial Classification
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(I.R.S. Employer
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incorporation or organization)
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Code Number)
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Identification Number)
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(
(Address and telephone number of Registrant's principal executive offices)
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th
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(Name, address (including zip code) and telephone number (including
area code) of agent for service in the United States)
____________________
Securities registered or to be registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Securities registered pursuant to Section 12(g) of the Act: None.
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
For annual reports, indicate by check mark the information filed with this Form:
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Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: As at March 31, 2021, the Registrant had outstanding
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. [X]
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). [X]
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 12b-2 of the Exchange Act.
Emerging growth company
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.
The term "new or revised financial accounting standard" refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
EXPLANATORY NOTE
Burcon NutraScience Corporation (the "Company" or the "Registrant") is filing this Amendment No. 1 (the “Amendment to Form 40-F”) to the Annual Report on Form 40-F (the “Original Form 40-F”) for the fiscal year ended March 31, 2021 for the purpose of amending Exhibit 99.2 “Audited Annual Consolidated Financial Statements of the Registrant for the years ended March 31, 2021 and 2020 and notes thereto, presented in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, together with the report of auditors thereon” to insert an inadvertently omitted signature of the auditor.
This Amendment to Form 40-F does not reflect any events that have occurred after the Original Form 40-F was filed.
FORWARD LOOKING STATEMENTS
This Amendment to Form 40-F and the Exhibits incorporated by reference into this Amendment to Form 40-F of the Registrant may contain "forward-looking information" or "forward-looking statements" within the meaning of applicable securities laws (collectively referred to herein as "forward-looking statements"). All statements other than statements of fact may be deemed to be forward-looking statements, including statements with regard to expected financial performance, strategy and business conditions. The words "believe", "plan", "intend", "estimate", "expect", "anticipate", "continue", or "potential", and similar expressions, as well as future or conditional verbs such as "will", "should", "would", and "could" often identify forward-looking statements. These statements reflect management's beliefs with respect to future events and are based on information available to management as of the respective dates set forth in the Exhibits incorporated by reference into this Amendment to Form 40-F, including reasonable assumptions, estimates, internal and external analysis and opinions of management considering its experience, perception of trends, current conditions and expected developments as well as other factors that management believed to be relevant as at the date such statements were made. These statements involve known and unknown risks, uncertainties, and other factors that may cause actual results or events to differ materially from those anticipated or implied in such forward-looking statements, including, without limitation, those described in the Registrant's Annual Information Form for the year ended March 31, 2021, attached hereto as Exhibit 99.1.
The Registrant and management caution readers not to place undue reliance on any forward-looking statements, which speak only as of the date made. Although the Registrant believes that the expectations reflected in the forward-looking statements were reasonable as of the time such forward-looking statements were made, it can give no assurance that such expectations will prove to have been correct. The Registrant and management assume no obligation to update or revise them to reflect new events or circumstances except as required by applicable securities laws.
DIFFERENCES IN UNITED STATES AND CANADIAN REPORTING PRACTICES
The Registrant is permitted, under a multijurisdictional disclosure system adopted by the United States, to prepare this report in accordance with Canadian disclosure requirements, which are different from those of the United States. The Registrant prepares its consolidated financial statements, which are filed with this report on Form 40-F in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and the audit is subject to Canadian auditing and auditor independence standards.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents, or the portions thereof indicated below, that are filed as Exhibits 99.1, 99.2 and 99.3 to this Amendment to Form 40-F, are incorporated herein by reference.
• Annual Information Form of the Registrant for the year ended March 31, 2021;
• Audited Annual Consolidated Financial Statements of the Registrant for the years ended March 31, 2021 and 2020 and notes thereto, presented in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, together with the report of auditors thereon; and
• Management's Discussion and Analysis of the Registrant for the years ended March 31, 2021 and 2020.
DISCLOSURE CONTROLS AND PROCEDURES
As of the end of the period covered by this Amendment to Form 40-F, the Registrant carried out an evaluation, under the supervision of the Registrant's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Registrant's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act). Based upon that evaluation, the Registrant's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Amendment to Form 40-F, the Registrant's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Registrant in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission (the "Commission") rules and forms, and (ii) accumulated and communicated to the Registrant's management, including its principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.
The Registrant's management, including the Chief Executive Officer and Chief Financial Officer, does not expect that its disclosure controls and procedures or internal procedures will prevent all error and all fraud. A control system can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Registrant have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion by two or more people, or by management override of the control. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.
MANAGEMENT ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
This annual report does not include a report of management's assessment regarding internal control over financial reporting or an attestation report of the company's registered public accounting firm due to a transition period established by rules of the Securities and Exchange Commission for newly public companies.
ATTESTATION REPORT OF THE REGISTERED PUBLIC ACCOUNTING FIRM
The Registrant qualifies as an "emerging growth company" under Section 3 of the Exchange Act, as a result of enactment of the Jumpstart Our Business Startups Act (the "JOBS Act"). Under the JOBS Act, "emerging growth companies" are exempt from Section 404(b) of the Sarbanes-Oxley Act of 2002, which generally requires that a public company's registered public accounting firm provide an attestation report relating to management's assessment of internal control over financial reporting. The Registrant qualifies as an "emerging growth company" and therefore has not included in, or incorporated by reference into, this Amendment to Form 40-F such an attestation report as of the end of the period covered by this Amendment to Form 40-F.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the period covered by this Amendment to Form 40-F, no changes occurred in the Registrant's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting.
NOTICES PURSUANT TO REGULATION BTR
None.
CODE OF ETHICS
The Registrant has adopted a code of business ethics and conduct (the "Code"), which is applicable to all directors, officers and employees of the Registrant. A copy of the Code can be obtained from the Registrant's website at www.burcon.ca or without charge, upon request from Burcon NutraScience Corporation, 1946 West Broadway, Vancouver, British Columbia V6J 1Z2, Canada, or by email at: info@burcon.ca. There were no amendments to the Code, or waivers of the Code that apply to the Company's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions during the fiscal year ended March 31, 2021.
DIRECTOR INDEPENDENCE
The Registrant's Board of Directors consists of the following individuals: Alan Chan, Rosanna Chau, Debora Fang, J. Douglas Gilpin, Peter Kappel, David Ju, Calvin Chi Leung Ng and David Lorne John Tyrrell. The Registrant's Board of Directors has determined that Debora Fang, J. Douglas Gilpin, Peter Kappel, David Ju and David Lorne John Tyrrell are independent, as that term is defined by the Nasdaq listing standards applicable to the Registrant.
IDENTIFICATION OF THE AUDIT COMMITTEE
The Registrant has a separately-designated standing audit committee established in accordance with section 3(a)(58)(A) of the Exchange Act. The Registrant's audit committee is composed of the following directors: J. Douglas Gilpin, Debora Fang and Peter Kappel. The Board of Directors has determined that each of the audit committee members is independent, as that term is defined by the Nasdaq listing standards applicable to the Registrant.
AUDIT COMMITTEE FINANCIAL EXPERT
The Registrant's Board of Directors has determined that J. Douglas Gilpin, a member of the Audit Committee, qualifies as an audit committee financial expert, as defined in paragraph (8)(b) of General Instruction B of Form 40-F, and is independent as that term is defined by the Nasdaq listing standards applicable to the Registrant.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The required disclosure is included in the Annual Information Form, under the heading "Audit Committee and Disclosure under National Instrument 52-110," which is incorporated herein by reference to Exhibit 99.1.
OFF-BALANCE SHEET ARRANGEMENTS
The Registrant has no off-balance sheet arrangements.
CURRENCY
Unless otherwise indicated, all dollar amounts in this Amendment to Form 40-F are in United States dollars. The exchange rate of Canadian dollars into United States dollars, on March 31, 2021, based upon the daily exchange rate as quoted by the Bank of Canada was U.S.$1.00 = Cdn.$1.2575.
CONTRACTUAL OBLIGATIONS
The following table lists, as of March 31, 2021, information with respect to the Registrant's known contractual obligations (in thousands):
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Payments due by period
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Contractual Obligations
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Total
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Less than
1 year |
1-3 years
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3-5 years
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More than
5 years |
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Long-Term Debt Obligations
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—
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—
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—
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—
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—
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Capital (Finance) Lease Obligations
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—
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—
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—
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—
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—
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Operating Lease Obligations
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356
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141
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190
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25
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—
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Purchase Obligations
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—
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—
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—
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—
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—
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Other Long-Term Liabilities Reflected on the Company's Balance Sheet under the GAAP of the primary financial statements
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—
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—
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—
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—
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—
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Total
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356
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141
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190
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25
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NASDAQ STATEMENT OF CORPORATE GOVERNANCE DIFFERENCES
As a Canadian corporation listed on the NASDAQ, we are not required to comply with most of the NASDAQ's corporate governance standards, and instead may comply with Canadian corporate governance practices. However, we are required to disclose the significant differences between our corporate governance practices and the requirements applicable to U.S. domestic companies listed on the NASDAQ. These significant differences are disclosed on our website at https://burcon.ca/investors/governance/. Except as disclosed on our website, we are in compliance with the NASDAQ corporate governance standards in all significant respects.
MINE SAFETY DISCLOSURE
Not applicable.
UNDERTAKING
The Registrant undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Commission staff, and to furnish promptly, when requested to do so by the Commission staff, information relating to the securities in relation to which the obligation to file an annual report on Form 40-F arises or transactions in said securities.
CONSENT TO SERVICE OF PROCESS
The Registrant previously filed a Form F-X in connection with the class of securities to which this Amendment to Form 40-F relates.
Any change to the name or address of the Registrant's agent for service shall be communicated promptly to the Commission by amendment to the Form F-X referencing the file number of the Registrant.
SIGNATURES
Pursuant to the requirements of the Exchange Act, the Registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this Amendment to Form 40-F to be signed on its behalf by the undersigned, thereunto duly authorized.
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Burcon NutraScience Corporation
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By:
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/s/ Johann F. Tergesen
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Name: Johann F. Tergesen
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Date: August 11, 2021
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Title: President & CEO
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EXHIBIT INDEX
The following documents are being filed with the Commission as Exhibits to this Amendment to Form 40-F:
*Previously filed.
Burcon NutraScience Corporation
Consolidated Financial Statements
March 31, 2021 and 2020
(Prepared in Canadian dollars)
Report of Independent Registered Public Accounting Firm
To the Directors of Burcon NutraScience Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Burcon NutraScience Corporation and its subsidiaries (together, the Company) as of March 31, 2021 and 2020, and the related consolidated statements of operations and comprehensive loss, changes in shareholders’ equity and cash flows for the years then ended, including the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2021 and 2020, and its financial performance and its cash flows for the years then ended in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements; and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
PricewaterhouseCoopers LLP
PricewaterhouseCoopers Place, 250 Howe Street, Suite 1400, Vancouver, British Columbia, Canada V6C 3S7
T: +1 604 806 7000, F: +1 604 806 7806
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.
Investment in Merit Functional Foods Corporation
As described in Notes 2 and 5 to the consolidated financial statements, the Company has an investment in Merit Functional Foods Corporation (“Merit”), which is accounted for under the equity method of accounting. Under the equity method of accounting, investments are recorded at historical cost as an asset and adjusted for dividends received, capital contributions, other transactions that result in changes in ownership interest held by the Company, and the Company’s share of Merit’s earnings or losses, which is recorded as a component of loss and comprehensive loss for the year. Management considers whether there are any indicators of impairment to determine whether it is necessary to recognize any impairment loss with respect to the Company’s investment in an associate. When such indicators of impairment exist, the carrying amount of the investment is tested for impairment by comparing the recoverable amount of the investment with its carrying amount. As at March 31, 2021, the Company’s investment in Merit amounted to $13,508,192. For the year ended March 31, 2021, the Company’s share of loss from Merit was $2,421,459 and the Company recorded a gain on dilution of investment in Merit of $6,384,942.
The principal considerations for our determination that performing procedures relating to the investment in Merit is a critical audit matter are the magnitude of the investment in Merit, its related share of loss, and the judgments made by management related to the internal and external factors used in their assessment of impairment indicators. This led to an increased audit effort, including the need to involve auditors of Merit.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others: (i) evaluating the Company’s investment in Merit and share of loss in Merit by obtaining, reviewing and evaluating information from the auditor of Merit, including information necessary to understand significant findings or issues identified and actions taken to address them; (ii) assessing the completeness of internal and external factors that could be considered as indicators of impairment of the Company’s investment in Merit, including consideration of evidence obtained in other areas of the audit; and (iii) testing the gain on dilution of investment in Merit, which included comparing the investment value to the shareholders agreement, agreeing the book value of Merit’s net assets at the date of the transaction to underlying accounting records and recalculating the resulting gain on dilution.
/s/ PricewaterhouseCoopers LLP
Chartered Professional Accountants
Vancouver, British Columbia, Canada
June 29, 2021
We have served as the Company's auditor since 2001.
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BURCON NUTRASCIENCE CORPORATION Consolidated Balance Sheets As at March 31, 2021 and March 31, 2020 |
| (Prepared in Canadian dollars) |
| March 31, 2021 $ |
March 31, 2020 $ |
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| ASSETS | ||||||
| Current assets | ||||||
| Cash and cash equivalents | ||||||
| Amounts receivable (notes 5 and 13) | ||||||
| Inventory | ||||||
| Prepaid expenses | ||||||
| Property and equipment (note 3) | ||||||
| Deferred development costs - net of accumulated amortization of $ (2020 - $) (note 4) | ||||||
| Investment in and loan to Merit Functional Foods Corporation (note 5) | ||||||
| Goodwill | ||||||
| LIABILITIES | ||||||
| Current liabilities | ||||||
| Accounts payable and accrued liabilities (note 13) | ||||||
| Lease liability | ||||||
| Deferred revenue (note 6) | ||||||
| Accrued interest (notes 7 and 8) | ||||||
| Lease liability | ||||||
| Convertible debentures (note 7) | ||||||
| SHAREHOLDERS' EQUITY (note 9) | ||||||
| Capital stock | ||||||
| Contributed surplus | ||||||
| Options | ||||||
| Warrants | ||||||
| Convertible debentures (note 7) | ||||||
| Deficit | ( |
) | ( |
) | ||
Subsequent events (note 17)
Approved by the Board of Directors
| "Douglas Gilpin" | "D. Lorne Tyrrell" | |
| Director | Director |
The accompanying notes are an integral part of these consolidated financial statements.
BURCON NUTRASCIENCE CORPORATION
Consolidated Statements of Operations and Comprehensive Loss
Years ended March 31, 2021 and 2020
(Prepared in Canadian dollars)
| 2021 $ |
2020 $ |
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| REVENUE | ||||||
| Research income (note 6) | ||||||
| Royalty income (note 1(b)) | ||||||
| EXPENSES | ||||||
| Research and development (note 10) | ||||||
| Intellectual property | ||||||
| General and administrative (notes 11 and 13) | ||||||
| LOSS FROM OPERATIONS | ( |
) | ( |
) | ||
| INTEREST AND OTHER INCOME (note 13) | ||||||
| MANAGEMENT FEE INCOME (notes 6 and 13) | ||||||
| GAIN ON DILUTION OF INVESTMENT IN MERIT FUNCTIONAL FOODS CORPORATION (note 5) | ||||||
| SHARE OF LOSS IN MERIT FUNCTIONAL FOODS CORPORATION (note 5) | ( |
) | ( |
) | ||
| INTEREST AND OTHER EXPENSE (notes 5, 7, 8 and 13) | ( |
) | ( |
) | ||
| FOREIGN EXCHANGE (LOSS) GAIN | ( |
) | ||||
| LOSS ON DISPOSAL OF EQUIPMENT | ( |
) | ||||
| CHANGE IN FAIR VALUE OF DERIVATIVE LIABILITY (note 6) | ||||||
| LOSS AND COMPREHENSIVE LOSS FOR THE YEAR | ( |
) | ( |
) | ||
| BASIC AND DILUTED LOSS PER SHARE (note 12) | ( |
) | ( |
) |
The accompanying notes are an integral part of these consolidated financial statements.
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BURCON NUTRASCIENCE CORPORATION Consolidated Statements of Changes in Shareholders’ Equity Years ended March 31, 2021 and 2020 |
(Prepared in Canadian dollars) |
| Number of fully paid common shares |
Capital stock $ |
Contributed surplus $ |
Options $ |
Warrants $ |
Convertible debentures $ |
Deficit $ |
Total shareholders' equity $ |
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| Balance - March 31, 2019 | ( |
) | ( |
) | ||||||||||||||||||||
| Loss and comprehensive loss for the year | — | — | — | — | — | — | ( |
) | ( |
) | ||||||||||||||
| Shares issued | — | — | — | — | — | |||||||||||||||||||
| Share issue costs | — | ( |
) | — | — | — | — | — | ( |
) | ||||||||||||||
| Options exercised | — | ( |
) | — | — | — | ||||||||||||||||||
| Options cancelled | — | — | ( |
) | — | — | — | — | ||||||||||||||||
| Warrants issued | — | — | — | — | — | — | ||||||||||||||||||
| Warrant issue costs | — | — | — | — | ( |
) | — | — | ( |
) | ||||||||||||||
| Warrants exercised | — | — | ( |
) | — | — | ||||||||||||||||||
| Warrant adjustment | — | — | — | — | — | — | ||||||||||||||||||
| Convertible debentures | — | — | — | — | — | — | ||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | ||||||||||||||||||
| Balance - March 31, 2020 | ( |
) | ||||||||||||||||||||||
| Loss and comprehensive loss for the year | — | — | — | — | — | — | ( |
) | ( |
) | ||||||||||||||
| Conversion of convertible debentures | — | — | — | ( |
) | — | ( |
) | ||||||||||||||||
| Options exercised | — | ( |
) | — | — | — | ||||||||||||||||||
| Options expired | — | — | ( |
) | — | — | — | — | ||||||||||||||||
| Warrants exercised | — | — | ( |
) | — | — | ||||||||||||||||||
| Share issue costs | — | ( |
) | — | — | — | — | — | ( |
) | ||||||||||||||
| Warrant issue costs | — | — | — | — | ( |
) | — | — | ( |
) | ||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | ||||||||||||||||||
| Balance - March 31, 2021 | ( |
) |
The accompanying notes are an integral part of these consolidated financial statements.
BURCON NUTRASCIENCE CORPORATION
Consolidated Statements of Cash Flows
Years ended March 31, 2021 and 2020
(Prepared in Canadian dollars)
| 2021 $ |
2020 $ |
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| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||
| Loss for the year | ( |
) | ( |
) | ||
| Items not affecting cash | ||||||
| Amortization of property and equipment | ||||||
| Unrealized foreign exchange loss (gain) | ( |
) | ||||
| Interest accretion | ( |
) | ( |
) | ||
| Finance income | ( |
) | ||||
| Interest and other expense | ||||||
| Gain on dilution of investment in Merit Functional Foods Corporation | ( |
) | ||||
| Change in fair value of derivative liability | ( |
) | ||||
| Share of loss in Merit Functional Foods Corporation | ||||||
| Loss on disposal of equipment | ||||||
| Warrant adjustment | ||||||
| Stock-based compensation expense | ||||||
| ( |
) | ( |
) | |||
| Changes in non-cash working capital items | ||||||
| Amounts receivable | ( |
) | ( |
) | ||
| Inventory | ( |
) | ( |
) | ||
| Prepaid expenses | ||||||
| Accounts payable and accrued liabilities | ||||||
| Deferred revenue | ( |
) | ||||
| ( |
) | ( |
) | |||
| Interest received | ( |
) | ( |
) | ||
| Interest paid | ( |
) | ( |
) | ||
| Net cash used in operating activities | ( |
) | ( |
) | ||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||
| Interest received | ||||||
| Investment in Merit Functional Foods Corporation | ( |
) | ||||
| Development costs deferred | ( |
) | ( |
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| Acquisition of property and equipment | ( |
) | ( |
) | ||
| ( |
) | ( |
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| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||
| Issue of capital stock | ||||||
| Issue of warrants | ||||||
| Issue of convertible debentures | ||||||
| Issue costs | ( |
) | ( |
) | ||
| Lease liability | ( |
) | ||||
| Short-term loan | ||||||
| Repayment of convertible note | ( |
) | ||||
| Repayment of short-term loan | ( |
) | ||||
| FOREIGN EXCHANGE (LOSS) GAIN ON CASH AND CASH EQUIVALENTS | ( |
) | ||||
| (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | ( |
) | ||||
| CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR | ||||||
| CASH AND CASH EQUIVALENTS - END OF YEAR |
The accompanying notes are an integral part of these consolidated financial statements.
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BURCON NUTRASCIENCE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2021 and 2020 Prepared in Canadian dollars) |
1. Nature of operations
Burcon NutraScience Corporation ("Burcon" or the "Company") is an incorporated entity headquartered in Vancouver, British Columbia, Canada.
Burcon is a research and development company that has developed plant protein extraction and purification technology in the field of functional, renewable plant proteins. The Company has an extensive portfolio of composition, application and process patents covering novel plant-based proteins derived from pea, canola, soy, hemp, sunflower seed and more.
a) Pea and canola proteins
Burcon has developed novel pea proteins that it has branded Peazazz® and Peazac® and three canola protein products, Puratein®, Supertein® and Nutratein®.
In May 2019, Burcon and two other entities formed Merit Functional Foods Corporation ("Merit Foods"). Merit Foods has completed the construction of a 94,000 square foot protein commercial production facility in Manitoba, Canada to produce, under license, Burcon's pea and canola protein products. See note 5 for further details.
b) CLARISOY®
Burcon had a license and production agreement (the "Soy Agreement") with Archer Daniels Midland Company ("ADM") to license its CLARISOY® technology to ADM on an exclusive basis to produce market and sell CLARISOY® soy protein worldwide. On August 7, 2020, Burcon and ADM agreed to terminate the Soy Agreement. As part of the agreement to terminate the exclusive license, the CLARISOY trademark reverted back to Burcon.
2. Significant accounting policies
Basis of presentation
These consolidated financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the IFRS Interpretations Committee (“IFRIC”).
The Company has consistently applied the same accounting policies throughout all periods presented. Certain comparatives have been restated to conform with this year's presentation. The board of directors approved these consolidated financial statements on June 24, 2021.
Principles of consolidation
These consolidated financial statements include the accounts of the Company and its subsidiaries, Burcon NutraScience (MB) Corp. ("Burcon-MB") and Burcon NutraScience Holdings Corp. ("Burcon Holdings"). A subsidiary is an entity in which the Company has control, directly or indirectly. Under IFRS 10, an investor controls an investee if and only if the investor has power over the investee, exposure, or rights, to variable returns from its involvement with the investee, and the ability to use its power over the investee to affect the amount of the investor's returns. All material intercompany transactions and balances have been eliminated on consolidation.
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BURCON NUTRASCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (Prepared in Canadian dollars) |
Details of the Company's subsidiaries at March 31, 2021 are as follows:
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Burcon NutraScience (MB) Corp. |
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Burcon NutraScience Holdings Corp. |
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Investment holding |
Investment in Associates
An associate is an entity over which the Company has significant influence. Significant influence is the power to participate in the financial and operating policy of the investee without the power to control or jointly control those policies.
The results and assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting. Under the equity method of accounting, investments are recorded at historical cost as an asset and adjusted for dividends received, capital contributions, other transactions that result in changes in ownership interest held by the Company, and the Company's share of Merit's earnings or losses, which is recorded as a component of Loss and Comprehensive Loss for the year. When the Company's share of losses of an associate exceeds the Company's interest in the associate, which includes any long-term interests that, in substance, form part of the Company's net investment in the associate, the Company discontinues recognizing its share of further losses. Additional losses are recognized only to the extent that the Company has incurred legal or constructive obligations or made payments on behalf of the associate.
Management considers whether there are any indicators of impairment to determine whether it is necessary to recognize any impairment loss with respect to the Company's investment in an associate. When such indicators of impairment exist, the carrying amount of the investment is tested for impairment by comparing the recoverable amount with its carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.
Revenue recognition
The Company recognizes revenue when the amount of revenue can be reliably measured, and it is probable that future economic benefits will flow to the Company. The Company may earn revenues from licensing agreements under which third parties are granted rights to use the Company's technologies.
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BURCON NUTRASCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (Prepared in Canadian dollars) |
If the substantive rights to the technologies are retained by the Company, or the Company has remaining performance obligations under the licensing agreements, and as such not all of the risks and rewards have been transferred to the licensee, the Company recognizes amounts received or receivable as royalties when earned on an accrual basis.
At the point when all of the risks and rewards associated with the use of the technologies have, in substance, been relinquished under the licensing agreements, the Company recognizes the fair value of future payments expected to be received as proceeds from the sale of the technologies in the consolidated statements of operations and comprehensive loss, once the expected future payments can be reliably measured.
Upfront payments and similar non-refundable payments received under these agreements are initially recognized as deferred revenue. Subsequently, if the Company recognizes royalty revenue, the amounts deferred are recognized as revenue on a straight-line basis over the estimated period royalties are expected to be earned commencing in the period royalties are first recognized as revenue. Otherwise, the deferred amounts are recognized as sale proceeds at the date of sale of the technologies.
License agreements may consist of multiple elements and provide for varying consideration terms, such as upfront payments and milestone or similar payments. Revenue arrangements with multiple elements are reviewed in order to determine whether the multiple elements can be divided into separate units of accounting. If separable, the consideration received is allocated among the separate units of accounting based on their respective fair values, and the applicable revenue recognition criteria are applied to each of the separate units. Otherwise, the applicable revenue recognition criteria are applied to the revenue arrangement as a single unit.
Government assistance
The Company carries out research and development in Canada that is eligible for Scientific Research and Experimental Development ("SR&ED") Investment Tax Credits ("ITC") at both the federal and provincial level. The Company has recognized the refundable portion of ITC at the provincial level but has not recognized the benefits of ITC at the federal level because realization of these benefits is not probable at this time. The Company's determination of ITC involves uncertainty with respect to management's interpretation of complex tax regulations. The ITC claims are subject to review and acceptance by the Canada Revenue Agency prior to collection.
Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related costs are recognized in the statement of profit or loss in the period in which they become receivable.
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BURCON NUTRASCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (Prepared in Canadian dollars) |
Accounting estimates and judgments
The preparation of consolidated financial statements in accordance with IFRS requires management to apply judgment when making estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements, the reported amount of revenue and expenses during the reporting period, and disclosures made in the accompanying notes to the consolidated financial statements. Actual results may differ from those estimates.
The significant areas where management's judgment is applied are in determining the fair value of stock-based compensation (see note 9 for assumptions used by management), whether all criteria for deferring development costs are met, the point at which amortization of development costs commences, the expense allocation to deferred development costs and the recoverable amounts of investment in associates, expected credit losses on loans receivable, goodwill, and the discount rate used to fair value the loans receivable from Merit Foods following their modification (note 5).
Cash and cash equivalents
Cash and cash equivalents consist of cash on deposit with banks and highly liquid short-term interest bearing securities with maturities at the date of purchase of three months or less.
Financial instruments
Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets are derecognized when the rights to receive cash flows from the assets have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. Financial assets and liabilities are offset and the net amount is reported in the consolidated balance sheets when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.
At initial recognition, the Company classifies its financial instruments in one of the following categories: amortized cost, fair value through profit or loss, and fair value through other comprehensive income.
Derivatives are recognized initially and subsequently at fair value. Transaction costs are expensed in the consolidated statements of operations and comprehensive loss. Gains and losses arising from changes in fair value are presented in the consolidated statements of operations and comprehensive loss, through profit or loss, in the period in which they arise.
Financial assets carried at amortized cost, which include loans and receivables initially recognized at the amount expected to be received, less a provision for the expected credit loss. Subsequently, financial assets carried at amortized cost are measured at amortized cost using the effective interest method less a provision for the expected credit loss. The Company classifies its cash and cash equivalents and amounts receivable as financial assets carried at amortized cost.
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BURCON NUTRASCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (Prepared in Canadian dollars) |
Other financial liabilities are initially recognized at the amount required to be paid, less, when material, a discount to reduce the payables to fair value. Subsequently, other financial liabilities are measured at amortized cost using the effective interest method.
At each reporting date, the Company assesses whether there is objective evidence that a financial asset is impaired. If such evidence exists, the Company recognizes an impairment loss, as follows:
Financial assets carried at amortized cost: the impairment loss is the difference between the carrying value of the asset and the amortized cost of the financial asset, less the expected credit loss. The carrying amount of the asset is reduced by this amount which is recognized in the consolidated statements of operations and comprehensive loss, through profit or loss. Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods if the amount of the expected credit loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized.
Transaction costs of an equity transaction are accounted for as a deduction from equity to the extent that they are incremental costs directly attributable to the equity transaction that otherwise would have been avoided. Qualifying transaction costs incurred prior to the Company's year-end in anticipation of an issuance of equity instruments subsequent to the Company's year-end are deferred on the consolidated balance sheets until the equity instruments are issued.
Property and equipment
Property and equipment are recorded at cost less accumulated amortization. The Company provides for amortization at the following annual rates:
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Inventories
Inventories are recorded at the lower of cost and net realizable value.
Impairment of long-lived assets
The Company tests property and equipment for impairment whenever events or circumstances indicate that the carrying value of an asset or group of assets may not be recoverable. Intangible assets that are not being amortized are tested annually for impairment and also if the Company identifies indicators of impairment. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows (cash-generating units). The evaluation is based on the higher of the asset's fair value less costs of disposal and its value in use, which is the present value of future cash flows expected to be derived from the asset in its current state. An impairment loss is recognized in the period it is determined to the extent that the carrying value exceeds the higher of fair value less costs to sell and value in use of the asset or group of assets.
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BURCON NUTRASCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (Prepared in Canadian dollars) |
Research and development costs
Research costs are expensed in the year incurred. Development costs are also expensed in the year incurred unless the related process is clearly defined and the costs attributable thereto can be reliably measured; the technical feasibility of the process has been established so that it will be available for use or sale; management has indicated its intention to produce and market, or use, the process; an ability to use or sell the process exists; the process will generate probable future economic benefits; and adequate resources exist, or are expected to be available, to complete the development and to use or sell the process. On July 1, 2019, the Company commenced deferring development costs related to its pea and canola technologies. The deferred development costs will be amortized on a straight-line basis over their estimated useful lives commencing on the date the Company starts earning royalties.
Goodwill
Goodwill represents the excess at the date of acquisition of the cost of the acquired business over the fair values attributed to the underlying net tangible assets and the identifiable intangible assets. Goodwill is not amortized.
On at least an annual basis, or when circumstances indicate the carrying value of goodwill may not be recoverable, the Company subjects goodwill to an impairment test. For impairment testing purposes, the carrying value of goodwill is allocated to the group of assets that realize the benefits of the acquisition. The impairment assessment is performed by comparing the carrying value of the group of assets, including the allocated carrying value of goodwill, to the higher of its fair value less costs to sell and its value in use, which is the present value of future cash flows expected to be derived from the group of assets in their current state. If the carrying amount of the group of assets exceeds the recoverable amount, an impairment loss is charged to operations in the period such impairment is identified, allocated first to reducing the carrying amount of the goodwill allocated to the group, and then to the other assets of the group.
Income taxes
The Company uses the balance sheet liability method of accounting for income taxes. Under this method, current income taxes are recognized for the estimated income taxes payable for the current year. Deferred income tax assets and liabilities are recognized in the current year for temporary differences between the tax and accounting bases of assets and liabilities as well as for the benefit of losses available to be carried forward to future years for tax purposes. Deferred income tax assets and liabilities are measured using substantively enacted tax rates and laws expected to apply in the years in which those temporary differences are expected to be recovered or settled. Deferred income tax assets are recognized only to the extent they are considered probable to be realized.
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BURCON NUTRASCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (Prepared in Canadian dollars) |
Stock-based compensation
The Company accounts for stock-based compensation granted to employees using the fair value method calculated using the Black-Scholes option pricing model. Stock-based compensation granted to non-employees is measured at the fair value of the goods and services received unless the fair value cannot be measured reliably, in which case the amount is measured using the fair value of the options granted. For options granted to employees and those providing similar services, including officers and directors, the compensation cost is measured at the fair value of the equity instrument granted at the date of grant and is expensed to operations over the award's vesting period. When stock options are exercised, capital stock is credited by the sum of the consideration paid and by the related portion previously recorded in options. Additional information related to the stock option plan and the assumptions used in the Black-Scholes option pricing model are provided in note 9(c).
Loss per share
Basic loss per share is computed by dividing the net loss for the year available to common shareholders by the weighted average number of common shares outstanding during the year. The Company applies the treasury stock method to calculate diluted loss per share. Diluted loss per share excludes all dilutive potential common shares if their effect is anti-dilutive.
Foreign currency translation
a) Functional and presentation currency
Items included in the financial statements of each consolidated entity are measured using the currency of the primary economic environment in which the entity operates (the "functional currency"). These consolidated financial statements are presented in Canadian dollars, which is the Company's and its subsidiaries' functional currency.
b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transactions. Generally, foreign exchange gains and losses resulting from the settlement of foreign currency transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in currencies other than an operation's functional currency are recognized in the consolidated statements of operations and comprehensive loss.
Newly adopted accounting standards and amendments
IFRS 16 - Leases
Effective April 1, 2019, the Company adopted IFRS 16 - Leases, which requires, among other things, leases to recognize leases traditionally recorded as operating leases in the same manner as a financing lease.
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BURCON NUTRASCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (Prepared in Canadian dollars) |
The Company applied IFRS 16 on a modified retrospective basis and it did not have a significant impact on the consolidated financial statements.
Accounting standard and amendments issued and not yet adopted
Amendments to IAS 1 - Classification of Liabilities as Current or Non-Current
The amendment clarifies the classification requirements to determine if a liability should be presented as current or non-current in the statement of financial position. Under the new requirement, the assessment of whether a liability is presented as current or non-current is based on the contractual arrangements in place as at the reporting date and does not impact the amount or timing or recognition. The amendment is effective for annual reporting periods beginning on or after January 1, 2022 and is to be applied retrospectively, with earlier application permitted. The Company is still considering whether the new standard will have a significant impact on the consolidated financial statements.
3. Property and equipment
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BURCON NUTRASCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (Prepared in Canadian dollars) |
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Additions to property and equipment have been reduced by a cash grant received from the government of Manitoba of $
4. Deferred development costs
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5. Investment in and loan to Merit Functional Foods Corporation
On May 23, 2019, Burcon, through a new wholly-owned subsidiary incorporated on May 22, 2019, Burcon Holdings, entered into a shareholders' agreement (the "Shareholders' Agreement") with two other entities (the "Partners") to become shareholders of Merit Foods, to build and own a new commercial production facility (the "Flex Production Facility") in Manitoba, Canada to produce, sell, market and distribute Burcon's Peazazz® and Peazac® pea proteins, Burcon's Puratein®, Supertein® and Nutratein® canola proteins, as well as Burcon's new pea and canola protein blends that it has branded Nutratein-PS® and Nutratein-TZ®. The construction of the Flex Production Facility was completed by December 31, 2020.
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BURCON NUTRASCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (Prepared in Canadian dollars) |
On inception, Burcon Holdings held
On August 27, 2020, Bunge Limited ("Bunge") made an investment of $
Summary financial position for Merit Foods as at March 31, 2021 and 2020
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As at March 31, 2020 |
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Summary financial results for Merit Foods
| Year ended March 31, 2021 |
Period ended March 31, 20201 |
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1 Merit Foods was incorporated on May 15, 2019. As a result, information in this table represents certain financial information of Merit Foods from the date of its incorporation to March 31, 2020.
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BURCON NUTRASCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (Prepared in Canadian dollars) |
As at March 31, 2021, Burcon Holdings has made capital loan advances of $
| Investment in Share capital $ |
Capital Contribution $ |
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Total net investment $ |
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From inception to December 2019, the Merit Shareholder Loans were recorded as loan receivable. In December 2019, the terms of the Merit Shareholder Loans were finalized. The loans are non-interest bearing, unsecured, subordinated to Merit Foods' other secured and unsecured debts, have a term of
Burcon has a license agreement (the "License Agreement") with Merit Foods for an exclusive, royalty-bearing, worldwide license to use and exploit Burcon's Products. As part of the Bunge transaction, Bunge, Burcon and the Partners have amended the License Agreement (the "Amended License Agreement") and Burcon, Bunge and the Partners have also amended the Shareholders Agreement (the "Amended Shareholders Agreement"). Under the Amended License Agreement and Amended Shareholders Agreement, Burcon, Bunge and the Partners have agreed to certain contractual rights, including a right, but not an obligation, of Burcon, in certain circumstances, to participate in a sale of all but not less than all of its shares in Merit Foods, and that in certain circumstances, Merit Foods will have the right to buy out from Burcon the Amended License Agreement for $
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BURCON NUTRASCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (Prepared in Canadian dollars) |
Burcon has a services agreement (the "Services Agreement") with Merit Foods to provide technical, administrative and general management services, research and analytical services and sample production services based on rates set out in the Services Agreement. For the year ended March 31, 2021, included in management fee income is $
Merit Foods also provided certain technical and consulting services to Burcon. For the year ended March 31, 2021, Burcon recorded professional fee expense of $
In May 2020, Burcon announced that Merit Foods had secured a debt financing package of up to $
In connection with the LC, Burcon Holdings entered into a short-term loan agreement (the "Merit Loan Agreement") with Merit Foods in the amount of $
In addition, Burcon provided a guarantee to EDC and FCC in connection with the $85 million financing package (the "Guarantees"), pursuant to which Burcon agreed to guarantee all of the indebtedness, liabilities and obligations to Merit Foods under the loan agreements between EDC, FCC and Merit Foods. The aggregate maximum liability of Burcon under the Guarantees was limited to $
In June 2020, Burcon announced that Merit Foods had secured additional debt financing of $
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BURCON NUTRASCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (Prepared in Canadian dollars) |
In total, Merit Foods secured a total of $
6. Deferred revenue
In January 2020, Burcon, Société Des Produits Nestlé ("Nestlé ") and Merit Foods entered into a joint development agreement (the "JDA") to tailor Burcon and Merit's plant-based proteins for use in Nestlé food and beverage applications. The JDA covered ongoing innovation and the future supply of Burcon and Merit’s plant-based proteins from the Flex Production Facility. The partnership was intended to combine Nestlé’s expertise in the development, production and commercialization of plant-based foods and beverages with Burcon’s proprietary plant protein extraction and purification technology, while leveraging Merit Foods’ plant protein production capabilities. During the year, Burcon conducted research work and provided various samples to Nestlé for testing and analysis. The research conducted by Burcon was successful in identifying processing techniques to modify and improve the functionality of Burcon’s and Merit’s plant-based proteins and as such, Burcon’s role in the JDA ended in January 2021, Merit has continued to work with Nestlé for the supply of Merit Foods’ plant protein products. During the year, Burcon recorded $
7. Convertible debentures and convertible note
Convertible debentures
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BURCON NUTRASCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (Prepared in Canadian dollars) |
The Debentures were convertible at the option of the holder, in whole or in part, into common shares of the Company at a conversion price of $
The Debentures were a level 3 financial liability with an embedded conversion feature. The debt and equity components were bifurcated, and the instrument valued to par at the issuance date. The value assigned to the liability at December 10, 2019 was the present value of the contractually determined stream of future cash flows discounted at
Convertible note
The Company had a convertible note (the "Note") with Large Scale Investments Limited ("Large Scale'), a wholly owned subsidiary of Firewood Elite Limited ("Firewood"), for the principal amount of $
On May 21, 2019, the Company and Large Scale amended (the "Amendment") the Note's Maturity Date to June 21, 2019, as well as providing Large Scale with the right to offset any amounts due to it under the Note against any obligations of Large Scale to pay for subscription proceeds of any rights offering that Burcon may conduct. In connection with the 2019 Rights Offering (note 9(a)), Large Scale exercised its right to offset the amounts due under the Note against its obligations to pay for subscription proceeds under the 2019 Rights Offering. The offset was completed on June 25, 2019. The total amount offset under the Note included the principal amount and accrued interest of $
The conversion option was recorded as a derivative liability (note 16). Under the terms of the Note, there are certain conditions where the conversion price may be adjusted. Therefore, in accordance with IFRS, an obligation to issue shares for a price that is not fixed must be classified as a derivative liability and measured at fair value, with changes recognized in change in fair value of conversion option in the consolidated statement of operations and comprehensive loss.
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BURCON NUTRASCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (Prepared in Canadian dollars) |
The conversion and prepayment options were recorded as a net derivative liability and measured at fair value, with changes in fair value recorded in the consolidated statement of operations and comprehensive loss. The fair value of the conversion and prepayment options was estimated based on a methodology for pricing convertible bonds using the Partial Differential Equation Method, with the following initial assumptions: expected volatility of
8. Short-term loan
The Company had a short-term loan with Large Scale to provide Burcon with an unsecured loan for up to $
In connection with the 2019 Rights Offering (note 9(a)), Large Scale exercised its right to offset the amounts due under the Loan against its obligations to pay for subscription proceeds under the 2019 Rights Offering. The offset was completed on June 25, 2019 for $
9. Shareholders’ equity
a) Capital stock
Authorized
Unlimited number of common shares without par value
2020 Equity Offering
On February 19, 2020, the Company completed a bought deal equity offering of
Each Unit consisted of one common share of the Company and one-half of one common share purchase warrant (each whole common share purchase warrant, a "Warrant"). Each Warrant is exercisable to acquire one common share (a "Warrant Share") until February 19, 2022 at an exercise price of $
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BURCON NUTRASCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (Prepared in Canadian dollars) |
The agents received a cash commission of
In addition to the Agents' Warrants, the Company incurred total issue costs of $
2019 Rights Offering
On June 25, 2019, the Company completed a rights offering (the "2019 Rights Offering") for
The Company's directors, officers and persons controlling over 10% of the common shares of the Company agreed to exercise at least all of the 2019 Rights they were issued in connection with the 2019 Rights Offering for
Of the net proceeds of the 2019 Rights Offering, $
b) Contributed surplus
Contributed surplus comprises the value ascribed to expired warrants and options and forfeited vested options, previously categorized in either warrants or options, as applicable, within shareholders’ equity.
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BURCON NUTRASCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (Prepared in Canadian dollars) |
c) Options
The Company has a stock option plan in which all directors, officers, employees and consultants of the Company and its subsidiary are eligible to participate.
At March 31, 2021,
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2020 |
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Weighted average exercise price $ |
Number of options |
Weighted average exercise price $ |
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The following table summarizes information about stock options outstanding and exercisable at March 31, 2021:
| Options outstanding | Options exercisable | ||||||||||||||
| Range of exercise prices $ |
Number outstanding at March 31, 2021 |
Weighted average remaining contractual life (years) |
Weighted average exercise price $ |
Number exercisable at March 31, 2021 |
Weighted average exercise price $ |
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BURCON NUTRASCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (Prepared in Canadian dollars) |
The fair value of each option is estimated as at the date of grant or other measurement date using the Black-Scholes option pricing model and the following weighted average assumptions:
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| Expected forfeitures | ||||||
| Expected average option term (years) |
The expected forfeitures are based on historical forfeitures. The expected volatility is based on historical volatility and also historical volatilities of a group of comparable public companies. The risk-free rate of return is the yield on a zero-coupon Canadian treasury bill of a term consistent with the expected average option term. The expected average option term is the average expected period to exercise, based on the historical activity patterns for each individually vesting tranche.
The weighted average fair value of the options granted during the year ended March 31, 2021 was $
Included in research and development expenses is $
10. Research and development
| 2021 $ |
2020 $ |
|||||
| Salaries and benefits (note 9) | ||||||
| Laboratory operation | ||||||
| Amortization of property and equipment | ||||||
| Rent | ||||||
| Analyses and testing | ||||||
| Travel and meals | ||||||
| Gross research and development expenses | ||||||
| Allocated to deferred development costs | ( |
) | ( |
) | ||
| Allocated to inventory production | ( |
) | ( |
) | ||
| Net research and development expenses |
Research and development expenses have been reduced by COVID-19 subsidies of $
18
|
BURCON NUTRASCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (Prepared in Canadian dollars) |
11. General and administrative
| 2021 $ |
2020 $ |
|||||
| Salaries and benefits (note 9) | ||||||
| Professional fees | ||||||
| Investor relations | ||||||
| Office supplies and services (note 13) | ||||||
| Transfer agent and filing fees | ||||||
| Amortization | ||||||
| Financing expense (notes 5 and 13) | ||||||
| Other | ||||||
| Travel and meals | ||||||
| Rent | ||||||
Salaries and benefits have been reduced by $
12. Basic and diluted loss per share
The following table sets forth the computation of basic and diluted loss per share:
| 2021 $ |
2020 $ |
|||||
| Loss for the year, being loss attributable to common shareholders - basic and diluted | ( |
) | ( |
) | ||
| Weighted average common shares - basic and diluted | ||||||
| Basic and diluted loss per share | ( |
) | ( |
) |
For the years ended March 31, 2021 and 2020, the Company excluded all potential common share equivalents from the diluted loss per share calculation as they were anti-dilutive.
13. Related party transactions
The Company engaged an entity that is related by virtue of common officers for the following related party transactions:
- For the year ended March 31, 2021, the Company made payments of $
19
|
BURCON NUTRASCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (Prepared in Canadian dollars) |
- For the year ended March 31, 2021, included in general and administrative expenses (management fees) are $
Burcon has a Services Agreement with Merit Foods to provide technical, administrative and general management services, research and analytical services and sample production services based on rates set out in the Services Agreement. (See note 5 for details).
In connection with the LC, Burcon Holdings entered into the Merit Loan Agreement with Merit Foods in the amount of $
Certain directors and an officer subscribed for $
Burcon had the Loan (note 8) and Note (note 7) with Large Scale, a company that is wholly owned by Firewood. For the year ended March 31, 2020, included in interest expense is $
Upon completion of the 2019 Rights Offering, the exercise price for the share purchase warrants issued to Dr. Yap, former chief executive officer of the Company, was adjusted from $
14. Key management compensation
Key management includes the Company's Chief Executive Officer. Remuneration of directors and key management personnel comprises:
| 2021 $ |
2020 $ |
|||||
| Short-term benefits | ||||||
| Option-based awards | ||||||
Short-term benefits comprise salaries, director fees and employment benefits.
Option-based awards represent the cost to the group of senior management and directors' participation in the incentive stock option plan, as measured by the fair value of instruments granted accounted for in accordance with IFRS 2, Share-based Payment. For details of these plans refer to note 9 to the consolidated financial statements.
20
|
BURCON NUTRASCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (Prepared in Canadian dollars) |
| 2021 $ |
2020 $ |
|||||
| Recovery of income taxes based on the combined statutory income tax rate of |
( |
) | ( |
) | ||
| Changes in unrecognized deferred tax assets | ( |
) | ||||
| Financing costs | ( |
) | ( |
) | ||
| Non-deductible items and tax adjustments | ||||||
| Recovery of income taxes |
As at March 31, 2021 the Company has non-capital losses of approximately $
|
$ |
|
| 2026 | |
| 2027 | |
| 2028 | |
| 2029 | |
| 2030 | |
| 2031 | |
| 2032 | |
| 2033 | |
| 2034 | |
| 2035 | |
| 2036 | |
| 2037 | |
| 2038 | |
| 2039 | |
| 2040 | |
| 2041 | |
In addition, the Company has SR&ED expenditures of approximately $
ITCs of $
For the year ended March 31, 2021, included in interest and other income is $ (2020 - $
21
|
BURCON NUTRASCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (Prepared in Canadian dollars) |
| 2021 $ |
2020 $ |
|||||
| Deferred income tax assets (liability) | ||||||
| SR&ED expenditures | ||||||
| Losses from operations carried forward | ||||||
| Investment in Merit Foods | ( |
) | ||||
| Deferred development costs | ( |
) | ( |
) | ||
| Interest expense | ( |
) | ||||
| Financing costs | ||||||
| Property and equipment | ||||||
| Right-of-Use assets/liability | ( |
) | ||||
| Unrecognized deferred income tax assets |
16. Financial instruments
Credit risk
The financial instruments that expose the Company to a concentration of credit risk are cash and cash equivalents and amounts receivable. The Company's cash and cash equivalents may comprise interest-bearing savings instruments with Canadian chartered banks. The Company limits its exposure to credit loss by placing its cash and cash equivalents with two Canadian chartered banks.
An expected credit loss provision of $
Interest rate risk
All of the Company's financial instruments are non-interest bearing except for cash and cash equivalents that earn interest at variable market rates, and the loan to Merit Foods that bore interest at a fixed interest rate. Burcon's cash and cash equivalents are held at two Canadian chartered banks to maximize interest and to diversify risk. For the year ended March 31, 2021, the weighted average interest rate earned on the Company's cash and cash equivalents was
22
|
BURCON NUTRASCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (Prepared in Canadian dollars) |
Liquidity risk
The Company manages liquidity risk through the management of its capital structure (note 16). It also manages liquidity risk by monitoring actual and forecasted cash flows taking into account current and planned operations. The Company's estimated minimum contractual undiscounted cash flow requirement for its financial liabilities at March 31, 2021 is $
Fair value
The fair value of the Company's short-term financial assets and financial liabilities, including cash and cash equivalents, amounts receivable, accounts payable and accrued liabilities and accrued interest, approximates their carrying values due to the short-term maturities of these financial instruments.
The carrying values and fair values of financial instruments, by class, are as follows as at March 31, 2021 and 2020:
| As at March 31, 2021 | ||||||||||||
| At fair value through profit or loss |
Financial assets at amortized cost |
Financial liabilities at amortized cost |
Fair value | |||||||||
| Financial assets | $ | $ | $ | $ | ||||||||
| Cash and cash equivalents | ||||||||||||
|
Amounts receivable |
|
|
|
|
||||||||
|
Loan to Merit Foods |
|
|
|
|
||||||||
| Total | ||||||||||||
| Financial liabilities | ||||||||||||
| Accounts payable and accrued liabilities | ||||||||||||
| Total | ||||||||||||
| As at March 31, 2020 | ||||||||||||
| At fair value through profit or loss |
Financial assets at amortized cost |
Financial liabilities at amortized cost |
Fair value | |||||||||
| Financial assets | $ | $ | $ | $ | ||||||||
| Cash and cash equivalents | ||||||||||||
| Amounts receivable | ||||||||||||
| Loan to Merit Foods | ||||||||||||
| Total | ||||||||||||
| Financial liabilities | ||||||||||||
| Accounts payable and accrued liabilities | ||||||||||||
| Accrued interest | ||||||||||||
| Convertible debentures | ||||||||||||
| Total |
23
|
BURCON NUTRASCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (Prepared in Canadian dollars) |
Currency risk
The Company has not hedged its exposure to currency fluctuations. As at March 31, 2021 and 2020, the Company is exposed to currency risk through the following assets and liabilities denominated in U.S. dollars:
| March 31, 2021 |
March 31, 2020 |
|||||
| U.S. Dollars | ||||||
| Cash and cash equivalents | $ | $ | ||||
| Amounts receivable | ||||||
| Accounts payable and accrued liabilities | ( |
) | ||||
| Net exposure | $ | $ | ( |
) | ||
| Canadian dollar equivalent | $ | $ | ( |
) |
Based on the above net exposure at March 31, 2021, a
Capital disclosures
The Company considers its capital to be its shareholders' equity.
The Company manages its capital structure to have sufficient resources available to meet day-to-day operating requirements, continue as a going concern and fund its research and development program. The Company is dependent on non-operating sources of cash, primarily from issuing equity and debt, to fund its operations and research development programs. The Company monitors its capital and the expected cash flows required to achieve its business objectives to determine its future financing needs. It seeks additional capital when deemed appropriate, but there is no assurance that it will be able to secure the necessary capital when required.
The Company is not subject to externally imposed capital requirements and there has been no change with respect to the overall capital risk management strategy during the year ended March 31, 2021.
24
|
BURCON NUTRASCIENCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021 and 2020 (Prepared in Canadian dollars) |
17. Subsequent events
Subsequent to the year-end:
a) Warrants were exercised for
b)
c)
18. COVID-19
The COVID-19 outbreak was declared as a pandemic by the World Health Organization on March 11, 2020. Globally, governments worldwide have focused on containment of the outbreak and the prevention of further spread. Since the outbreak, global economies have been impacted as governments have imposed restrictions such as travel bans, self-imposed quarantines, social distancing and temporary closures of non-essential businesses. While economies began to slowly reopen in June 2020 after an initial lockdown, governments were required to reinstate lockdowns and closures when infection rates returned at the end of 2020 and early 2021. Since March 2021, the supply of vaccines has become more secure in Canada and immunization rates are continuing to improve in Canada, the United States and may developed countries in the world. The duration and long-term effects of the pandemic is unknown at this time.
In response to the COVID-19 pandemic, Burcon implemented measures to ensure the safety of work conditions for its staff at the Winnipeg Technical Centre and at its head office in Vancouver. While the COVID-19 pandemic has not had significant adverse effect on Burcon's and Merit Foods' business operations to-date, it is not possible to predict how long the pandemic will continue to last and whether the financial and business conditions of Burcon and Merit Foods will be impacted in future periods.
Governments worldwide, including Canada, have implemented significant monetary and fiscal relief programs designed to stabilize their economies. Burcon has received Canadian government assistance through the CEWS and CERS programs. See notes 10 and 11 for details.
25
EXHIBIT 99.4
CERTIFICATION REQUIRED BY RULE 13a-14(a) OR RULE 15d-14(a), PURSUANT
TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Johann F. Tergesen, certify that:
1. I have reviewed this Annual Report on Form 40-F of Burcon NutraScience Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;
4. The issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the issuer's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer's internal control over financial reporting; and
5. The issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer's auditors and the audit committee of the issuer's board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer's ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer's internal control over financial reporting.
| Date: August 11, 2021 | /s/ Johann F. Tergesen |
| Name: Johann F. Tergesen | |
| Title: President and Chief Executive Officer |
EXHIBIT 99.5
CERTIFICATION REQUIRED BY RULE 13a-14(a) OR RULE 15d-14(a), PURSUANT
TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jade Cheng, certify that:
1. I have reviewed this Annual Report on Form 40-F of Burcon NutraScience Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;
4. The issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) evaluated the effectiveness of the issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the issuer's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer's internal control over financial reporting; and
5. The issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer's auditors and the audit committee of the issuer's board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer's ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer's internal control over financial reporting.
| Date: August 11, 2021 | /s/ Jade Cheng |
| Name: Jade Cheng | |
| Title: Chief Financial Officer |
EXHIBIT 99.6
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ENACTED PURSUANT TO
SECTION 906 OF THE U.S. SARBANES-OXLEY ACT OF 2002
Burcon NutraScience Corporation (the "Company") is filing with the U.S. Securities and Exchange Commission on the date hereof, its Annual Report on Form 40-F for the fiscal year ended March 31, 2021 (the "Report").
I, Johann F. Tergesen, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as enacted pursuant to section 906 of the U.S. Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
i. the Report fully complies with the requirements of section 13(a) or 15(d) of the U.S. Securities Exchange Act of 1934; and
ii. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 11, 2021
/s/ Johann F. Tergesen
Name: Johann F. Tergesen
Title: President and Chief Executive Officer
EXHIBIT 99.7
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ENACTED PURSUANT TO
SECTION 906 OF THE U.S. SARBANES-OXLEY ACT OF 2002
Burcon NutraScience Corporation (the "Company") is filing with the U.S. Securities and Exchange Commission on the date hereof, its Annual Report on Form 40-F for the fiscal year ended March 31, 2021 (the "Report").
I, Jade Cheng, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as enacted pursuant to section 906 of the U.S. Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
i. the Report fully complies with the requirements of section 13(a) or 15(d) of the U.S. Securities Exchange Act of 1934; and
ii. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 11, 2021
/s/ Jade Cheng
Name: Jade Cheng
Title: Chief Financial Officer
Consent of Independent Registered Public Accounting Firm
We hereby consent to the incorporation by reference in this Amended Annual Report on Form 40-F/A for the year ended March 31, 2021 of Burcon NutraScience Corporation of our report dated June 29, 2021, relating to the consolidated financial statements, which appears in Exhibit 99.2 in this Amendment No. 1 to Form 40-F.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Vancouver, British Columbia
Canada
June 29, 2021
PricewaterhouseCoopers LLP
PricewaterhouseCoopers Place, 250 Howe Street, Suite 1400, Vancouver, British Columbia, Canada V6C 3S7
T: +1 604 806 7000, F: +1 604 806 7806, www.pwc.com/ca
“PwC” refers to PricewaterhouseCoopers LLP, an Ontario limited liability partnership.