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Item 1. Financial Statements

2017-12-15 compared with 2017-09-15 · 166 added, 89 removed, 176 unchanged (59% of the section changed)

Financial Statements

Our unaudited interim condensed consolidated financial statements for the period ended July 31, 2017 form part of this quarterly report.

Our unaudited interim condensed consolidated financial statements for the period ended October 31, 2017 form part of this quarterly report.

All currency references in this report are to U.S.

1 unchanged sentence

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 and six month periods ended July 31, 2017 are not necessarily indicative of results to be expected for any subsequent period.

The results of operations for the three and nine month periods ended October 31, 2017 are not necessarily indicative of results to be expected for any subsequent period.

PIVOT PHARMACEUTICALS INC.

1 unchanged sentence

(Expressed in U.S.

Period ended July 31, 2017 (unaudited) and January 31, 2017

Period ended October 31, 2017 (unaudited) and January 31, 2017

PIVOT PHARMACEUTICALS INC.

5 unchanged sentences

Security deposit

Liabilities and Stockholders’ Deficit

Intangible asset (Notes 4(a) and 5)

Liabilities and Stockholders’ Equity (Deficit)

Current liabilities

3 unchanged sentences

Derivative liability (Note 7)

Total current liabilities

Promissory note (Note 8)

Total liabilities

Stockholders’ Deficit

Stockholders’ Equity (Deficit)

Common stock:

Unlimited shares authorized, without par value, 75,847,114 and 75,647,114 shares issued and outstanding, respectively

Unlimited shares authorized, without par value, 79,600,925 and 75,647,114 shares issued and outstanding, respectively (Note 9)

Subscriptions payable (Note 9)

Additional paid-in capital

1 unchanged sentence

Accumulated deficit

(20,923,121 )

(20,597,753 )

Total stockholders’ deficit

Total liabilities and stockholders’ deficit

Total stockholders’ equity (deficit)

Total liabilities and stockholders’ equity (deficit)

(The accompanying notes are an integral part of these condensed consolidated financial statements)

2 unchanged sentences

(Expressed in U.S.

Amortization of intangible asset (Note 5)

Foreign exchange (gain) loss

6 unchanged sentences

Amortization of discount on convertible debenture

Gain on change in fair value of derivative liabilities

Loss (gain) on change in fair value of derivative liabilities

Gain on disposal of asset (Note 3)

Gain on settlement of debts

1 unchanged sentence

Total other income (expense)

Net income (loss)

Other comprehensive income (loss)

Foreign currency translation adjustment

Net comprehensive loss

Net income (loss) per share, basic and diluted

Weighted average shares outstanding – basic and diluted

Net comprehensive income (loss)

Net income (loss) per share, basic

Net income (loss) per share, diluted

Weighted average shares outstanding – basic

Weighted average shares outstanding – diluted

(The accompanying notes are an integral part of these condensed consolidated financial statements)

3 unchanged sentences

Operating activities

Net income (loss)

Adjustments to reconcile net loss to net cash used in operating activities:

1 unchanged sentence

Fair value of stock options vested

Gain on change in fair value of derivative liabilities

(Gain) loss on change in fair value of derivative liabilities

Gain on disposal of assets

Gain on settlement of debts

2 unchanged sentences

Prepaids and other current assets

Due to related parties

Accounts payable and accrued liabilities

Other liabilities

Net cash used in operating activities

Financing activities

Proceeds from related party advances

Proceeds from convertible debenture

Proceeds from debenture

Proceeds from issuance of common stock

Proceeds from issuance of common stock subscriptions

Net cash provided by financing activities

Effects of exchange rate changes on cash

Decrease in cash

Increase in cash

Cash – beginning of period

Cash – end of period

Supplemental disclosures:

Interest paid

Income tax paid

Non-cash investing and financing activities

Capital contribution through forgiveness of debt

Supplemental cash flow disclosures (Note 12)

(The accompanying notes are an integral part of these condensed consolidated financial statements)

1 unchanged sentence

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Period ended July 31, 2017

Period ended October 31, 2017

(Expressed in U.S.

6 unchanged sentences

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 July 31, 2017, the Company has not earned any revenue, has a working capital deficit of $1,287,374 and an accumulated deficit of $20,923,121.

As of October 31, 2017, the Company has not earned any revenue, has a working capital of $145,887 and an accumulated deficit of $20,392,333.

The continued operations of the Company are dependent on its ability to generate future cash flows or obtain additional financing.

17 unchanged sentences

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Period ended July 31, 2017

Period ended October 31, 2017

(Expressed in U.S.

6 unchanged sentences

Pivot Pharmaceuticals Inc.

IndUS Pharmaceuticals, Inc.

Pivot Green Stream Health Solutions Inc.

(e) Loss Per Share

5 unchanged sentences

Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive.

As at July 31, 2017, the Company had 5,908,347 (January 31, 2017 – 9,692,748) potentially dilutive shares.

As at October 31, 2017, the Company had 2,822,046 (January 31, 2017 – 9,692,748) potentially dilutive shares.

(f) Financial Instruments and Fair Value Measures

8 unchanged sentences

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.

The Company’s financial instruments consist principally of cash, amounts receivable, accounts payable and accrued liabilities, due to related parties and promissory note.

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.

2 unchanged sentences

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Period ended July 31, 2017

Period ended October 31, 2017

(Expressed in U.S.

2 unchanged sentences

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.

Disposal of Asset

On September 11, 2017, the Company completed an exchange agreement whereby the Company exchanged with its past Chief Executive Officer 100% of its shares of common stock of its wholly-owned subsidiary, IndUS Pharmaceuticals, Inc.

(“IndUS”), for 3,800,000 shares of common stock of the Company (Note 9(a)).

Pursuant to the exchange agreement, the Company has provided its former Chief Executive Officer a promissory note (Note 8(a)) in the amount of $200,000 in discharge of all obligations with respect to Dr.

Chaturvedi’s accrued salary totaling $267,267 through September 11, 2017.

The disposal of IndUS resulted in a gain as follows:

3,800,000 shares of common stock acquired and cancelled

Net liabilities exchanged

Gain on disposal of asset

The disposal of IndUS did not meet the definition of discontinued operations as it did not represent a strategic shift that has a major effect on the Company’s operations and financial results.

Asset Acquisitions

(a) BiPhasix License

On September 12, 2017, the Company entered into a licensing agreement with Altum Pharmaceuticals Inc.

(“Altum”) whereby the Company acquired worldwide rights to the BiPhasix™ transdermal drug delivery technology for the development and commercialization of Cannabinoids, Cannabidiol and Tetrahydrocannabinol products.

Consideration included:

Issuance of 2,500,000 shares of common stock on September 12, 2017 (Notes 5 and 9(b));

Issuance of 2,500,000 shares of common stock of Pivot upon Health Canada Natural Product Number approval;

Royalties on annual gross sales;

For pharmaceutical products, milestone payments payable upon first Investigative New Drug Approval, upon positive outcome of Phase II trial in first indication, and upon New Drug Application approval.

(b) Solmic Solubilization License

On September 23, 2017, the Company entered into a collaboration and license agreement with SolMic GmbH (“Solmic”) whereby the Company will acquire worldwide rights to Solmic’s Solubilization Technology for the development and commercialization of cannabinoid-containing natural extracts.

Milestones include payments upon the following developments:

1) Regulatory approval of a natural health product;

2) First approval of an investigative new drug application for a pharmaceutical product;

3) Positive outcome of a Phase II clinical trial of a pharmaceutical product in the first indication;

and 4) Approval of a New Drug Application for a pharmaceutical product by the US Food and Drug Administration.

Other consideration include a sales milestone upon aggregate net sales of $5,000,000 and royalties on aggregate net sales.

PIVOT PHARMACEUTICALS INC.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Period ended October 31, 2017

(Expressed in U.S.

Intangible Asset

Balance, January 31, 2017

License agreement (Note 4(a))

Balance, October 31, 2017

Accumulated Amortization

Balance, January 31, 2017

Balance, October 31, 2017

Net book value, October 31, 2017

Net book value, January 31, 2017

Convertible Debenture

11 unchanged sentences

The Company recorded the share purchase warrant at an estimated fair value of $20,154 with a corresponding discount to the convertible debenture (Note 11).

As of July 31, 2017, the carrying value of the convertible debenture is $394,042 (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 July 31, 2017, interest accrued on the convertible debenture is $27,748 (January 31, 2017 - $10,307) and the fair value of the conversion option derivative liability is $142,905 (January 31, 2017 - $312,541).

As of July 31, 2017, the Company has not repaid the convertible debenture, which is in default.

PIVOT PHARMACEUTICALS INC.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Period ended July 31, 2017

Period ended October 31, 2017

(Expressed in U.S.

Convertible Debenture (continued)

On September 18, 2017, the lender converted the outstanding principal and accrued interest of the convertible debenture into 4,623,825 shares of common stock (Note 9(c)) of the Company at a conversion price of $0.10.

A loss on conversion of debenture of $21,236 was recorded within gain on settlement of debts in the condensed consolidated statements of operations and comprehensive income.

As of October 31, 2017, the carrying value of the convertible debenture is $nil (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 October 31, 2017, interest accrued on the convertible debenture is $nil (January 31, 2017 - $10,307) and the fair value of the conversion option derivative liability is $nil (January 31, 2017 - $312,541).

Derivative Liability

Derivative liability consists of convertible debenture with variable conversion price (Note 6).

The fair value of derivative liability as at July 31, 2017 and January 31, 2017 is as follows:

On September 18, 2017, the convertible debenture was converted into shares of common stock (Note 6).

The fair value of derivative liability as at October 31, 2017 and January 31, 2017 is as follows:

September 2016 convertible debenture

The fair value of derivative financial liability was determined using the binomial option pricing model, using the following assumptions:

Interest Rate

Dividend Yield

Expected Volatility

Risk-free Interest Rate

Expected Dividend Yield

Expected Life

1 unchanged sentence

September 2016 convertible debenture

As at July 31, 2017:

September 2016 convertible debenture

Promissory Note

Principal (Note 8(a))

Accrued interest (Note 8(a))

(a) Promissory Note – Former Chief Executive Officer (Note 3)

Promissory note bears interest at 8% per annum.

Principal and accrued interest are due on the earlier of:

1) 30 days after the completion of a financing of at least $2,000,000 and (ii) September 10, 2027.

PIVOT PHARMACEUTICALS INC.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Period ended October 31, 2017

(Expressed in U.S.

Promissory Note (continued)

(b) Promissory Note – Third Party

On September 27, 2017, the Company issued a promissory note in the amount of $400,000, bearing interest at 12% per annum and maturing on December 31, 2018, which no proceeds have been received by the Company as at October 31, 2017.

As part of the promissory note, 100,000 shares of our common stock were issued (Note 9(d)).

On September 11, 2017, 3,800,000 shares of common stock were acquired and cancelled pursuant to the share exchange agreement (Note 3).

On September 12, 2017, 2,500,000 shares of common stock were issued pursuant to the Altum licensing agreement (Note 4(a)).

On September 18, 2017, 4,623,825 shares of common stock were issued upon conversion of convertible debenture (Note 6).

On October 26, 2017, 100,000 shares of common stock were issued pursuant to a promissory note issued (Note 8(b)).

In October 2017, the Company received proceeds totaling $223,000 pursuant to private placements for the issuance of 2,230,000 shares of common stock.

330,000 shares of common stock were issued on October 30 and 1,900,000 shares of common stock were issuable as of October 31, 2017.

As of October 31, 2017 200,000 shares of common stock were issuable related to share issue costs on this private placement.

The 1,900,000 shares of common stock related to the private placement and the 200,000 shares of common stock related to share issue costs were issued on November 2, 2017.

In October 2017, the Company received proceeds totaling $76,000 pursuant to private placements for the issuance of 380,000 units, consisting of one common stock and one half of one share purchase warrant.

Each share purchase warrant entitles the holder to purchase a common share at $0.35 for 18 months.

These units were issuable as of October 31, 2017.

On November 30, 2017, 380,000 shares of common stock and 190,000 share purchase warrants were issued in full satisfaction of the stock subscription payable.

On October 31, 2017, the Company settled $35,152 of accounts payable through the issuance of 92,384 shares of common stock (Note 13), which were issued on November 2, 2017.

Stock Options

3 unchanged sentences

The following table summarizes the continuity of the Company’s stock options:

Weighted Average

Exercise Price

Weighted Average Remaining Contractual Life (years)

Outstanding, January 31, 2017

Outstanding, July 31, 2017

PIVOT PHARMACEUTICALS INC.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Period ended July 31, 2017

Period ended October 31, 2017

(Expressed in U.S.

Stock Options (continued)

Number of Options

Exercise Price

Weighted Average Remaining Contractual Life (years)

Outstanding, January 31, 2017

Outstanding, October 31, 2017

The fair value of stock-based compensation expense was estimated using the Black-Scholes option pricing model and the following assumptions:

Interest Rate

Dividend Yield

Expected Volatility

Risk-free Interest Rate

Expected Dividend Yield

Expected Life

29,000 options expiring on May 2, 2021

Additional information regarding stock options as of July 31, 2017, is as follows:

Options Outstanding

Additional information regarding stock options as of October 31, 2017, is as follows:

November 30, 2020

4 unchanged sentences

$60 of stock-based compensation have yet to be recognized and will be recognized in future periods.

PIVOT PHARMACEUTICALS INC.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Period ended October 31, 2017

(Expressed in U.S.

Share Purchase Warrant

The following table summarizes the continuity of share purchase warrant:

Weighted Average Exercise

Weighted Average Exercise Price

Balance, January 31, 2017

Balance, July 31, 2017

As at July 31, 2017, the following share purchase warrant was outstanding:

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.

Balance, October 31, 2017

As at October 31, 2017, there are no share purchase warrants outstanding.

On November 30, 2017, 190,000 share purchase warrants, entitling the holder to purchase a common share at $0.35 for 18 months, were issued (Note 9(f)).

Supplemental Cash Flow Information

Supplemental disclosures:

Interest paid

Income tax paid

Non-cash investing and financing activities:

Capital contribution through forgiveness of debt

Common stock issued for settlement of accounts payable

Common stock issued for settlement of convertible debenture

Common stock issued for prepaid assets

Common stock issued for intangible asset

Common stock subscriptions issued for services

Debt discounts on convertible debt

Promissory note issued for settlement of accrued salaries

Treasury stock returned and retired in disposition of assets

Related Party Transactions

As at October 31, 2017, the Company owed $4,544 (January 31, 2017 - $4,154) to a director of the Company, which is unsecured, non-interest bearing, and due on demand.

During the nine months ended October 31, 2017, $552,889 of accrued management fees to the Company’s Chief Financial Officer and Chief Business Officer were forgiven.

In addition, $35,152 of accounts payable due to a company controlled by the Company’s Chief Financial Officer were settled for 92,384 shares of common stock.

PIVOT PHARMACEUTICALS INC.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Period ended July 31, 2017

Period ended October 31, 2017

(Expressed in U.S.

Related Party Transactions

As at July 31, 2017, the Company owed $3,737 (January 31, 2017 - $4,154) to a director of the Company, which is unsecured, non-interest bearing, and due on demand.

As at July 31, 2017, the Company owed $43,264 (January 31, 2017 – $18,420) to the Company’s past Chief Executive Officer (Note 10).

At July 31, 2017, $552,889 of accrued management fees to the Company’s Chief Financial Officer and Chief Business Officer were forgiven.

Fair Value Measurements

The Company’s financial liabilities carried at fair value measured on a recurring basis as of July 31, 2017 and January 31, 2017, consisted of the following:

Total fair value at July 31,

Quoted prices in active markets

Significant other observable inputs

Significant unobservable inputs

The Company’s financial liabilities carried at fair value measured on a recurring basis as of October 31, 2017 and January 31, 2017, consisted of the following:

prices in active markets

other observable inputs

Derivative liability (1)

Total fair value at January 31,

Quoted prices in active markets

Significant other observable inputs

Significant unobservable inputs

active markets

other observable inputs

Derivative liability (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 6).

The Company has no financial assets carried at fair value.

The Company’s minimum future lease commitments are:

Subsequent Events

On September 11, 2017, the Company entered into an exchange agreement with its subsidiary, IndUS, and its Chief Executive Officer whereby the Company exchanged all of its outstanding common stock of IndUS for 3,800,000 common stock of the Company, upon with its Chief Executive Officer resigned.

As part of this exchange agreement, the Company provided its past Chief Executive Officer with a non-interest bearing promissory note of $200,000 payable at the earlier of 45 days after the completion of a financing of at least $2,000,000 and September 10, 2027, and in discharge of all obligations with respect to all accrued and unpaid salary through September 11, 2017.

Approximately $350,000 of liabilities belonging to IndUS will be assumed by the Company’s past Chief Executive Officer.

PIVOT PHARMACEUTICALS INC.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Period ended July 31, 2017

(Expressed in U.S.

Subsequent Events (continued)

Concurrently, on September 11, 2017, the Company appointed Dr.

Patrick Frankham as its interim Chief Executive Officer.

On September 12, 2017, the Company entered into a licensing agreement with Altum Pharmaceuticals Inc.

(“Altum”) whereby the Company was granted worldwide rights to BiPhasix Transdermal Drug Delivery Technology (“BiPhasix Technology”) for the delivery and commercialization of cannabinoids, cannabidiol (“CBD”), and tetrahydrocannabinol-based products.

Financial consideration includes:

· Issuance of 2,500,000 shares of common stock on closing of the licensing agreement (issuable as at September 15, 2017);

· Issuance of 2,500,000 shares of common stock of the Company upon Health Canada Natural Product Number (“NPN”) approval for a CBD product developed using the BiPhasix Technology;

· Five percent (5%) royalties on annual net sales;

· For pharmaceutical products:

$1,000,000 payable upon first Investigative New Drug Application approval;

$1,000,000 payable upon positive outcome of Phase II trial in first indication;

$2,000,000 payable upon New Drug Application approval.

On November 7, 2017, 50,000 shares of common stock were issued to a service provider for services rendered.

On November 15, 2017, the Company entered into scientific advisory board agreements whereby 100,000 options to purchase shares of common stock with the following terms were granted:

Exercise price of $0.39;

25% vesting on each of the following dates:

November 15, 2017, May 15, 2018, November 15, 2018 and May 15, 2019;

Expiry on November 14, 2022.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements