Item 1. Financial Statements
Item 1. Financial Statements
Our unaudited interim condensed consolidated financial statements for the period ended April 30, 2017 form part of this quarterly report. All currency references in this report are to U.S. dollars unless otherwise noted. This financial information, in the opinion of management, includes all adjustments consisting of normal recurring entries necessary for the fair presentation of such data. The results of operations for the three month period ended April 30, 2017 are not necessarily indicative of results to be expected for any subsequent period.
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PIVOT PHARMACEUTICALS INC.
Condensed Consolidated Financial Statements
(Expressed in U.S. dollars)
Period ended April 30, 2017 (unaudited) and January 31, 2017
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PIVOT PHARMACEUTICALS INC.
Condensed Consolidated Balance Sheets
(Expressed in U.S. dollars)
April 30,
2017
$
January 31,
2017
$
(unaudited)
Assets
Current assets
Cash
46,698
112,421
Prepaid and other current assets
16,804
17,337
Total current assets
63,502
129,758
Security deposit
2,900
2,900
Total assets
66,402
132,658
Liabilities and Stockholders’ Deficit
Current liabilities
Accounts payable and accrued liabilities
1,187,213
996,853
Due to related parties (Note 7)
24,887
22,574
Convertible debenture, net of discount (Note 3)
365,978
275,011
Derivative liability (Note 4)
221,317
312,541
Total liabilities
1,799,395
1,606,979
Stockholders’ Deficit
Common stock: Unlimited shares authorized, without par value, 75,647,114 and 75,647,114 shares issued and outstanding, respectively
7,327,588
7,327,588
Additional paid-in capital
11,211,784
11,211,031
Accumulated other comprehensive income
645,205
584,813
Accumulated deficit
(20,917,570
)
(20,597,753
)
Total stockholders’ deficit
(1,732,993
)
(1,474,321
)
Total liabilities and stockholders’ deficit
66,402
132,658
(The accompanying notes are an integral part of these condensed consolidated financial statements)
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PIVOT PHARMACEUTICALS INC.
Condensed Consolidated Statements of Operations
(Expressed in U.S. dollars)
Three Months
Ended
April 30,
2017
$
Three Months
Ended
April 30,
2016
$
(unaudited)
(unaudited)
Revenue
–
–
Expenses
Foreign exchange loss
70,137
14,230
General and administrative
53,289
974,350
Management fees
137,295
2,246,579
Professional fees
24,797
96,653
Total expenses
285,518
3,331,812
Loss from operations
(285,518
)
(3,331,812
)
Other income (expense)
Amortization of discount on convertible debenture
(105,392
)
–
Interest expense
(8,789
)
–
Gain on change in fair value of derivative liabilities
79,887
–
Total other income (expense)
(34,294
)
–
Net loss
(319,812
)
(3,331,812
)
Other comprehensive income (loss)
Foreign currency translation adjustment
60,392
(186,529
)
Net comprehensive loss
(259,420
)
(3,518,341
)
Net loss per share, basic and diluted
(0.00
)
(0.04
)
Weighted average shares outstanding – basic and diluted
75,647,114
74,836,659
(The accompanying notes are an integral part of these condensed consolidated financial statements)
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PIVOT PHARMACEUTICALS INC.
Condensed Consolidated Statements of Cash Flows
(Expressed in U.S. dollars)
Three Months
Ended
April 30,
2017
$
Three Months
Ended
April 30,
2016
$
(unaudited)
(unaudited)
Operating activities
Net loss
(319,812
)
(3,331,812
)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of discount on convertible debenture
105,392
–
Fair value of stock options vested
773
3,030,288
Gain on change in fair value of derivative liabilities
(79,887
)
–
Stock issued for services
–
109,393
Changes in operating assets and liabilities:
Prepaids and other current assets
205
3,306
Accounts payable and accrued liabilities
225,347
109,500
Net cash used in operating activities
(67,982
)
(79,325
)
Financing activities
Proceeds from related party advances
3,000
–
Net cash provided by financing activities
3,000
–
Effects of exchange rate changes on cash
(741
)
37,122
Decrease in cash
(65,723
)
(42,203
)
Cash – beginning of period
112,421
71,639
Cash – end of period
46,698
29,436
Supplemental disclosures:
Interest paid
–
–
Income tax paid
–
–
(The accompanying notes are an integral part of these condensed consolidated financial statements)
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PIVOT PHARMACEUTICALS INC.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Period ended April 30, 2017
(Expressed in U.S. dollars)
1.
Nature of Operations and Continuance of Business
Pivot Pharmaceuticals Inc. (the “Company”) was incorporated in British Columbia under the Business Corporations Act on June 10, 2002. On April 7, 2015, the Company changed its name from Neurokine Pharmaceuticals Inc. to Pivot Pharmaceuticals Inc. The Company is in the business of developing and commercializing therapeutic pharmaceutical products, focused on the strategy of identifying new therapeutic treatments to address unmet medical needs in women’s health.
These consolidated financial statements have been prepared on the going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. As of April 30, 2017, the Company has not earned any revenue, has a working capital deficit of $1,735,893 and an accumulated deficit of $20,917,570. The continued operations of the Company are dependent on its ability to generate future cash flows or obtain additional financing. These factors raise substantial doubt about the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the recorded assets or liabilities that might be necessary should the Company be unable to continue as a going concern.
2.
Significant Accounting Policies
(a)
Basis of Presentation
The consolidated financial statements and the related notes of the Company are prepared in accordance with generally accepted accounting principles in the United States and are expressed in U.S. dollars. The Company’s fiscal year-end is January 31.
(b)
Use of Estimates
The preparation of these consolidated financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the useful life and recoverability of long-lived assets, assumptions used to determine the fair values of stock-based compensation and derivative liabilities and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
(c)
Interim Financial Statements
These interim unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s condensed consolidated financial position, results of operations and cash flows for the periods shown. The condensed consolidated results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period. Certain disclosures and financial information have been condensed in accordance with generally accepted accounting principles in the United States.
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PIVOT PHARMACEUTICALS INC.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Period ended April 30, 2017
(Expressed in U.S. dollars)
2.
Significant Accounting Policies (continued)
(d)
Basis of Consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The consolidating entities include:
% of ownership
Jurisdiction
Pivot Pharmaceuticals Inc.
Parent
Canada
IndUS Pharmaceuticals, Inc.
100%
USA
(e)
Loss Per Share
The Company computes net loss per share in accordance with ASC 260, Earnings Per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the consolidated statement of operations. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method for all exercisable options and warrants and the if-converted method for all outstanding convertible debentures. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive. As at April 30, 2017, the Company had 4,115,304 (January 31, 2017 – 9,692,748) potentially dilutive shares.
(f)
Financial Instruments and Fair Value Measures
ASC 820, Fair Value Measurements, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1: Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2: Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3: Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company’s financial instruments consist principally of cash, amounts receivable, accounts payable and accrued liabilities, due to related parties and convertible debenture. Pursuant to ASC 820, the fair value of our cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
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PIVOT PHARMACEUTICALS INC.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Period ended April 30, 2017
(Expressed in U.S. dollars)
2.
Significant Accounting Policies (continued)
(g)
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect and that may impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its consolidated financial position or results of operations.
(h)
Reclassification
Results for the three months ended April 30, 2016 have been reclassified to allocate previously reported stock-based compensation of $3,030,288 as follows: $817,409 to general and administrative, $77,505 to professional fees and $2,135,374 to management fees.
3.
Convertible Debenture
On September 30, 2016, the Company issued a convertible debenture with a non-related party for $500,000 Canadian Dollars ($380,411 US Dollars at September 30, 2016) (“Initial Advance”). The debenture is secured under a General Security Agreement, bears interest at 8% per annum and matures on the earlier of:
·
The date the lender demands repayment of principal and interest following an event of default,
·
The date of a dissolution event,
·
The date of a liquidity event, and
·
March 30, 2017.
The Company may request one or more additional advances of up to an aggregate amount of $1,000,000 Canadian Dollars (“Additional Advances”) provided that the aggregate amount under the convertible debenture does not exceed $1,500,000 Canadian Dollars.
The note, including the Initial Advance and any Additional Advances, is convertible into common shares at a conversion price equal to the average closing market price of the Company’s common stock during the five day period leading up to the conversion date. The Company recorded the conversion feature of the convertible debenture as a derivative liability at an estimated fair value of $134,892 with a corresponding discount to the convertible debenture (Note 4).
Pursuant to the convertible loan agreement, the Company issued 434,622 share purchase warrants to which the lender may acquire an interest in the Company equal to 12% of the maximum principal amount outstanding at any time at a price of $0.10, which equates to the ten day average trading price of the Company’s common stock determined as at September 30, 2016. The Company calculated the 434,622 share purchase warrants based on the maximum outstanding principal balance on the convertible loan as of September 30, 2016. The Company recorded the share purchase warrant at an estimated fair value of $20,154 with a corresponding discount to the convertible debenture (Note 6).
As of April 30, 2017, the carrying value of the convertible debenture is $365,978 (January 31, 2017 - $275,011) which is net of debt discounts related to conversion feature, financing costs and warrants of $nil, $nil and $nil, respectively (January 31, 2017 - $94,709, $6,126 and $6,477, respectively). As of April 30, 2017, interest accrued on the convertible debenture is $17,998 (January 31, 2017 - $10,307) and the fair value of the conversion option derivative liability is $221,317 (January 31, 2017 - $312,541).
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PIVOT PHARMACEUTICALS INC.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Period ended April 30, 2017
(Expressed in U.S. dollars)
4.
Derivative Liability
Derivative liability consists of convertible debenture with variable conversion price (Note 4). The fair value of derivative liability as at April 30, 2017 and January 31, 2017 is as follows:
April 30,
2017
$
January 31,
2017
$
September 2016 convertible debenture
221,317
312,541
221,317
312,541
The fair value of derivative financial liability was determined using the binomial option pricing model, using the following assumptions:
Expected
Volatility
Risk-free
Interest
Rate
Expected
Dividend Yield
Expected
Life
(in years)
As at issuance date:
September 2016 convertible debenture
296
%
0.45
%
0
%
0.50
As at April 30, 2017:
September 2016 convertible debenture
229
%
0.99
%
0
%
0.50
5.
Stock Options
Effective December 30, 2015, the Company adopted a stock option plan. Under this plan, the Company may grant options to its directors, officers, employees and consultants up to an amount as determined by the Company and will be no more than a percentage of its outstanding common stock as may be required by the stock exchange the Company is listed with. The exercise price of the stock options will be determined by the Company and will be no less than any minimum exercise price as may be required by the stock exchange the Company is listed with.
The following table summarizes the continuity of the Company’s stock options:
Number of
Options
Weighted
Average
Exercise
Price
(US$)
Weighted
Average
Remaining Contractual
Life
(years)
Aggregate
Intrinsic
Value
(US$)
Outstanding, January 31, 2017
15,520,833
0.38
4.2
68,599
Granted
–
–
–
–
Forfeited
–
–
–
–
Outstanding, April 30, 2017
15,520,833
0.38
4.0
203,137
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PIVOT PHARMACEUTICALS INC.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Period ended April 30, 2017
(Expressed in U.S. dollars)
5.
Stock Options (continued)
The fair value of stock-based compensation expense was estimated using the Black-Scholes option pricing model and the following assumptions:
Expected
Volatility
Risk-free
Interest
Rate
Expected
Dividend
Yield
Expected
Life (in
years)
200,000 options expiring on November 30, 2020
408
%
1.45
%
0
%
3.6
29,000 options expiring on May 2, 2021
403
%
1.63
%
0
%
4.0
Additional information regarding stock options as of April 30, 2017, is as follows:
Options Outstanding
Options
Exercisable
Exercise
Price
$
Expiry Date
200,000
150,000
0.25
November 30, 2020
4,000,000
4,000,000
0.10
December 14, 2020
7,250,000
7,250,000
0.70
February 22, 2021
29,000
27,000
0.34
May 2, 2021
4,000,000
4,000,000
0.10
December 14, 2021
41,833
41,833
0.05
January 23, 2022
15,520,833
15,468,833
$417 of stock-based compensation have yet to be recognized and will be recognized in future periods.
6.
Share Purchase Warrant
The following table summarizes the continuity of share purchase warrant:
Number
of
Warrants
Weighted
Average
Exercise
Price
$
Balance, January 31, 2017
434,622
0.10
Granted
–
–
Balance, April 30, 2017
434,622
0.10
As at April 30, 2017, the following share purchase warrant was outstanding:
Number of
Warrants
Exercise
Price
$
Expiry Date
434,622
0.10
Upon repayment of convertible debenture (Note 3)
Pursuant to the convertible debenture (Note 3), the Company will be required to issue additional share purchase warrants on any Additional Advances to which the lender may acquire an interest in the Company equal to 12% of the maximum principal amount outstanding.
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PIVOT PHARMACEUTICALS INC.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Period ended April 30, 2017
(Expressed in U.S. dollars)
7.
Related Party Transactions
As at April 30, 2017, the Company owed $3,471 (January 31, 2017 - $4,154) to a director of the Company, which is unsecured, non-interest bearing, and due on demand.
As at April 30, 2017, the Company owed $21,416 (January 31, 2017 - $18,420) to the Company’s Chief Executive Officer.
8.
Fair Value Measurements
The Company’s financial liabilities carried at fair value measured on a recurring basis as of April 30, 2017 and January 31, 2017, consisted of the following:
Total fair
value at
April 30,
2017
Quoted
prices in
active
markets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant unobservable
inputs
(Level 3)
Derivative liability (1)
$
221,317
$
-
$
221,317
$
-
Total fair
value at
January 31,
2017
Quoted
prices in
active
markets
(Level 1)
Significant
other
observable
inputs
(Level 2)
Significant unobservable
inputs
(Level 3)
Derivative liability (1)
$
312,541
$
-
$
312,541
$
-
_____________
(1)
Derivative liability amounts are due to the embedded derivatives of convertible debenture issued by the Company and are calculated using the binomial option pricing model (Note 4).
The Company has no financial assets carried at fair value.
9.
Commitments
The Company’s minimum future lease commitments are:
$
2018
17,900
2019
23,900
2020
12,000
10.
Subsequent Events
Management has evaluated subsequent events through the date these financial statements were available to be issued. Based on such evaluation, no events occurred that required disclosure.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.