What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2018-05-01 compared with 2017-04-28 · 210 added, 126 removed, 262 unchanged (56% of the section changed)

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Pivot Pharmaceuticals Inc.

To the Board of Directors and Shareholders of Pivot Pharmaceuticals Inc.:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Pivot Pharmaceuticals Inc.

(the “Company”) as of January 31, 2017 and 2016 and the related consolidated statements of operations and comprehensive income (loss), stockholders’ deficit and cash flows for each of the years in the two-year period ended January 31, 2017.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.

(“the Company”) as of January 31, 2018 and 2017, the related consolidated statements of operations and comprehensive income (loss), stockholders’ deficit, and cash flows for each of the years in the two-year period ended January 31, 2018 and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of January 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the two-year period ended January 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph Regarding Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency which raise substantial doubt about its ability to continue as a going concern.

Management's plans in regard to these matters are also described in Note 1.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s 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 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 financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

Our audits included performing procedures to assess the risks of material misstatement of the 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 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 financial statements.

We believe that our audits provide a reasonable basis for our opinion.

In our opinion the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Pivot Pharmaceuticals Inc.

as of January 31, 2017 and 2016, and the results of their operations and cash flows for each of the years in the two-year period ended January 31, 2017, in conformity with U.S.

generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated financial statements, the Company had an accumulated deficit, negative working capital, and no revenue to date as of January 31, 2017 which raises substantial doubt about its ability to continue as a going concern.

Management’s plans concerning these matters are also described in Note 1.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Sadler, Gibb & Associates, LLC

We have served as the Company’s auditor since 2014.

Salt Lake City, UT

April 28, 2017

PIVOT PHARMACEUTICALS INC.

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Security deposit

Intangible asset, net (Note 5)

Liabilities and Stockholders’ Deficit

4 unchanged sentences

Derivative liabilities (Note 7)

Promissory note (Note 8)

Total liabilities

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Unlimited shares authorized, without par value, 82,373,559 and 75,647,114 shares issued and outstanding, respectively (Note 9)

Common stock issuable (Note 6)

Additional paid-in capital

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Nature of operations and continuance of business (Note 1)

Commitments (Note 11)

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

2 unchanged sentences

(Expressed in U.S.

Depreciation and amortization

Due diligence costs

Foreign exchange loss

2 unchanged sentences

Professional fees

Research and development

Total expenses

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Amortization of discount on convertible debentures

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

Gain on disposal of asset (Note 3)

Gain on settlement of debts

Interest expense

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

Total other income (expenses)

Other comprehensive (loss) income

Other comprehensive income (loss)

Foreign currency translation adjustment

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PIVOT PHARMACEUTICALS INC.

Consolidated Statements of Stockholders’ Equity (Deficit)

Consolidated Statements of Stockholders’ Deficit

(Expressed in U.S.

Foreign Currency Translation

Balance – January 31, 2016

Common stock issued for services

Common stock issued in asset acquisition (Note 2)

Common stock issued for cash

Stock-based compensation (Restated)

Net loss (Restated)

Warrants issued with convertible debenture

Stock-based compensation

Balance – January 31, 2017

Common stock issued for services

Warrants issued with convertible debenture

Common stock issued for settlement of accounts payable and accrued liabilities to related parties

Capital contribution by officers in forgiveness of liabilities

Common stock issued for conversion of debenture

Common stock issued for acquisition of license

Common stock and warrants issued for cash

Common stock issued for finder’s fee

Cancellation of common stock pursuant to disposal of asset

Stock-based compensation

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Common stock issued for services

Compensation expense recognized in asset acquisition

Depreciation and amortization

Fair value of stock options vested

Loss (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

Changes in operating assets and liabilities:

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 issuance of common stock

Proceeds from issuance of common stock and warrants

Proceeds from debenture

Proceeds from issuance of convertible debenture

Proceeds from related party advances

Net cash provided by financing activities

Effects of exchange rate changes on cash

Increase in cash

Net change in cash

Cash – beginning of period

Cash – end of period

Supplemental disclosures:

Interest paid

Income tax paid

Non-cash activities:

Common stock issued in asset acquisition

Debt discount on convertible debenture

Supplemental cash flow disclosures (Note 13)

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

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to Pivot Pharmaceuticals Inc.

The Company is in the business of developing and commercializing new treatments for unmet medical needs in women’s cancers as well as exploring new uses for existing drugs and/or developing proprietary drug delivery technologies.

The Company is in the business of developing and commercializing therapeutic pharmaceuticals and nutraceuticals, as well as drug delivery platform technologies.

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.

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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 factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements.

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.

Asset Acquisition

On November 20, 2015, the Company completed the acquisition of IndUS Pharmaceuticals, Inc.

(“IndUS”) pursuant to an Agreement and Plan of Merger and Acquisition Agreement dated as of November 4, 2015.

As consideration for the purchase, the Company issued 4,750,000 shares of common stock, of which 4,512,500 shares of common stock were issued on November 23, 2015 and 237,500 shares of common stock were issued on December 4, 2015 which shares were being held as a contingency pertaining to the liabilities of IndUS which were assumed by Pivot.

The Company will also be granting 41,833 stock options pursuant to the Agreement and Plan of Merger.

IndUS is a United States-India cross-border pharmaceutical company conducting research and development activities for advancing novel therapeutics in the areas of oncology, infectious diseases and diabetes whose assets consisted of a portfolio of patented and proprietary, novel anticancer drug candidates from multiple chemical classes of molecules referred to as pyrrolobenzodiazepine dimers.

The Company evaluated this acquisition in accordance with ASC 805, Business Combinations (10-55-4) to discern whether the assets and operations of IndUS met the definition of a business.

The Company concluded there were not a sufficient number of key processes obtained to develop the inputs into outputs, nor could such processes be easily obtained by the Company.

Accordingly, the Company accounted for this transaction as the acquisition of assets and a key employee (compensation arrangement).

The transaction was accounted for in accordance with asset acquisition guidance found in ASC 805 and share based payment guidance found in ASC 718, Compensation – Stock Compensation.

The consideration transferred, assets acquired, liabilities assumed and compensation expense recognized is as follows:

Consideration paid:

Liabilities assumed

Stock options granted

Common stock issued

Total purchase price

PIVOT PHARMACEUTICALS INC.

Notes to the Consolidated Financial Statements

Year ended January 31, 2016

(Expressed in U.S.

Asset Acquisition (continued)

Consideration received:

Other current assets

Compensation expense

Net value of assets purchased

Significant Accounting Policies

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The consolidating entities include:

% of ownership

Pivot Pharmaceuticals Inc.

IndUS Pharmaceuticals, Inc.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.

As at January 31, 2017 and 2016, the Company had no cash equivalents.

Pivot Green Stream Health Solutions Inc.

PIVOT PHARMACEUTICALS INC.

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Significant Accounting Policies (continued)

Cash and Cash Equivalents

The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.

As at January 31, 2018 and 2017, the Company had no cash equivalents.

Intangible Asset

Intangible assets consists of costs incurred to acquire a license.

Intangible assets are considered finite live assets and recorded at cost less accumulated amortization and accumulated impairment.

Subsequent expenditures are capitalized only when they increase the future economic benefits embodied in the asset.

Amortization is recorded using the straight-line method and is intended to amortize the license over its estimated useful life of four years.

Stock-Based Compensation

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

As at January 31, 2017, the Company has 6,840,834 (2016 – 1,700,750) potentially dilutive shares.

As at January 31, 2018, the Company has excluded 6,153,764 (2017 – 6,840,834) potential dilutive shares.

Comprehensive Income (Loss)

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Research costs are expensed in the period that they are incurred.

There were no research costs incurred during the years ended January 31, 2017 and 2016.

PIVOT PHARMACEUTICALS INC.

Notes to the Consolidated Financial Statements

Year ended January 31, 2017

(Expressed in U.S.

Significant Accounting Policies (continued)

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Income Taxes”.

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As of January 31, 2018 and 2017, the Company did not have any amounts recorded pertaining to uncertain tax positions.

The Company files federal and provincial income tax returns in Canada and federal and state income tax returns in the United States.

The Company files federal and provincial income tax returns in Canada.

The Company recognizes interest and penalties related to uncertain tax positions in tax expense.

During the years ended January 31, 2018 and 2017, there were no charges for interest or penalties.

PIVOT PHARMACEUTICALS INC.

Notes to the Consolidated Financial Statements

Year ended January 31, 2016

(Expressed in U.S.

Significant Accounting Policies (continued)

Financial Instruments and Fair Value Measures

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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, 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, and the fair value of derivative liabilities is determined based on “Level 3” inputs.

The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

PIVOT PHARMACEUTICALS INC.

Notes to the Consolidated Financial Statements

Year ended January 31, 2017

(Expressed in U.S.

Significant Accounting Policies (continued)

Foreign Currency Translation

The functional currency of the parent entity, Pivot Pharmaceuticals Inc., is the Canadian dollar and the functional currency of its subsidiary is the US dollar.

The functional currency of the parent entity, Pivot Pharmaceuticals Inc., and the wholly-owned subsidiary, Pivot Green Stream Health Solutions Inc., is the Canadian dollar.

The Company’s presentation currency is the US dollar.

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Gains or losses arising on translation are recognized in other comprehensive income (loss) as foreign currency translation adjustments.

Reclassifications

We have made reclassifications to certain numbers reported in the prior year to conform to the presentation of the current year.

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.

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(b)).

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 for which a gain of $102,259 has been included in gain on settlement of debts in the statement of operations.

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.

PIVOT PHARMACEUTICALS INC.

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(Expressed in U.S.

Significant Accounting Policies (continued)

Recent Accounting Pronouncements

Asset Acquisitions

BiPhasix License

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

(“Altum”), a party related by way of common director and officers, 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 valued at $247,556 (Notes 5 and 9(c));

Issuance of 2,500,000 shares of common stock of Pivot upon Health Canada Natural Product Number approval (not yet issued as of the date of this report);

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.

As of January 31, 2018 and the date of this report, no milestones have been achieved.

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, which have not been achieved as at January 31, 2018 and as of the date of this report.

Intangible Asset

Balance, January 31, 2017

License agreement (Note 4(a))

Effect of foreign exchange rate changes

Balance, January 31, 2018

Accumulated Amortization

Balance, January 31, 2017

Balance, January 31, 2018

Net book value, January 31, 2018

Net book value, January 31, 2017

Weighted average life remaining on intangible asset is 3.6 years.

Future amortization for the next four years is:

PIVOT PHARMACEUTICALS INC.

Notes to the Consolidated Financial Statements

Year ended January 31, 2017

(Expressed in U.S.

Intangible Asset (continued)

Convertible Debenture

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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 7).

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.

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 per share, 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 11).

As of January 31, 2017, the carrying value of the convertible debenture is $275,010 (January 31, 2016 - $nil), which is net of debt discounts related to conversion feature, financing costs and warrants of $94,709, $6,126 and $6,477 respectively (January 31, 2016 - $nil, $nil and $nil, respectively).

As of January 31, 2017, interest accrued on the convertible debenture is $10,307 (January 31, 2016 - $nil) and the fair value of the conversion option derivative liability is $312,541 (January 31, 2016 - $nil).

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(d)) 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 consolidated statements of operations and comprehensive income.

As of January 31, 2018, 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 January 31, 2018, 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).

PIVOT PHARMACEUTICALS INC.

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

The fair value of derivative liability as at January 31, 2017 and 2016 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 January 31, 2018 and January 31, 2017 is as follows:

September 2016 convertible debenture

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September 2016 convertible debenture

As at January 31, 2017:

September 2016 convertible debenture

Promissory Note

Principal (Note 8(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, provided that if repayment occurs prior to the second anniversary date, all interest will be waived.

On February 28, 2018, the Company issued senior secured convertible debentures for gross proceeds of $5,000,000 Canadian dollars (Note 15).

Accordingly, accrued interest being waived, principal was due and repaid on March 30, 2018.

In accordance with ASC 470-10-45-2, the Company has classified the note payable as a current liability.

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 January 31, 2018.

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

PIVOT PHARMACEUTICALS INC.

Notes to the Consolidated Financial Statements

Year ended January 31, 2017

(Expressed in U.S.

During the year ended January 31, 2018:

On July 19, 2017, 200,000 shares of common stock were issued for services rendered.

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 at a price of $0.10 per share.

330,000 shares of common stock were issued on October 30 and 1,900,000 shares of common stock were issued on November 2, 2017.

On November 2, 2017, 200,000 shares of common stock related to share issue costs on this private placement were issued.

On October 31, 2017, the Company settled $35,153 of accounts payable through the issuance of 92,384 shares of common stock (Note 12(d)), which were issued on November 2, 2017.

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

Effective December 15, 2017, the Company closed a private placement for an aggregate of 505,000 units, consisting of one common share and one half of one share purchase warrant, at price of $0.20 per unit for gross proceeds of $101,000.

On November 21, 2017, 380,000 shares of common stock and 190,000 share purchase warrants were issued.

On December 18, 2017, 125,000 shares of common stock and 62,500 share purchase warrants were issued.

Finder’s fee consisted of a cash payment of $5,050 and issuance of 25,250 units, consisting of one common share and one half of one share purchase warrant.

On December 18, 2017, 25,250 shares of common stock and 12,625 share purchase warrants related to the finder’s fee were issued.

During the year ended January 31, 2017:

On February 10, 2016, the Company issued 100,000 shares of common stock to service providers for services provided valued at $68,000.

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The value of the common stock was based on the market price of the stock on the date of issuance.

During the year ended January 31, 2016:

On March 6, 2015, 10,000,000 shares of common stock were issued to directors, an officer and a consultant (the “shareholders”) and valued at $894,656 using the market price of the stock on the date of issuance.

An additional 30,000,000 shares of common stock were held in escrow and to be released as follows:

10,000,000 shares of common stock on each of August 25, 2015, February 25, 2016 and February 25, 2017.

On August 25, 2015, 10,000,000 shares of common stock were released to the shareholders.

In October 2015, the shareholders returned 20,000,000 shares of common stock issued and received to the Company for cancellation.

On the same date, the remaining 20,000,000 shares of common stock held in escrow were returned to the Company for cancellation.

PIVOT PHARMACEUTICALS INC.

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(Expressed in U.S.

Common Stock (continued)

On April 15, 2015, the Company issued 2,500,000 shares of common stock to a service provider and an officer for services provided valued at $239,195.

The value of the common stock was based on the market price of the stock on the date of issuance.

In July 2015, 1,000,000 shares of common stock were issued for cash proceeds of $200,084 or $0.20 per share.

In April 2015, 400,000 shares of common stock were issued for cash proceeds of $40,148 or $0.10 per share.

On August 1, 2015, 25,000 shares of common stock were issued to a member of the Company’s Scientific Advisory Board (“SAB member”) and valued at $9,125 using the market price of the stock on the date of issuance.

An additional 75,000 shares of common stock are held in escrow and will be released as follows:

25,000 shares of common stock on each of January 31, 2016, July 31, 2016 and January 31, 2017.

On January 31, 2016, 25,000 shares of common stock were released to the SAB member.

For the year ended January 31, 2016, an additional $16,206 was recognized for services provided, which was valued using the market price of the stock on January 31, 2016.

On August 24, 2015, 100,000 shares of common stock were issued to a service provider and valued at $53,500 using the market price of the stock on the date of issuance.

On November 23, 2015, 4,512,500 shares of common stock were issued pursuant to the asset acquisition (Note 2).

On December 4, 2015, a further 237,500 shares of common stock were issued pursuant to this acquisition.

The shares issued were valued at $46,723, which is the net value of assets purchased.

On November 30, 2015, 8,333 shares of common stock were issued to the Company’s Chief Executive Officer (“CEO”) pursuant to an employment agreement and valued at $8,750 using the market price of the stock on the date of issuance.

On December 31, 2015 and January 29, 2016, 25,000 shares of common stock were issued to the Company’s CEO pursuant to the same employment agreement and valued, using market prices of the stock on these dates, at $25,000 and $22,500, respectively

Share Purchase Warrants

The following table summarizes the continuity of share purchase warrants:

Weighted Average Exercise Price

Weighted Average

Balance, January 31, 2017

Granted (Note 9(j))

Balance, January 31, 2018

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

As at January 31, 2018, the following share purchase warrants were outstanding:

Number of Warrants

March 30, 2017

Pursuant to the convertible debenture (Note 4), 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.

PIVOT PHARMACEUTICALS INC.

Notes to the Consolidated Financial Statements

Year ended January 31, 2016

(Expressed in U.S.

Exercise Price $

June 14 ,2019

Stock Options

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Outstanding, January 31, 2018

PIVOT PHARMACEUTICALS INC.

Notes to the Consolidated Financial Statements

Year ended January 31, 2017

(Expressed in U.S.

Stock Options (continued)

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

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41,833 options expiring on January 23, 2021

100,000 options expiring on November 14, 2022

Additional information regarding stock options as of January 31, 2018, is as follows:

Options Outstanding

Options Exercisable

Exercise Price $

November 30, 2020

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January 23, 2022

November 14, 2022

$112,147 of stock-based compensation have yet to be recognized and will be recognized in future periods.

Supplemental Cash Flow Disclosures

Supplemental disclosures:

Interest paid

Income tax paid

Non-cash investing and financing activities:

Capital contribution through forgiveness of debt

Common stock issued for finders’ fee

Common stock issued for settlement of accounts payable

Common stock issued for settlement of convertible debenture

Common stock issued for intangible asset

Debt discounts on convertible debt

Promissory note issued for settlement of accrued salaries

Common stock received and constructively retired in disposition of assets

PIVOT PHARMACEUTICALS INC.

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As at January 31, 2018, the Company owed $4,767 (2017 - $4,154) to a director of the Company, which is unsecured, non-interest bearing, and due on demand.

As at January 31, 2017, the Company owed $18,421 (2016 – receivable of $866) to the Company’s Chief Executive Officer, which is unsecured, non-interest bearing, and due on demand.

As at January 31, 2017, the Company owed $nil (2016 - $37,622) to related parties related to stock options to be granted pursuant to the Agreement and Plan of Merger and Acquisition Agreement dated as of November 4, 2015 between the Company and IndUS (Note 2).

As at January 31, 2018, the Company owed $nil (2017 – $18,421) to the Company’s past Chief Executive Officer.

On September 12, 2017, the Company entered into a licensing agreement with Altum, a party related by way of common director and officers, whereby the Company acquired worldwide rights to the BiPhasix™ transdermal drug delivery technology for the development and commercialization of Cannabinoids, Cannabidiol and Tetrahydrocannabinol products (Note 4(a)).

As at January 31, 2018, the Company owed Altum $5,337 (2017 - $nil) for expenses paid on behalf of the Company, which was repaid subsequent to year end.

During the year ended January 31, 2018, a capital contribution amounting to $552,888 was made by two officers who forgave accrued management fees.

In addition, $35,153 of accounts payable due to a company controlled by the Company’s Chief Financial Officer were settled for 92,384 shares of common stock.

The Company has approximately $7.7 million of non-capital losses carried forward to offset taxable income in future years which expire beginning in fiscal 2029.

9 unchanged sentences

The significant components of deferred income tax assets and liabilities as at January 31, 2018 and 2017, after applying enacted corporate income tax rates, are as follows:

Share issue costs

Non-capital losses carried forward

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The following table lists the fiscal year in which the loss was incurred and the expiration date of the operating loss:

The Company’s minimum future lease commitments are:

Subsequent Events

Effective February 28, 2018, the Company issued promissory notes for up to CDN $1,000,000 which accrue interest at 10% per annum and mature on December 29, 2022.

CDN$557,000 was advanced to the Company, which was repaid with proceeds from the issuance of senior secured convertible debentures on February 28, 2018.

Effective February 28, 2018, the Company issued senior secured convertible debentures with a conversion price of $1.74 per common share for aggregate gross proceeds of CDN$5,000,000 (the "Offering").

The convertible debentures will bear interest at the rate of 10% per annum, payable quarterly, and will mature 12 months following the date of their issuance.

Beginning on the date that is four months and one day following the issuance of the convertible debentures, the Company may force the conversion of the principal amount of the then outstanding convertible debentures at the conversion price on not less than 30 days’ notice should the daily volume weighted average trading price of the shares of common stock be greater than $2.50 for any 20 consecutive trading days on the Canadian Stock Exchange, or such other exchange our common shares are principally traded.

On February 28, 2018, the Company completed the acquisition of ERS Holdings, LLC (“ERS”) pursuant to an Exchange Agreement dated as of February 10, 2018 among the Company, ERS and the members of ERS.

As consideration for the purchase, the Company paid $333,333 in cash on closing, issued 5,000,000 shares of common stock and will pay an additional $333,333 six and twelve (12) months after closing.

Financial consideration include royalties on future annual net sales.

On March 2, 2018, the Company completed the acquisition of Thrudermic, LLC (“Thrudermic”) and worldwide rights to Thrudermic’s patented Transdermal Nanotechnology for the development and commercialization of transdermal cannabinoids pursuant to an Exchange Agreement dated as of March 2, 2018 among the Company, Dr.

Joseph Borovsky, Dr.

Leonid Lurya and Thrudermic.

As consideration for the purchase, the Company paid $1 in cash on closing and issued 500,000 shares of our common stock.

On March 12, 2018, the Company granted 200,000 options to purchase common stock to a third party with exercise price of $1.76 Canadian dollars per share, expiry on March 11, 2023 and equal monthy vesting over 12 months.

On March 14, 2018 and April 4, 2018, the Company issued 75,000 and 62,500 shares of common stock, respectively, to third parties for services rendered.

On March 31, 2018, the Company issued 44,087 shares of common stock pursuant to employment agreements entered into upon the acquisitions of ERS and Thrudermic.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

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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-K

Item 8. Financial Statements and Supplementary Data