BetterLife Pharma Inc. 10-Q

Item 1. Financial Statements Our unaudited interim condensed consolidated financial statements for the period ended April 30, 2018 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 period ended April 30, 2018 are not necessarily indicative of results to be expected for any subsequent period. 3 Table of Contents PIVOT PHARMACEUTICALS INC. Condensed Consolidated Financial Statements (Expressed in U.S. dollars) Period ended April 30, 2018 (unaudited) and January 31, 2018 4 Table of Contents PIVOT PHARMACEUTICALS INC. Condensed Consolidated Balance Sheets (Expressed in U.S. dollars) April 30, 2018 $ January 31, 2018 $ (unaudited) Assets Current assets Cash 1,510,868 64,511 Prepaid and other current assets 148,851 84,742 Total current assets 1,659,719 149,253 Deposit (Note 6) 196,340 – Equipment (Note 7) 3,879 – Intangible assets (Notes 4(a), 4(c), 5 and 8) 6,954,561 234,564 Total assets 8,814,499 383,817 Liabilities and Stockholders’ Equity (Deficit) Current liabilities Accounts payable and accrued liabilities 89,444 217,921 Due to related parties (Note 15) 310 10,104 Convertible debenture (Note 9) 3,464,979 – Promissory note (Note 10) – 201,175 Other obligation (Note 5) 666,667 – Total liabilities 4,221,400 429,200 Stockholders’ Equity (Deficit) Common stock: Unlimited shares authorized, without par value, 88,055,146 and 82,373,559 shares issued and outstanding, respectively (Note 11) 14,252,122 8,263,767 Common stock issuable (Note 11) 50,066 – Additional paid-in capital 12,046,797 11,816,057 Accumulated other comprehensive income 587,765 593,728 Accumulated deficit (22,343,651 ) (20,718,935 ) Total stockholders’ equity (deficit) 4,593,099 (45,383 ) Total liabilities and stockholders’ equity (deficit) 8,814,499 383,817 (The accompanying notes are an integral part of these condensed consolidated financial statements) 5 Table of Contents PIVOT PHARMACEUTICALS INC. Condensed Consolidated Statements of Operations and Comprehensive Income (Expressed in U.S. dollars) Three Months Ended April 30, 2018 $ Three Months Ended April 30, 2017 $ (unaudited) (unaudited) Revenue – – Expenses Amortization (Notes 7 and 8) 129,832 – Due diligence costs 96,168 – Foreign exchange (gain) loss 12,898 70,137 General and administrative 749,415 53,289 Professional fees 177,303 24,797 Research and development 85,293 – Salaries and wages 188,549 137,295 Sales and marketing 7,000 – Total expenses 1,446,458 285,518 Loss from operations (1,446,458 ) (285,518 ) Other income (expense) Amortization of discount on convertible debenture (90,273 ) (105,392 ) Gain on change in fair value of derivative liabilities – 79,887 Gain on repayment of promissory note 6,969 – Interest expense (67,665 ) (8,789 ) Other expense (26,967 ) – Total other income (expense) (177,936 ) (34,294 ) Net loss (1,624,394 ) (319,812 ) Other comprehensive income (loss) Foreign currency translation adjustment (5,963 ) 60,392 Net comprehensive loss (1,630,357 ) (259,420 ) Net loss per share, basic and diluted (0.02 ) (0.00 ) Weighted average shares outstanding – basic and diluted 86,209,585 75,647,114 (The accompanying notes are an integral part of these condensed consolidated financial statements) 6 Table of Contents PIVOT PHARMACEUTICALS INC. Condensed Consolidated Statements of Cash Flows (Expressed in U.S. dollars) Three Months Ended April 30, 2018 $ Three Months Ended April 30, 2017 $ (unaudited) (unaudited) Operating activities Net loss (1,624,394 ) (319,812 ) Adjustments to reconcile net loss to net cash used in operating activities: Amortization of discount on convertible debenture 90,273 105,392 Amortization 129,832 – Expenses paid related to debt issuance (298,503 ) – Fair value of stock options vested 27,188 773 Gain on change in fair value of derivative liabilities – (79,887 ) Gain on repayment of promissory note (6,969 ) – Stock issued for services 228,797 – Changes in operating assets and liabilities: Prepaids and other current assets (67,038 ) 205 Deposit (196,340 ) – Due to related parties (9,436 ) 3,000 Accounts payable and accrued liabilities (145,090 ) 225,347 Net cash used in operating activities (1,871,680 ) (64,982 ) Investing activities Business acquisition (333,333 ) – Net cash used in investing activities (333,333 ) – Financing activities Proceeds from convertible debenture, net 3,879,663 – Proceeds from promissory notes 394,615 – Repayment of loan payable (15,925 ) – Repayment of promissory note (588,839 ) – Net cash provided by financing activities 3,669,514 – Effects of exchange rate changes on cash (18,144 ) (741 ) Increase (decrease) in cash 1,446,357 (65,723 ) Cash – beginning of period 64,511 112,421 Cash – end of period 1,510,868 46,698 Supplemental cash flow disclosures (Note 14) (The accompanying notes are an integral part of these condensed consolidated financial statements) 7 Table of Contents PIVOT PHARMACEUTICALS INC. Notes to the Condensed Consolidated Financial Statements (Unaudited) Period ended April 30, 2018 (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 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. As at April 30, 2018, the Company has not earned any revenue, has a working capital deficit of $2,561,681 and an accumulated deficit of $22,343,651. 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 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. 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. 8 Table of Contents PIVOT PHARMACEUTICALS INC. Notes to the Condensed Consolidated Financial Statements (Unaudited) Period ended April 30, 2018 (Expressed in U.S. dollars) 2. Significant Accounting Policies (continued) These interim consolidated financial statements should be read in conjunction with the financial statements included in our Annual Report on Form 10-K (the "2018 Form 10-K") for the year ended January 31, 2018, which was filed with the Securities and Exchange Commission (the "SEC") on May 1, 2018. (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 Pivot Green Stream Health Solutions Inc. 100 % Canada Pivot Naturals, LLC (from date of acquisition on February 28, 2018) 100 % U.S.A. (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, 2018, the Company had 7,384,908 (January 31, 2018 – 6,153,764) 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. 9 Table of Contents PIVOT PHARMACEUTICALS INC. Notes to the Condensed Consolidated Financial Statements (Unaudited) Period ended April 30, 2018 (Expressed in U.S. dollars) 2. Significant Accounting Policies (continued) 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. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations. (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. 3. 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. Pursuant to the exchange agreement, the Company has provided its former Chief Executive Officer a promissory note (Note 10(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 380,000 Net liabilities exchanged 229,311 Gain on disposal of asset 609,311 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. 4. 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: 1) Issuance of 2,500,000 shares of common stock on September 12, 2017; 2) Issuance of 2,500,000 shares of common stock of Pivot upon Health Canada Natural Product Number approval; 3) Royalties on annual gross sales; and 4) 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. 10 Table of Contents PIVOT PHARMACEUTICALS INC. Notes to the Condensed Consolidated Financial Statements (Unaudited) Period ended April 30, 2018 (Expressed in U.S. dollars) 4. Asset Acquisitions (continued) (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. (c) Thrudermic Transdermal Nanotechnology On March 2, 2018, the Company entered into an exchange agreement with Thrudermic, LLC (“Thrudermic”) and the members of Thrudermic whereby the Company paid $1.00 for the issued and outstanding units of Thrudermic and issued 500,000 shares of common stock (Notes 8 and 11(b)) to the members of Thrudermic for their intellectual property portfolio, including patents, good will and know-how in connection with the Thrudermic Transdermal Nanotechnology. 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. 5. Business Acquisition On February 28, 2018, the Company completed the acquisition of Pivot Naturals, LLC (previously ERS Holdings, LLC) (“Pivot Naturals”) pursuant to an exchange agreement dated as of February 10, 2018. As consideration for the purchase, the Company paid $333,333 in cash on closing, issued 5,000,000 shares of common stock (Note 11(a)) and will pay an additional $333,333 six (6) and twelve (12) months after closing. Financial consideration include royalties on future annual net sales. The Company evaluated this acquisition in accordance with ASC 805, Business Combinations (10-55-4) to discern whether the assets and operations of Pivot Naturals met the definition of a business. The Company concluded there were a sufficient number of key processes obtained to develop the inputs into outputs and such processes be easily obtained by the Company. Accordingly, the Company accounted for this transaction as an acquisition of a business. The consideration transferred, assets acquired and liabilities assumed recognized is as follows: Consideration paid: $ Cash paid 333,333 Cash to be paid 666,667 Common stock issued 5,150,000 Total purchase price 6,149,999 11 Table of Contents PIVOT PHARMACEUTICALS INC. Notes to the Condensed Consolidated Financial Statements (Unaudited) Period ended April 30, 2018 (Expressed in U.S. dollars) 5. Business Acquisition (continued) Net assets acquired: $ Cash 2,152 Equipment 4,037 Intangible asset (patents) 6,190,868 Accounts payable and accrued liabilities (31,133 ) Loan payable (15,925 ) Net value of business purchased 6,149,999 The Company applied the acquisition method to the business combination and valued each of the assets acquired (cash, equipment, intangible asset) and liabilities assumed (accounts payable and accrued liabilities and loan payable) at fair value as of the acquisition date. The cash, accounts payable and accrued liabilities and loan payable were deemed to be recorded at fair value as of the acquisition date. The Company determined the fair value of the equipment to be historical net book value. The preliminary allocation of the purchase price was based on estimates of the fair value of the assets and liabilities assumed based on provisional amounts. The allocation of the excess purchase price is not final and the amounts allocated to intangible assets are subject to change pending the completion of final valuations of certain assets and liabilities. Pursuant to the acquisition, the Company expensed $120,000 of acquisition-related costs. Patents acquired will be amortized over an estimated useful life of ten (10) years. 6. Deposit Pursuant to a letter of intent signed with Agro-Biotech Inc. (“ABI”) on February 19, 2018 for exclusive negotiations related to the acquisition of ABI by April 15, 2018, the Company paid a deposit of $250,000 Canadian Dollars ($196,340 US Dollars). The deposit is non-refundable, except upon wrongful refusal of ABI to conclude the acquisition. The acquisition of ABI was not concluded by April 15, 2018. On April 24, 2018, the Company submitted an originating application to the Superior Court in the province of Quebec, Canada seeking to recover losses arising from the lack of cooperation by ABI, including the deposit made, in concluding the transaction. 7. Equipment Cost Lab Equipment $ Balance, January 31, 2018 – Exchange agreement (Note 5) 5,700 Balance, April 30, 2018 5,700 Accumulated Amortization Balance, January 31, 2018 – Exchange agreement (Note 5) 1,663 Amortization 158 Balance, April 30, 2018 1,821 12 Table of Contents PIVOT PHARMACEUTICALS INC. Notes to the Condensed Consolidated Financial Statements (Unaudited) Period ended April 30, 2018 (Expressed in U.S. dollars) 7. Equipment (continued) Net book value, April 30, 2018 3,879 Net book value, January 31, 2018 – 8. Intangible Assets Cost BiPhasix License $ Patents $ Total $ Balance, January 31, 2018 259,639 – 259,639 Addition and exchange agreement (Notes 4(c) and 5) – 6,858,011 6,858,011 Effect of foreign exchange rate changes (8,972 ) – (8,972 ) Balance, April 30, 2018 250,667 6,858,011 7,108,678 Accumulated Amortization Balance, January 31, 2018 25,075 – 25,075 Amortization 15,281 114,628 129,909 Effect of foreign exchange rate changes (866 ) – (867 ) Balance, April 30, 2018 39,489 114,628 154,117 Net book value, April 30, 2018 211,178 6,743,383 6,954,561 Net book value, January 31, 2018 234,564 – 234,564 Weighted average life remaining on intangible asset is 9.5 years. Future amortization for the next four years is: Expiry Date $ 2019 788,031 2020 953,026 2021 955,526 2022 922,202 2023 873,233 9. Convertible Debenture (a) 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. 13 Table of Contents PIVOT PHARMACEUTICALS INC. Notes to the Condensed Consolidated Financial Statements (Unaudited) Period ended April 30, 2018 (Expressed in U.S. dollars) 9. Convertible Debenture (continued) 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. 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. 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 of the Company at a conversion price of $0.10. (b) On March 2, 2018, the Company issued convertible debentures with two non-related parties totaling $5,000,000 Canadian Dollars ($3,878,675 US Dollars). The debentures are secured under a General Security Agreement, bear interest at 10% per annum payable quarterly and mature on March 2, 2019. The notes are convertible into common shares at a conversion price equal to C$1.74 per common share. The Company evaluated the conversion feature for whether it was beneficial as described in ASC 470-30, Debt. In general, the beneficial conversion feature is measured by comparing the effective conversion price, after considering the relative fair value of detachable instruments included in the financing transaction, if any, to the fair value of the shares of common stock at the commitment date to be received upon conversion. The beneficial conversion feature of these convertible debentures have been measured at $262,400. As of April 30, 2018, the carrying value of the convertible debenture is $3,464,979 which is net of debt discounts related to financing costs and warrants of $289,057 and $172,768, respectively. As of April 30, 2018, interest accrued on the convertible debenture is $32,275. 10. Promissory Note (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 March 2, 2018, the Company issued senior secured convertible debentures for gross proceeds of $5,000,000 Canadian dollars (Note 9(b)). Accordingly, accrued interest being waived, principal was due and repaid on March 30, 2018 and a gain on repayment of promissory note of $6,969 was recorded. 14 Table of Contents PIVOT PHARMACEUTICALS INC. Notes to the Condensed Consolidated Financial Statements (Unaudited) Period ended April 30, 2018 (Expressed in U.S. dollars) 10. 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 April 30, 2018. As part of the promissory note, 100,000 shares of our common stock were issued on October 26, 2017. (c) Promissory Note – Altum On February 16, 2018, the Company issued a promissory note of up to $560,000 Canadian Dollars, bearing interest at 10% per annum to Altum and maturing on May 15, 2018. On February 19 and March 1, 2018, $250,000 Canadian Dollars and $252,464 Canadian Dollars were advanced to the Company. On March 2, 2018, the Company repaid the principal amount and accrued interest on the note totaling $503,285 Canadian Dollars. 11. Common Stock (a) On February 28, 2018, 5,000,000 shares of common stock were issued pursuant to the exchange agreement with Pivot Naturals (Note 5). (b) On March 2, 2018, 500,000 shares of common stock were issued pursuant to the exchange agreement with Thrudermic and the members of Thrudermic (Note 4(c)). (c) On March 14, 2018 and April 4, 2018, 75,000 and 62,500 shares of common stock, respectively, were issued to third parties for services rendered. As at April 30, 2018, 77,519 shares of common stock were recorded as common stock issuable for a third party consulting expense related to April 2018. These shares of common stock were issued on May 3, 2018. (d) On March 29, 2018, 44,087 shares of common stock were issued as compensation for March 2018 pursuant to employment agreements entered into as part of the acquisitions of the Thrudermic Transdermal Nanotechnology (Note 4(c)) and Pivot Naturals (Note 5). As at April 30, 2018, 91,315 shares of common stock were recorded as common stock issuable for compensation related to April 2018. These shares of common stock were issued on May 3, 2018. 12. 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: 15 Table of Contents PIVOT PHARMACEUTICALS INC. Notes to the Condensed Consolidated Financial Statements (Unaudited) Period ended April 30, 2018 (Expressed in U.S. dollars) 12. Stock Options (continued) Number of Options Weighted Average Exercise Price (US$) Weighted Average Remaining Contractual Life (years) Aggregate Intrinsic Value (US$) Outstanding, January 31, 2018 13,620,833 0.34 3.26 22,917,756 Granted 200,000 1.30 4.87 – Forfeited (200,000 ) (0.25 ) (2.59 ) – Outstanding, April 30, 2018 13,620,833 0.35 3.05 1,932,132 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) 100,000 options expiring on November 14, 2022 378 % 2.79 % 0 % 4.55 200,000 options expiring on March 11, 2023 381 % 2.79 % 0 % 4.87 Additional information regarding stock options as of April 30, 2018, is as follows: Options Outstanding Options Exercisable Exercise Price $ Expiry Date 4,000,000 4,000,000 0.10 December 14, 2020 5,250,000 5,250,000 0.70 February 22, 2021 29,000 29,000 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 100,000 25,000 0.39 November 14, 2022 200,000 33,334 1.30 March 11, 2023 13,620,833 13,379,167 $48,920 of stock-based compensation have yet to be recognized and will be recognized in future periods. 13. Share Purchase Warrant The following table summarizes the continuity of share purchase warrant: Number of Warrants Weighted Average Exercise Price $ Balance, January 31, 2018 and April 30, 2018 265,125 0.35 Granted 172,413 1.35 Balance, April 30, 2018 437,538 0.74 As at April 30, 2018, the following share purchase warrants were outstanding: 16 Table of Contents PIVOT PHARMACEUTICALS INC. Notes to the Condensed Consolidated Financial Statements (Unaudited) Period ended April 30, 2018 (Expressed in U.S. dollars) 13. Share Purchase Warrant (continued) Number of Warrants Exercise Price $ Expiry Date 190,000 0.35 May 20, 2019 75,125 0.35 June 14, 2019 172,413 1.35 March 1, 2021 14. Supplemental Cash Flow Information Three Months Ended April 30, 2018 Three Months Ended April 30, 2017 Supplemental disclosures: Interest paid – – Income tax paid – – Non-cash investing and financing activities Stock issued for services 178,416 – Stock issuable for services 50,381 – Stock issued for intangible assets (Note 4(c)) 620,328 – Stock issued for acquisition of business (Note 5) 5,191,662 – Warrants granted for finder’s fee (Note 8(b)) 203,553 – 15. Related Party Transactions (a) As at April 30, 2018, the Company owed $310 (January 31, 2018 - $4,767) to a director of the Company, which is unsecured, non-interest bearing, and due on demand. (b) 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)). (c) During the three months ended April 30, 2018, the Company paid $644 in interest expense on a promissory note issued to Altum (Note 10(c)). 16. Subsequent Events (a) On May 3, 2018, 168,834 shares of common stock, recorded as common stock issuable as at April 30, 2018, were issued (Notes 11(c) and 11(d)). On June 6, 2018, 214,753 shares of common stock, related to management compensation and third party consulting expense for May 2018, were issued. (b) On May 23, 2018, the Company’s wholly-owned subsidiary, Pivot Naturals, entered into a lease agreement for a manufacturing facility in Costa Mesa, California at a base rent of $16,100 per month, commencing on July 15, 2018 and expiring on July 14, 2023. 17 Table of Contents 16. Subsequent Events (continued) (c) On May 30, 2018, the Company entered into an options and materials transfer agreement with IP Med Inc. (“IP Med”) for an option to license exclusively IP Med’s TriVair device for the delivery of powder formulations of cannabis-based products. Upon signing of the agreement, the Company paid IP Med a non-refundable option fee of $50,000, which will be credited against payments owed by the Company to IP Med under the licence agreement, if and when signed. 18 Table of Contents