Item 1. Financial Statements
Item 1. Financial Statements
Our unaudited interim condensed consolidated financial statements for the period ended October 31, 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 and nine month period ended October 31, 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 October 31, 2018 (unaudited) and January 31, 2018
4
Table of Contents
PIVOT PHARMACEUTICALS INC.
Condensed Consolidated Balance Sheets
(Expressed in U.S. dollars)
October 31,
2018
$
January 31,
2018
$
(unaudited)
Assets
Current assets
Cash
406,901
64,511
Prepaid and other current assets
142,328
84,742
Inventory (Note 6)
6,795
–
Total current assets
556,024
149,253
Equipment, net (Note 7)
3,404
–
Intangible assets, net (Notes 3(a), 4 and 8)
6,520,449
234,564
Total assets
7,079,877
383,817
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities
Accounts payable and accrued liabilities
465,410
217,921
Due to related parties (Note 15)
3,255
10,104
Convertible debenture, net (Note 9)
2,722,270
–
Promissory note (Note 10)
–
201,175
Acquisition obligation (Note 4)
340,000
–
Deferred revenues
120,000
–
Total current liabilities
3,650,935
429,200
Stockholders’ Equity (Deficit)
Common stock: Unlimited shares authorized, without par value, 95,828,235 and 82,373,559 shares issued and outstanding, respectively (Note 11)
16,718,718
8,263,767
Additional paid-in capital
13,240,333
11,816,057
Accumulated other comprehensive income
605,199
593,728
Accumulated deficit
(27,135,308 )
(20,718,935 )
Total stockholders’ equity (deficit)
3,428,942
(45,383 )
Total liabilities and stockholders’ equity (deficit)
7,079,877
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)
(Unaudited)
Three Months Ended
October 31,
2018
$
Three Months Ended
October 31,
2017
$
Nine Months Ended
October 31,
2018
$
Nine Months Ended
October 31,
2017
$
Revenue
–
–
–
–
Expenses
Amortization (Notes 7 and 8)
187,309
8,309
504,346
8,309
Due diligence costs
52,188
–
181,091
–
Foreign exchange loss
30,702
38,762
64,789
101,324
General and administrative
432,112
50,480
1,609,280
179,410
Licensing fees
23,181
–
23,181
–
Professional fees
214,450
55,166
468,048
128,174
Rent
93,067
–
126,690
–
Research and development
65,029
–
237,103
–
Salaries and wages
313,463
31,941
817,494
301,714
Sales and marketing
309
–
7,309
–
Total expenses
1,411,810
184,658
4,039,331
718,931
Loss from operations
(1,411,810 )
(184,658 )
(4,039,331 )
(718,931 )
Other income (expense)
Amortization of discount/premium on convertible debenture
(131,772 )
–
(358,467 )
(105,392 )
Gain on change in fair value of derivative liabilities
–
33,260
–
204,711
Gain on disposal of assets
–
609,311
–
609,311
Gain on repayment of promissory note
–
–
6,969
–
Gain on settlement of debts
–
80,144
–
240,144
Interest expense
(134,851 )
(7,331 )
(299,478 )
(24,481 )
Interest income
2,923
–
2,923
–
Loss on extinguishment of convertible debentures (Note 9)
(1,508,836 )
–
(1,508,836 )
–
Other expense
–
–
(26,967 )
–
Write-off of deposit (Note 5)
(193,175 )
–
(193,175 )
–
Total other income (expense)
(1,965,711 )
715,384
(2,377,031 )
924,293
Net (loss) income
(3,377,521 )
530,726
(6,416,362 )
205,362
Other comprehensive income (loss)
Foreign currency translation adjustment
30,639
(102,502 )
11,471
(728 )
Net comprehensive loss
(3,346,882 )
428,224
(6,404,891 )
204,634
Net loss per share, basic
(0.04 )
0.01
(0.07 )
0.00
Net loss per share, diluted
(0.04 )
0.01
(0.07 )
0.00
Weighted average shares outstanding – basic
89,623,532
76,761,576
88,079,787
76,055,298
Weighted average shares outstanding –diluted
89,632,532
81,596,692
88,079,787
78,877,344
(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)
Nine Months
Ended
October 31,
2018
$
Nine Months
Ended
October 31,
2017
$
(unaudited)
(unaudited)
Operating activities
Net (loss) income
(6,416,362 )
205,362
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of discount/premium on convertible debenture
358,467
105,392
Depreciation and amortization
504,346
8,309
Expenses paid related to debt issuance
(294,221 )
–
Fair value of stock options vested
58,341
1,057
Gain on change in fair value of derivative liabilities
–
(204,711 )
Gain on disposal of assets
–
(609,311 )
Gain on repayment of promissory note
(6,969 )
–
Gain on settlements of debts
–
(240,144 )
Loss on extinguishment of convertible debentures
1,508,836
–
Stock issued for services
443,093
24,531
Changes in operating assets and liabilities:
Prepaids and other current assets
(63,691 )
35,589
Inventory
(6,795 )
–
Due to related parties
(6,294 )
4,510
Accounts payable and accrued liabilities
240,875
457,439
Deferred revenue
120,000
–
Other liabilities
–
12,266
Net cash used in operating activities
(3,560,374 )
(199,711 )
Investing activities
Business acquisition
(659,999 )
–
Net cash used in investing activities
(659,999 )
–
Financing activities
Proceeds from convertible debenture, net
3,817,119
–
Proceeds from debenture
–
36,500
Proceeds from issuance of common stock
–
31,799
Proceeds from issuance of common stock subscriptions
–
264,326
Proceeds from issuance of units
976,164
Proceeds from promissory notes
394,616
–
Repayment of loan payable
(15,925 )
–
Repayment of promissory note
(588,839 )
–
Net cash provided by financing activities
4,583,134
332,625
Effects of exchange rate changes on cash
(20,371 )
5,051
Increase in cash
342,390
137,965
Cash – beginning of period
64,511
112,421
Cash – end of period
406,901
250,386
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 October 31, 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 October 31, 2018, the Company has not earned any revenue, has a working capital deficit of $3,094,911 and an accumulated deficit of $27,135,308. 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 October 31, 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.
Thrudermic, LLC (from date of acquisition on March 2, 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 excludes all dilutive potential shares if their effect is anti dilutive. As at October 31, 2018, the Company had 29,776,226 (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.
9
Table of Contents
PIVOT PHARMACEUTICALS INC.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Period ended October 31, 2018
(Expressed in U.S. dollars)
2. Significant Accounting Policies (continued)
Level 3: Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company’s financial instruments consist principally of cash, amounts receivable, accounts payable and accrued liabilities, due to related parties, convertible debenture 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. Asset Acquisitions
(a) 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, goodwill 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 at cost of $805,000 Canadian Dollars ($624,467 US Dollars).
(b) Solumer Oral Drug Delivery Technology
On August 7, 2018, the Company entered into a licensing agreement with Solubest Ltd. (“Solubest”) whereby the Company will acquire worldwide rights for the use, development and commercialization of Solubest’s Solumer Oral Drug Technology solely for the improved bio-availability, delivery and commercialization of Cannabinoid and Tetrahydrocannabinol-based products for human and animal use. Financial considerations include: 1) Monthly license fee until commercialization date ($20,000); 2) Monthly development fee ($10,000); 3) Milestone payments upon commercialization ($150,000) and upon net sales of $5,000,000 ($250,000). Other consideration include royalties on aggregate net sales.
10
Table of Contents
PIVOT PHARMACEUTICALS INC.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Period ended October 31, 2018
(Expressed in U.S. dollars)
4. 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. On September 28, 2018, a payment of $326,666, representing a portion of the payment due six (6) months after closing, was made. The remainder of the payment due six (6) months after closing of $6,667 has been withheld due to infringement of the Company’s patent by the recipient. The acquisition obligation outstanding as at October 31, 2018 is $340,000. 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
666,666
Common stock issued
5,150,000
Total purchase price
6,149,999
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.
11
Table of Contents
PIVOT PHARMACEUTICALS INC.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Period ended October 31, 2018
(Expressed in U.S. dollars)
5. 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. For the period ended October 31, 2018, the Company wrote-off the balance of the deposit and recorded a loss on write-off of deposit of $193,175.
6. Inventory
October 31,
2018
January 31,
2018
Raw materials
6,795
–
7. Equipment
Cost
Lab
Equipment
$
Balance, January 31, 2018
–
Exchange agreement (Note 4)
5,700
Balance, October 31, 2018
5,700
Accumulated Amortization
Balance, January 31, 2018
–
Exchange agreement (Note 4)
1,663
Amortization
633
Balance, October 31, 2018
2,296
Net book value, October 31, 2018
3,404
Net book value, January 31, 2018
–
12
Table of Contents
PIVOT PHARMACEUTICALS INC.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Period ended October 31, 2018
(Expressed in U.S. dollars)
8. Intangible Assets
Cost
BiPhasix
License
$
Patents
$
Total
$
Balance, January 31, 2018
259,639
–
259,639
Addition and exchange agreement (Note 4)
–
6,803,408
6,803,408
Effect of foreign exchange rate changes
(16,774 )
–
(16,774 )
Balance, October 31, 2018
242,865
6,803,408
7,046,273
Accumulated Amortization
Balance, January 31, 2018
25,075
–
25,075
Amortization
45,413
456,667
502,080
Effect of foreign exchange rate changes
(1,331 )
–
(1,331 )
Balance, October 31, 2018
69,157
456,667
525,824
Net book value, October 31, 2018
173,708
6,346,741
6,520,449
Net book value, January 31, 2018
234,564
–
234,564
9. Convertible Debenture
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 $1.74 Canadian Dollars ($1.33 US Dollars) per common share. The Company issued 172,413 share purchase warrants with an exercise price of $1.74 Canadian Dollars and three year expiry as finder’s fee for the convertible debentures.
On October 22, 2018, $1,500,000 Canadian Dollars ($1,144,601 US Dollars) of the convertible debentures were settled through the issuance of 3,750,000 units of the Company with each unit consisting of one common stock and one share purchase warrant with an exercise price of $0.60 Canadian Dollars ($0.46 US Dollars) and three year expiry. The Company considered the settlement to be a substantial modification of the terms of the convertible debenture and recorded a loss on extinguishment of debenture of $1,508,836 in the condensed consolidated statement of operations. Pursuant to the settlement, the Company paid $41,439 representing the remainder of the interest on the debentures settled through maturity date of March 2, 2019.
On October 22, 2018, the Company modified the conversion price on the remainder of the convertible debentures, totaling $3,500,000 Canadian Dollars ($2,670,736 US Dollars), to C$0.42 per common share. As the modification was considered a modification with substantially different terms, the modification has been accounted for as an extinguishment of the original debenture and the recognition of a new convertible debenture with a loss on extinguishment of debenture of $126,327 recorded in the condensed consolidated statement of operations.
As of October 31, 2018, the carrying value of the convertible debenture is $2,722,270, which is inclusive of debt premium of $59,053. As of October 31, 2018, interest accrued on the convertible debenture is $29,725.
13
Table of Contents
PIVOT PHARMACEUTICALS INC.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Period ended October 31, 2018
(Expressed in U.S. dollars)
10. Promissory Note
(a) Promissory Note – Former Chief Executive Officer The Company issued a promissory note in the amount of $200,000 to its former CEO, which 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). 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.
(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, 2018. As part of the promissory note, 100,000 shares of our common stock were issued on October 26, 2017.
(c) Promissory Note – Altum Pharmaceuticals Inc. (“Altum”)
On February 16, 2018, the Company issued a promissory note of up to $560,000 Canadian Dollars ($445,895 US 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 ($198,981 US Dollars) and $252,464 Canadian Dollars ($196,761 US 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 ($390,398 US Dollars).
11. Common Stock
(a) On February 28, 2018, 5,000,000 shares of common stock, with fair value of $5,191,662, were issued pursuant to the exchange agreement with Pivot Naturals (Note 4).
(b) On March 2, 2018, 500,000 shares of common stock, with fair value of $620,328, were issued pursuant to the exchange agreement with Thrudermic and the members of Thrudermic (Note 3(a)).
(c) During the nine months ended October 31, 2018, the Company issued 598,735 shares of common stock, with fair value totaling $323,338, to third parties for services rendered.
(d) During the nine months ended October 31, 2018 the Company issued 277,691 shares of common stock, with fair value totaling $119,606, as compensation pursuant to employment agreements entered into as part of the acquisitions of the Thrudermic Transdermal Nanotechnology (Note 3(a)) and Pivot Naturals (Note 4).
(e) On October 22, 2018, 3,750,000 units of the Company, with each unit consisting of one common stock and one share purchase warrant with an exercise price of $0.60 Canadian Dollars and three year expiry, were issued pursuant to settlement of $1,500,000 Canadian Dollars of convertible debentures (Note 9).
14
Table of Contents
PIVOT PHARMACEUTICALS INC.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Period ended October 31, 2018
(Expressed in U.S. dollars)
11. Common Stock (continued)
(f) In October, 2018, 3,328,250 units of the Company, with each unit consisting of one common stock and one share purchase warrant with an exercise price of $0.60 Canadian Dollars and three year expiry, were issued for subscription proceeds of $1,331,300 Canadian Dollars ($1,022,005 US Dollars). Pursuant to the private placement, the Company paid finders’ fee of $64,104 in cash and issued 142,260 share purchase warrants with an exercise price of $0.60 Canadian Dollars and three year expiry. An additional 38,000 share purchase warrants, with an exercise price of $0.60 Canadian Dollars and three year expiry, in finders’ fee were issued on November 2, 2018.
12. Stock Options
Effective December 30, 2015, the Company adopted a stock option plan. Under this plan, the Company may grant options to its directors, officers, employees and consultants up to an amount as determined by the Company and will be no more than a percentage of its outstanding common stock as may be required by the stock exchange the Company is listed with. The exercise price of the stock options will be determined by the Company and will be no less than any minimum exercise price as may be required by the stock exchange the Company is listed with.
The following table summarizes the continuity of the Company’s stock options:
Number
of Options
Weighted Average Exercise Price (US$)
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
300,000
0.97
4.57
–
Forfeited
(229,000 )
(0.26 )
(2.15 )
–
Outstanding, October 31, 2018
13,691,833
0.35
2.56
1,771,295
Exercisable, October 31, 2018
13,475,169
0.35
2.53
1,771,295
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
333 %
2.95 %
0 %
4.04
200,000 options expiring on March 11, 2023
342 %
2.98 %
0 %
4.36
100,000 options expiring on October 28, 2023
364 %
2.98 %
0 %
4.99
15
Table of Contents
PIVOT PHARMACEUTICALS INC.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Period ended October 31, 2018
(Expressed in U.S. dollars)
12. Stock Options (continued)
Additional information regarding stock options as of October 31, 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
4,000,000
4,000,000
0.10
December 14, 2021
41,833
41,833
0.05
January 23, 2022
100,000
50,000
0.39
November 14, 2022
200,000
133,336
1.30
March 11, 2023
100,000
-
0.32
October 28, 2023
13,691,833
13,475,169
$50,983 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
265,125
0.35
Granted
7,392,923
0.48
Balance, October 31, 2018
7,658,048
0.48
As at October 31, 2018, the following share purchase warrants were outstanding:
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
2,853,250
0.47
September 21, 2021
8,000
0.47
October 1, 2021
609,260
0.46
October 18, 2021
3,750,000
0.46
October 22, 2021
7,658,048
16
Table of Contents
PIVOT PHARMACEUTICALS INC.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
Period ended October 31, 2018
(Expressed in U.S. dollars)
14. Supplemental Cash Flow Information
Nine Months
Ended
October 31,
2018
Nine Months
Ended
October 31,
2017
Supplemental disclosures:
Interest paid
269,293
–
Income tax paid
–
–
Non-cash investing and financing activities
Capital contribution through forgiveness of debt
–
531,310
Common stock issued for settlement of accounts payable
–
35,152
Common stock issued for settlement of convertible debenture (Note 9)
1,230,446
601,097
Common stock issued for prepaid assets
–
72,924
Common stock issued for intangible asset (Note 3(a))
620,328
262,500
Common stock issued for services
443,093
21,207
Common stock issued for acquisition of business (Note 4)
5,191,662
–
Promissory note issued for settlement of accrued salaries
–
200,000
Treasury stock returned and retired in disposition of assets
–
380,000
Warrants granted for finder’s fee (Note 9)
203,553
–
Warrants granted for settlement of convertible debenture (Note 9)
1,162,383
–
15. Related Party Transactions
(a) As at October 31, 2018, the Company owed $3,255 (January 31, 2018 - $4,767), $1,339 (January 31, 2018 - $nil), $8,270 (January 31, 2018 - $nil) and $1,071 (January 31, 2018 - $nil) to a director, a director and officer, an officer of the Company and an officer of the Company’s subsidiary, respectively, which are 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.
(c) During the nine months ended October 31, 2018, the Company paid $644 in interest expense on a promissory note issued to Altum (Note 10(c)).
(d) During the nine months ended October 31, 2018, the Company’s subsidiary, Pivot Naturals, paid $49,540 to a company owned by its President for research and development.
16. Subsequent Events
On November 2, 2018, the Company issued 750,000 units, with each unit consisting of one common stock and one share purchase warrant with an exercise price of $0.60 Canadian Dollars and three year expiry, for subscription proceeds of $300,000 Canadian Dollars. Pursuant to the private placement, the Company paid finders’ fee of $24,000 Canadian Dollars in cash and issued 60,000 share purchase warrants with an exercise price of $0.60 Canadian Dollars and three year expiry. In addition, 38,000 share purchase warrants related to finder’s fee on the private placement in October 2018 were issued (Note 11(f)).
17
Table of Contents
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.